The Petronas Activity Outlook (PAO) 2025-27, which was published unusually late this year, offered interesting new insights this time.
In the report, there is an activity outlook across three regions and clearer plant turnaround distinction between upstream, downstream and gas segments.
The biggest insight however, is probably a clear segregation of activity outlook between Peninsular Malaysia, Sabah and Sarawak for all activities.
Previously, this segregation was only revealed for plant turnarounds.
As it is, plant turnaround is the biggest winner but 2Q25, 2Q26 and 1Q27 are critical periods of execution risk for this subsegment.
For rigs, a new revelation disclosed that about 50%/20% of Malaysia’s drilling demand is fulfilled by jackup (JU) and tender rigs respectively.
Although there are cuts in exploration-stage and jack-up (JU) rig outlook, maintenance demand is largely intact.
For rigs, a new revelation disclosed that about 50%/20% of Malaysia’s drilling demand is fulfilled by jackup (JU) and tender rigs respectively.
The PAO report is based on Petronas's long-term oil price projection of between US$70 and US$80 per barrel.
The PAO report provides insights into industry trends, demand projections, and Petroliam Nasional Bhd’s forecasted activities for the next three years, covering its upstream, downstream, gas, maritime, and clean energy businesses.
Petronas remains committed to achieving 2m boepd in local O&G production versus 1.7 million barrels of oil equivalent per day in 2024.
Essentially, the new PAO aligned with the view that after the Petronas-Petros saga, exploration and drilling-related contracts will be adversely affected, but contracts focusing on maintenance should be resilient.
Indeed, outlook for local JU rigs was severely cut by 30%, consistent with some cuts in exploration wells while development well drilling outlook is intact.
Most analysts are overweight on the O&G sector.
Among the top picks for the sector, Dayang Enterprise Holdings Bhd and Dialog Group Bhd stand to benefit, given their track records in the maintenance space, solid execution, and strong financial position.
Dayang was seen as a prime beneficiary, supported by its market leadership in the maintenance sector and solid financial footing with a net cash position of RM152.7mil as of the third quarter ended Sept 30, 2024.
Dayang is also well-positioned for onshore maintenance and is actively bidding for offshore decommissioning contracts worth RM2.5bil. It is a leading contender for the RM1.1bil Sarawak package.
However, some analysts have downgraded Bumi Armada to ‘hold’ at an unchanged target price of 65 sen, as valuations had benefited sufficiently from the merger rumour with MISC.
The O&G sector is expected to show strong earnings momentum this year driven by robust domestic upstream activity.
The tight market supply also presents opportunities for new floating production storage and offloading and offshore supply vessel builds in 2025.