Petronas faces a broad split among analysts on its 2025 capital expenditure plans as the national oil company navigates a mix of market headwinds, restructuring moves, and evolving agreements with Petros and Sarawak. With no formal guidance issued yet on 2025 capex, the debate centers on whether Petronas will scale back spending to around RM43 billion—a roughly 20% reduction—or maintain capex at or above the RM50 billion mark. Market observers weigh the implications of a potential spending pullback against expectations of continued maintenance investments, production optimization, and the company’s longer-term growth priorities. The discussion unfolds against a backdrop of Petronas’ 2024 results, a weaker earnings base, and shifting cash allocation that will frame how aggressively the company can fund its core operations, dividends to the government, and strategic initiatives under the PAO 2025-2027 framework.
Analysts’ divergent views on Petronas’ 2025 capex
Analysts are divided over whether Petronas will markedly reduce its capex in 2025 or hold steady despite macro headwinds and internal restructurings. One prominent view comes from RHB Research, which signaled a possible 20% reduction in Petronas’ capex target for 2025, projecting a level around RM43 billion. The rationale posits that the company may recalibrate spending in light of uncertainties surrounding the work arrangements between Petros (Petroleum Sarawak Bhd) and Petronas, as well as the broader environment for upstream and gas development activities. This perspective suggests a cautious approach to investment spending, with a focus on sustaining production and cash flow while deferring non-core or high-risk projects where possible. RHB underscored that there remains no formal capex target guidance for this year, which makes the path to 2025 spend contingent on a number of evolving variables and strategic discussions that have not yet been fully disclosed to investors. In this scenario, the emphasis would be on maintaining a lean but efficient capital program that preserves operating cash flow generation and supports the company’s dividend objectives and balance sheet strength.
In contrast, some analysts advocate for a more resilient capex trajectory, arguing that Petronas could retain a capex level of RM50 billion or higher. This view contends that the company will need to continue funding production maintenance and development to preserve output levels, especially if Sarawak’s gas aggregation arrangements undergo changes that could erode other revenue streams. Supporters of the higher capex hypothesis highlight the importance of sustaining upstream activity and gas projects, which underpin Petronas’ long-term production profile and its ability to fund dividends and strategic initiatives, including domestic and international energy transition projects. They also point to the company’s healthy balance sheet and operating cash flow as capable of supporting a steady to elevated investment pace, even in a tougher price environment. The debate remains unsettled because the market is digesting a complex mix of policy signals, partnership risk with Petros, and evolving domestic gas dynamics in Sarawak.
The broader context includes the company’s half-year results, in which Petronas reported that earnings declined year over year, with Net Profit hitting RM55 billion for the period analyzed and EBITDA showing a meaningful decline. The drop was driven by weaker average selling prices, asset write-offs, and higher tax costs, highlighting how pricing pressures and asset-level impairment considerations could influence the financial capacity for capital deployment in the near term. The results also show that Petronas paid RM32 billion in dividends to the government for FY2024, down from RM40 billion in FY2023, signaling a shift in capital allocation priorities that may influence capex planning and the potential for more conservative payout trajectories if market conditions deteriorate. The company’s net cash position tightened to RM93 billion at the end of 2HFY2024, reflecting the impact of capex and dividend payments on liquidity, despite some improvement in operating cash flow on a semiannual basis. These dynamics frame how much flexibility Petronas has to adjust capex while pursuing dividend sustainability and investment in strategic initiatives.
The market is also noting the breakdown of capex in 2HFY2024, where capex reached RM28.5 billion, up 11% from the prior half-year but down 9% year over year, culminating in a FY2024 total of RM52.8 billion, a 3% rise year over year. The upstream segment remained the largest single contributor to capex, accounting for about 52% of investments, with gas contributing 21%, Gentari 9%, and downstream 7%. This distribution underscores the persistence of upstream and gas as the primary engines of Petronas’ investment cycle, even as the group explores expansion in other segments tied to energy transition and downstream optimization. The mix also reveals that the company’s capex strategy is not solely about sustaining production but also about maintaining a diversified asset base that can support long-term value creation and resilience in the face of fluctuating commodity prices and evolving regulatory landscapes.
