KUALA LUMPUR, 27 November 2020 – PETRONAS today announced its third quarter financial results amid prolonged challenging market conditions and continued uncertainties in crude oil prices. The Group remains steadfast in responding to these challenges and is better prepared to withstand a depressed industry outlook in the next quarter.
The results reflect the Group’s agility in responding to unprecedented market challenges whilst remaining focused in pursuing its deliberate steps of long-term growth strategies as a progressive energy and solutions partner that enriches lives for a sustainable future.
Tengku Muhammad Taufik, President and Group Chief Executive Officer, PETRONAS
“Having persevered through nine grueling months, PETRONAS has recorded slight improvements in Quarter 3 2020 compared to the previous quarter resulting from sporadic easing of lockdowns which has led to gradual resumptions of economic activities worldwide. Amid the fluid operating environment brought about by the pandemic as well as prolonged volatility of oil prices, PETRONAS is adopting a cautious outlook and anticipates that the remainder of 2020 will be challenging. We expect our performance to be continuously affected by the volatility of oil prices aggravated by the ongoing COVID-19 pandemic.
We remain focused on our deliberate steps to reshape our portfolio, retool our human capital equation and focused execution at pace in managing the unpredictable business environment as we strive towards our 3-pronged growth strategy.
As we pursue this, our recently announced aspiration to achieve Net Zero Carbon Emissions by 2050 underlines our stronger commitment to sustainability. We are committed to provide cleaner energy solutions through innovative offerings and leveraging on our technological advancements.”
Cumulative Period Ended 30 September 2020
The Group recorded a revenue of RM134.7 billion, a decline of 24 per cent from RM176.2 billion in the corresponding period last year. This is predominantly driven by lower average realised prices for all products and lower sales volume, mostly from processed gas, liquefied natural gas (LNG) and petroleum products.
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) stood at RM43.4 billion, a 41 per cent decrease from RM73.5 billion in the previous corresponding period, in line with lower revenue partially offset by lower costs.
Given the lower EBITDA coupled with the impairment loss on assets, the Group recorded Loss After Tax (LAT) of RM19.9 billion for the first nine months of 2020, compared to the Profit After Tax (PAT) of RM36.4 billion in the corresponding period last year.
Meanwhile, PAT excluding impairment stood at RM10.3 billion, a 74 per cent decrease from RM39.4 billion compared to the corresponding period in 2019.
The Group generated positive Cash Flows from Operating Activities (CFFO) amounting to RM32.6 billion, despite the softer results during the period, a decline of 50 per cent from RM64.6 billion in the corresponding period last year.
Capital Investments (CAPEX) for the period amounting to RM22.5 billion, is mainly attributed to Upstream projects.
Total assets decreased to RM594.8 billion as at 30 September 2020 compared to RM622.4 billion as at 31 December 2019, mainly due to impairment loss on assets during the period. Shareholders’ equity observed a decline to RM337.2 billion as at 30 September 2020 compared to RM389.1 billion as at 31 December 2019 primarily due to the loss recorded during the period and dividends declared to shareholders amounting to RM34.0 billion whereby RM24.0 billion dividend payment was based on FY2019 performance. The remaining RM10.0 billion was an additional dividend the Board had approved to support the unprecedented challenges brought about by the COVID-19 pandemic.
Gearing ratio increased to 25.3 per cent as at 30 September 2020 from 19.4 per cent as at 31 December 2019, mainly due to reduction in equity associated with the loss for the period ended 30 September 2020 and issuance of a new bond in April 2020 of US$6 billion. The bond proceeds are to be used for capital investment, working capital, refinancing and general corporate purposes.
Third Quarter 2020
For the third quarter of 2020, the Group recorded a revenue of RM41.1 billion, lower by 25 per cent from RM55.1 billion in the corresponding quarter last year, mainly due to lower average realised prices for major products. EBITDA stood at RM14.0 billion, a decrease of 26 per cent from RM18.8 billion in the corresponding quarter last year, in line with lower revenue partially offset by lower costs.
The Group recorded LAT of RM3.4 billion for the third quarter of 2020, as compared to the PAT of RM7.4 billion in the third quarter of 2019 primarily due to lower EBITDA, higher impairment loss on assets and higher tax expenses attributed to derecognition of deferred tax assets, primarily as a result of lower oil and gas prices outlook. Excluding impairment loss, the Group would record a PAT of RM2.6 billion.
