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Last Updated: March 15, 2017
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PETRONAS’ financial year results that ended 31 December 2016 have shown improvements despite the challenging market environment. This was the result of the deliberate sequential measures undertaken by the Group in response to the low oil prices which included the Group’s transformation efforts and its continuous pursuit to optimise cost and improve efficiency.

PETRONAS’ profit grew by 12 per cent to record higher Profit After Tax (PAT) of RM23.5 billion, from RM20.9 billion recorded in 2015. This was mainly due to lower operating expenditures and tax expenses partially offset by lower average prices.

The Group’s revenue for the year dipped by 17 per cent to RM204.9 billion from RM247.7 billion in 2015. The decrease reflected the lower average prices in line with the downward trend of key benchmark prices (Dated Brent and Japan Customs Cleared Crude) coupled with the impact of lower sales volume.

Cumulative 2016 Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) was RM70.4 billion compared to RM75.5 billion recorded in 2015.

Cash flows from the Group’s operating activities also decreased from RM69.6 billion in 2015 to RM53.8 billion due to lower average prices, partially offset by lower tax paid.

The Group’s continuous efforts to reduce cost had contributed in 8 per cent or RM4.1 billion decrease in controllable costs to RM49.1 billion compared to RM53.2 billion in 2015.

Total assets and shareholders’ equity increased to RM603.3 billion and RM380.3 billion respectively, contributed by the impact of weakening of Ringgit against US Dollar exchange rate and favourable movement on fair value of available-for-sale financial assets.

Gearing ratio increased to 17.4 per cent compared to 16.0 per cent recorded last year. This was due to higher borrowings following additional drawdown made during the year. Return on Average Capital Employed (ROACE) increased to 5.3 per cent compared to 5.1 per cent in 2015 in line with the Group’s higher profits.

Capital investments for the year was reduced by 22 per cent to RM50.4 billion following project deferment and rephasing as well as cost optimisation efforts.

Meanwhile, PETRONAS’ quarter four profits recorded a strong 85 per cent jump in PAT to RM11.3 billion from RM6.1 billion recorded in the previous quarter. The RM5.2 billion increase was primarily driven by higher average realised product prices and sales volume mainly from LNG and processed gas as well as impact of favourable exchange rate partially offset by higher taxation.

Revenue rose by 20 per cent to RM58.6 billion from RM48.7 billion in the preceding quarter.

EBITDA for the quarter also grew by 44 per cent to RM21.9 billion in line with the Group’s higher profits.


Upstream


Upstream continued to focus on delivering its commitments across the oil and gas value chain while putting in measures to increase cash generation and optimise cost.

Malaysia and PETRONAS Group’s international total upstream production was 2,363 thousand boe per day in 2016, a three per cent increase compared to 2,290 thousand boe per day in 2015. This was mainly driven by the resumption of operations of the Sabah-Sarawak Gas Pipeline, higher facilities uptime in Malaysia and Canada, and higher production from Malaysia, Indonesia and Australia.

PETRONAS Group’s total Liquefied Natural Gas (LNG) third party sales volume for the year was 29.01 million tonnes, marginally higher compared to 28.49 million tonnes in 2015 mainly contributed by higher volumes from Train 9 in Bintulu and GLNG in Australia, partially offset by lower trading volume.

Average sales gas volume for Malaysia in 2016 was higher as compared to 2015 in line with higher demand.

Among notable achievements in Upstream for 2016 include acquisition of four international blocks which include two recently acquired blocks in Mexico and two in Myanmar, the commissioning and delivery of first LNG cargo from Train 9, and successful commissioning of PFLNG Satu.


Downstream


Downstream Business managed the impact of depressed market growth, lower product prices and spreads to record only a slight decline in the Downstream’s PAT from RM8.4 billion in 2015 to RM8.3 billion in 2016.

The collaborative efforts undertaken across the value chain led to higher utilisation of the Group’s manufacturing units in 2016. PETRONAS’ refineries in Malaysia and South Africa recorded strong refinery utilisation at 90.5 per cent and 89.9 per cent respectively.

Meanwhile, its petrochemical plants set a new record in utilisation since incorporation of 95.7 per cent, an improvement from the previous record of 85.3 per cent in 2015. This led to an increase in petrochemical products sales volume by 14 per cent from 6.4 million metric tonnes to 7.3 million metric tonnes.

Rationalisation of marketing and trading strategies to drive value focused activities, resulted in higher margins despite lower sales volume. Total petroleum products sales volume was 268.1 million barrels, 14.5 million barrels lower compared to 2015, while crude oil sales volume was 189.3 million barrels, 24.6 million barrels lower compared to the previous year.

