Kenanga Research has maintained an “Overweight” for the Oil & Gas Sector with stock picks being Petronas Chemical Group Bhd, Hibiscus Petroleum Bhd as proxies for the high oil prices as well as Dayang enterprise holdings Bhd and Uzma Bhd as beneficiaries of the recovery in local activity levels.
It said that with the unfolding of Russia’s invasion of Ukraine, Brent crude prices have jumped over USD100/barrel in light of fears of supply disruption. Note that Russia contributes to ~10% global oil supply.
It said that this managed to more than offset expectations of a slight global oversupply in 2022 under a “no war” status quo scenario. “Meanwhile, the OPEC+ alliance is expected to continue sticking to its planned supply increase of 400k barrels per day (bpd) – with no plans of further increasing output (at least for now), which could further exacerbate global supply disruption fears,” Kenanga Research said
RHB said that with an anticipated pick-up in Petronas’ CAPEX spending going forward, local activity levels are also expected to see some mild recovery.
On how this would impact local stocks, RHB said that Dayang would be one of the key beneficiaries, given the planned increase in offshore maintenance, construction and modification (MCM), and hook-up and commissioning (HUC) works.
It said that UZMA could also benefit from the increased levels of brownfield activities – especially in an environment of higher oil prices as producers would be more incentivised to enhance well productions.
