Kuala lumpur: Kenanga Investment Bank Bhd (Kenanga IB) has reported that the newly released Petronas Activity Outlook for 2026-2028 maintains a largely neutral stance regarding the upstream services sector, primarily due to the ageing vessels and rig supply in the local market.
According to BERNAMA News Agency, Kenanga IB noted that while the rig and offshore support vessel (OSV) undersupply dynamics will somewhat counterbalance the predicted decline in activities compared to the previous outlook report from last year, the overall sentiment remains cautious. The investment bank stated, "We maintain our neutral call on the sector despite Petronas' weaker forward guidance. Upstream service providers' valuations have largely been priced in. The overall subsector's balance sheet is in a much better shape versus previous cycles, and the risk of asset impairment is low."
Kenanga IB anticipates a significant increase in exploration activities by 2026, which could present more opportunities for service providers like Dayang Enterprise Holdings Bhd, Velesto Energy Bhd, and Keyfield International Bhd in the subsequent years. Nonetheless, the guidance for upstream maintenance, drilling, and OSV requirements has diminished for 2026 when compared to the 2025-2027 outlook, indicating a potential downturn in activities.
On the other hand, Hong Leong Investment Bank (HLIB) expressed optimism about the 2026-2028 report's outlook on hook-up and commissioning activities, predicting that plant maintenance providers will emerge as the primary beneficiaries, whereas drilling rig players might experience reduced activities this year. HLIB highlighted that this scenario could pose slight challenges for Dayang's topside maintenance operations, although the robust hook-up and commissioning activities are expected to favor contractors with a strong focus on such works, including Deleum Bhd.
HLIB also identified Malaysia's prominent pipe-coating player, Wasco Bhd, as a potential benefactor from the anticipated surge in activity once projects reach the execution stage. The bank further mentioned that turnaround activities are expected to remain vigorous in 2026, largely due to increased activity at facilities in Peninsular Malaysia and East Malaysia, especially in larger-scale turnarounds necessitating over 350,000 manhours. Conversely, gas plant turnaround activities appear to be on a downward trend.
Additionally, the report indicated that Petronas has projected a relatively stable OSV demand of 106 vessels annually from 2026 to 2028, a decrease from the higher OSV utilization levels observed in 2025. HLIB remarked, 'We believe OSV demand is likely to remain muted in 2026, amid softer upstream activity levels, partly impacted by the ongoing Petronas-Petros dispute, and softer oil price environment.' Consequently, fleet utilization is expected to decline for OSV operators such as Keyfield and Perdana Petroleum, with daily charter rates anticipated to drop in 2026.