Downstream projects continued to progress well. The Pengerang Integrated Complex as at February 2017 is close to 60 per cent completion and is on track to commence operations by 2019. Recently, PETRONAS signed a Share Purchase Agreement with Saudi Aramco for a 50 per cent equity in selected ventures and assets of the RAPID project. Meanwhile SAMUR is expected to begin commercial operations within the first half of 2017.


Outlook


The Group continues to maintain a conservative outlook for 2017 and expects prices to remain uncertain. PETRONAS will continue to focus on its group-wide efforts to reduce costs and further improve efficiency and sustain world-class operational efficiencies through collaborations within and outside the industry.


Datuk Wan Zulkiflee Wan Ariffin, President and Group CEO PETRONAS


"I am encouraged that PETRONAS has emerged from 2016 as a more resilient Corporation with strong underlying performance driven by our new structure, significant cost reductions and improved performance. We are in a stronger position heading into 2017."



Issued by


Media Relations Department


Group Strategic Communications


PETRONAS

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Nigeria’s Energy Focus Must Change From Crude Oil to Gas – Dr Chukwueloka Umeh

According to the Nigeria National Petroleum Corporation (NNPC), Nigeria has the world’s 9th largest natural gas reserves (192 TCF of gas reserves). As at 2018, Nigeria exported over 1tcf of gas as Liquefied Natural Gas (LNG) to several countries. However domestically, we produce less than 4,000MW of power for over 180million people.

Think about this – imagine every Nigerian holding a 20W light bulb, that’s how much power we generate in Nigeria. In comparison, South Africa generates 42,000MW of power for a population of 57 million. We have the capacity to produce over 2 million Metric Tonnes of fertilizer (primarily urea) per year but we still import fertilizer. The Federal Government’s initiative to rejuvenate the agriculture sector is definitely the right thing to do for our economy, but fertilizer must be readily available to support the industry. Why do we import fertilizer when we have so much gas?

I could go on and on with these statistics, but you can see where I’m going with this so I won’t belabor the point. I will leave you with this mental image: imagine a man that lives with his family on the banks of a river that has fresh, clean water. Rather than collect and use this water directly from the river, he treks over 20km each day to buy bottled water from a company that collects the same water, bottles it and sells to him at a profit. This is the tragedy on Nigeria and it should make us all very sad.

Several indigenous companies like Nestoil were born and grown by the opportunities created by the local and international oil majors – NNPC and its subsidiaries – NGC, NAPIMS, Shell, Mobil, Agip, NDPHC. Nestoil’s main focus is the Engineering Procurement Construction and Commissioning of oil and gas pipelines and flowstations, essentially, infrastructure that supports upstream companies to produce and transport oil and natural gas, as well as and downstream companies to store and move their product. In our 28 years of doing business, we have built over 300km of pipelines of various sizes through the harshest terrain, ranging from dry land to seasonal swamp, to pure swamps, as well as some of the toughest and most volatile and hostile communities in Nigeria. I would be remiss if I do not use this opportunity to say a big thank you to those companies that gave us the opportunity to serve you. The over 2,000 direct staff and over 50,000 indirect staff we employ thank you. We are very grateful for the past opportunities given to us, and look forward to future opportunities that we can get.

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July, 19 2019
Your Weekly Update: 15 - 19 July 2019

Market Watch 

Headline crude prices for the week beginning 15 July 2019 – Brent: US$66/b; WTI: US$59/b

  • Global oil prices gained as US crude inventories shrank more than expected and a hurricane in the Gulf of Mexico threatened American offshore production
  • Tropical Storm Barry – which became a hurricane on landfall in Louisiana – was in the path of up to a third of Gulf of Mexico crude output, prompting producers to shut down most of their operations; resumption of normal service has begun
  • At the same time, US crude oil stockpiles fell by almost 10 million barrels, far more than expected, with US refineries ramping up production ahead of summer demand to add some bullishness to the market
  • The ongoing tensions between the US and Iran have not escalated further yet, but Iran has vowed to continue retaliating against the British seizure of its crude tanker in the Mediterranean off Gibraltar
  • These factors have been enough to keep current crude prices trending higher, but oil producing club OPEC warns that the market will swing back into surplus next year, estimating that it is currently producing 560,000 b/d more than will be needed without even factoring in rising US shale production
  • In Venezuela, where oil production has been crippled by sanctions, Chevron is reportedly seeking a waiver to continue operating in the country after the current waiver expires in July 27
  • The US active oil and gas rig count fell once again, shedding a net five rigs (including 4 oil rigs) as merely stable prices reduced the appetite for investment; the total active rig count is now 958, 96 sites lower than this period last year
  • As the threat of Tropical Storm Barry abated, crude prices fell back in line. Without any further disruptions on the horizon, Brent should trend in the US$62-64/b range and WTI in the US$55-57 range


