September 9, 2012

PETRONAS Struggle to Match Last Year's Performance

Petroliam Nasional Bhd (Petronas), which posted a 30 per cent drop in earnings to RM15.22 billion in the second quarter ended June 30, 2012, will struggle to match last year's performance due to production issues, low oil prices and anticipated increase in gas subsidy.

"By year-end, it's going to be a struggle to reach the RM90 billion pre-tax profit achieved in the nine-month 2011 results with the third-quarter results going to get worse," said President/Group Chief Executive Officer, Tan Sri Shamsul Azhar Abbas.

The national oil corporation has indirectly told the government that it cannot do much, he told reporters at the company's second quarter results briefing.

Petronas posted a slightly higher pre-tax profit of RM52.7 billion for the first half of financial year 2012 compared with RM51.7 billion in the same period in 2011.

The company's performance is expected to take a hit mainly due to the
halt in South Sudan production, depletion in domestic production, ageing facilities maintenance expenditure and anticipated trend increase in subsidised amount.

He said the stalled production in Sudan had weighed down profits and would hit Petronas' bottom line by US$1 billion per year.

Meanwhile, the domestic production would remain a challenge until 2014 due to depleting production from ageing fields.

"This year we expect zero production from South Sudan, lower domestic production as well as deferred maintenance work, and shutdown cost of RM32 billion over the next five years will be squeezing output and earnings.

"Meanwhile, gas subsidies borne by Petronas have touched RM14 billion in the first half of this year and could double to RM28 billion by year-end, which is a significant increase compared to RM23.7 billion last year.

"That's the revenue we have foregone, money that is required to grow business," he explained.

Oil price stood at US$119.17 per barrel in the first quarter and declined to US$116.81 in the second quarter, and dipped to US$88 in June, he said.

Although Petronas' financial projections are based on US$87 crude oil per barrel, Shamsul Azhar said the company would struggle to meet plans with a drop to US$80 a barrel.

"As of this morning the price has gone up to US$114 per barrel, which is a reflection of turmoil in the Middle East and economic problems in Europe and the United States," he said.

Petronas has proposed a new dividend policy of 30 per cent payout of profit to the government from 2013 onwards compared to RM30 billion committed this year, but the government has yet to agree to it, he said.

"The understanding is there. There's nothing in black and white," he added.

Source: BERNAMA NEWS (07/09/2012)