PETRONAS reported a commendable performance over the last quarter despite a difficult period, due to better operational efficiencies despite lower production entitlement and LNG volumes.
Speaking at the national oil company’s second Quarter Financial Result Media Briefing, PETRONAS President and Group CEO Datuk Wan Zulkiflee Wan Ariffin said that its past prudent cash management practices had provided sufficient financial reserves to weather the effects of the low oil price. However, PETRONAS is bracing itself for more challenges ahead as low oil prices persist.
“Overall, it has been an unrelenting difficult period, but with tenacity and discipline in sticking to our business strategies, PETRONAS has persevered and continues to show resilience. The next phases however, will really test the organisation’s stamina and endurance,” said Datuk Wan Zulkiflee.
PETRONAS made RM11.1 billion in profits after tax, on the back of RM61 billion revenue in the second quarter of 2015. This is lower by 3% and 7% respectively, compared to the previous quarter mainly due to lower LNG volumes and prices.
The three-month average Japan Crude Cocktail (JCC) reported a decrease of 14% in LNG prices where average price for LNG in Quarter 2 was at USD57 per barrel as compared to USD66 per barrel in the previous quarter.
The drop in profits and revenue was cushioned by three factors: better operational efficiencies, current Brent price increasing 15% to USD62 per barrel from the previous quarter; and stronger refining margins.
Datuk Wan added that the group also notched several operational and project milestones in Q2, such as:
· PETRONAS achieved first hydrocarbons from three greenfields – two in Malaysia and one from the Bukit Tua field in Indonesia.
· The first steel-cutting ceremony for PETRONAS’ second floating LNG facility, the PFLNG 2 in Korea in June, putting the company on track to deploy PFLNG 2 offshore Sabah in 2018, as part of its long-term LNG business strategy to differentiate PETRONAS in an increasingly technologically-competitive market.
· PNW Integrated LNG Project in Canada achieved a conditional Final Investment Decision (FID) in June, and to date has completed the first of two conditions, which is the legislated approval of the Project Development Agreement or PDA by the British Columbia government.
· On the downstream business side, PETRONAS has kicked off the construction for the Pengerang Integrated Complex in the last quarter. The RAPID project is expected to be completed by Q1 of 2019, with commercial operations to begin in Q2 of 2019 as planned.
· Operationally, PETRONAS domestic refineries and petrochemical plants continue to chart excellent performance levels, with OEE at 94.1% and 89.5% respectively.
Speaking further on the industry’s outlook, Datuk Wan Zulkiflee said that PETRONAS does not foresee a reprieve from the low oil prices in the near future.
“I do not expect our cash flow from operations this year to meet our CAPEX and dividend commitments. This means that we will have to persevere through with more austerity measures, and will have to draw on our cash reserves. Cost management and efficiency will continue to be a key focus across the organisation,” he said.
He also called on the Malaysian oil and gas industry to work together in collaborative efforts towards tangible outcomes in the interest of building the collective resilience of the industry.
”I strongly urge companies in the Malaysian oil and gas industry to join forces for the greater good in this pervasive low oil price environment. There are ample opportunities in the market for consolidation, leading ultimately to increased cost efficiency and competitiveness across the industry,” said Wan Zulkiflee in his closing.
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