Will Petronas maintain its 2023 capital expenditure at 2022 levels?

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Petronas Expected to Maintain 2023 Capital Expenditure at 2022 Levels

Kenanga Research forecasts that Petronas will sustain its capital expenditure (capex) in 2023 at the same level as in 2022. The upstream oil and gas sector is anticipated to continue receiving the largest portion of this investment. This projection is supported by Petronas' robust financial standing, evidenced by a net-cash position of RM103 billion, which is the highest since the end of the 2018 financial year, further bolstered by prevailing strong oil prices.
Sustained Investment in Upstream Activities

The upstream segment of the oil and gas industry is expected to remain the primary focus for Petronas' capital allocation in 2023. This sustained investment suggests that activity levels within this sector are likely to remain consistent. Companies such as Dayang Enterprise Holdings Bhd and Uzma Bhd are identified as potential beneficiaries, with increased demand anticipated for offshore maintenance, hook-up and commissioning works, and brownfield production activities, respectively.
Strong Financial Position Facilitates Spending

Petronas' substantial net-cash reserves of RM103 billion provide a strong foundation for meeting its financial obligations, including capital expenditure and dividend commitments. This financial strength is seen as sufficient to accommodate potential increases in dividends beyond the originally planned RM35 billion for 2023, which was raised from RM50 billion in 2022. The company's ability to manage these financial requirements is further enhanced by the current favourable oil price environment.
Anticipated 2022 Capex and Q4 Spending Patterns

For the full year 2022, Kenanga Research estimates Petronas' capex to reach RM60 billion. A significant portion of this spending is expected to occur in the fourth quarter, a pattern historically observed for Petronas. Year-to-date in 2022, Petronas had incurred RM27.4 billion in capex, representing a 35 per cent year-on-year increase. For context, the fourth quarter of 2021 alone accounted for 41 per cent of the full-year capex of RM30.5 billion.

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Will Petronas maintain its 2023 capital expenditure at 2022 levels?

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