Winners – Decommissioning, HWU, offshore installation players
From the recently released Petronas Activity Outlook report, 4 segments are expected to benefit from higher activities in 2021. Petronas estimates to decommission 18 wells in 2021, higher compared to the 15 wells in 2020. Potential beneficiaries include Uzma, Destini, Handal and T7 Global (non-rated). Demand for hydraulic workover units (HWU) is expected to increase to 5 units, higher compared to the average 2 units in 2020, benefiting players like Velesto Energy and Uzma. The amount of offshore installation lifting work in 2021 is set to increase to 12 lifts (from 3 lifts in 2020).
Avoid getting sea-sick and stay on land
In the offshore space, hook up commissioning (HUCC) man hours are expected to decline 20.5% yoy (a reduction from 4.4m in 2020 to an estimated 3.5m), and MCM man hours to fall 9.8% yoy (from 11.2m in 2020 to 10.1m). Companies which fall under this segment include Dayang, Petra Energy, Deleum, Carimin (non-rated), and Sapura Energy. However, onshore plant turnaround activities are expected to increase to 11 facilities (2020: 7 facilities) likely benefiting companies like Dialog and Serba Dinamik (both being listed as a Buy call).
Caution on drillers and fabricators
Outlook for the heavy capex dependent segments like drillers and fabricators are still looking challenging. Jack up rig demand is projected to fall to 10 units (from an average of 11.5 units in 2020) affecting Velesto Energy and Perisai. For the fabricators (Sapura Energy and MMHE), the number of wellhead platform awards are expected to reduce to 6 units in 2021, lower compared to the 7 awarded in 2020, and single CPP awards (similar to 2020). Our current Sell ratings on Velesto, Sapura and MMHE reflect the slow and challenging recovery outlook in these spaces.
Reiterate Neutral rating
We maintain a Neutral on the sector as activities moving into 2021 are still lackluster. Dialog and Serba Dinamik are both our sector preference as they will benefit from higher plant turnaround activities. We recommend that investors stay away from Sapura, Velesto and MMHE given the challenging outlook.
Source: Affin Hwang Research - 4 Jan 2021
Created by kltrader | Jan 03, 2023
Created by kltrader | Sep 30, 2022