MIDF Research positive on O&G sector following Petronas capex announcement

"We believe the RM60b capex is fair and necessary to minimise the higher cost of having deferred and delayed projects, as well as to support upcoming projects in the remaining 2022, including the allocations for the group's green energy and sustainability initiatives," it said in a note today.

The investment in the oil and gas sector ensures that the production rate is maintained.

Petronas' status as a national oil company, energy security and affordability remain its top priorities, followed by profitability from lower costings and higher efficiency.

"Hence, we believe the recent capex announcement would be an attractive proposition for other sub-companies to recover and improve, through project tenders and collaborations," it added.

However, MIDF Research said it remained cautious on the inflation impact on prices of Petronas' retail sector.

At the time of writing, the price for industrial gas had been nearing parity with global natural gas. Additionally, the risk of fuel subsidiaries being abolished in the current political climate also plays a part in securing continuous demand despite the inflation risk.

Another challenge to Petronas' operations is meeting its sustainability expectations in time.

"On that note, we expect that the price of the benchmark Brent crude oil will average in a range-bound of US$110 per barrel to US$116 per barrel in 2022.

"The range is set as such to cater for the volatility of the market over the Russian sanctions, rising inflation and supply chain disruption, as well as the increase in shipping rate, offset by the possibility of increasing production and supply output towards year-end," it added.