KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB) said that Petronas is turning more prudent in its capex spending and is likely reassessing its greenfield projects.
The firm favours operational contractors as they are the least prone to job cuts due to Petronas's emphasis on maintaining its upstream production.
"The winners of the Pan Malaysia MCM-HUC tender are expected to enjoy better unit rates and project margins from 2025 onwards.
"We await Petronas's annual activity outlook report for 2025 to ascertain the impact of capex cuts on the local oil and gas services and equipment (OGSE) sector," it said in a note.
On outlook, HLIB reckons "geopolitical risks fatigue" has partly contributed to softening Brent oil prices in recent months.
The firm thinks fundamentals will continue to precede geopolitics in dictating price direction.
"OPEC has once again delayed its oil output hike to Apr-25 (from Jan-25).
"Despite the extension of voluntary production cuts by OPEC+, which has somewhat eased the overhang in 2025, overproduction by some OPEC+ members, strong supply growth from non-OPEC+ countries, and modest demand increase will leave the market comfortably supplied in 2025," it said.
Overall, HLIB has maintained a neutral rating on the oil & gas sector with Brent oil price forecasts for 2025/2026 at US$75/70 per barrel.
Locally, the bank takes the view that most OGSE names, which have displayed impressive earnings growth over the past year, have likely seen their earnings reach their peak in 2024 (with marginal growth in 2025 at best).
"However, we reckon the steep share price correction in the sector due to the Petronas-Petros saga has been overdone, especially on OGSE names such as Enterprise Holdings Bhd and Wasco Bhd that will likely display sustained earnings in 2025," it added.