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Malaysia's Petronas posts 47% hike in Q2 profit

Publication Date : 14-08-2014


Petroliam Nasional Bhd (Petronas) expects the current decline in crude oil prices to dampen its earnings in the second half of the year, even as its net income in the second quarter ended June 30, 2014 surged 46.58 per cent to 18.33 billion ringgit (US$5.76 billion) from 12.51 billion ringgit (US$3.93 billion) a year ago.

Chief executive Shamsul Azhar Abbas also warned that costs were on the rise, as exploration and production efforts grew more complex.

“Everybody has to accept this fact. Production-sharing contractors are also looking for clarity (in terms of costs) and this could affect FIDs (final investment decisions).

“Things will not be easy this year. You can’t just take our profit for the first half and multiply it by two,” he cautioned.

The national oil company yesterday posted a 14.69 per cent increase in second-quarter revenue to 85.36 billion ringgit ($26.83 billion) versus 74.42 billion ringgit ($23.40 billion) previously.

Net profit for the first half of the year rose 14.75 per cent to 34.5 billion ringgit ($10.84 billion) from 30.06 billion ringgit ($9,45 billion) as revenue climbed 12.12 per cent to 169.41 billion ringgit ($53.25 billion) from 151.1 billion ringgit ($47.50 billion), courtesy of higher oil and gas production, sales of petroleum and liquefied natural gas (LNG) products and a favourable exchange rate.

Its total production for the six months to June averaged 2.23 million barrels of oil equivalent per day (mmboe/d) from 2.12 mmboe/d in the same period last year, helped by a resumption in its South Sudan operations, production enhancements, fresh production from Malaysia and Iraq, and additional production from Canada, Petronas said in the notes to its accounts.

The state-owned oil firm recorded an average Brent crude price of US$108.93/barrel in the year-to-date, a slight improvement over US$107.5/barrel in the same period last year.

In a briefing with the media yesterday, Shamsul said crude oil prices could fall further as supply exceeded demand, although he sees prices being supported at US$95-US$100/barrel.

“Even if we ramp up production, that won’t compensate for the downtrend in prices,” he said.

The International Energy Agency (IEA) on Tuesday cut its forecast for global oil demand amid soaring production in the United States, which, in July, produced the most oil in nearly 30 years.

The IEA also trimmed its projection for demand growth for this year to one million barrels a day, down by 180,000 barrels.

As at 6pm yesterday, US crude was being traded at US$97.25, declining 1.2 per cent so far this year.

Despite cooling prices, Shamsul said Petronas’ 2014 capital expenditure (capex) was intact, given the need for ongoing investment and replacement of ageing infrastructure like pipelines.

Rates for offshore supply vessels had tumbled 30 per cent in a recent tender exercise, which was a “good thing,” as the market for offshore services had been overheating for “far too long,” he added.

Petronas’ core upstream segment, made up of its exploration and production, and gas and power arms, saw revenue jump 23 per cent and profit after tax 16 per cent to 105.5 billion ringgit ($33.16 billion) and 32.4 billion ringgit ($10.18 billion), respectively, while the downstream business suffered a drop in its top and bottom lines to 105.5 billion ringgit ($33.16 billion) and 79.3 billion ringgit ($24.93 billion) due to lower refining margins and sales volumes.

The group’s gearing as of end-June improved to 10.6 per cent from 11.1 per cent at end-2013.

Some 64 per cent of its capex during the six-month period was spent domestically and the remaining abroad.


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