Bumper dividend for government


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KUALA LUMPUR: Petroliam Nasional Bhd (PETRONAS) will raise its annual capital expenditure (capex) to about RM60bil to support its decarbonisation targets as well as paying for rising cost pressures.

The national oil company (NOC) also announced it will pay the government another RM25bil in dividends in the second half of the year, which takes its total dividend paid for 2022 to RM50bil in total, the second highest dividend paid in the past three years.

President and group CEO Datuk Tengku Muhammad Taufik said the extra dividend was declared in response to a request from the government and after taking into consideration the company’s financial resources and obligations, as well as its strong financial year so far.

“PETRONAS’ strong performance in the first half of 2022 demonstrates our commitment to undertake all necessary measures to remain resilient even as we sustain commercial and operational excellence in all our business operations, in the face of the increasingly volatile global environment.

“We aim to secure energy security for the country and look at opportunities for growth,” he said at the release of the group’s first half (1H22) results yesterday.

Putrajaya is shouldering a RM78bil subsidy bill for the year which economists had speculated would be partly funded by a higher dividend payout from PETRONAS.

The 2022 payout is double the RM25bil dividend declared in 2021 by the NOC and is the second highest historically since the RM54bil dished out in 2019. The extra payout means PETRONAS paid out all the RM48.6bil net profit it made in financial year 2021.

This was possible as strong energy prices and boom in demand post-Covid-19 lockdowns enabled PETRONAS to enjoy a significantly improved second quarter (2Q) ended June 30, 2022, with its net profit rising 139% year-on-year (y-o-y) to RM23bil as revenue surged 63.6% y-o-y to RM93.4bil.

For the cumulative six months of 2022, earnings stood at RM46.4bil versus RM18.8bil in 1H21 while 1H22 revenue amounted to RM172.1bil as compared to RM109.6bil in 1H21.

The bulk of the improved financials for the period came from a significant improved performance from its upstream business (crude oil sales) and liquefied natural gas (LNG) business, while its downstream business grew at a more modest pace in the period.

Muhammad Taufik expects that to continue, as he sees demand-supply dynamics to remain bullish and energy prices to remain elevated this year.

“We expect 2H22 crude oil prices to range between US$90 and US$95 (RM426 and RM403) a barrel before gradually easing in 2023 as demand supply fundamentals improve,” he said.

PETRONAS total assets rose 10% year-to-date to RM699.5bil while shareholder equity rose 7% to RM75.6bil for the same period.

He added the higher capex over the next five to six years would be necessary to support its three-pronged growth strategy and Net Zero Carbon Emissions by 2050 aspiration. The money would be needed to strengthen the energy ecosystem at home and in 44 other countries it operates.

He said PETRONAS remains committed to creating value that supports Malaysia’s economic growth which includes supporting the resilience of the local oil and gas ecosystem and cultivating strong partnerships towards sustaining a conducive environment for businesses to thrive.

Much like its peers in the industry, Muhammad Taufik said PETRONAS experienced a 36% y-o-y rise in costs to RM128.2bil in 1H22 due to rates escalating in the services sector.

Rates have risen between 30% and 200% for services like jack-up rigs to offshore support vessels as capex expansion has taken away limited resources.

“I would like to remind the sector players that we have to work together through cycles for shared prosperity of all,” he said, indicating price expectations of contractors will need to be flexible in accordance with the business cycles.

PETRONAS capex in 1H22 rose 49% y-o-y to RM18.9bil with 63% of it spent in the upstream segment. Capex spending has returned to pre-pandemic levels while domestic capex grew 30% y-o-y in 1H22.

The group also signed five new production sharing contracts in the period for offshore acreages to exploit potential hydrocarbon resources there.

The group also does not expect a major rise in financing costs, as most of its lending is at a fixed rate, officials said.

It added that it had completed the sale of its assets in Azerbaijan and recent news reports suggest it is prepared to listen to offers for assets in Africa as well. Company officials did not comment on this during the briefing.

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