The Petronas Activity Outlook (PAO) 2025-27, which was published unusually late this year, offered some interesting new insights. The report provides an outlook across three regions and a clearer distinction between plant turnarounds in the upstream, downstream, and gas segments.

One of the biggest takeaways from this year's PAO is the clear segregation of activity outlook between Peninsular Malaysia, Sabah, and Sarawak for all activities. Previously, this level of segregation was only disclosed for plant turnarounds. As it stands, plant turnaround is the biggest winner, but 2Q25, 2Q26, and 1Q27 are critical periods of execution risk for this subsegment.

For rigs, a new revelation showed that 50% and 20% of Malaysia’s drilling demand is fulfilled by jack-up (JU) and tender rigs, respectively. While the outlook for exploration-stage and JU rigs has been cut, maintenance demand remains largely intact. Additionally, the PAO report revealed a 30% cut in local JU rig outlook, aligning with reductions in exploration wells, although development well drilling remains stable.

The PAO is based on Petronas' long-term oil price projection of US$70–US$80 per barrel. It provides insights into industry trends, demand projections, and Petronas’ forecasted activities across upstream, downstream, gas, maritime, and clean energy businesses for the next three years. Despite changes in exploration activity, Petronas remains committed to achieving 2 million barrels of oil equivalent per day (boepd) in local O&G production, up from 1.7 million boepd in 2024.

The report also supports the view that after the Petronas-Petros saga, exploration and drilling-related contracts will be impacted, but maintenance contracts should remain resilient. This has led analysts to maintain an overweight stance on the O&G sector.

Among the top picks, Dayang Enterprise Holdings Bhd and Dialog Group Bhd are expected to benefit, thanks to their track records in maintenance, strong execution, and solid financials. Dayang, in particular, is seen as a prime beneficiary, holding market leadership in maintenance and a net cash position of RM152.7 million as of Q3 2024. The company is also actively bidding for offshore decommissioning contracts worth RM2.5 billion and is a leading contender for the RM1.1 billion Sarawak package.

However, some analysts have downgraded Bumi Armada to a ‘hold’ rating, maintaining its target price at 65 sen, as valuations have already factored in merger rumors with MISC.

Overall, the O&G sector is expected to show strong earnings momentum in 2025, driven by robust domestic upstream activity. The tight market supply is also creating opportunities for new floating production storage and offloading (FPSO) and offshore supply vessel (OSV) builds in the coming year.