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Worst over for Petronas, capex to increase in 2021

KUALA LUMPUR: The worst is over for Petroliam Nasional Bhd (Petronas) despite its weaker performance in 2020 with some analysts expecting its capital expenditure (capex) to recover by about 20 per cent this year.

This would be fuelled by higher oil prices and recovering Malaysian economy, they said.

They added that together with stronger commitment from the Organisation of the Petroleum Exporting Countries + (Opec+) to keep oil prices afloat, successful vaccine rollouts and strong economic recovery from China, this would bolster the local oil and gas firms this year.

Oil and gas stocks were traded higher yesterday as Bursa Malaysia’s Energy Index rose 1.23 per cent or 11.49 points to 943.38 with 595.733 million shares changing hands.

They included Bumi Armada Bhd, Sapura Energy Bhd, Velesto Energy Bhd, KNM Group Bhd, Techna-X Bhd and Hibiscus Petroleum Bhd.

Bumi Armada’s shares gained 7.59 per cent to 43 sen from 40 sen last Friday, on a volume of 169.93 million units.

Sapura Energy’s shares rose 3.45 per cent to 15 sen from 14 sen on Friday, with 107.11 million shares traded.

Velesto added 6.06 per cent to 17 sen from 16 sen at Friday’s closing, with 139.43 million shares traded.

KNM Group’s shares remained unchanged at 20 sen with 101.23 million shares changing hands, while Hibiscus’ rose 0.73 per cent to 69 sen from 68 sen last Friday, with 37.17 million shares traded.

Hong Leong Investment Bank Bhd (HLIB) said Petronas’ capex for the year ending December 31, 2021 (FY21) was likely to recover by 21 per cent to about RM40 billion.

HLIB analyst Low Jin Wu said higher oil prices and the recovering Malaysian economy could support Petronas’ capex.

The firm upgraded its Brent crude oil price per barrel assumption from US$55 to US$60 for FY21 and from US$60 to US$65 for FY22.

It also upgraded the O&G sector call to “overweight” from “neutral”.

Low said the Opec+ commitment to provide a good equilibrium for oil supply and the timeline and efficacy of vaccine rollouts would lead to significantly higher oil demand in the second half of 2021.

“The freezing temperatures in Texas has also affected most shale oil producers in the Permian basin and it could impede US’ future oil supply as it might be an onerous task for shale producers to resume production at full capacity.”

He said the massive under-investments on O&G capex from oil majors like Exxon, Shell and Chevron would lower the future supply of oil.

Petronas announced on Friday a net loss of RM21 billion in FY20 from a net profit of RM48.8 billion recorded in FY19, while group’s revenue during the year slid to RM178.7 billion from RM240.3 billion.

This was largely due to the effects of plummeting oil prices which saw lower average realised prices for all products, along with demand disruption resulting in lower sales volume from processed gas, petroleum products and liquefied natural gas (LNG).

Low believes there should be less pressure for higher dividend payouts from Petronas in FY21 if the Malaysian economy recovered quicker than anticipated.

Petronas had declared RM34 billion dividend for FY20 from RM54 billion in FY19.

Source: NST