Prolonged low oil price and moderate demand recovery impacted by the COVID-19 pandemic continue to pose challenges to the industry.
Despite these challenges, PETRONAS will remain focused in maintaining portfolio resilience, upholding disciplined capital and operational spending as well as preserving liquidity to ensure business sustainability.
The Board expects the performance of PETRONAS Group in the final quarter of 2020 to be continuously affected by the challenging business environment.
Update on PETRONAS’ Response to COVID-19
As the COVID-19 pandemic situation continues, PETRONAS pledges to support the Malaysian Government and the countries where we operate, in helping to manage the rising cases.
In early November, Yayasan PETRONAS had delivered RM2.5 million worth of medical equipment and PPE to hospitals across Sabah to support the efforts of medical front-liners in mitigating COVID-19 cases in the state. In addition, RM5.2 million worth of medical equipment, Personal Protective Equipment (PPE), hand sanitisers, disinfectants, and face masks as well as food supplies were distributed to the communities in our domestic and international operations including Azerbaijan, Brazil, Brunei, Canada, Gabon, India, Indonesia, Iraq, Mexico, Myanmar, Suriname and South Sudan as at 30 September 2020.
To date, the Group’s total contribution towards the COVID-19 efforts and initiatives stands close to RM44 million.
It is imperative for PETRONAS to effectively manage the impact of COVID-19 in ensuring business continuity with minimal disruptions to operations. The Group continues to operate its business by leveraging on technology that includes cloud computing, machine learning and automation, and artificial intelligence, whilst at the same time equip its workforce with the necessary digital skills and competencies. Our focus remains to ensure an uninterrupted supply of energy to support the daily requirements of communities, businesses and governments worldwide.
Operational Highlights – Cumulative Period Ended 30 September 2020
- Upstream remains committed to achieve its operational delivery amidst the challenging business landscape. On the back of the low oil price and reduced demand brought about by the prolonged impact of the COVID-19 pandemic, Upstream recorded total daily production average of 2,190 thousand barrels of oil equivalent (boe) per day, lower than the 2,328 thousand boe per day recorded in 2019. In addition, PETRONAS continues to strive to conform to the voluntary production adjustment as agreed collectively during OPEC+ Ministerial Meetings in line with the OPEC+’s Declaration of Cooperation.
- In alleviating the effects of these challenges, Upstream undertook a thorough assessment of its assets and cost optimisation including a comprehensive review of its operating philosophy, expenditure and business portfolio against the backdrop of anticipated volatile long-term oil prices. Upstream also enhanced its strategies to address future uncertainties at pace. Upstream continued to maintain minimal disruptions to its operations in Malaysia and abroad, testimony to its resilience and agile operations.
- PETRONAS continued to fully leverage on digital tools and platforms which have reduced CAPEX and OPEX across its Upstream operations. Various technologies and digital applications were deployed including:
- First in Malaysia Remote Operations Platform deployed at Resak, offshore Terengganu. The pilot project has a potential of 30 per cent OPEX reduction.
- Deployment of Enhanced Single-Trip Multizone (ESTMZ) at Samarang, offshore Sabah, for well extension packing (part of the well completion process) which reduced operating rig time by half. This was achieved through the simplification of complex operational processes which also reduced capital expenditure of the gravel pack operation by 50 per cent. .
- Corrosion under Insulation (CUI) system at Erb West, offshore Sabah, which is a portable lightweight x-ray device designed especially to monitor and detect corrosion without removing the insulation. The pilot project showed more than 33 per cent reduction in OPEX and is 10 times swifter than conventional methods.
- During this challenging period, Upstream successfully achieved the following:
- A total of 15 projects achieved first hydrocarbon, comprising nine Brownfields in Peninsular Malaysia, Sarawak, Sabah and Indonesia, as well as six Greenfields in Peninsular Malaysia, Sarawak and Indonesia.
- A total of three exploration discoveries – one offshore United States Gulf of Mexico and two in the Salina Basin, offshore Mexico -- in April and May 2020, respectively.
- A total of nine projects achieved Final Investment Decision (FID) of which eight are in Malaysia and one international. PETRONAS continues to prioritise projects that are robust and provide the best value to its portfolio.
- In line with our commitment towards Net Zero Carbon Emissions by 2050, we have sanctioned several zero continuous venting and flaring of hydrocarbon projects in the assets which we operate in Malaysia and internationally, with an estimated total gas recovery of about 33 MMscfd and total GHG reduction of approximately 2 MtCO2e/year. These include Bokor and Betty projects, offshore Sarawak; Erb West, offshore Sabah; and Bukit Tua, Indonesia.
