"Global upstream capex could hit a new high of US$410 billion (RM1.2 billion) this year. Petronas' five-year capex target is RM250 billion, translating into annual capex of RM50 billion, which would be a new record," it said in a note.
Although Petronas did not disclose the segmental breakdown for its planned capex, CIMB Research expects 64 per cent of it, or RM32 billion would go into exploration & production activities. The spending will benefit the broader sector, but drillers and fabricators will be the big winners.
The research house said the recently-concluded first quarter 2011 reporting season saw the sector's best performance since he fourth quarter 2008 when it started its quarterly reviews.
"For the first time, all stocks met or beat our expectations. We remain overweight on the sector and maintain all our stock recommendations, earnings forecasts and target prices.
"The Economic Transformation Programme newsflow is a potential rerating catalyst for the sector, along with more contract awards," it said.
SapuraCrest remains CIMB Research's top pick. Its massive RM13 billion order book is second to none and will sustain the company for the next four years, it said.
The research house said despite a healthy first quarter performance earnings-wise, the share prices of oil and gas stocks in its coverage had edged up an average of only 1.6 per cent since the results season started on May 3, tracking the 1.3 per cent uptick in the FBM KLCI.
This is attributed to profit-taking as the share prices had risen by an average of 23 per cent year-to-date, which is well above the FBM KLCI's two per cent.
"All the oil and gas stocks in our portfolio, with the exception of Petra Perdana, have outperformed the FBM KLCI since the start of the year.
"Dialog is the star performer, outpacing the benchmark index by a whopping 54 per cent. Our newest coverage Perisai came in second with a 38 per cent outperformance, followed by Petronas Dagangan at third place with 37 per cent," it said.