Published: Friday March 8, 2013 MYT 11:28:00 AM

AmResearch maintains overweight on O&G sector

KUALA LUMPUR: AmResearch is maintaining an Overweight call on the oil and gas (O&G) sector with Buy calls for SapuraKencana Petroleum, Bumi Armada, Dialog Group and Alam Maritim due to the multiple flows of contracts this year.

It said on Friday it expects Petroliam Nasional (Petronas) to ramp up its capital expenditure over the next three year and this would see a pick up in contracts.

On Thursday, Petronas' FY12 net profit fell 17% on-year to RM49bil despite relatively flat revenues due to higher operating costs and impairment losses on property, plant & equipment largely in Egypt.

Excluding the RM1.5bil gains on the listing of Gas Malaysia, the disposal of equity stakes in Centrica Plc and APA Group, Petronas' FY12 core net profit still contracted 16% on-year to RM48bil.

Petronas' 4Q2012 capital expenditure rose by 18% to RM14bil, which caused 2012 capex to rise 11% on-year to RM46bil.

“But this was still far short of the expected average RM60bil annually for 2011-2015, for Petronas were to remain on track of its projected spending of RM300bil within the next three years,” said the research house.

AmResearch said for the group to achieve its earlier capex targets, Petronas would need to ramp up its spending by 56% this year to RM71bil annually over the next three years.

It expected the pace of contract rollouts to reignite this year, underpinned by the affirmation from Petronas' president and chief executive officer Tan Sri Shamsul Azhar Abbas that the group will focus on ramping up domestic production this year.

“Since the beginning of the year, the total contracts awarded to industry players have already reached RM4.2bil, a 4.4 times rebound from RM972mil in 4Q2012,” it said.

AmResearch said these include the RM2.4bil Malikai tension leg platform production facility for the joint venture between Malaysia Marine & Heavy Engineering Holdings and Technip and over RM1bil of marine charter contracts awarded to Alam Maritim Resources and Perdana Petroleum.

“In 1H2013, we expect the award of the 3 blocks of RM8bil-RM10bil umbrella tender for hook-up, construction and commissioning works, delayed from 4Q2012.

“In 2H2013, the rollout of the second phase of the North Malay basin gas cluster project, which will involve a large central processing platform at the Bergading field and multiple satellite well-head platforms, should sustain the re-rating momentum,” it said.

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