Gas & New Energy
- Gas & New Energy (GNE) continues to weather a challenging market landscape as a reliable provider of cleaner energy solutions while growing its presence in the renewable space. In the first nine months of 2020, GNE recorded reductions in production and sales, mainly attributed to weakened market demand and lowered energy consumption as countries went into lockdown due to the COVID-19 pandemic:
- Total LNG production for the first nine months of 2020 decreased by 5.3 per cent to 19.5 million metric tonnes as compared to 20.6 million metric tonnes achieved in the same period in 2019.
- As for LNG sales volume, gross sales for the first nine months of 2020 was 1.2 per cent lower at 24.3 million metric tonnes as compared to 24.6 million metric tonnes achieved in the same period in 2019.
- Malaysia’s average sales gas volume for the first nine months of 2020 decreased by 13.6 per cent to 2,488 mmscfd, as compared to 2,881 mmscfd achieved in the same period in 2019.
- Overall Equipment Effectiveness (OEE) for GNE business stood at 97.1 per cent across all business segments in the third quarter of 2020, recording a decrease of 0.1 per cent as compared to 97.2 per cent achieved in the third quarter of 2019.
- As of the third quarter of 2020, PETRONAS has successfully delivered over 11,426 LNG cargoes from the PETRONAS LNG Complex (PLC) in Bintulu. This marks over 37 years of world-class asset performance since operations began in 1983.
- PETRONAS’ second floating LNG vessel, PFLNG DUA, achieved ready-for-start-up (RFSU) status on 27 August 2020 and is progressing towards commercialisation planned for 2021. Once ready for commercial operations, PFLNG DUA which is moored at the Rotan gas field, located 140 km offshore Kota Kinabalu, Sabah, will be able to monetise deep-water gas fields in depths of up to 1,500 metres with a production capacity of 1.5 MTPA.
- Amidst a challenging quarter with continued depressed prices, PETRONAS leveraged on its strengths as a global LNG portfolio player and provided creative solutions and operational flexibility to its LNG buyers to assist them through this period of demand uncertainty. As of the third quarter of 2020, PETRONAS continues to expand its presence in the market with over 4.6 MTPA in LNG deals concluded.
- As at 30 September 2020, PETRONAS secured 345 MMscfd of new natural gas supply deals with customers across Peninsular Malaysia which will be transported starting 2021 via the Peninsular Gas Utilisation (PGU) transmission grid, the national trunk line system spanning over 2,623 km across Peninsular Malaysia. PETRONAS also launched and completed its first Virtual Pipeline System (VPS) delivery in the third quarter of 2020 where LNG was transported using road trucks fitted with cryogenic ISO tanks to an off-grid customer in Peninsular Malaysia.
- On the renewable energy front in Malaysia, PETRONAS’ New Energy business has more than 50MWp of solar solutions under development focusing on commercial and industrial customers. These include projects using PETRONAS’ flagship rooftop solar solution known as M+ by PETRONAS. As of the third quarter of 2020, PETRONAS has completed solar rooftop installations at 13 out of the 15 TESCO stores across Malaysia. Upon completion, the solar panels will collectively generate about 18 Gigawatt-hours (GWh) of clean energy per year enabling, TESCO Malaysia to reduce more than 13,500 tonnes of carbon emissions into the atmosphere.
- Internationally, PETRONAS New Energy’s 100 per cent owned distributed energy company, Amplus Energy Solutions (Amplus), has over 800MWp of solar capacity under operation and development in India and South East Asia, with 580MWp total capacity commissioned with a balance of 220 MWp of projects under development. The growth in solar capacity was a result of Amplus’ acquisition of Acme Solar, which is one of the largest solar independent power producers in India. With Acme Solar, PETRONAS continues its expansion as a clean energy provider and is now capable of providing clean energy to India’s utility sector, in addition to commercial and industrial sectors.
- Downstream business maintains its operational performance across all business segments in this challenging market environment, as gradual recovery is seen across economic and trade activities. The Downstream business remains focused on expanding its offerings and diversifying its portfolio to generate new revenue streams for the business.
- OEE was recorded at 92.4 per cent across all businesses. Our domestic refineries and international refinery in Durban, South Africa saw stable operations contributed by high plant reliability, recording an OEE of 97.2 per cent and 89.3 per cent respectively.