Kenanga Research, offering a more balanced view, expects Petronas to maintain capex at RM50 billion or higher, arguing that the company will continue funding production maintenance and development even if Sarawak’s gas aggregation income faces potential losses. Their assessment suggests that the headwinds from reduced gas aggregation revenue, anticipated to be no more than RM10 billion, are manageable enough not to necessitate an abrupt capex cut. They also flagged the sustainability of Petronas’ RM32 billion dividend to the government, anchored by a robust operating cash flow of about RM102 billion in FY2024. Kenanga notes that while the specifics of the gas aggregation agreement remain undisclosed, the loss of Petronas’ gas aggregation role to Sarawak appears to be priced into the stock to a degree. The brokerage’s perspective aligns with a cautious but constructive stance that the market may have priced in some degree of capex normalization, allowing for a measured stance on 2025 investments.
From an analyst lens, the implications of capex direction for 2025 extend beyond the headline spend figures. A reduction of roughly RM5 billion to RM10 billion, depending on which scenario materializes, could align with a broader market expectation of tighter capex cycles across the sector while preserving the ability to fund ongoing maintenance and select growth projects. The market has already reflected some of this thinking: the KL Energy Index has fallen significantly since its mid-2024 peak, suggesting investors anticipate a softer capex impulse and a scaled-back expansion plan. This market backdrop informs how investors price in Petronas’ stock and related Malaysian oil and gas equities, including the implications for firms with exposure to upstream, offshore services, MCM/HUC activities, and related segments.
Analysts have also highlighted that Petronas’ strategic priorities will likely involve workforce rightsizing as a means to enhance efficiency and productivity. A mid-year push to optimize the workforce is anticipated as part of broader organizational changes designed to improve operating performance. In parallel, Petronas’ PAO 2025-2027 remains a critical framework shaping capex guidance and activity outlook. The PAO outlines the expected activity levels and spending guidance, providing the market with a lens to evaluate the sector’s near-term trajectory. The reduction in overall spending guidance observed in recent activity outlooks is not unexpected given the scale-back in some project portfolios and the need to align investments with cash flow realities and risk exposure. Analysts emphasize maintaining a prudent approach while ensuring that essential maintenance and key growth initiatives remain funded to protect long-term value and production resilience.
Ultimately, the divergent views on 2025 capex reflect a mix of risk assessments about Petros’ impact on Petronas’ operations, Sarawak’s gas arrangements, and the likelihood that the company will balance the need for maintenance with selective growth investments. The coming weeks and months will likely bring clarity as Petronas releases more detailed guidance or color on its capex plan, the PAO 2025-2027 framework, and any policy decisions that affect domestic gas operations and cross-border energy commitments. In the meantime, investors should prepare for a wide band of potential capex outcomes, with hedged expectations and a focus on cash flow stability, dividend sustainability, and the potential for selective investments that anchor Petronas’ long-term value proposition.
Petronas’ 2024 results: earnings, cash flow, and dividends
Petronas’ latest half-year results paint a picture of a company navigating a softer price environment and higher costs, translating into a material decline in earnings compared with the previous year. Net profit for the reported period fell by about 32% year over year, landing at RM55 billion, while EBITDA declined by approximately 22% over the same comparison. The drivers behind these declines include weaker average selling prices, asset write-offs, and higher tax expenses, which collectively dampened the bottom line despite any ongoing operational strength in certain segments. These earnings dynamics have important implications for how the group allocates capital going forward, including capex budgets, dividend policy, and strategic investments in newer growth avenues tied to energy transition and downstream optimization.
In parallel with the earnings deterioration, Petronas’ cash allocation to the government as dividends remained a central element of its capital distribution framework. For FY2024, the company paid RM32 billion in dividends to the Malaysian government, down from RM40 billion in FY2023. This reduction in dividend size reflects a combination of factors, including the broader earnings base and the desire to preserve liquidity for other corporate needs, such as sustaining a robust capex program and maintaining a strong balance sheet. The interplay between dividends and capex is critical because it signals the company’s willingness to allocate cash toward ongoing investments while fulfilling its government-sharing obligations. Investors will scrutinize how this balance evolves in the face of potential capex reductions and ongoing financial pressures.
Petronas’ net cash position also deteriorated during 2HFY2024, slipping to RM93 billion on a half-year basis. The decline was driven by the twin pressures of capex outlays and dividend payments, compounded by weaker operating cash flows relative to the prior period. The cash flow story, however, remains complex: while cash flows from operations improved by 13% quarter-over-quarter, they showed an 18% year-over-year decline. This indicates some volatility in annual operational cash generation, but the company continued to invest in its asset base and other strategic initiatives. The combination of a tighter cash position and ongoing capital expenditure plans underscores the need for careful budgeting and prioritization of projects with the highest return potential, as well as a thoughtful approach to sustaining or adjusting the dividend while maintaining financial flexibility.
