KUALA LUMPUR: Petroliam Nasional Bhd’s higher capital expenditure (capex) stance moving forward may benefit local oil and gas service providers, said Kenanga Research.
This includes fabricators as well as floating production storage and offloading players bidding for local contracts.
Kenanga said the 2019 capex will largely be targeted for the upstream segment, including under-development green fields and recent discoveries.
Petronas has guided 2019 capex of over RM50 billion, higher than the RM46.8 billion spent in 2018.
The oil and gas giant said it would spend roughly RM30 billion capex for upstream activities in 2019 of which half of it will be spent domestically.
The capex over the last few years were mostly spent on the development of Pengerang Integrated Complex of which 97 per cent has been completed as at end-2018.
“However, we feel that cost optimisation would be a key concern, as we expect to see competitively low margins for upcoming job awards,” Kenanga said.
The research house believes Brent prices ranging between US$60 and US$70 a barrel to be 'sensible', with oil majors comfortable producing at these levels.
“In fact, we expect to see increased final investment decisions globally in the coming one-two years, spurred by massive new fields in the Middle-east and Africa,” it said.
“From here, we look towards OPEC’s next meeting in April for indications of continued output cut commitments.”
Meanwhile, Petronas has also committed to higher dividend pay-out, having declared a total dividend of RM54 billion, of which RM30 billion is a special dividend and all to be paid in 2019.
Kenanga said the increased dividend pay-out should not be overly burdening for the group, with its net-cash pile having jumped 64 per cent to RM105 billion from a year ago.
This comes on the back of its improved cash flows during the year following the better financial results, it added.
Petronas announced RM19 billion dividend in financial year 2017.