Petronas records RM45.5 bil profit in 2017, pays RM19 bil dividend to government

by MARK RAO/Pix by AFIF ABD HALIM

Petroliam Nasional Bhd’s (Petronas) earnings rose 61.6% year-on-year (YoY) to RM18.21 billion for the final three months of 2017 as impairment provisions dropped drastically, higher oil prices and lower spending mitigated the stronger ringgit factor.
 
The state-owned oil company’s revenue rose 13.7% to RM61.79 billion, ending a dismal few years of low oil price regime and massive provisions/
 
For the full financial year (FY17), profit jumped 91.6% to RM45.52 billion while revenue inched 14.6% higher to RM223.62 billion.
 
Petronas executive VP and group CFO Datuk George Ratilal said the group was not expecting to recognise any significant impairments this year, especially in light of the stronger oil price environment.
 
“No substantial level of impairments as what we and the whole industry incurred over the last two years is expected in FY18,” Ratilal said at the oil firm result announcement in Kuala Lumpur today.
 
Petronas recognised an average Brent oil price of US$54.27 per barrel last year compared to US$43.69 per barrel in FY16, with most the gains being noted in the 4Q17 when oil prices averaged US$61.39 per barrel.
 
The Brent oil price began the year on a stronger footing at about US$66 per barrel. It is expected to remain above the US$60 per barrel for the remainder of this year on a lower inventory surplus despite threat from US shale.
 
Ratilal said that future cash flow adjustments based on fluctuating oil prices and breakdown in operations will result in some impairments.
 
He added that the stronger ringgit against the US dollar will have a material impact on the group’s bottomline though at a manageable level.
 
While a stronger ringgit is positive in terms of the group’s US dollar-denominated capital expenditure (capex) and borrowings, Petronas’ asset base will see some strain due to the translation loss.
 
In FY17, the group’s asset base fell slightly by 0.6% YoY to RM599.8 billion while borrowings stood at RM64.1 billion – approximately 80% of which is denominated in US dollar.
 
Petronas’ capex for the period was also lower by 12% at RM44.5 billion, 53% of which was utilised for the refinery and petrochemical integrated development (RAPID) downstream project in Southern Johor.
 
The project is part of the US$27 billion Petronas-led Pengerang Integrated Complex (PIC), which has achieved 87% overall progress to-date and is due for start-up in 1Q19.
 
Petronas has allocated a higher capex for FY18, which will sit somewhere around RM55 billion. It has also committed to pay RM19 billion in dividends to the government, RM3 billion more from the RM16 billion declared for FY17.