Diversify revenue base, O&G players urged


Dateline 2020-03-16, NST:

Malaysia’s oil and gas services providers will need to diversify revenue base to mitigate their operations against oil price shocks, analysts said.

They must also increase operational efficiency to lift margins or venture into alternative energy business to reduce dependency on oil prices.

MIDF Research analyst Noor Athila Mohd Razali said tumbling oil prices could delay the award of new contracts and renewals. This would result in margin compression for O&G service providers.

“The low oil price environment will have an impact on the entire O&G value-chain be it directly or indirectly.

“The upstream producers will be more directly impacted by the low oil price environment as lower revenue as a result of higher cost of production and low selling price will weigh on earnings,” she told the New Straits Times.

For downstream players, Athila said feedstock prices would be more favourable following the drop in oil price.

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