O&G sector earnings weakness to persist in 2Q
PETALING JAYA: Local companies involved in the oil and gas services and equipment (OGSE) industry could see lower offshore activities and jobs.
This follows the shift in Opec's policies, which may result in lower capital expenditure (capex) anticipated from oil majors.
Coupled with softer outlook displayed by oil & gas (O&G) companies during the recent first quarter of 2025 (1Q25), Maybank Investment Bank (Maybank IB) Research has downgraded the sector to Neutral from Positive.
"Our Brent crude oil price assumption was also lowered to US$67 per barrel for 2025, from US$70 in our earlier May 6 report," the research firm said.
The research firm said most O&G companies under its coverage met expectations but it expects softer outlook ahead.
"Out of six Malaysia O&G stocks under coverage, Velesto Energy Bhd 's results came in above expectations due to higher-than-expected net margins driven by lower depreciation and cost optimisation initiatives.
Bumi Armada Bhd missed expectations due to a recognition of a penalty to UK-based EnQuest due to certain asset specification issues. Results for other companies came in within expectations," it added.
It noted that daily rates for renting rigs have peaked due to a higher rig supply as Saudi Arabia terminated over 20 rigs amid capex rationalisation programme by oil company Saudi Aramco.
According to Maybank IB this was indicated in Velesto's updated rig schedule and its recent job wins in Vietnam & Indonesia.
Meanwhile, it said Keyfield International Bhd and Perdana Petroleum Bhd stated subdued offshore activity and charter projects delayed in 1Q25 as compared to a year ago. This is a signal of softer operating environment ahead, said the research firm.
There could be potential cuts to Petroliam Nasional Bhd (PETRONAS) spending due to the dispute between the former and Sarawak's Petros over the role of gas aggregator in Sarawak. In addition, lower crude oil prices could deter aggressive capex spending in general.
Similarly, CIMB Securities lowered its sector rating to Neutral from an Overweight. Following the earnings weakness in 1Q25, it has revised 2025 sector core net profit growth forecast to -7.8% year-on-year, from +0.9% previously.
"This suggests a reset to a lower earnings base, reaching a fresh low in the sector's declining earnings trend observed since 2021.
"We anticipate earnings recovery to be gradual, constrained by structural challenges and company-specific headwinds," added CIMB.
Where stocks are concerned its likes MISC Bhd for its stable earnings, backed by long-term contracts across its gas, petroleum, and offshore segments, as well as full earnings contribution from FPSO Mero 3 in 2025.
The other stock it favours is Dialog Group Bhd , which has strong growth potential in Pengerang, Johor.
It said the group has stable recurring income from storage terminals, with utilisation rates above 90% and spot rates of around SG$6.50 per cubic metre.
There is also a potential turnaround in the group's engineering, procurement, construction, and commissioning (EPCC) and maintenance segments from the first half of financial year 2026 onwards.
Dialog's valuation is also attractive at 20.1 times price-to-earnings, which is about 1 standard deviation below the 10-year mean of 28.1 times.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Star
2 hours ago
- The Star
Hygiene woes swamp Gelang Patah
Pandak at the state assembly sitting raising his constituents' concerns about safety and cleanliness. LACK of cleanliness and the presence of foreign workers in shoplots in Gelang Patah can tarnish the area's image, says a Johor assemblyman. Speaking at the state assembly sitting, Datuk Pandak Ahmad (BN-Kota Iskandar) said quick action was needed to ensure the area remained clean, safe and comfortable for residents. 'Many of the three-storey shophouses near an industrial park in Tanjung Pelepas, Gelang Patah, have been turned into foreign workers' accommodation. 'The area could be labelled as a 'little Bangladesh town' due to the presence of these foreigners. 'Some of these foreigners are even operating sundry shops without valid licences,' Pandak said in his speech during the debate session of the state assembly meeting at Bangunan Sultan Ismail in Kota Iskandar. He expressed hope that the Labour Department, Iskandar Puteri City Council and related agencies would address these issues because rubbish strewn in the back alleys of the shoplots had become a common sight. Separately, Tan Eng Meng (BN-Pekan Nanas) in his speech thanked the state government for not sidelining Pontian in development plans. He was glad that serious attention had been given to districts such as Pontian, where his state constituency is located, rather than just focusing on economic developments only in areas such as Iskandar Malaysia and Pengerang. 'One of the significant developments in Pontian is the Tropicana Industrial Park in Pekan Nanas, involving a major investment of RM2bil by Alton Industry Ltd Group. 'This development will create new job opportunities for locals and strengthen the industrial sector that forms the backbone of the district's economic development. 'In fact, the presence of this new facility, which functions as a research and development hub, marks a major leap for Pekan Nanas,' said Tan. Alton is a US-based global supplier of consumer and commercial tools, appliances and floor care. Tan pointed out that the project had opened up vast opportunities for local talents to develop their potential in the high-tech field, which was becoming increasingly vital.
The Star
3 hours ago
- The Star
Oil settles lower on new Iran-related sanctions
Brent crude futures settled down US$1.84, or 2.33%, to US$77.01 a barrel. US West Texas Intermediate crude for July was down 21 cents, or 0.28%, at US$74.93. HOUSTON: Oil prices settled down on Friday as the US imposed new Iran-related sanctions, marking a diplomatic approach that fed hopes of a negotiated agreement, a day after President Donald Trump said he might take two weeks to decide US involvement in the Israel-Iran conflict. Brent crude futures settled down US$1.84, or 2.33%, to US$77.01 a barrel. Billed as RM9.73 for the 1st month then RM13.90 thereafters. RM12.33/month RM8.63/month Billed as RM103.60 for the 1st year then RM148 thereafters. Free Trial For new subscribers only
Borneo Post
3 hours ago
- Borneo Post
Registration still open for Export Day Sarawak 2025 at Imperial Hotel Kuching
According to the organiser, the Sarawak Ministry of International Trade, Industry and Investment (Mintred), the deadline for registration is June 30. — Bernama photo KUCHING (June 21): Registration is still open for Sarawak-based entrepreneurs to participate in the Export Day Sarawak 2025, which will take place at Imperial Hotel here on July 2-3. The event will run from 8.30am till 5.30pm daily, with free admissions for all Sarawak micro, small and medium enterprises (MSMEs). According to the organiser, the Sarawak Ministry of International Trade, Industry and Investment (Mintred), the deadline for registration is June 30. 'Are you a Sarawak-based entrepreneur ready to take your business global? Join us at Export Day Sarawak 2025, a two-day event designed to empower Micro, Small and Medium Enterprises (MSMEs) with the knowledge, tools, and connections needed to succeed in international markets,' said the ministry in a statement yesterday. Participants can gain insights into export readiness strategies, trade finance options for MSMEs, leveraging free trade agreements (FTAs), logistics support, pricing strategies and legal compliance. The programme also covers advice on Environmental, Social and Governance (ESG) practices for sustainable exports and the use of digital platforms for market expansion. In addition, the event will feature the unveiling of real success stories from Sarawak exporters and a town hall session with Deputy Premier Datuk Amar Awang Tengah Ali Hasan, who is also the Minister of International Trade, Industry and Investment. The event is organised by Mintred in collaboration with Invest Sarawak and the Malaysia External Trade Development Corporation (Matrade), with strategic partners including Affin Bank, Maybank, Redly Express, Malaysian Green Technology and Climate Change Corporation (MGTC). The ministry said participants must attend both days to receive an e-certificate. Confirmation of participation will be emailed to successful applicants. Interested MSMEs are encouraged to register early to secure their spot by clicking the link: Export Day Sarawak 2025 Imperial Hotel lead registration
