KUALA LUMPUR (Dec 21): Petroliam Nasional Bhd’s (Petronas) capital expenditure (capex) is estimated to be at RM45 billion to RM50 billion for the financial year ending Dec 31, 2023, with a 20% allocation to clean energy solutions, said RHB Investment Bank Research. 

In a sector update on Wednesday (Dec 21), the research house said the national oil and gas company previously allocated a higher capex of RM60 billion for 2022, as it prepared for the resumption of business activities, which were earlier disrupted by Covid-19-driven movement restrictions, and as the company set aside money for clean energy or non-hydrocarbon-related ventures.

However, RHB said Petronas’ capex spending for 2022 could potentially land below its RM60 billion target, as the cumulative nine-month spending stood at RM27 billion. 

Touching on the latest Petronas Activity Outlook 2023-2025, it said the report suggests that upstream activities will remain robust in 2023. 

“We see more upward revisions for activities in 2023, but more downward tweaks to 2024 projections, due to an overflow of uncompleted jobs this year into 2023, with Petronas remaining fairly prudent in its spending in the longer run. [There will be] greater emphasis on the energy transition, as Gentari is taking a greater role with ambitious targets being outlined,” it said. 

Overall, the research house maintained an "overweight" call on the sector. RHB’s top picks are Dayang Enterprise Holdings Bhd (target price or TP: RM1.28), Yinson Holdings Bhd (RM3.28) and Bumi Armada Bhd (61 sen), with a "buy" call on all three counters.

“On the other hand, what caught us by surprise was a sharp reduction in well decommissioning projections that may not bode well for Uzma Bhd. 

“That said, one possible explanation could be that Petronas is looking to extend the life of wells in order to leverage current high oil prices. This may eventually benefit Uzma, as the company also focuses on brownfield rejuvenation,” said RHB. 

On the Brent crude oil price, RHB kept its projections at US$90 per barrel in 2023, and US$80 in 2024 and 2025. 

At the time of writing, Bursa Malaysia’s Energy Index had ticked up 0.08% to 783.85. Brent crude oil, meanwhile, had gained 16 sen or 0.2% to US$80.15 per barrel.