At the project execution level, Petronas’ capex tempo in 2HFY2024 reached RM28.5 billion, representing an 11% increase from the previous half-year period but a 9% decline year over year. This pattern lifted the total for FY2024 to RM52.8 billion, a modest 3% year-over-year increase. The distribution of capex across the company’s segments provides insight into the operational focus areas: the upstream segment remained the largest contributor, accounting for 52% of capex, followed by gas at 21%, Gentari at 9%, and downstream at 7%. This allocation highlights Petronas’ emphasis on sustaining upstream production while continuing to invest in gas-related assets and certain downstream and energy transition opportunities. The segmental breakdown also offers clues about where the company expects returns to come from in the near to mid-term, including the potential for continued growth in gas and downstream segments even as upstream remains the dominant driver of capital expenditure.
The results and the capex profile have downstream implications for related Malaysian oil and gas players and the broader market ecosystem. The combination of lower earnings, reduced dividend payouts, and a disciplined capex approach can influence liquidity, project activity, and the viability of ancillary services and supply chain players tied to Petronas’ capital program. Investors and analysts will be watching for how the company navigates the dual objective of maintaining cash flow and preserving the industrial base that supports Malaysia’s oil and gas sector, particularly in areas like maintenance services, offshore operations, and the supply chain for capex-driven projects. The results also add to the broader narrative about the country’s energy security strategy and how Petronas’ financial posture aligns with the government’s fiscal and economic priorities in a challenging commodity environment.
Capex by segment: upstream, gas, Gentari, and downstream
Petronas’ capital expenditure by segment provides a window into the company’s strategic priorities and how it balances the needs of sustaining current production with pursuing growth and energy transition opportunities. In the reported period, the upstream segment emerged as the largest contributor to capex, capturing a little over half of total investments. This emphasis reflects the ongoing requirement to sustain reservoir performance, optimize production flows, and advance exploration and development programs that underpin future output. Upstream projects are often capital-intensive and have long lead times, making them central to the company’s ability to maintain a robust cash flow profile and production resilience in a volatile price environment.
The gas segment accounted for about one-fifth of capex, underscoring the significance of gas development, processing, and associated infrastructure in Petronas’ portfolio. Gas operations are a critical component of the company’s domestic energy strategy and export capability, supporting steady cash generation and contributing to the diversification of energy supply. The investments in gas-related assets include infrastructure that enables efficient gas transmission, processing, and distribution, which is especially relevant in a market where gas prices and demand dynamics influence both price competitiveness and long-term energy security.
Gentari, the company’s energy transition arm, represented around 9% of capex, signaling ongoing commitment to cleaner energy initiatives and lower-emission technologies. Gentari’s activities span a broad spectrum, including renewable energy projects, hydrogen initiatives, storage solutions, and emissions reduction programs that align with Malaysia’s and the region’s climate and energy goals. While Gentari’s share is smaller relative to upstream and gas, its role in shaping Petronas’ long-term energy mix remains strategically important, particularly as the company navigates the evolving energy transition landscape.
Downstream operations accounted for roughly 7% of capex, reflecting continued investment in refining, petrochemicals, logistics, and related value chains. Downstream investments aim to enhance efficiency, product diversification, and integration across the value chain to capture margins and create closer connections with end users. The modest downstream capex share indicates a cautious approach to high-capital downstream projects, balancing the potential for incremental returns with the need to preserve cash flow for core operations and other strategic priorities.
The capex mix across segments suggests that while the company remains heavily invested in sustaining upstream production, it continues to allocate resources to gas infrastructure and energy transition projects through Gentari, while maintaining a careful stance on downstream expansion. This distribution may evolve as Petronas evaluates new partnerships, regulatory changes, and domestic energy policy developments that influence gas pricing, supply adequacy, and market demand. In the near term, the capex agenda will likely reflect a steady emphasis on maintaining production efficiency, ensuring reliability of gas infrastructure, and gradually scaling energy transition initiatives to meet policy objectives and market demand.
