KUALA LUMPUR (March 18): RHB Investment Bank (RHB IB) has maintained its “overweight” rating of the integrated oil and gas sector, and said despite Petroliam Nasional Bhd (Petronas) expecting lower oil prices for 2024, the research house remains positive on upstream services players.

In a sector update on Monday, RHB IB said sustained activities in this segment should be backed by the national oil company’s capital expenditure (capex) allocation of RM50 billion to RM60 billion (2023: RM52.8 billion), despite the first quarter being a seasonally weak quarter due to the monsoon season.

“We still favour the upstream service providers. Our 2024-2025 crude oil price estimates remain at US$80 (RM377.40)-US$85/bbl,” it said.

RHB IB said its top picks are Dialog Group Bhd, Yinson Holdings Bhd and Dayang Enterprise Holdings Bhd.

The research house said capex spending continued to accelerate in the fourth quarter of 2023 (4Q2023), up 42% quarter-on-quarter (q-o-q), to RM18.4 billion, lifting the 2023 figure to RM52.8 billion (+5% year-on-year or y-o-y).

It said the upstream segment was the largest contributor (51%), followed by the gas business at 18% and Gentari at 12%.

“Domestic capex accounted for 50% of total capex, and surged by 41% y-o-y in 2023 to RM26.2 billion, due to the near-shore floating liquefied natural gas project in Sabah, the Kasawari gas field project, and carbon dioxide sequestration facilities in Sarawak. Petronas has allocated capex of RM50 billion to RM60 billion for 2024 (versus its five-year average annual capex guidance of RM60 billion), of which 20% is meant for decarbonisation and expansion into cleaner energy solutions.

“Its renewable energy capacity in operations and under development increased by 0.5GW q-o-q to 2.9GW (1.6GW being installed capacity), putting it on track to meet the target of 3GW by 2024.

RHB IB said drilling activities should remain solid, similar to maintenance activities.

“Meanwhile, the outlook for the offshore supply vessel market is rosy, as there are still potential improvements in daily charter rates due to tight vessel supply,” it said.