Malaysian state-owned oil and gas company Petroliam Nasional Bhd.'s fiscal third-quarter net profit rose 74 percent from a year earlier helped by higher oil prices and one-time gains, and said crude oil prices are likely to remain above $100 per barrel over the next couple of months.
The company, however, said it will face challenges ahead as many of its oil and gas producing assets in the country average between 19 years and 28 years in age, which will require large amounts of capital spending as it attempts to replace and refurbish them.
Chief Executive Shamsul Azhar Abbas said Wednesday, "The next five years will be all about capex," adding that the company is targeting capital expenditure spending of 50 billion to 55 billion Malaysian ringgit, or about $16.5 billion to $18.1 billion, annually over the next five years.
Crude oil prices have been on an upswing recently hurt by the expectation of disruption in supplies as the political conflict in the Middle East and North Africa threatens to spread to neighboring large oil producing nations. Shamsul said the impact of easy money policies in the US on risk sentiment and the US dollar is expected to support crude oil prices together with growing demand by emerging economies.
For the quarter ended Dec. 31, the company�known as Petronas�said net profit rose to 21.21 billion ringgit compared with 12.19 billion ringgit a year earlier, while revenue rose 12 percent to 60.04 billion ringgit from 53.44 billion ringgit.
The company had one-time gains amounting to 9.3 billion ringgit from the listing of two of its units during the third quarter. Petronas Chemicals Group Bhd. made its debut in November raising 12.8 billion ringgit, while Malaysia Marine & Heavy Engineering Holdings Bhd. had its listing in late October raising about $645 million.
Shamsul said the company benefited from higher crude oil prices during the quarter, but the strengthening ringgit against the US dollar has hurt profitability.
Malaysia's most profitable company said third quarter earnings before interest, tax, depreciation and amortization was up 4.6 percent at 24.9 billion ringgit, excluding the impact of the one-time gain.
Shamsul also said the company is on track to meet its fiscal year 2011 pretax profit target of 80 billion ringgit, excluding the one-off gains. He expects the fourth quarter to be "strong" on the back of higher oil prices.
Nymex crude-oil prices for April delivery straddled the psychologically-important $100 a barrel level in electronic trading on fears of a prolonged conflict between forces supporting and opposing Libyan ruler Col. Moammar Gadhafi. The front-month futures contract was at $99.48 a barrel, down 15 cents from their close in New York overnight; the contract rose as high as $100.64 earlier in the day on Globex.
In the quarter just ended, Petronas produced 2.13 million barrels of oil equivalent a day, down from 2.18 million a year earlier. Crude oil and condensates accounted for 875,000 barrels, down 4.6 percent on year, and natural gas fell slightly to 1.25 million from 1.26 million.
The decline in production of crude oil and condensates was mainly caused by adverse reservoir performance and natural field depletion, Petronas said.
Unlisted Petronas controls several listed units such as shipping firm MISC Bhd., gasoline-station operator Petronas Dagangan Bhd. and gas distributor Petronas Gas Bhd.
Petronas Vice President Finance George Ratilal said the company paid 30 billion ringgit in dividends to the government for the nine-months ended Dec. 31. Shamsul said, given the need for high capital spending going forward it will be difficult for the company to sustain high dividend payout.
Ratilal also said the company's balance sheet remains strong with total assets rising 4.8 percent to 430.5 billion ringgit as of Dec. 31, compared with 410.9 billion ringgit as at the end of March 2010. The group's total debt to total assets is at 0.11 times as of the end of December, down from 0.13 times as of the end of March 2010.
