KUALA LUMPUR (Mar 1): Performance of oil and gas (O&G) counters on the FBM KLCI this morning seemed relatively unfazed by the announcement of up to RM 20 billion in capital expenditure, as well as operating expenditure cuts in 2016 by national oil company Petroliam Nasional Bhd.

At 10.18 am today, SapuraKencana Petroleum Bhd shares were up 1 sen (0.53%) to RM1.91, Dialog Group Bhd was up 1 sen (0.64%) to RM1.58, UMW O&G Corp Bhd was up 0.5 sen (0.52%) to 96.5 sen, Bumi Armada Bhd was up 1.5 sen (1.55%) to 98 sen, Yinson Holdings Bhd was down 1 sen(0.35%) to RM2.81, Uzma Bhd was unchanged at RM1.69, Malaysia Marine and Heavy Engineering Holdings Bhd was unchanged at RM1.01 and KNM Group Bhd was unchanged at 46 sen.

Hong Leong Investment Bank (HLIB) Research, which had a neutral call on the sector, opined upstream-related service players — including rig, offshore support vessel, installation and fabricator — would be adversely affected by the situation, with more cost cuts expected to feed into their existing contracts.

“Asset-heavy players (jack-up rig & OSV) remain as the most exposed to this development, due to their high fixed cost structure which is difficult to be adjusted downwards in short span of time.

“We still prefer floating production, storage and offloading (FPSO) players in view of robust FPSO contract terms, and downstream fabrication players on expectations of newsflow in the downstream sector,” said HLIB Research in its note today.

CIMB Research, which also had a neutral call on the O&G sector, advised investors to be selective in stock-picking.

“We believe that there are still companies within the industry that should still do relatively better, compared to their peers in the challenging industry environment; our top picks are Bumi Armada Bhd for upstream big caps, Uzma Bhd for upstream small caps and Dialog Group Bhd for downstream,” said the research firm in its note today.