CIMB Equities Research expects the Malaysian oil and gas sector to see a further increase in activities in 2013 as Petronas boosts its exploration and production activities with local and overseas partners.
It said on Wednesday billions of dollars are being committed to new projects as the national oil company aims to exploit new reserves and strives to get the most from mature and marginal field assets.
The sector started 2013 on a very optimistic note, with an onshore oil discovery in Sarawak and goodies for the marine support players which are enjoying an operational revival.
The research house said in the first two weeks of the new year alone, Perdana and Alam bagged five contracts worth a cumulative RM1.1bn with more in the pipeline.
CIMB Research said in addition to more works for the marine support players, key projects to watch for this year are: 1) EOR, 2) marginal field development, and 3) hook-up and commissioning (see the next sections).
A high oil price backs Petronas's E&P works, and gives it and other producers more confidence to open their wallets. Brent crude oil price is currently hovering at US$112 a barrel and is expected to stay at elevated levels on the optimism that global economic growth will accelerate.
“We understand that an oil price of around US$60/barrel is needed to support marginal field exploration.
“We remain Overweight on the sector with our top picks being PetDag for the big caps and Perisai for the small caps. Also intact are all our stock recommendations, earnings forecasts and target prices.
“PetDag makes it to our list of eight regional high-conviction calls for 1Q13, due mostly to the company's defensive operations and attractive 50% dividend payout ratio with quarterly payments,” said CIMB Research.