Analysts note that any shift in capex allocation across segments could have knock-on effects for suppliers, service providers, and contractors engaged in upstream drilling, gas processing, MCM/HUC maintenance programs, and OSV fleets. The sector’s capacity to absorb changes will depend on the pace of project execution, contract awards, and the extent to which Petronas can leverage digital technologies, efficiency measures, and workforce optimization to maximize returns from the capital deployed. Investors will watch how capex decisions interact with Petronas’ PAO 2025-2027 guidance and the company’s broader strategic priorities, including domestic energy security, export commitments, and transition strategies that could unlock new revenue streams or risk-managed growth opportunities in the years ahead.
Petros-Sarawak dynamics and the capex context
The evolving relationship between Petronas and Petros (Petroleum Sarawak Bhd) sits at the heart of the capex debate, with uncertainties around work arrangements in Sarawak influencing analysts’ views on 2025 capital expenditure. The nature of Sarawak’s gas aggregation arrangements and any potential impact on Petronas’ income streams have a direct bearing on the company’s ability to sustain or increase capex levels, particularly in the gas and upstream segments. The market has already priced in some portion of the risk associated with losing or reconfiguring the gas aggregation role in Sarawak, but the precise financial and operational effects remain subject to government policy developments, regulatory clarifications, and contract-level details that have not been fully disclosed.
Analysts recognize that any transition in Sarawak’s gas framework could alter the expected revenue mix for Petronas, potentially affecting the sustainability of past dividend levels and the company’s capacity to fund a robust capex program without compromising liquidity. The potential shift in revenue streams could necessitate greater emphasis on other cash generation channels or a re-prioritization of capex projects that deliver the most immediate cash flows or strategic value under the new arrangements. While the exact terms of the Petros-Sarawak partnership and its financial impact remain undisclosed, the market participants are factoring in a range of scenarios, from modest adjustments to meaningful structural changes in how gas and broader resource development are managed within the state of Sarawak.
Petronas has acknowledged the need to refine its operating framework in light of these developments and has signaled ongoing efforts to optimize its organizational structure and cost base. A key part of this effort is planned workforce rightsizing, which is expected to begin by mid-year as part of broader efficiency improvements aimed at reducing operating costs and increasing capex leverage. The ongoing reassessment of the company’s operating model includes evaluating where savings can be realized without compromising production reliability, safety, or long-term growth potential. The workforce optimization initiative aligns with the general trend across the oil and gas sector toward leaner structures and greater operational efficiency, particularly in areas where redundancy or overlap exist due to organizational realignments and project portfolio adjustments.
In the broader context, the PAO 2025-2027 framework continues to guide how Petronas interprets capex targets, project selection, and strategic priorities in a way that supports sustained cash generation and dividends while enabling the company to invest in critical maintenance and future growth opportunities. Analysts expect that the PAO will reflect the realities of the Sarawak dynamic, the evolving energy landscape, and the need to balance domestic energy security with international market opportunities. The net effect of these factors is a cautious but constructive stance among market participants: capex will be exercised with a focus on necessity, efficiency, and strategic value, while Petronas maintains a disciplined approach to capital allocation to ensure liquidity and resilience.
Petronas’ approach to investments in Sarawak-related projects and the broader habitat of Sarawak’s gas resources will also influence contractor and service provider dynamics in Malaysia. The uncertainty around Petros’ cooperation and its consequences for project execution timelines and budgets could impact the visibility and certainty of capex spend, particularly in segments tied to gas supply and gas-based power generation. OSV providers, MCM/HUC contractors, and downstream service firms may experience investment activity shifts depending on how Petronas structures its procurement, project sequencing, and risk management around these Sarawak-related initiatives. The market will closely observe how Petronas communicates its stance on Sarawak and the steps it takes to ensure continuity of supply, maintenance, and project execution across the country while managing the risk profile associated with these governance changes.
PAO 2025-2027 guidance and activity outlook
The PAO 2025-2027 acts as a compass for Petronas’ planned activity levels and capital expenditure, guiding investor expectations and the company’s internal budgeting. In line with the broader market’s focus on capex discipline, the PAO 2025-2027 has signaled a general trend toward lower activity guidance and a more prudent approach to spending, in tandem with the scale-down in overall investment commitments. The reduced activity outlook is understandable given the macroeconomic environment, price volatility for oil and gas, and a risk-adjusted approach to capital deployment that prioritizes essential maintenance, safety, and reliability alongside targeted growth opportunities. Analysts view the PAO as a critical vehicle through which Petronas communicates its long-range strategy, balancing the need to deliver stable cash flow and dividends with the imperative to invest in core assets and strategic initiatives.
