PETALING JAYA: Notwithstanding the decline in oil prices, 2025 earnings for the sector are expected to be resilient on the back of selective and sound investments, says MIDF Research.

According to the research firm, the upstream segment will continue to be stable going by the recently released PETRONAS Activity Outlook for the 2025 to 2027 period to maintain the upstream and gas pipelines activities, while mitigating external risks for the downstream.

MIDF Research said the ongoing supply cuts by The Organisation of the Petroleum Exporting Countries and its allies’ (Opec+) is likely to keep Brent oil prices in a range bound of US$70 to US$80 per barrel.

The research house notes that the average Brent crude oil for February slipped to minus 8.3% year-on-year (y-o-y) to an average of US$74.95.

At the time of writing, oil price was trading at US$71.30 a barrel.

In line with the decline in oil prices and volatile global economy following the ongoing US trade tariffs, the KL Energy Index in February dropped by 5.1% y-o-y.

For context, this was also due to a higher base in February 2024 in comparison to February this year, as key companies improved significantly in 2023, further encouraging investments in the oil and gas sector early last year, said MIDF Research.

As for the financial year 2024 (FY24) results, the research firm said it came in mixed, but prospects looked promising.

“Upstream the oil and gas services and equipment (OGSE) segment delivered positive FY24 financial performance, followed by midstream transportation.

“However, other subsectors saw a mixed performance, due to internal changes in operations and projects, delays and impairments fuelled by volatile oil prices and higher raw material prices,” said MIDF Research in a report yesterday.

It said the total FY24 revenue from the local energy sector amounted to RM106.8bil, which is up 8.4% y-o-y, attributable to the increased activities in the upstream and part of the midstream.

Meanwhile, earnings added up to RM4.6bil, a rise of 9.5% y-o-y despite the mixed results.

“This could signal that the sector’s earnings are still resilient coming into 2025. We believe that selective and sound investments would help to propel the energy industry,” it added.

According to MIDF Research, the global upstream O&G division is currently seeing cautious investments due to the geopolitical tensions and economic uncertainties, amplified by the expected increased production that could overthrow the supply demand balance and the US trade tariffs.

However, sanctions and Opec+ intervention are expected to reduce the volatility in the oil market, while significant discoveries in the African continent are expected to keep the upstream stable.

“Meanwhile in Malaysia, upstream saw a renewed interest from investors, in tandem with the recent discoveries of 1bboe of new resources which is expected to contribute to Malaysia’s production targets.

“Ongoing advancements in artificial intelligence tech for upstream activities and higher demand for OGSE are anticipated to support the division moving forward,” it added.