PETALING JAYA: Petroliam Nasional Bhd (PETRONAS), Malaysia’s largest revenue-generating company, saw its profit margin squeezed by over RM14bil in previously unrecognised losses from a downstream venture it is now moving to take full control of.
The non-cash hit weighed heavily on the bottomline even as PETRONAS recorded stronger revenue.
In the first half of financial year 2026 (1H26), PETRONAS’ profit after tax (PAT) margin fell to 17.8% from nearly 20% in 1H25.
The downstream venture refers to Pengerang Refining Company Sdn Bhd and Pengerang Petrochemical Company Sdn Bhd, or collectively known as PRefChem.
Loss-making PRefChem, located within the Pengerang Integrated Complex in Johor, was a 50:50 joint venture between PETRONAS and Saudi Aramco.
PETRONAS is buying out Saudi Aramco and the completion of the share transfer is expected to be completed during the second half of the year.
Despite the margin pressure, the national oil and gas firm argued the PAT margin remained in line with industry peers.
In fact, the 1H26 PAT margin was higher than peer group average, it said.
Peer group range comprised BP, Chevron, ConocoPhillips, Eni, Equinor, ExxonMobil, PTT, Saudi Aramco, Shell and TotalEnergies.
Last Friday, PETRONAS said it achieved “resilient first-half results”, underscoring its ability to safeguard energy security while navigating a volatile global energy landscape.
Revenue rose 15% year-on-year (y-o-y) in 1H26 to RM152.4bil on higher domestic production, stronger liquefied natural gas (LNG) and processed gas sales volumes, and favourable average realised prices.
Profit after tax edged up 4% y-o-y to RM27.2bil, while earnings before interest, tax, depreciation and amortisation (Ebitda) increased to RM56.8bil from RM54.4bil in 1H25.
Ebitda rose 4% y-o-y, primarily driven by higher revenue but was partially offset by certain identified non-cash items amounting to RM14.8bil.
The non-cash items comprised recognition of previously unrecognised accumulated share of losses of a joint venture following additional equity injection made during the period.
This injection formed part of transactions undertaken by PETRONAS to enhance operational alignment and flexibility across PRefChem’s value chain, in support of PETRONAS’ commitment to Malaysia’s energy security and the strengthening of international partnerships that position Malaysia as a progressive energy nation.
“This was partially offset by the gains on divestments and dilutions mainly arising from the group’s dilution of participating interests in certain assets and disposal of certain subsidiaries in exchange of equity interest in a newly established upstream joint venture company,” added PETRONAS.
Cash flows from operations remained steady at RM47.5bil, though slightly lower than last year, reflecting working capital outflows.
Capital expenditure (capex) surged to RM41.4bil versus RM17.7bil in 1H25 driven by upstream exploration and development as well as additional capital injection into the PRefChem joint venture, the national oil company stated in a release.
Of the RM41.4bil capex, about 78% is invested in Malaysia. Segment wise, about 63% of the 1H26 capex were downstream.
President and group chief executive officer Tan Sri Tengku Muhammad Taufik stressed that PETRONAS’ priority was to “safeguard energy security for those we serve”, highlighting strategic investments to reinforce portfolio resilience.
“PETRONAS leveraged the strength of our integrated portfolio and intensified efforts across the value chain to deliver uninterrupted energy for Malaysia as its national oil company.
“Despite prevailing challenges, PETRONAS continued to maintain financial and operational discipline, while strengthening our upstream position, expanding our LNG supply nodes and enhancing our new energy offerings.
“These efforts have contributed to a resilient financial performance in the period under review, which was delivered against a backdrop of prolonged uncertainty and volatility.
“The group’s commitment remains unwavering as we work to deliver reliable energy, pursue sustainable growth, even as it endeavours to strengthen its position and create long-term value for our stakeholders,” he stated.
Operationally, PETRONAS achieved several milestones.
Upstream production averaged 2.34 million barrels of oil equivalent (boe) per day, slightly lower due to portfolio optimisation and conflict-related disruptions, but offset by improved gas availability.
The group recorded seven first hydrocarbons, 18 final investment decisions, and three exploration discoveries, including in Suriname and Indonesia.
A major highlight was the establishment of Searah Ltd with Italy’s Eni, covering 19 assets across Malaysia and Indonesia with 500,000 boe/per day of sustainable production.
In gas and maritime, LNG sales rose 17% y-o-y to 20.29 million tonnes in the period supported by new long-term supply arrangements with Japanese and South Korean partners, and a landmark LNG SPA with QatarEnergy to bolster Malaysia’s energy security.
Downstream operations played a critical role in ensuring supply continuity during the West Asia conflict, while Petronas Chemicals Group Bhd
and Petronas Dagangan Bhd units worked closely with government and industry to secure raw materials and fuel supply.
Gentari, PETRONAS’ clean energy arm, advanced its renewable portfolio to 9.1 gigawatts, expanded electric vehicle charging infrastructure across South-East Asia and India, and progressed hydrogen initiatives, including a demonstration project with IHI Corp for ammonia-powered turbines.