The implication for the 2025 capex plan is that a more conservative 2025 spend could align with the PAO’s trajectory, especially if Petronas chooses to preserve liquidity to manage potential disruptions in revenue streams arising from Petros-Sarawak negotiations and the associated market uncertainties. However, the PAO’s framework also accommodates selective investments that can yield value in the medium term, particularly in areas that support ongoing production maintenance, efficiency improvements, and selective downstream and energy transition projects. The guidance provided by the PAO will likely influence which projects get prioritized and how procurement cycles are managed, including the engagement of MCM/HUC contractors, OSV fleets, and other service providers impacted by capex planning.
Market observers have noted that the latest PAO outlook has, in some respects, reduced activity guidance compared with prior iterations, which is consistent with the broader trend of a more cautious capex stance. The reduction in activity guidance, while not universally accepted as the final word on 2025 spending, reflects prudent risk management in light of the macro and policy uncertainties and the Sarawak dynamic. As a result, several analysts anticipate a capex trajectory that remains elevated enough to sustain production and cover routine maintenance and selected development projects, but not so large as to overshoot cash flow targets or risk liquidity stress in the event of price or revenue shocks. The net effect is a more conservative growth approach that still preserves strategic opportunities in the energy transition arena and downstream optimization.
In terms of currency and commodity assumptions, analysts continue to model a baseline Brent crude oil price around a mid-cycle level that supports Petronas’ capex calculus and project economics. The original forecast cited in market notes included a target around US$75 per barrel, reflecting a balance between price strength necessary to underpin investment returns and the risk of continued volatility. While price assumptions can shift capex timing and project viability, the fundamental priority remains maintaining a robust cash generation engine and ensuring the capital program is aligned with the company’s strategic priorities and financial resilience. As always, the PAO remains subject to revision as new information emerges, and investors will watch for any updates on capex guidance, project selection criteria, and the company’s approach to risk management amid ongoing market and regulatory developments.
OSV, MCM/HUC, and the domestic service landscape in 2025
Another key theme for investors concerns the offshore support vessel (OSV) market and the maintenance, construction, and modification (MCM) activity under the hook-up and commissioning (HUC) framework for 2025. Hong Leong Investment Bank (HLIB) highlighted that, although exploration and drilling activities are expected to be lower in 2025, there remains a steady stream of opportunities for offshore service contractors and onshore plant maintenance contractors. This expectation is driven by the multi-year Pan Malaysia MCM and HUC service contracts that have recently been awarded, which should sustain a pipeline of work for 2025 and beyond. In particular, OSV players—especially those with a Malaysian-flagged fleet—are anticipated to experience favorable dynamics, either through elevated charter rates or through improved utilization as providers adapt to the ongoing demand for maintenance and integrated services across offshore facilities.
HLIB suggested that OSV supply tightness could persist, reinforcing the case for higher utilization and potentially higher charter rates in 2025. The OSV market tends to be sensitive to the health of offshore projects, including FPSO-related work and LNG-related developments, which remain core to Malaysia’s offshore activity. In this environment, MCM/HUC contractors and plant maintenance players could outpace peers that are more exposed to exploration-driven revenue cycles and drilling-related expenditures. The analysis also emphasizes the importance of resilience in earnings for companies with diversified exposure to both Malaysia and international markets, given that domestic capex cycles can be impacted by policy shifts and project approvals.
Within this framework, several stock calls highlighted by researchers point to a selective investment approach focusing on companies with robust earnings visibility and structural exposure to the anticipated capex upticks in the MCM/HUC space. Among them are Dialog Group Bhd and Wasco Bhd, identified as top sector picks due to accretive earnings growth potential and exposure to midstream and terminal expansions. Dialog Group is seen as positioned to benefit from midstream terminal expansion programs and the tailwinds from legacy EPCC contracts approaching or expiring, which could unlock new earnings streams as projects transition into maintenance and operations. Wasco is viewed as an attractive proxy for the capex upcycle in the oil and gas sector globally, with potential upside from FPSO-related activities and broader energy transition initiatives such as carbon capture, utilization and storage (CCUS), hydrogen infrastructure, and renewables (wind and solar).
