This article first appeared in The Edge Malaysia Weekly on March 2, 2026 - March 8, 2026

EQUITY laggards in the local oil and gas (O&G) sector are back on the radar, fund managers tell The Edge, as value re-emerged from the latest round of selling in 2025, coupled with supportive industry prospects ahead.

O&G stocks are now too cheap to ignore, they say, and companies with stronger balance sheets are optimising their capital allocation strategies, including leaning towards higher dividends and share buybacks, as well as diversification.

The renewed interest comes even as uncertainty persists in Sarawak — the country’s biggest gas-producing state — due to the tussle between the state government and Petroliam Nasional Bhd (PETRONAS) on operating rights in the state, which caused a slowdown in greenfield fabrication projects up until last year.

“The cautious sentiment is understandable but the fundamentals have changed,” says Hang Tuah Amin Tajudin, CEO of PMB Investment Bhd, which manages RM1.65 billion in assets.

“Unlike in 2014, today’s companies are leaner, have less debt and are far better managed,” Hang Tuah adds. “We’re betting on the oil and gas companies that are using their current profits to move into renewable energy or hydrogen.”

Neoh Jia Man, portfolio manager at boutique asset management firm Tradeview Capital, says while the sector remains “unloved” and one should not expect a strong growth up cycle, valuations are “reasonable” and some stocks are now dividend plays.

“Given our view that the downside risk to oil and gas prices appears limited at this juncture, investors allocating to the sector could benefit not only from stable dividend income but also have a potential hedge against geopolitical risks that may trigger a spike in hydrocarbon prices,” he tells The Edge.

The latest reporting period saw upstream O&G service players, including Wasco Bhd (KL:WASCO), Dayang Enterprise Holdings Bhd (KL:DAYANG) and Carimin Petroleum Bhd (KL:CARIMIN), continue to dish out healthy dividends.

Other names such as Deleum Bhd (KL:DELEUM), Hibiscus Petroleum Bhd (KL:HIBISCS) and Pantech Group Holdings Bhd (KL:PANTECH) largely maintained their payouts.

As their share prices fell, the trailing dividend yield of the above-mentioned companies went north of 5%. “Since the companies are not getting any love from the (investment) funds, major shareholders are just paying themselves more,” a fund manager quips.

Of the 40 O&G-linked companies screened by The Edge, close to half of the dividend payers declared more dividends in the latest financial period under review.

This is despite just one-third of the companies posting better year-on-year results in 2025. “Last year was bad,” a senior executive at an upstream services firm says. “But we are already seeing the jobs coming in.”

In a nutshell, maintenance firms posted a weak 2025, hit mainly by a late post-monsoon start and contracting delays. Deleum is an exception as its better-than-expected results were supported by its machinery segment, which caters to midstream and downstream clients.

“The Pan Malaysia contracts were only awarded in late 2024, and there was quite a bit of reshuffling of contractors in different regions … So there were a lot of handovers and planning. Work started only in April/May, whereas typically it should have started in late February,” an industry executive explains.

While recent years have seen a rerating of offshore support vessel operators, others are trading at a low forward price-earnings ratio (PER): from floating production, storage and offloading (FPSO) firm Bumi Armada (KL:ARMADA) at four times to O&G producer Hibiscus (4.6 times) and service companies Deleum (5.7 times), Wasco (6.5 times) and Pantech (9.1 times).

Bumi Armada, whose shares are trading at a five-year low, is said to be bidding for new FPSO jobs in Indonesia that are expected to be announced in the middle of the year, but analysts say management is considering higher payouts or share buybacks.

Independent producer Hibiscus — a key proxy for oil prices — is trading at a low forward PER of 4.6 times, even with a committed dividend payout (estimated yield of 5%-6.3%, depending on oil prices) and share buybacks.

Others that have not declared dividends in the current reporting period include Uzma Bhd (KL:UZMA), which is trading at 3.9 times forward PER, T7 Global Bhd (KL:T7GLOBAL) at 4.4 times, Steel Hawk Bhd (KL:HAWK) at 6.3 times, and Malaysia Marine and Heavy Engineering Bhd (KL:MHB) at 6.4 times.

At PETRONAS’ results briefing last Friday (Feb 27), president and group CEO Tan Sri Tengku Muhammad Taufik said the national oil company is committed to maintaining its capital expenditure.

PETRONAS’ national hydrocarbon production target remains at two million barrels of oil equivalent per day (boepd), after it was increased to 1.9 million boepd last year from 1.7 million in 2024.

The Malaysia Oil & Gas Services Council (MOGSC), in a response to questions from The Edge, says activities for long-term jobs should pick up. Meanwhile, the award of a decommissioning contract “will introduce a new and important segment” beginning 2026 and “kick off a long-awaited structural removal campaign in Malaysian waters, which the industry has been preparing for over the past five years”.

“The subsurface segment is also expected to see increased activity,” it adds, while noting that downstream turnaround activities — particularly in Pengerang — are planned this year.

“Based on the current outlook and planned activities, the MOGSC is cautiously positive that 2026 will be a stronger year compared to 2025.

“MOGSC is optimistic that work volumes will progressively increase in the following years as operators accelerate their planned activities and fully utilise these contract frameworks.”

That said, some are more cautious about the prospects for the O&G sector. Danny Wong, CEO of Areca Capital (which has assets under management of over RM5 billion), says the firm remains “selective” in approaching it.

“Generally, there are better prospects in other sectors,” he says, adding that O&G is not its main focus in the absence of a catalyst such as higher oil prices that could lift sentiment among upstream players.

However, a senior portfolio manager at a local firm, which has maintained long-term exposure to the sector, says “most of the O&G players that survived in the last 10 years are now in a position of strength”.

“Why not [look at more O&G names]? Many companies showed last year that the results were not as bad … Some are sitting on big net cash and they are also more open to exploring venturing overseas [if the domestic landscape changes].” 

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