PETRONAS Capex Cuts Hit Local OGSE Sector as Profits Decline Amid Weaker Oil Prices

KUALA LUMPUR: PETRONAS’ sharp reduction in capital expenditure (capex) during the first half of 2025 has directly impacted Malaysia’s oil and gas services and equipment (OGSE) industry, according to Maybank Investment Bank (Maybank IB).

The national oil company reported group capex of RM17.7 billion, a 31% drop compared with RM25.7 billion in the same period last year. This decline dampened upstream activities and limited new contract opportunities for local OGSE firms. Maybank IB noted that many companies posted weaker corporate earnings in Q2 2025 due to fewer projects and reduced offshore activity.

PETRONAS Capex Cuts

The downturn was compounded by lower Brent crude prices, averaging US$71 per barrel in H1 2025 versus US$83 last year, as well as foreign exchange challenges, with a stronger ringgit at 4.38 against the US dollar compared to 4.73 previously.

PETRONAS’ upstream segment saw a 23% year-on-year drop in profit after tax, while its downstream business slipped into a RM865 million loss, compared to a small RM186 million profit in 2024, due to weaker selling prices and currency effects. Net profit fell 21% to RM24.1 billion, with revenue down 16% to RM132.6 billion.

Maybank IB highlighted Dialog Group Bhd as a top pick, citing strong midstream assets and growth potential in Pengerang Phase 3, while Velesto Energy Bhd is expected to attract investors with dividends exceeding 10% amid healthy cash flows. The bank maintained a “Neutral” call on the sector, forecasting Brent to average US$67 per barrel in 2025.

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