HLIB’s preference for Dialog Group and Wasco is anchored in the expectation of sequential earnings growth in the coming quarters, driven by earnings catch-up from contract renewals, the completion of legacy EPCC commitments, and new midstream advances. Wasco’s diversified revenue mix, with only a partial domestic exposure (about 30% of total revenue derived from Malaysia), is presented as a key resilience factor, reducing vulnerability to domestic capex risk while enabling the company to capitalize on international capex cycles and global energy transition projects. Such characteristics are seen as aligning with the sector’s longer-term earnings resilience, given continued demand for offshore maintenance, FPSO projects, and associated services across global energy markets.
HLIB acknowledged that the ongoing Petronas-Petros dynamic and geopolitical uncertainties could contribute to negative sentiment in the OSV and OGSE space, potentially depressing near-term stock prices for locally listed players. However, it argued that the sell-down may have been overdone for companies with steady earnings outlooks in 2025, particularly those with a meaningful exposure to maintenance and MCM/HUC activities. In this context, Dayang Enterprise Holdings Bhd emerged as a potential recovery play given its advantageous position within the domestic OGSE space and its ability to benefit from a stable to improving maintenance and service revenue stream. While Dayang was not framed as a core beneficiary of upstream capex growth per se, its defensive earnings profile and low sensitivity to Petronas’ upstream capex volatility make it an appealing option in a portfolio focused on steady cash generation and resilience to market perturbations.
Analysts’ broader assessment emphasizes that maintaining selective exposure to capex-driven services and equipment players is prudent, given the sector’s sensitivity to macro and policy shifts while still offering upside from the energy transition and LNG megaprojects that shape the global energy supply chain. The emphasis on MCM/HUC and OSV players underscores the importance of a diversified approach: investors should favor firms with robust order books, resilient earnings trajectories, and strategic diversification that can weather the volatility of Petronas’ capex decisions and Sarawak-related policy changes. As 2025 unfolds, the OSV and MCM/HUC space will remain central to the trajectories of several listed players, with continued attention to fleet utilization, charter rates, project backlog, and the ability to convert contracts into recurring maintenance revenue.
Stock strategy and sector picks amid capex uncertainty
Against the backdrop of a potentially scaled-back capex regime, analysts advocate for a selective stock-picking strategy that emphasizes segments with steady or predictable earnings and robust cash flow generation, even in a slower investment cycle. In this vein, a number of brokerage houses have highlighted the importance of balancing exposure to Petronas’ capex cycle with exposure to related service providers that can generate resilient earnings. The case for a disciplined approach gains further support from the belief that certain names are better insulated from capex swings, given their diversified portfolios, exposure to international markets, or the nature of their contracts and backlogs that provide a degree of earnings visibility.
Dialog Group Bhd has emerged as a notable top pick in this environment due to expectations of sequential earnings growth in the coming quarters. The anticipation is grounded in the tailwinds from the decline of legacy EPCC contracts, potential expansion of midstream tank terminals, and the broader improvement in project execution efficiency that can lift margins in the near term. Dialog’s position as a key midstream facilitator makes it a compelling beneficiary of a stabilizing energy value chain, particularly as maintenance and expansion efforts require dedicated logistics and terminal infrastructure.
Wasco Bhd is identified as another top pick, with a price target set at a level reflecting its role as a proxy for the capex upcycle in the global oil and gas sector, as well as the expansion of energy transition projects. Wasco’s strategic exposure to FPSOs, LNG projects, and broader energy transition initiatives aligns with long-term demand drivers in the sector. The company’s diversified revenue base, with a limited share of domestic revenue, helps mitigate Malaysia-centric capex risk and positions Wasco to capitalize on international opportunities in offshore and renewables markets. The rationale for Wasco underscores the economic value of holding equities exposed to global energy infrastructure and transition projects, where the upside from higher activity levels can offset volatility in domestic capex cycles.
Among other sector participants, Dayang Enterprise Holdings Bhd is highlighted as a potential beneficiary of the 2025 capex environment, given its track record and defensive earnings profile. Dayang’s business model, with a focus on offshore maintenance and service provision, positions it to perform well in a maintenance-centric environment. While not the primary beneficiary of upstream capex, Dayang offers a reliable revenue stream that remains essential to the operating budgets of offshore facilities and platforms, particularly in a market characterized by constrained discretionary capex and a focus on operational efficiency.
