KUCHING: Petroliam Nasional Bhd’s (Petronas) Activity Outlook for 2020-2022 has garnered positive views, with analysts noting that it should give assurance of maintained elevated upstream activities, thus benefiting a slew of local names.

According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), the takeaways from Petronas Activity Outlook 2020-2022 were mostly positive with Kenanga Research comforted that upstream activity levels will stay mostly elevated from 2019 levels.

“Summarising our read-through, we are positive on the activity outlook, and feel comforted that upstream activities would continue to stay elevated from the surge in 2019. Most of the upstream value chains are expected to see approximately maintained activity levels as in 2019, with several of them anticipated to see a surge,” Kenanga Research said.

More specifically, the research arm identified that the biggest rise in activities would come from offshore fabrications, especially for wellhead platforms (WHP), which almost saw a doubling in number of projects and marine vessels, which are expected to see a rise in demand for anchor handling tug supply (AHTS), platform supply vessels (PSVs), straight supply vessels (SSVs) and other forms of support vessels.

It also noted that rise in activities would come from maintenance, construction and modification, which is expected to see a peak in man-hours for 2020 despite a strong year in 2019.

“Meanwhile, most of the other value chains are expected to see maintained activity levels as in 2019. Notably, drilling – jack-up demand is expected to remain at approximately 16 rigs, hook-up and commissioning flattish at approximately 4.6 million man-hours and decommissioning – is expected to see a slight dip in number of wells for 2020, before a surge in 2021.”

Kenanga Research identified big winners from Petronas’ Activity Outlook to include fabricators such as Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) and Sapura Energy Bhd (Sapura Energy) which are set to benefit from the surge in numbers of WHPs while marine vessel providers, for example, Perdana Petroleum Bhd, Alam Maritim Resources Bhd, Icon Offshore Bhd and Coastal Contracts Bhd (Coastal Contracts), are to benefit from the huge rise in offshore support vessel (OSV) demands.

As for offshore maintenance players, the research arm noted that Dayang Enterprise Holdings Bhd and Carimin Petroleum Bhd will continue to enjoy increased maintenance, construction and modification (MCM) work orders.

Meanwhile, Velesto Energy Bhd, which rig fleet are currently fully chartered out, is expected to continue to enjoy high utilisation rates amidst sustained drilling rig demand.

All in, Kenanga Research maintained ‘neutral’ on the oil and gas sector, given limited upsides on large-cap Petronas-related counters, albeit with increased sanguinity within the service and equipment providers.

“If anything, we believe this latest Petronas Activity Outlook 2020-2022 should give assurance of maintained elevated upstream activities, thus benefiting a slew of the local names. As for stock picks, with most of them having seen strong year to date (YTD) gains, we see laggard-play angle in some fabricators such as MHB and Sapura Energy, which are still trading at discounted valuations despite multi-year’s high order-books.”

Meanwhile, for OSV players, the research firm preferred Coastal Contracts given that it has the healthiest balance sheet within the sub-segment.

Sources: Borneo Post Online