KUALA LUMPUR: Uzma Bhd and Dayang Enterprise Holdings Bhd are expected to be the main beneficiaries of the accelerated domestic capital expenditure (capex) by Petroliam Nasional Bhd (Petronas).
Public Investment Bank (PublicInvest) said the Petronas Activity Outlook (PAO) 2024 has indicated an elevated activity level for the next three years that requires a significant number of assets, such as hydraulic workover units (HWUs) and offshore service vessels (OSVs).
"Thus, the unit or daily charter rates for such assets will continue to creep up due to the scarcity of these assets among the local players.
"Uzma and Dayang are well-positioned to benefit from the tight market as owners of these key assets," it said in a note.
According to PublicInvest, Petronas' capex increased to RM52.8 billion in the financial year 2023 (FY23), the highest since 2018, from RM50.1 billion in FY22.
It allocated the most capex to the upstream segment, amounting to RM26.9 billion.
FY23 also recorded the highest domestic capex in six years at RM26.2 billion.
The capex was mainly channelled to nearshore floating liquefied natural gas (LNG) projects in Sabah and Kasawari field development and CO2 sequestration facilities in Sarawak.
PublicInvest also noted that Petronas generated an operating cash flow of RM114.2 billion at an average Brent crude oil price of US$82.60 per barrel in FY23 and has an ample buffer after the payment of capex and dividends.
As such, moving into FY24, the investment bank expects Petronas domestic capex to remain intact with an annualised target of RM22.6 billion on the back of stable oil prices, as Brent has traded at an average of US$81 per barrel on a year-to-date (YTD) basis.
"Sentiment also lifted with the recent OPEC+ production cut extension until June 2024 and the higher revision of the oil demand outlook to grow by 1.3 million barrels per day from 1.2 million barrels per day by the International Energy Agency (IEA).
"Nevertheless, we are not overly bullish on Brent being sustainable at above US$90 per barrel in the short term due to ample spare capacity from OPEC+ and elevated production levels in the US," it added.
Overall, PublicInvest has maintained a "neutral" call on the oil and gas (O&G) sector.