The market’s outlook for these stocks rests on several interconnected variables: the pace at which Petronas clarifies its capex guidance for 2025, the ability of Sarawak and Petros to reach workable arrangements that stabilize revenue streams, the depth of maintenance and MCM activity, and the demand for offshore services in both domestic and international markets. Analysts stress the importance of staying selective rather than broad-based exposure, focusing on firms with resilient earnings, diversified client bases, and manageable exposure to domestic capex fluctuations. The combination of a cautious capex outlook and selective investment opportunities creates a nuanced investment landscape in which well-researched names with predictable earnings pipelines can deliver meaningful returns even if the broader capex cycle slows.
Dividend policy, cash flow, and sustainability
The dividend policy and overall cash flow dynamics remain central to evaluating Petronas’ near-term strategies and its willingness to sustain or adjust its capital plan. The company’s ability to finance its operating needs, capex program, and government dividend obligations depends critically on the strength and predictability of its cash flows. The 2024 dividend payment, while sizable, was impacted by the broader earnings environment and the need to preserve liquidity for ongoing capital investments and potential restructuring costs. The cash flow story is further complicated by the strong but variable nature of operating cash flow, which bounced between periods of expansion and contraction in response to commodity price movements, currency dynamics, and operating efficiency improvements. A robust operating cash flow is essential to support a steady dividend and to maintain the financial flexibility necessary to navigate capex decisions in a volatile environment.
Investors are also weighing the implications of the reported net cash position for Petronas, which showed a deterioration in the second half of the year as capex and dividends outpaced cash inflows in that period. A cash-negative year in the context of a lower earnings base could prompt a tighter control on capital spending and a more thorough evaluation of project viability. Nonetheless, the company’s overall cash position still reflects a substantial resource pool to support strategic investments, contingent on macroeconomic conditions and policy developments. The challenge for Petronas is to reconcile the need for ongoing capital expenditure with the necessity of maintaining a comfortable liquidity cushion and ensuring sustainable dividends that align with government expectations and shareholder value creation.
From a strategic vantage point, maintaining a sustainable dividend while addressing capex constraints requires a careful balance between return on investment and risk management. The market’s view is that a measured capex path, complemented by disciplined capital allocation and efficient project execution, can preserve dividend integrity while enabling targeted investments. The ability to sustain dividents in the face of a potentially lower capex environment will depend on Petronas’ ability to optimize its asset base, realize efficiencies in capital projects, and secure favorable terms in procurement and partnerships. The company’s governance framework and risk management practices will be critical to ensuring that the dividend policy remains credible in the eyes of investors and the government as it navigates a potentially constrained investment cycle.
Analysts also emphasize the importance of securing a stable cash flow through a diversified asset mix and a resilient pricing regime for core products. In an environment where ASPs (average selling prices) and other revenue drivers may remain volatile, Petronas’ capacity to generate steady cash flows from upstream, gas, and downstream ventures remains essential for meeting financial obligations and supporting ongoing investment in growth initiatives and energy transition plans. The ability to maintain a predictable cash flow foundation will be a key determinant of whether the company can sustain its dividend, invest in critical maintenance, and pursue selective growth opportunities that align with the PAO 2025-2027 and the strategic vision for the future.
Sector strategy and market positioning amid capex uncertainty
In light of potential capex reductions, investors are advised to take a selective, risk-aware approach to sector exposures that emphasizes resilience, earnings visibility, and strategic value. The capital expenditure movement in 2025 has broad implications for the Malaysia oil and gas sector, influencing the demand for services, equipment, and maintenance work, as well as the pipeline of new contracts and projects. Companies with robust order books, diversified revenue streams, and meaningful international exposure are better positioned to weather a potential slowdown in domestic capex while capturing opportunities in global markets tied to LNG, FPSO expansions, and energy transition initiatives.
Analysts recommend focusing on segments with high earnings visibility and low sensitivity to Petronas’ upstream capex cycles. This includes maintenance-oriented services, MCM/HUC-related activities, and ancillary services that sustain production infrastructure and facilities. The capacity to convert contracts into recurring revenue streams will be a critical factor in sustaining earnings under a slower capex regime. In parallel, the sector’s exposure to energy transition projects, including CCUS, hydrogen infra, and renewables initiatives, could serve as a counterbalance to traditional oil and gas capex cycles, offering growth opportunities as global demand for cleaner energy sources continues to rise.
