Lower global oil prices to impact Petronas' profitability
Published on: Thursday, March 05, 2015
Kuala Lumpur: Petroliam Nasional Bhd (Petronas), which reported its first quarterly loss in the fourth quarter of 2014, expects "bad outlook" for 2015 as its profitability will be significantly impacted by lower global oil prices.The state-owned oil major's dividends contribution to the government coffers will also be lowered to RM26 billion as compared with RM27 billion a year ago.For the fourth quarter ended Dec 31, 2014, Petronas incurred a net loss of RM7.28 billion compared with a net profit of RM12.76 billion in the previous corresponding period, mainly due to assets impairment losses as a result of steep decline in oil prices.
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On a full year basis, it was still in positive territory, registering RM47.61 billion in net profit, even when it registered a drop of 27.4pc compared with the RM65.59 billion it made in 2013 despite total impairments of RM22.6 billion.Speaking at a media briefing last Friday, Petronas executive vice-president and group CFO Datuk George Ratilal stressed that the group doesn't foresee any significant impairments moving forward, saying that the impairments can be written back if oil prices improve."The impairments were based on the current price…it's a temporary thing and not permanent, it's an accounting standard," he said.He believes that the group will still be profitable this year though oil production is expected to be tapered off over the next two to three years due to cutback in capital expenditure (capex).
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"We're still working out the impact of lower oil price on the production, we'll know better in the next three months," Ratilal noted.Petronas' upstream production stood at 2,226 kilo barrels of oil equivalent per day (kboe/d) for 2014, an increase of 5pc against 2,127 kboe/d in 2013. This was despite average dated Brent of US$98.99 per barrel in 2014, a drop of 9pc compared with US$108.66 in 2013.
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Its fourth-quarter revenue went down 6.41pc from RM84.81 billion to RM79.37 billion, while full-year revenue increased 3.73pc from RM317.31 billion to RM329.15 billion.Petronas outgoing president and group CEO Tan Sri Shamsul Azhar Abbas said the group is still reviewing its plan for the coming two years, with an expectation of oil prices to be in the range of US$50 to US$60 per barrel for at least two years. Petronas' oil price assumption for 2015 is US$55 a barrel.Following that, he said key oil and gas projects had been deferred until oil prices recover, including the Sepat gas processing project to be deferred until 2017 or 2018.For risk service contract in particular, Shamsul said it would only viable when oil prices stay above US$80 per barrel."Anything less than that will not see the award of small field development contract," he added.However, he reiterated that the Refinery and Petrochemical Integrated Development (Rapid) project will proceed as scheduled and is slated for completion by 2019 or 2020.Shamsul said there will be 10pc and 15pc capex cuts for 2015 and 2016 respectively. The capex cuts work out to some RM20 million to RM30 million over the next few years.He also noted that operating expenditure (opex) will be cut by as much as 30pc, but he gave assurance that no retrenchment will be made as the manpower can be remobilised to other areas."We don't see a single staff losing their job," he noted.Commenting on Petronas' RM36 billion liquefied natural gas project in Canada, Shamsul said Petronas is in a discussion of further divesting another 10pc to 12pc stake in the project to 50pc from the current 62pc."Last couple of weeks, we were in a discussion with another Chinese party who is interested," he noted.Stay up-to-date by following Daily Express’s Telegram channel.
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