KUALA LUMPUR (Aug 17): Oil and gas service providers such as Sumatec Resources Bhd and Bumi Armada Bhd declined after Petroliam Nasional Bhd (Petronas) announced that only 14 of its oil rigs will be in operation by year-end.

This compared with 39 as at end 2014 due to a persistently low crude oil price environment.

As at 11.04am, Sumatec was the tenth most active stock, fell 1 sen or 11% to 12 sen with 19 million shares changing hands. Meanwhile Bumi Armada slipped 5 sen or 5.26% to 90 sen, with 8.03 million shares changing hands.

SapuraKencana Petroleum Bhd also fell 13 sen or 6.74% to RM1.80.

AmResearch oil and gas analyst Wong Joe Vuei said in a note today that he expects the operating environment for offshore support vessels to remain slow, given the slowdown of contract flows.

“Charter rates have also softened given the overcapacity, especially for lower bhp (brake horsepower) vessels. While works in the existing production fields will remain relatively unaffected, we see muted growth prospects against the backdrop of a slowdown in upstream activities,” he said.

The research house prefers established companies that are exposed to the production phase with long-term service contracts and recurring income, as these are less sensitive to the oil price fluctuations.

“We maintain our ‘neutral’ view on the sector with ‘buy’ calls on Yinson Holdings Bhd,” said Wong, adding that UMW Oil and Gas Corp Bhd will remain unaffected in the near term as its two rigs under contract with Petronas Carigali is on a term charter.

Brent crude oil is 1.22% lower at US$48.59 per barrel.