KUALA LUMPUR (Jan 13): Macquarie Research sees national oil firm Petroliam Nasional Bhd’s (Petronas) capital expenditure (capex) contracting to RM44 billion in 2015 from RM55 billion last year.

In a report Jan 12, the research house said given the recent directive by the Ministry of Finance to all government linked companies, government statutory bodies and its subsidiaries to stop buying foreign assets, it believed Petronas would refocus on domestic fields and assets, which favours Malaysia oilfields services companies.

Hence, even with a reduced capex, but a refocus on Malaysia, the decrease in the amount of contracts awarded even after considering the fall in oil price, may be less than expected, it said.

Within Macquarie Research's Malaysia oils coverage, only SapuraKencana Petroleum Bhd is involved in upstream production, after the acquisition of Newfield oil and gas fields in Malaysia, in addition to other oilfield services, while the other companies are involved in oilfield services.

“All Oil & Gas (O&G) stocks have been sold down sharply when Petronas stated it would reduce its capex for 2015 by 15%-20% over 2014 in light of the falling crude oil price.

“The negative sentiment is largely focused on future contract wins while investors ignored the existing locked in orderbook for 2015 and 2016 that most O&G stocks in Malaysia, which are oilfield services companies have,” it said.

Among its stock picks, Macquarie Research has an “Outperform” rating on Dayang Enterprise Holdings Bhd at RM2.91 with a target price of RM4.25 and said that the maintenance of existing production assets was critical.

It said Dayang was only involved in hook-up, commissioning and topside maintenance of offshore production platforms, adding that its RM4.2 billion orderbook was until 2018.

“As Petronas delays the development of new fields, the reliance on existing fields to produce becomes more crucial.

“We believe Dayang’s contracts are unlikely to be cancelled or delayed as Petronas cannot afford any unscheduled shutdown in its existing production assets,” it said.

Macquarie Research has an “Outperform” rating on SapuraKencana at RM3.25 with a target price of RM4.80, noting the company's RM26.8 billion worth of orderbook including RM12.6 billion in Brazil in a long-term pipe lay support vessel charter.

It said SapuraKencana’s contracts were mostly in development and production and not exploration and appraisal.

“We believe their contracts secured are unlikely to be cancelled. Their break contract clause is favourable at 75% of contracted value.

"SapuraKencana’s exposure to oil price is through their oilfield in Malaysia which is producing 20,000 barrels per day and its break even oil price is below US$40 per barrel enabling it to remain profitable at low oil price environment,” it said.

At 12.30pm, Dayang fell 3.35% or 9 sen to RM2.60 with 1.2 million shares done, while SapuraKencana lost 2.41% or 6 sen to RM2.43 with 9.78 million shares done.