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Lower oil prices, impairments weigh on Petronas 1H performance

KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) posted lower revenue of RM93.6bil in the first half ended June 30,2020 as it was mainly impacted by lower average realised prices for all products and lower sales volume mainly due to processed gas and liquified natural gas (LNG).

The national oil company said in a statement on Friday revenue in 1H 20 fell by 23% from the RM121.1bil in the previous corresponding period.

Petronas also said it was impacted by the downward revision of the price outlook due to the current economic landscape and also the growing pace of energy transition.

“This led to sizeable impairments recognised during the period, ” it said where it posted a loss after tax of RM16.5bil compared with net profit of RM28.9bil a year ago.

“Excluding impairment loss, the group would have recorded net profit of RM7.7bil.

“Earnings before interest, tax, depreciation and amortisation (Ebitda) stood at RM29.4bil, down 46% from RM54.7bil, in line with lower profit, ” it said.

Amid the challenging period, it said the group was able to sustain positive levels of cashflow from operation at RM26.3bil despite the softer results during the first half.

As for capital investments, it recorded RM14.8bil which were mainly for upstream projects.

Petronas’ total assets declined by 1.5% to RM613bil at at June 30 this year compared with RM622.4bil as at Dec 31,2019, mainly due to net impairment losses on assets.

Petronas said its gearing ratio increased to 24.8% as at June 30 from 19.4% at Ded 31,2019, mainly due to the reduction in equity associated with the 1H loss and increases in borrowings after the successful issuance of a US$6bil multi-tranche senior bond offering in April 2020.

As for the second quarter, its revenue fell by 42% to RM34bil from RM59.1bil a year ago mainly due to lower average realised prices for major products and lower sales volume mainly from petroleum products, LNG and processed gas.

It posted loss after tax of RM21bil in contrast with net profit of RM14.7bil a year ago, primarily due to lower revenue coupled with net impairment losses on assets. It said Ebitda fell by 66% to RM9.1bil from RM26.9bil in line with lower profit.

Its capital investments in the first half fell to RM14.8bil from RM15.7bil a year ago.

Operational Highlights – 1H FY2020


In the first half of 2020, 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 2,255 thousand barrels of oil equivalent (boe) per day, lower than the 2,418 thousand boe per day recorded in 2019.

This was partially offset by higher liquid production from Brazil.

Upstream undertook cost optimisation efforts, including a comprehensive review of its operational expenditure, together with a robust review of its business portfolio against the backdrop of anticipated volatile long-term oil prices while enhancing its strategies to adapt.

Upstream continued to perform operations with minimal disruption, through agile Standard Operating Procedures and implementation of digital tools and platforms while ensuring the safety and well-being of its staff and personnel.

There were minimal disruptions to our operations in Malaysia, allowing us to, amongst others, ensure continued supply of gas to meet the daily requirements in both Peninsular and East Malaysia.

Internationally, operations were largely uninterrupted, except for the Garraf field in Iraq, which has since resumed operations as of 21 July 2020. This is a testimony to our resilience and agile operations.

During this challenging period, Upstream successfully achieved the following:

A total of 10 projects achieved first hydrocarbon, adding 50 kboe per day of new production, comprising five Brownfields in Peninsular Malaysia, Sarawak and Indonesia, as well as five Greenfields in Peninsular Malaysia and Sarawak.

A total of four exploration discoveries – one in Sarawak, one offshore United States Gulf of Mexico and two in the Salina Basin, offshore Mexico — in April and May 2020, respectively.

A total of eight projects of which seven are in Malaysia and one international achieved Final Investment Decision (FID). PETRONAS continues to prioritise projects that are robust and provide the best value to its portfolio.

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