Wednesday, September 15, 2010

HDBSVR positive on macro outlook of O&G

KUALA LUMPUR: Hwang DBS Vickers Research remains positive on the macro outlook of the oil & gas industry.

It said on Wednesday, Sept 15 that accelerated contract awards, improving visibility on pipeline of projects, and impending listing of several oil & gas big names (for example MMHE and Petronas Chemicals) are key catalysts to put the industry back in the limelight.

'Our top picks for the oil & gas sector are Dayang Enterprise (TP: RM3.00; beneficiary of contract flows) and Perisai Petroleum (TP: RM0.70; strong contender for local deepwater jobs),' it said.

Acceleration of contract awards may just be what that is needed to revitalize the industry. A clear visibility of major oil & gas contracts (e.g. RM1.2 billion maintenance contracts) in the pipeline should chart the industry's next growth chapter, and recent award of SOGT contract may just kick off the start of more local contracts.

Hwang DBS Vickers said the Malaysia deepwater development story is enfolding with PETRONAS recently agreed to take delivery of two drillships in September and November.

However, it believes one key hurdle to the progress of local oil & gas companies hinges on lack of communication with Petronas on its development plans.

'At this juncture, we see very limited engagement between Petronas and the local companies, which we think impedes the growth of local companies. We are of the view that an active dialogue would give local companies ample time and opportunity to carry out necessary groundwork for future development undertakings,' it said.

Local companies are keen to tap on the potential of Malaysia's deepwater projects. However, the high capital investment outlay needed to acquire asset and TECHNOLOGY [] deterred most from venturing aggressively.

"We believe that fiscal incentives, such as capital allowances or tax credits on value-added assets and technology investments would help encourage local companies to move up the value chain," it said

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