KUALA LUMPUR (Jan 20): Shares of oil and gas-related counters fell this morning after national oil firm Petroliam Nasional Bhd was reported to plan an RM50 billion capital expenditure (capex) cut over four years.

At 9.35am, Icon Offshore Bhd, SapuraKencana Petroleum Bhd, Alam Maritim Resources Bhd, Dayang Enterprise Holdings Bhd, Coastal Contracts Bhd, Perisai Petroleum Teknologi Bhd and UMW Oil & Gas Corporation Bhd lost between 4.05% and 2.67%.

Hong Leong IB Research has maintained its “Neutral” rating on the oil and gas sector and said that in the extreme scenario (all local Capex cut), the implied Capex cut is RM12.5 billion per annum, a significant reduction of circa 20% from its original annual budget of RM60 billion (9M15 CAPEX: RM48.1 billion).

“Bad news for upstream and asset players. We believe asset owners in the rig (UMW Oil & Gas Corporation Bhd, Perisai Petroleum Teknologi Bhd) and OSV (Alam Maritim Resources Bhd, Icon Offshore Bhd, Dayang Enterprise Holdings Bhd, Coastal Contracts Bhd segment would be hit the hardest given their heavy involvement in exploration and production (E&P) activities.

“We believe RAPID is still a ‘go’ given the improving prospects of the downstream industry. However, further delays can be expected with pricing adjustment and project prioritisation adapting to the lower crude oil price.

“Downstream players especially refiners (i.e. Petron Malaysia Refining & Marketing Bhd and Shell Refining Company (Federdation of Malaya) Bhd) would continue to benefit from the crude oil price trend due to improvement in refining margin.

“We remain Neutral on the sector with downside bias,” it said.