Petronas’ 2Q loss dents dividend expectations

State-owned oil firm made a loss of RM21b after tax in 2Q20, its 1st quarterly loss since 2015


PETROLIAM Nasional Bhd (Petronas) is likely to mull over a cut in its annual dividend payment to the federal government as energy prices has tanked amid the Covid-19 global pandemic.

The state-owned oil firm made a loss of RM21 billion after tax in the second quarter ended June 30, 2020 (2Q20), its first quarterly loss since 2015, and a far cry from the profit after tax of RM14.7 billion recorded last year for the same period.

Oanda Corp senior market analyst for Asia Pacific Jeffrey Halley said it is almost inevitable the national oil company’s dividend to the government will be cut.

“The Petronas CEO made great emphasis on ‘affordability’ in the question and answer (Q&A) with regard to the dividend. He is clearly preparing the ground for a dividend cut and managing expectations downwards with both the public and government,” he told The Malaysian Reserve on Sunday.

Putra Business School associate Prof Dr Ahmed Razman Abdul Latiff, however, appears to have an alternative view.

“Petronas still have a cash reserve of RM156.86 billion as at June 30, so if the government demands the usual annual RM24 billion of dividend, they can still afford to maintain the same payment,” he said.

Last Friday, Petronas said any dividend payout to the government this year would depend on whether the company could afford it in light of weaker crude oil prices.

President and group CEO Tengku Muhammad Taufik Tengku Aziz said the company’s year-end results would be the guidance to set the expectation.

He added there was no pressure from the government about the dividend, given the unprecedented challenges oil and gas companies faced.

Petronas, a major contributor to state coffers, in February stated it was planning a RM24 billion dividend payment this year to the government, its sole shareholder.

The company paid RM54 billion in 2019, which included a special dividend of RM30 billion.

A dividend payout would in part assist Prime Minister Tan Sri Muhyiddin Yassin to fund the government’s stimulus packages to revive the economy from the impact of the pandemic.

AmInvestment Bank Bhd analyst Alex Goh is not surprised Petronas has yet to declare any dividend to date for the first half of the year (1H20) given the current losses and uncertain prospects for the rest of the year.

“Given Petronas’ net cash of RM64 billion and reserves of RM351 billion, we expect Petronas to still declare some dividend by the end of the year as the group is likely to experience a turnaround in 2H20 on higher crude oil prices and demand expectations,” he said in a note yesterday.

Kenanga Investment Bank Bhd analyst Steven Chan believes a lower dividend payout will be very likely as the world’s largest exporters of liquefied natural gas (LNG) seeks to conserve cash.

Petronas’ 2Q20 revenue fell 42% to RM34 billion from RM59.1 billion in 2Q19, dragged by lower average realised prices for major products and lower sales volume of petroleum products, LNG and processed gas.

For the 1H ended June 30, 2020, the group’s loss after tax stood at RM16.5 billion, compared to an after-tax profit of RM28.9 billion previously. Excluding impairment loss, the group would have made a profit of RM7.7 billion.

Pretax profit slid 46% to RM29.4 billion from RM54.7 billion a year earlier. Its 1H20 revenue was 23% lower at RM93.6 billion against RM121.1 billion in 1H19.