CEO Morning Brief

O&G Counters Rally Amid Reports That Oil Demand Set to Intensify as Early as 2030

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Publish date: Thu, 01 Feb 2024, 10:13 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (Jan 31): Oil and gas (O&G) counters emerged among gainers on Wednesday (Jan 31) due to investors’ buying interest, which may have been spurred by several O&G agencies reporting that oil demand is set to intensify as soon as 2030.

Gains in the O&G counters helped push Bursa Malaysia's Energy Index higher. The index jumped to a three-month high of 895.1 — up 1.81% — on Wednesday, making it the biggest gainer among Malaysian sectoral indices ahead of Real Estate Investment Trusts (0.85%) and Healthcare (0.68%).

Dayang Enterprise Holdings Bhd topped the O&G list and was the fifth top gainer of the day. Its shares climbed to a three-year high of RM2.05 — 16 sen or 8.47% higher than Tuesday’s close — valuing it at RM2.37 billion.

Uzma Bhd was also among the top 20 gainers, after its share price jumped nine sen or 8.26% to RM1.18 — its peak in five years. At RM1.18, Uzma is valued at RM456.93 million.

On Tuesday, Dayang said its wholly owned unit Dayang Enterprise Sdn Bhd’s contract for the provision of maintenance construction and modification for PM8E Seligi oilfields from EnQuest Petroleum Production Malaysia Ltd has been extended for approximately one year and five months until Dec 31, 2024.

Uzma also announced that its 70%-owned unit Malaysian Energy Chemical & Services Sdn Bhd has won a contract from Hibiscus Oil & Gas Malaysia Ltd for the supply of chemicals and related services to the PM3 offshore fields over a five-year period.

Meanwhile, Hibiscus Petroleum Bhd gained seven sen or 2.71% to close at RM2.65. Wasco Bhd shares rose 5.93% to close at a three-year high of RM1.25.

Other O&G stocks that gained are Deleum Bhd (up four sen or 3.74% to RM1.11), Carimin Petroleum Bhd (up three sen or 3.06% to RM1.01), Petra Energy Bhd (up three sen or 2.97% to RM1.04) and Yinson Holdings Bhd (up three sen or 1.18% to RM2.57).

AmInvestment Bank Bhd in its note on Jan 24 said that despite diverging views taken by agencies such as the US Energy Information Administration, the International Energy Agency and the Organisation of Petroleum Exporting Countries regarding the near-term outlook on the O&G landscape, the research firm does not see a significant decline in upstream capex in 2024.

Citing estimates by Rystad Energy, AmInvestment Bank stated that global upstream investments in 2023 is estimated to have closed at US$580 billion (RM2.74 trillion), which was 80% of the peak in 2014.

“We do not see a significant decline in upstream capex from current levels in 2024 given strong news flows on potential Final Investment Decisions (FID) to be made, particularly for assets in the Permian basin as well as deepwater field developments in South America and Africa,” the investment bank stated.

AmInvestment Bank maintained its "overweight" call on the O&G sector, with top picks being Dialog Group Bhd ("buy", fair value [FV]: RM3.46), supported by its resilient non-cyclical tank terminal and maintenance-based operations and highly strategic location in Pengerang, and Yinson Holdings Bhd ("buy", FV: RM4).

Yinson is the primary beneficiary of the floating production, storage and offloading upcycle, said AmInvestment Bank. The research firm also likes Petronas Gas Bhd ("buy", FV: RM19.97), which offers a decent dividend yield of 4.7%.

Source: TheEdge - 1 Feb 2024

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