Petronas had just released its Activity Outlook report for 2023−2025, providing insights on demand outlook and forecasted activities for the next few years. The report highlights that uncertainty in the energy market is still expected to continue, hence industry players need to be more agile. The oil giant also emphasised embracing the energy transition trend and reiterated its commitment to accelerate efforts to decarbonise operations to meet its projected net-zero carbon goals by 2050.
Kenanga in its sector viewpoint update has a positive activity outlook. Petronas remains positive, in line with the continued recovery seen throughout 2022, specifically for drilling rigs, well services activities, and underwater services due to repair and maintenance activities required to maintain the integrity of offshore facilities.
The detailed breakdown of the activity outlook for several notable value chains is as follows: Drilling rigs. Activities in 2022 went as planned, with the actual number of rigs utilised falling short of only 1, with 20 rigs utilised versus 21 initially planned. In 2023, Petronas is expected to utilise 26 drilling rigs. More encouragingly, the number of jack-up rigs is expected to jump from 9 to 12, while hydraulic workout units (HWU) are expected to rise from 6 to 8. This is expected to benefit jack-up rig provider VELESTO (OP, TP: RM0.16), as well as UZMA (OP, TP: RM0.67) which also operates in the HWU space. Offshore fabrication. 2023 will see a total of 9 fixed structures fabrication versus the actual 7 in 2022 (higher than the initially planned 5). This will benefit fabricators e.g. SAPNRG (NR) and MHB (NR).
There were, however, no floating structure projects executed in 2022, and that remains the case for 2023. Kenanga opines that there will be no impact on any listed companies as all three of our Bursa-listed FPSO players i.e. YINSON (OP, TP: RM3.15), ARMADA (OP, TP: RM0.63), and MISC (OP, TP: RM7.30) have already moved on to other international bids after the Limbayong FPSO tender failed to materialise previously.
2023 is expected to see 5m man-hours from a jump of only 3.4m in 2022 (falling short of the initially planned 4.5m due to lockdown activities earlier in the year). This is expected to benefit DAYANG (OP, TP: RM1.70). Offshore maintenance, construction, and modification (MCM). 2023 is expected to see the number of man-hours jump to 11.9m, from 8.7m in 2022 (almost in line with planned figures). Again, this would benefit DAYANG seeing that it is the largest player in the MCM and HUC spaces. Offshore support vessels (OSV). Demand for OSVs is expected to remain steady going into 2023, especially for vessels supporting drilling and wells projects. It was also reported in the press that Petronas is looking to increase its cut-off age for vessels to 20 years, from the existing 15 years. This will benefit the likes of ICON (NR), PERDANA (NR), and ALAM (NR).
Positive takeaways with no key losers. Overall, Kenanga is positive in its read-through of the activity outlook and has found no key losers this time round. Meanwhile, identified key winners to be: (i) the drilling provider i.e. UZMA (via HWUs), and more prominently, VELESTO (jack-ups); and (ii) the MCM and HUC space, whereby DAYANG is the biggest player.