The overall tone among analysts remains cautious but constructive. While some anticipate meaningful capex reductions, others expect a careful approach that preserves core investments and supports ongoing maintenance and selective growth. The interplay between Petronas’ capex decisions and the Petros-Sarawak arrangements will be a subject of ongoing scrutiny, influencing the sector’s sentiment and stock performance. Investors are urged to monitor not only capex targets but also the PAO 2025-2027 updates, project execution progress, and any updates on policy changes that could affect the company’s capital allocation framework. The sector’s resilience will likely hinge on how well Petronas communicates its strategy, how efficiently it executes its capital plan, and how it manages liquidity and dividend commitments in the context of a potentially tighter investment environment.
The broader macro picture for Malaysia’s oil and gas sector
Beyond company-specific dynamics, the Malaysia oil and gas sector is sensitive to the macroeconomic environment, commodity price cycles, and policy developments at the national level. A potential capex pullback at Petronas could have cascading effects on suppliers, service providers, and ancillary industries that rely on sustained investment to drive backlog and employment in the sector. Conversely, a bounded capex plan can incentivize efficiency improvements, better project management, and a more stable earnings environment for suppliers that can align with a leaner but more predictable investment cycle.
Investors will be watching for signals about global energy demand, LNG market dynamics, and the pace of energy transition investments in the region and globally. The sector’s performance is influenced by a combination of factors, including international price trends, exchange rate movements, and the regulatory and political environment in Malaysia and its neighbors. The energy transition agenda, which includes investments in cleaner fuels, storage, CCUS, and renewable technologies, is expected to shape the long-term growth profile of Petronas and its partners, potentially offering new revenue streams even as traditional upstream capex tightens. The degree to which Malaysia can sustain domestic energy security, maintain competitive export capacity, and attract foreign investment in its OGSE ecosystem will depend on consistency in policy, predictable project pipelines, and stability in regulatory frameworks that govern gas pricing, licensing, and cross-border energy arrangements.
For investors, the key takeaway is to balance exposure between traditional capex-driven segments and those aligned with transition and efficiency improvements. Companies that can demonstrate robust order books, diversification across international markets, and the ability to deliver on projects with stable cash flow will be well positioned to capitalize on opportunities in a potentially constrained 2025 environment. The Petronas-Petros-Sarawak dynamic remains a critical factor in shaping the sector’s near-term and mid-term trajectory, and as such, market participants should maintain a watchful eye on policy developments, contract awards, and the PAO 2025-2027 updates that will define the sector’s risk and reward profile in the coming periods.
Conclusion
The path for Petronas’ 2025 capex sits at a crossroads, shaped by a mix of cautious guidance expectations, structural changes in Sarawak, and the company’s ongoing discipline around capital allocation. Analysts are broadly divided, with some forecasting a fork toward RM43 billion in capex as a result of a possible 20% reduction, and others envisioning a more resilient spend at or above RM50 billion, backed by steady maintenance needs and selective growth initiatives. Petronas’ 2024 results provide a sobering context: earnings declined, dividends to the government moderated, and cash flow dynamics highlighted the trade-offs between maintaining liquidity and funding a robust capital program. The segment mix—upstream as the largest capex driver, followed by gas, Gentari, and downstream—reveals a clear emphasis on sustaining production while balancing investment in energy transition activities.
The Petros-Sarawak relationship, together with the PAO 2025-2027 guidance, will be decisive in determining the scale and composition of capex in 2025. The market’s focus on the potential for gas aggregation changes and the strategic significance of maintaining energy security in Malaysia will continue to influence investor sentiment, project execution timelines, and the health of the local supply chain. In the near term, the maintenance and MCM/HUC space is expected to offer more resilience than exploration-driven segments, especially if capex tightens across the broader portfolio. Analysts underscore the value of a selective stock approach, favoring companies with proven earnings resilience, backlog visibility, and diversified exposure that can weather capex volatility.
As the sector navigates these uncertainties, the emphasis remains on disciplined capital allocation, efficient operations, and the ability to deliver steady cash flows to support both dividends and meaningful investments in the energy transition. The coming months will likely bring more clarity on Petronas’ capex plan and PAO details, shaping how investors position themselves across the Malaysian oil and gas landscape. The end-state will hinge on how effectively the company translates its strategic priorities into a capex program that sustains production, secures liquidity, and fosters long-term value creation for its stakeholders.