The latest Petronas Activity Outlook (PAO) 2023-2025 still suggests upstream activities to remain robust in 2023. RHB Research in its sector update on Integrated Oil and Gas has stated that it estimates Petronas’ capex spending to be MYR45-50 billion in 2023, with a continuing re-deployment of resources to clean energy solutions. Whilst its forecast oil prices for 2023F-2025F are maintained at USD90/bbl, USD80/bbl, and USD80/bbl.
Petronas’ 2023 capex estimated at MYR45-50 billion. The national oil & gas (O&G) company’s capex spending for 2022 could potentially land below its MYR60 billion target (9M22’s MYR27 billion). Petronas, in the opinion of the research house, could allocate MYR45-50 billion in capex in 2023 with a 20% allocation to clean energy solutions.
PAO 2023-2025. The PAO 2023-2025 appears to be neutral as RHB Research sees quite a blend of upward revisions and downward adjustments on sub-segments’ activities in 2023-2024. Overall, the research house saw most sub-segments have not met their planned targets in 2022, except for OSV supporting production operations, underwater services, and fixed structure fabrications.
It sees more of upward revisions for activities in 2023 but more of downward tweaks to 2024 projections due to an overflow of uncompleted jobs this year to 2023. Petronas is also remaining fairly prudent in its spending in the longer run. A greater emphasis in energy transition is also on the cards, as Gentari is taking a greater role with ambitious targets being outlined.
Selective growth. Sub-segments with higher activities in 2023 are drilling (jack-up rig, tender assisted drilling rig (TADR), and hydraulic workover unit (HWU)), fixed structure fabrications, OSV supporting drilling and projects, hook-up & commissioning (HUC), and maintenance, construction & modification (MCM).
Meanwhile, well decommissioning, underwater services, plant turnarounds, and OSV supporting production operations could be lower YoY in 2023. Sub-segments with a positive outlook over the medium term (post 2025) are drilling, and well and underwater services (an upgrade from steady previously). Most sub-segments remained on steady/modest outlooks.
The research house has reiterated its positive stance over the outlook of upstream maintenance related players – ie Dayang, Carimin Petroleum and Petra Energy – for higher HUC & MCM projections in 2023 and domestic drillers, eg Velesto Energy. Higher total OSV demand in 2023 is likely to result in better vessel utilisation, benefiting OSV players such as Perdana Petroleum and Icon Offshore.
On the other hand, what caught us by surprise was the sharp reduction in well decommissioning projections which may not bode well for Uzma. That said, one possible explanation could be that Petronas is looking to extend the life of the wells in order to leverage on current high oil prices. This may eventually benefit Uzma as the company also focuses on brownfield rejuvenation.
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