Malaysia's Petronas raises payout commitment to government as profit surges

Malaysia's Petronas raises payout commitment to government as profit surges

Malaysia's state-owned energy firm Petroliam Nasional Bhd [PETR.UL] on
Friday raised its dividend payment commitment to the government after
reporting that second-quarter profit quadrupled because of higher oil prices
and improved margins.

But Petronas, as the company is known, maintained a cautious outlook, saying
its overall year-end performance is expected to be "fair" as oil price
volatility continues.

The energy firm's second-quarter profit rose to 7.06 billion ringgit ($1.65
billion) from 1.68 billion ringgit in the corresponding quarter last year.
Revenue rose 10 percent to 51.63 billion ringgit.

"Despite higher oil prices compared to a year ago and overall stronger
financial and operational performance, the industry remains volatile, and we
are tempering our optimism," Chief Executive Officer Wan Zulkiflee Wan
Ariffin said at a news conference.

"We temper our outlook because we are conservative," he said, adding that
the softer outlook does not have an impact on the dividend payout to its
sole shareholder, the Malaysian government.

Petronas, Malaysia's only Fortune 500 company, will pay the government 16
billion ringgit this year up from its earlier commitment of 13 billion
ringgit, said Wan Zulkiflee.

The increase was recently approved by the board due to the company's
financial performance, he said. Petronas last year paid the government 16
billion ringgit and 26 billion ringgit in 2015.

Petronas' dividends last year accounted for 7.5 percent of total government
revenue.

The money will add to the government coffers at a time when it has announced
infrastructure projects to build momentum for a general election that Prime
Minister Najib Razak is required to call by the middle of 2018.

COST CUTS

Petronas, like other oil majors, has taken a hit from lower oil prices.
Brent crude LCOc1, currently above $52 a barrel, is now less than half what
it was in mid-2014.

The energy firm has focused on cutting costs amid expectations that the low
oil price environment will continue.

Petronas has said it will slash spending by 50 billion ringgit from 2016 to
2019. It has also saved 7 billion ringgit from other cost optimization
efforts, Wan Zulkiflee told Reuters last week.

"The price of oil today, at around $50 per barrel, this is the level we must
take as the norm." Wan Zulkiflee said. He expects oil prices at $49 per
barrel at the end of the year and in the "high $40s" in 2018.

He said Petronas has decided to divest its position in Algeria and concluded
a partnership in Cameroon, as part of the company's portfolio review.

Last month, Petronas scrapped its proposed $29 billion liquefied natural gas
export terminal project in western Canada due to soft prices.

On Friday, Wan Zulkiflee said the termination would cost the company a total
of 1.5 billion ringgit after tax. About 700 million ringgit would be
impairment charges, while the rest will be paid to TransCanada (TRP.TO),
which was set to built a pipeline for the project.

"(We are) looking at our options and finalizing our strategy on how to
monetize our North American gas assets. All options are being looked at,"
Wan Zulkiflee said.

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Link to Original Article:
https://www.reuters.com/article/us-petronas-results-idUSKCN1B50GK

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com