- As at 30 September 2020, PIC is on-track in transitioning to commercial operations, with the focus on operational readiness to achieve safe, reliable and efficient operations. The Atmospheric Residue Desulphurisation Train 1 and Train 2 are also expected to achieve RFSU beginning 2021. Meanwhile, the repair work on the Diesel Hydro Treating unit is progressing as planned, with RFSU in Q4 2021. The restart-up of the Refinery and Petrochemical plants is currently planned for Q1 2021.
- The petrochemicals business under PETRONAS Chemicals Group Berhad (PCG) sustained its Plant Utilisation above 90 per cent, recording 94.5 per cent with an overall production volume of 8.0 million metric tonnes. Despite lower product spreads, the petrochemicals sales volume recorded a consistent increase compared to the preceding quarter. As at 30 September 2020, the overall sales volume stood at 6.1 million metric tonnes, a slight decrease compared to 6.2 million metric tonnes recorded in the same period last year.
- As part of the 3-pronged growth strategy under expanding core business, PCG recently inked an agreement with LG Chem to build a Nitrile Butadiene Latex (NBL) manufacturing plant at Pengerang Integrated Complex (PIC) in Johor. This marks PCG’s entry into the growing NBL-based product market, further creating new revenue streams for PCG and enhancing its presence in the Asia Pacific region. The construction of the plant will begin in 2021 while production is scheduled to start in 2023. Upon completion, the plant will have an annual NBL production capacity of 200,000 tonnes, further strengthening Malaysia’s position as the largest exporter of gloves globally.
- PETRONAS through PCG also entered into a Shares Sale and Purchase Agreement (SSPA) with PCC SE to acquire 50 per cent shares in its Malaysian subsidiary, PCC Oxyalkylates Malaysia Sdn Bhd (PCC-OM), marking our entry into the growing Oxyalkylates market. Ethoxylates are used among others, in the production of detergent, home care and personal care products, while polyether polyols are mainly used to produce foam mattresses and upholstery applications. Demand for these two chemicals are expected to grow especially in the Southeast Asia and the Asia Pacific regions. In addition, an uptick in demand for household products grew at a higher rate largely due to the change in consumer habits and greater time spent at home.
- The overall marketing business recorded gradual improvements compared to the preceding quarter as economic activities slowly resumed globally. As at 30 September 2020, overall sales volume stood at 15.7 billion litres, 17.3 per cent lower compared to the same period last year. Our domestic operations under PETRONAS Dagangan Berhad (PDB) recorded signs of recovery compared to the preceding quarter, mainly contributed by increased volume in Mogas and Diesel. However, the business suffered a 22 per cent volume drop compared to the same period last year. The business will continue to be pressured with the implementation of Conditional Movement Control Order (CMCO) in states with high volume stations across Malaysia.
- PDB has now extended its offerings as part of PETRONAS’ integrated value chain by providing more access to LNG solutions via road trucks fitted with cryogenic tanks for off-grid customers in Peninsular Malaysia, following the completion of PETRONAS' Virtual Pipeline System (VPS) solution via the Regasification Terminal in Pengerang, Johor. With the first delivery of LNG via VPS successfully completed in September 2020, PDB will continue to explore expanding its supply channels to build a stronger clean energy sector across industries.
- In efforts to grow complementary non-fuel businesses for our retail arm, PDB launched Makan@Mesra, offering premium food at affordable prices to capture a larger market. This new concept has garnered positive responses following the growing demand for food-to-go solutions as seen during the Movement Control Order period. Setel, Malaysia’s first e-payment solution for fuel purchases directly from mobile devices, launched Deliver2Me, the first service of its kind in Malaysia which enables Setel users to purchase selected items from Kedai Mesra and have it delivered directly to their vehicles while refueling. In our international operations in South Africa, Engen was recently voted the Coolest Petrol Station for the 11th consecutive year, as it continues to roll out innovative solutions and expand its offerings.
- Under our commitment to the PETRONAS Sustainability Agenda, we have partnered with Tata Consultancy Services to launch SEEd.Lab, Malaysia’s first 12-month Social Enterprise programme which aims to shape a sustainable future through digital and technology was designed to address youth unemployment in Malaysia. Currently in its incubation phase, the three social enterprises under the first cohort are expected to achieve commercialisation by Q1 2021.
To view PETRONAS Group Financial & Operational Report for Q3 FY2020, click here.
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