The regional oil and gas sector was anticipated to remain robust, with expectations of stable oil prices, according to a report by RHB Investment Bank (RHB).
The bank maintained its OVERWEIGHT rating for the sector, citing a favourable outlook for upstream exposure and international diversification. The bank's top picks included Dialog and Dayang Enterprise (DEHB) in Malaysia, PTT Exploration & Production (PTTEP) in Thailand, and Elnusa (ELSA) in Indonesia.
RHB's forecast for Brent crude oil prices remained unchanged at USD88, USD83, and USD80 per barrel for 2024, 2025, and 2026 respectively. The positive economic recovery momentum in key markets such as the US, China, and selected ASEAN economies supported this outlook. OPEC+ compliance was good at 105% in June 2024, with the cartel producing 5% less than required, leading to a theoretical supply deficit of 0.9mbpd in 2024F and 0.3mbpd in 2025F.
In Malaysia, RHB highlighted potential capex cuts by Petronas due to Petronas taking over the buying and selling of natural gas in Sarawak. Starting in the second half of 2024, this transition might impact Petronas's earnings and its ability to spend, despite commitments to pay sizeable dividends to the Federal Government. However, RHB expected a resolution that would not jeopardise existing productions or future domestic investments.
For Indonesia and Thailand, RHB expected higher oil prices of USD90 per barrel in the second half of 2024. ELSA was well-positioned amidst rising exploration activity in Indonesia and higher petroleum demand, with an undemanding valuation of 0.7x P/BV and a decent ROE and earnings growth. PTTEP remained the preferred pick in Thailand, with a strong medium-term outlook and a projected 5% CAGR in sales volume from 2024 to 2028.
RHB's recommendation for investors was clear: consider stocks with upstream exposure and international diversification, particularly Dialog, Dayang Enterprise, PTTEP, and Elnusa. These companies were well-positioned to benefit from the stable oil prices and growing global demand for oil and gas.