Petronas Q2 profits lower at RM11.1bil (Update)

Petronas president and CEO Datuk Wan Zulkiflee Wan Ariffin does not see a reprieve from low oil prices in near future

KUALA LUMPUR: Petroliam Nasional Bhd’s profit after tax was lower at RM11.1bil on the back of RM61.30bil in revenue in the second quarter ended June 30, 2015 from the preceding quarter.

When compared with the first quarter ended March 31, 2015, it said on Friday that the profit was 3% lower while revenue declined 7% mainly due to lower liquefied natural gas (LNG) volumes and prices.

However, despite the weaker performance Petronas said it was committed to paying RM26bil in dividends to the government this year, having paid out RM13bil year-to-date.

At a press conference on Friday, the national oil corporation group CEO Datuk Wan Zulkiflee Wan Ariffin predicted that oil prices would remain depressed for the remaining of the year due to chronic oversupply.

At 5pm, US light crude oil fell 29 cents to US$41.94 and Brent was down 28 cents to US$48.94.

When compared with a year ago, Petronas’ Q2 revenue fell 28% from the RM86.36bil mainly due to lower average realised prices for all the products in line with the significant downward trend of key benchmark prices. Its profit after tax fell 47.4% from RM21.06bil.

However, the drop was cushioned by the company's better operating efficiencies, the increase in Brent price and stronger refining margins.

Wan Zulkiflee said Petronas’ past prudent cash management practices had provided sufficient financial reserves to weather the impact of the low oil price.

However, he said the company was bracing for further challenges ahead as low oil prices continue to persist.

"The company has been able to keep afloat because of our strong financial reserves," he said.

Moving forward, he said, the company would not have this luxury, as it did not see a reprieve from the low oil prices in the near future.

"I do not expect our cash flow from operations this year to meet our capex and dividend commitments. This means we will have to persevere through with more austerity measures, and will have to draw on our cash reserves.

"Cost management and efficiency will continue to be a key focus across the organisation," he said.

The three-month average Japan Crude Oil (JCC) saw a drop of 14% in LNG prices with the average price at US$57 per barrel in the second quarter compared to US$66 in the previous quarter.

On the company's operational and project milestones, Wan Zulkiflee noted that Petronas had achieved first hydrocarbons from three greenfields - two in Malaysia and one from the Bukit Tua field in Indonesia.

He said the company had its first steel-cutting ceremony for Petronas' second floating LNG facility, the PFLNG 2 in Korea, putting them on track to deploy PFLNG 2 offshore Sabah in 2018.

"The  integrated LNG project in Canada achieved a conditional Final Investment Decision  (FID) in June, and to-date has successfully satisfied the first of two conditions, which is the legislated approval of the Project Development Agreement by the British Columbia government," he said.

The second condition is for Petronas to get the approval of the Canadian Environmental Assessment Agency, which he said was already at the tail-end of the process.

On the downstream business, he said Petronas had begun construction for the Pengerang Integrated Complex, with the Rapid project expected to be completed by the first quarter of 2019.