Petronas reveals 96% profit slump

Petronas is reeling from the slump in fuel prices. Source: Pixabay

Malaysia’s Petronas has revealed that falling oil prices have dragged its quarterly profits down by 96 per cent, and labelled the industry outlook “gloomy” well for next year.

Net income fell to 348 million ringgit (US$86 million) by June, from 9.1 billion ringgit in 2015. Revenue fell 21 per cent to 48.4 billion ringgit.

The state-owned supplier has seen a global slump in oil prices squeeze its assets, which make up a third of the Malaysian oil and gas income. The benchmark Brent futures price, which hit a 12-year low earlier in 2016, rose 25 per cent in the second quarter but remained lower than a year earlier.

“The first half of 2016 remained difficult for Petronas,” chief executive Wan Zulkiflee Wan Ariffin told the media in Kuala Lumpur. “The continuous volatility of oil prices means that we cannot let up, but instead continue to grow on the back of better operational efficiencies, more controllable.

“We should expect to see volatility continue and Petronas will not bank on optimistic oil prices to ease up on pressure. The combined factors of oversupply, growing inventories and slower demand growth point to an ongoing gloomy outlook well into 2017.”

Wan said the firm was planning for an average price this year of US$30 a barrel, unchanged from its February forecast. Brent crude, after a recent rally, traded at US$49.5.

For April-June, net profit reached 1.62 billion ringgit (US$402.48 million) on revenue that fell 21 per cent to 48.44-billion ringgit.

Petronas said oil price instability had caused impairment charges to rise by nearly 15 times year-by-year prior to 7.16 billion ringgit in the second quarter.

Petronas at the start of the year announced it would cut outgoings by up to 50 billion ringgit over the next four years in response to falling prices.

Wan said Petronas would enforce “fiscal discipline” regardless of oil price movement and that it expected to meet its dividend commitment of 16 billion ringgit to the official coffers for 2016.

He told the media that Petronas was yet to make a final decision on its liquefied natural gas (LNG) pilot in western Canada.

Petronas and its partners have been waiting around three years for a permit to build a Pacific NorthWest LNG export terminal in British Columbia and they are now waiting for the Canadian Environmental Assessment Agency to complete a review.

Wan said he expected Ottawa to make a decision by October.

“Until we get the final decision and presumably with the final conditions, we are not able to decide,” he said.