O&G firms remain upbeat

WHILE day-to-day business operations have undoubtedly become more precarious for local oil and gas (O&G) companies with exposure to the Middle East since hostilities began at the end of last month, most players are adopting cautious confidence, emphasising their own scope of control.

Although contained for now, fighting in Iran is being seen by most analysts to be lasting for several more weeks, even as President Donald Trump calls for more countries to help secure the all-important Hormuz Strait, the narrow strip of water through which roughly 20 million barrels of oil transits daily, or one-fifth of worldwide usage.

Acknowledging that the war has resulted in a significantly more volatile O&G market, Hibiscus Petroleum Bhd managing director (MD) Datuk Kenneth Pereira says the group needs to better understand the mid-term effects of the conflict before making any investment decisions.

Near-term influence vs mid-term perspective

Pereira tells StarBiz 7: “We do our best to ensure Hibiscus’ business performance is not reliant on sporadic events, which result in high O&G prices to be sustainable.

“Thus, we take a measured approach, subjecting any project or even merger and acquisition (M&A) activities to our long-term oil price projections and other investment criteria, such as those that would fetch an internal rate of return of at least 15%, with a maximum payback period of five years.”

At the same time, Wasco Bhd MD and group chief executive officer (CEO) Gian Carlo Maccagno emphasises that he is not expecting any material disruption to contracted project timelines in the Middle East at this stage.

He says although the situation remains dynamic, Wasco is managing operationally within its established risk parameters.

“The safety of our people remains our priority. We have implemented precautionary measures across our Middle East operations, including temporary travel adjustments, enhanced monitoring protocols, and close coordination with local authorities and site leadership,” says Maccagno.

From a supply chain perspective, he reveals that Wasco is closely tracking logistics routes and supplier schedules, and with approximately 15% of its order book being linked to the Middle East, the group remains in active engagement with vendors and clients to ensure continuity and mitigate potential delays.

He says: “Our broader operational footprint also provides additional flexibility should adjustments be required.

“Overall, our short-term revenue visibility from existing projects remains stable.”

Oil price strategies

Meanwhile, Pereira goes on to explain that Hibiscus sells oil in cargoes of a certain volume, while also selling gas production on a daily basis.

He confirms that if the current oil price trend remains high for an extended period (close to US$100 per barrel), he reckons that Hibiscus will be able to benefit if an oil cargo offtake coincides with this period of elevated prices.

“As far as gas is concerned, high oil prices can have a positive impact almost immediately as gas prices correlate to oil prices.

“Hence, we are focusing on opportunities to immediately increase gas production as much as possible, while also considering accelerating projects that could increase oil production in late 2026 and 2027.”

Separately, Pereira also reports that prior to the conflict, discussions with reputable investors to explore a potential long-term strategic investment had been ongoing, which is seen to provide a strong earnings foundation for the group.

For Wasco, Maccagno says increased oil prices generally impact upstream investment and infrastructure development over time, which he acknowledges can translate into demand for fabrication and pipeline-related work.

Concurrently, he explains that the present geopolitical uncertainty is expected to accelerate the timing of project sanctions and final investment decisions (FIDs) in the near term.

“What we typically see in these situations is that FIDs and tender timelines are pushed forward.

“More broadly, periods of geopolitical tension often reinforce the importance of resilient energy infrastructure and diversified supply sources,” he says.

More importantly for Wasco, Maccagno points out that the focus remains on maintaining a diversified order book and pursuing projects where the group’s fabrication and coating capabilities are well aligned with client requirements.

This helps Wasco manage short-term volatility while remaining positioned for longer-term investment cycles in the sector.

Has the war changed the outlook for 2026?

Pereira reassures investors that Hibiscus’ operations and deliveries would not be impacted by the geopolitical tensions in the Middle East, as the company’s assets are in South-East Asia and the United Kingdom.

He concedes that given the position of Hibiscus as a pure upstream producer, its earnings and cash flows correlate to O&G prices, and thus higher oil prices positively affect its revenue.

For specific assets in Malaysia, the company receives a premium to oil prices of up to 10%.

“Our current dividend guidance for the financial year ending June 2026 (FY26) is currently at eight sen per share, if average oil prices remain between US$65 and US$75 per barrel, and 10 sen per share if oil prices exceed US$75 per barrel.

“To date, we have declared total dividends of four sen per share,” says Pereira.

Meanwhile, Maccagno says Wasco’s approach remains centred on disciplined risk management and operational resilience, with the group having implemented precautionary monitoring measures across its Middle East operations.

These include temporary travel adjustments, enhanced oversight of logistics and supply-chain movements, and close coordination with Wasco’s local teams and relevant authorities.

“At the same time, our broader operational footprint provides flexibility across the value chain.

“In addition to our facilities in the Middle East, Wasco operates fabrication capacity in Batam and pipe coating facilities in Kuantan, which provide additional geographic diversification should operational adjustments are required,” he notes.

Looking ahead, Maccagno is maintaining his confidence in the Middle East’s long-term infrastructure and energy investment outlook.

He elaborates that the region is continuing to invest in both conventional and transition-related energy infrastructure, and believes that Wasco’s engineering, fabrication, and coating capabilities position the group well to support these developments.

“Our focus over the next 12 to 18 months will be on maintaining operational continuity, managing supply-chain risks proactively, and selectively pursuing projects aligned with our capabilities and risk thresholds,” he says.