KUALA LUMPUR – PETRONAS persevered amidst the challenging industry environment, recording positive results for Quarter three (Q3), buoyed by its downstream business.
The company recorded a Profit After Tax (PAT) increase of 38% for its downstream business compared to the year-to-date results for 2014. The results were fuelled by strong refining and marketing margins on the back of lower feedstock prices, and also improved plant performances for refineries and petrochemical plants.
However, PETRONAS’ Group PAT was affected by impairments taken on some Upstream assets, in response to the prolonged low oil price and oversupplied global market. PETRONAS recorded a PAT of RM1.4 billion in Q3, bringing the company’s year-to-date PAT to RM24 billion, a 57% drop compared to the same period last year.
In his speech at the press conference today, President and Group CEO of PETRONAS, Datuk Wan Zulkiflee Wan Ariffin said that the non-cash impairments are a necessary, prudent measure, as the company braces for a long drawn-out period of low oil prices.
“However, we remain confident of being able to weather through this storm, given that our cash flow from operations for Q3 of RM17 billion and for Year-To-Date of RM51 billion are at levels expected given the external factors,” said Wan Zul.
The company recorded revenue of RM60 billion in Q3, 25% less than the corresponding period last year. This brings PETRONAS’ year-to-date revenue to RM188 billion compared to RM250 billion for the same period in 2014.
The results reflected the impact of continued low oil prices, with Brent price averaging USD50 per barrel in Q3, compared to USD62 per barrel in Quarter two (Q2).
Despite the current industry downturn, PETRONAS continued to achieve notable operational milestones in both its upstream and downstream businesses.
PETRONAS’ operational highlights include:
•A 4% production growth for upstream business from the same period last year to 2.3 million Barrels of Oil Equivalent Per Day (BOE/D). The growth was driven by production enhancements or new productions mainly from Malaysia, Vietnam, Indonesia and Azerbaijan. These include two greenfields first hydrocarbon in Malaysia and three internationally, which brings the company’s year-to-date greenfield first hydrocarbon to 11.
•PETRONAS’ Gladstone LNG project in Australia achieved first production in Q3 and successfully delivered its first cargo to South Korea in October.
•Pacific North West (PNW) Integrated LNG project in Canada remains at conditional FID stage, pending the close-out of the final condition to obtain an approval from the Canadian Environmental Assessment Agency.
•PETRONAS’ Melaka Refinery Complex recorded better plant reliability, higher refining margin and realised operational synergies after completing the acquisition of remaining interests from Philip66.
•PETRONAS’ petrochemicals segment recorded higher plant reliability.
•For the company’s retail business, PETRONAS led the domestic market in launching the Euro 4M RON 97 fuel in mid-August.
•RAPID project is on-track for Phase 2 of site preparation while the refinery and cracker constructions are progressing on-schedule.
PETRONAS anticipates continued challenges due to the bearish market sentiments, and will continue to focus on internal measures of control to steer the company through the downturn.
“Moving forward, with the outlook on the oil and gas sector still uncertain, we must focus on adapting more prudent approaches to our cash management and materialising internal efficiency measures,” said Wan Zul.
He added that the company remained committed to its CAPEX projects which include RAPID, the Pacific North West LNG Project in Canada, the LNG Train 9 in Bintulu, and the two PETRONAS Floating LNG projects being constructed in Korea.
“These CAPEX projects are investments for the long-term, and we are set on seeing them through successfully to ensure PETRONAS’ sustainability well into the future,” said Wan Zul.
He also said that despite more than 200,000 job cuts announced by the industry globally, PETRONAS is not shedding jobs of permanent staff, and remains hopeful that the low oil prices will not prolong to a stage where such measures need to be considered. Instead, the company will be reallocating existing manpower across businesses, specifically to man increased downstream activities.
PETRONAS also announced a lower dividend to the Government, with an agreed RM16 billion dividend to be paid in 2016 as compared to RM26 billion being paid for this year.
As part of its ongoing efforts in leading industry-level change initiatives, PETRONAS announced that the company’s Cost Reduction Alliance initiative (Coral 2.0) realised actual savings of RM1.5 billion as at September 2015.
The CEO also echoed his call from previous quarters for Malaysian oil and gas players to consolidate to overcome the challenging environment.
“I feel that consolidation among players within the Malaysian oil and gas industry is not happening as quickly as we would like. I hope that our colleagues in the industry will heed this call and internalise that the only way out of this storm is to combine forces and become stronger players,” he said.
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