PETALING JAYA: Investors, who have put their money in oil and gas (O&G) stocks that have been sold down sharply, may consider holding on to them, given that analysts remain upbeat on the sector's earnings prospects.  

“The prospects for the O&G sector in Malaysia are promising, with steady rise in exploration and production (E&P) spending on the back of strong crude oil prices. 

“There will be increasing field development activities in existing and new fields, with deepwater and marginal fields creating opportunities for growth,” said HwangDBS Vickers Research in its latest O&G report.  

The research house noted that the demand for rigs, vessels and platforms was improving in tandem with the increasing offshore O&G activities.  

It also expected the downstream activities to pick up as a result of the construction of new pipelines at the Eastern and Northern Corridors.  

O&G stocks were hit hard by the recent strong selling wave.  

Muhibbah Engineering Bhd, Dialog Group Bhd, Petra Energy Bhd and Ramunia Holdings Bhd had plunged over 20% from their year's high recorded last month.  

Analysts said the O&G counters were among the best performing ones when the local bourse breached the new heights earlier.  

Thus, it was natural that the O&G stocks were the selling targets, with investors locking in hefty profits in the current bearish sentiment.  

“It is actually good time to buy now. Many O&G stocks have dropped substantially from their peaks. Furthermore, there is no change in the companies' fundamentals,” said an analyst.  

Late last month, OSK Investment Bank was cautiously optimistic that there was limited upside to the fair values of the O&G stocks after the recent run-up in share prices.  

The current slide in O&G stock prices has probably changed the scenario now.  

The share price weakness offered investors the opportunities to gain exposure to the sector at lower costs, said analysts.  

The key earnings driver for the local O&G sector is the widely expected spending upcycle in the country led by Petroliam Nasional Bhd (Petronas).  

More E&P activities would mean more contracts for the O&G firms that provided supporting services to the industry, said analysts. 

“The local O&G industry is going through a period of unprecedented boom from both upstream and downstream exploration and production activities,” said HwangDBS Vickers.  

It said the industry growth would be supported by the discovery of new oil fields as well as increased spending by Petronas and its production-sharing contractors.