Petronas’ 3Q profit falls nearly 50%

by ALIFAH ZAINUDDIN/ pic by MUHD AMIN NAHARUL

PETROLIAM Nasional Bhd (Petronas) yesterday reported a sharp 48% drop in third-quarter profit to RM7.42 billion as lower crude and gas prices, and impairment dragged the national oil company’s financials.

During the same quarter a year ago, the state-owned oil company posted a net profit of RM14.34 billion.

Revenue for the quarter ended Sept 30, 2019 (3Q19), fell 14% to RM55.11 billion from RM63.91 billion due to slower demand for oil and gas as the global economy slowed due to the unending China-US trade war.

But Petronas’ earnings were helped by the weaker ringgit against the US dollar.

For the first nine months of 2019, turnover declined by 3% to RM176.23 billion from RM181.07 billion a year earlier, while net income decreased 11% to RM36.36 billion against RM40.99 billion over the same period, pushed lower by impairment for its exploration segment.

Total assets fell to RM621.4 billion as at Sept 30, 2019, compared to RM636.3 billion as at end-December last year. Cashflow from operations for the cumulative period, however, increased by 15% on positive working capital changes.

Petronas president and group CEO Tan Sri Wan Zulkiflee Wan Ariffin said the company’s performance for the quarter demonstrates its resilience and ability as an integrated energy player in sustaining strong and reliable operations throughout the period despite persistent market volatility.

“While our performance will continue to be impacted by the challenging environment, Petronas’ financial position is expected to remain robust,” he said in a statement yesterday.

The lower crude prices have clearly dented Petronas results. Last year, the average price of Brent crude oil was at US$71.06 (RM297.03) per barrel.

This year, the average price is US$64.91. Analysts agreed that without a major shift, Brent prices would not reach the average US$111.63 in 2012.

Petronas foresees challenges to remain for the remaining part of the year driven by slowing global economy, geopolitical tensions and global trade issues that would result in demand disruptions.

Total production volume year-to-date (YTD) was 2,328 thousand barrels of oil equivalent (Mboe) per day, slightly higher than the 2,313 Mboe per day in the same period in 2018, mainly attributable to higher natural gas production.

Liquefied natural gas production over the same period remained strong with a 9% increment to 20.6 million metric tonnes (MT) compared to 18.9 million MT the year prior, contributed by higher feed gas supply and better plant performance.

Results at Petronas mirrored weaker earnings posted by Petronas Dagangan Bhd and Petronas Gas Bhd, which had reported weaker profitability for the quarter due to higher costs incurred and lower turnovers.

Petronas Chemicals Group Bhd also noted a 54% year-on-year drop in net profit in 3Q19, on adverse impacts from the challenging petrochemical industry which has been on a downturn since late last year. The three counters are trading in the red YTD.