KUALA LUMPUR: The earnings impact on Petroliam Nasional Bhd (Petronas) remains uncertain and could influence its spending capacity, despite its commitment to paying a substantial dividend to the federal government, according to RHB Investment Bank Bhd (RHB Research).
The firm noted growing discussions about possible capital expenditure (capex) reductions by Petronas following the announcement that Petroleum Sarawak Bhd (Petros) will take over the buying and selling of natural gas produced in Sarawak from Petronas.
The transition is expected to begin in the second half of 2024 (2H24).
"While we may see some potential operational disruption in the near term, we still assume a resolution to be achieved between these two involved parties without jeopardising existing productions and future domestic investments to capture the rising global gas demand.
"For now, we prefer upstream services players with greater exposure in the maintenance-related space, as they provide greater earnings resilience coupled with corporations with international diversification," it said in a note today.
It was reported that Petros has been appointed as the sole gas aggregator, as announced by Datuk Seri Julaihi Narawi, the Sarawak Minister of Utilities and Telecommunication.
This appointment means that Petros will oversee all activities related to the acquisition, supply, and distribution of natural gas produced in Sarawak.
Additionally, Petros will be responsible for monitoring the development, operation, and maintenance of the natural gas distribution system in the state.
Nevertheless, RHB Research noted that potential operational disruptions may occur in the near term until greater clarity or a resolution is reached between Petros and Petronas.
"However, we believe ultimately, both parties would want to maximise production, especially when oil prices are expected to remain stable.
"A drastic domestic capex cut by one party, in our view, is not sustainable in the long run as it would eventually jeopardise Malaysia's oil & gas position in the region," it said.
Meanwhile, RHB Research has maintained its Brent crude oil price forecasts for 2024, 2025, and 2026 at US$88, US$83, and US$80 per barrel, respectively.
The firm said this is premised on an optimistic outlook for the global economy in 3Q24 driven by a continued economic recovery momentum in the key markets such as the US, China, and selected ASEAN economies.
It added that overall Organisation of the Petroleum Exporting Countries (OPEC+) compliance remains fairly good, at 105 per cent in June 2024, as OPEC+ has been producing five per cent less than the required production.
The theoretical supply deficit is projected to reach 0.9 million barrels per day (mbpd) in 2024 and 0.3 million barrels per day (mbpd) in 2025.
"The market is able to absorb the additional barrels to be returned by OPEC+ backed by healthy global oil demand growth.
"The cartel, in our view, remains intact and would choose to support the oil market whenever necessary," it noted.
Overall, RHB Research has kept an "Overweight" call on the oil and gas sector, with its top picks being Dialog Group Bhd and Dayang Enterprise Holdings Bhd for Malaysia.
"Premised on the expectation of stable oil prices, we continue to favour counters with upstream exposure and international diversification amidst flagging higher uncertainties between Petronas-Petros in Malaysia," it noted.