RHB Investment Bank has maintained its OVERWEIGHT rating on Malaysia’s oil and gas (O&G) sector, supported by continued growth in PETRONAS’ upstream investments and a generally positive quarterly earnings season among major industry players.
In its latest sector report, RHB said PETRONAS’ upstream capital expenditure increased 19% year-on-year to RM8.7 billion in the first half of 2026, providing a positive indication of future activity for companies involved in exploration, production and related services.
The research house maintained MISC Bhd and Dialog Group Bhd as its preferred sector picks, citing their recurring earnings, diversified operations and exposure to improving industry conditions.
PETRONAS Invests RM41.4 Billion In First Half
PETRONAS recorded total capital investments of RM41.4 billion in the first half of 2026, with downstream operations accounting for RM26 billion, or approximately 63% of the total.
RHB noted that the downstream figure was largely influenced by an additional capital injection into the Pengerang Refining and Petrochemical (PRefChem) joint venture as part of PETRONAS’ transaction to obtain full ownership of the complex.
The research house said upstream expenditure provides a more meaningful indicator of activity for Malaysia’s broader O&G industry.
The 19% increase in upstream investment to RM8.7 billion is expected to support demand for engineering, maintenance, offshore services and other activities linked to oil and gas production.
Five O&G Companies Beat Earnings Expectations
The sector recorded a mixed but generally positive earnings season, with five of the nine companies under RHB’s coverage that reported quarterly results exceeding expectations.
Dialog Group, Malaysia Marine & Heavy Engineering, PETRONAS Dagangan, Sumisaujana and MISC delivered stronger-than-expected earnings.
Meanwhile, PETRONAS Chemicals, Dayang Enterprise, Bumi Armada and Wasco reported results below the research house’s estimates.
RHB attributed the positive earnings surprises to stronger tanker rates, margin recovery and improved project conversion, while weaker project execution, lower utilisation and operational disruptions weighed on other companies.
On a market capitalisation-weighted basis, the research house said the reporting season was skewed positively, with stronger performances from major companies such as MISC, Dialog and PETRONAS Dagangan outweighing earnings disappointments elsewhere.
Oil Prices And Geopolitical Tensions To Support Sector
RHB maintained its Brent crude oil price forecasts at US$89 per barrel for 2026 and US$72 per barrel for 2027.
The research house expects geopolitical tensions to provide near-term support for oil prices, petrochemical prices and freight rates.
MISC remains among its preferred stocks because of its largely contracted liquefied natural gas shipping portfolio, attractive dividend yield and exposure to improving tanker rates and floating production, storage and offloading (FPSO) demand.
However, RHB cautioned that uncertainty surrounding MISC’s potential transaction involving Yinson remains a near-term concern until greater clarity emerges on the deal’s structure and financing.
For Dialog Group, the research house highlighted its recurring income from predominantly take-or-pay midstream operations, healthy tank utilisation and further growth potential from the ongoing Phase 3 expansion of Pengerang Deepwater Terminals.
RHB said the main downside risks to its sector outlook include weaker oil prices, softer energy demand and reduced capital expenditure by O&G companies.