Headlines of the week

Upstream

  • Norway’s Equinor has bought a 16% stake in Swedish upstream firm Lundin Petroleum for US$650 million, which gains it an additional 2.6% interest in the giant Johan Sverdrup oil field bringing Equinor’s total stake up to 42.6%
  • Inpex has picked up the exploration permit for Block AC/P66 in Australia’s Northwest Shelf, which lies in the vicinity of existing promising oil fields
  • US independent Callon Petroleum Company has acquired Carrizo Oil & Gas for US$3.2 billion, deepening its holdings in the Permian and Eagle Ford shale basins, including 90,000 net acres in the prolific Delaware Basin
  • Total has agreed to divest several of its non-core assets in the UK – covering the Balloch, Dumbarton, Lochranza, Drumtochty, Flyndre, Affleck, Cawdow, GoldenEagle, Scott and Telford fields – to Petrogas NEO for US$635 million
  • CNOOC and Sinopec has signed a new agreement to collaborate on exploration activities in the Bohai Basin, Beibu Gulf, North Jiangsu and South Yellow Sea
  • Murphy Oil has completed the sale of its Malaysian upstream assets to a unit of Thailand’s PTTEP for US$2.035 billion for five offshore projects in Sabah
  • Seven upstream discoveries were made in Colombia in 2Q19, making it the market with the most discoveries during the period, leading India, Russia and Pakistan which each made three new oil and gas finds
  • Turkey has vowed to continue drilling offshore Cyprus unless a cooperation proposal between Turkish and Greek Cypriots is accepted
  • Encana is reportedly selling off its assets in eastern Oklahoma’s Arkoma Basin for US$165 million in cash to an undisclosed buyer
  • Sinopec is hunting for partners or buyers for its Buck Lake assets in Alberta’s Duvernay shale basin in Canada, to reduce its current full ownership

Midstream/Downstream

  • The Governor of Pennsylvania Tom Wolf has ruled out using state funds to save the Philadelphia Energy Solutions refinery after it was shuttered following a massive fire that took out the entire site last month
  • Blackouts hit Venezuela’s Amuay and Cardon refineries, bringing the 955,000 b/d Paraguana refining Center to a complete halt on total lack of power
  • Chevron Phillips Chemical (CP Chem) and Qatar Petroleum have agreed to develop a new 2 mtpa petrochemical complex on the US Gulf Coast, with the US Gulf Coast II Petrochemical Project drawing on NGLs from the Permian
  • Marathon Petroleum will shut down the gasoline FCCU unit at its 585,000 b/d Galveston Bay Refinery in Texas for up to 8 weeks for repairs

Natural Gas/LNG

  • Total has agreed to buy NG from Tellurian’s Driftwood LNG facility in Lake Charles, Louisiana in two separate deals – 1 million tons per annum for Total Gas & Power North America and 1.5 mtpa for Total Gas & Power – as well as invest US$500 million in Driftwood Holdings LP
  • Mozambique has put on hold plans to raise funds for its stake in the Anadarko-led Mozambique LNG project, citing current bad market conditions
  • ExxonMobil and Lucid Energy Group have agreed to collaborate on a long-term natural gas gathering and processing project, bringing natural gas from New Mexico’s Delaware Basin to the South Carlsbad gas processing system before being delivered to ExxonMobil’s downstream facilities in the US Gulf Coast
July, 19 2019
Iran drives unplanned OPEC crude oil production outage to highest levels since late 2015

Unplanned crude oil production outages for the Organization of the Petroleum Exporting Countries (OPEC) averaged 2.5 million barrels per day (b/d) in the first half of 2019, the highest six-month average since the end of 2015. EIA estimates that in June, Iran alone accounted for more than 60% (1.7 million b/d) of all OPEC unplanned outages.

EIA differentiates among declines in production resulting from unplanned production outages, permanent losses of production capacity, and voluntary production cutbacks for OPEC members. Only the first of those categories is included in the historical unplanned production outage estimates that EIA publishes in its monthly Short-Term Energy Outlook (STEO).

Unplanned production outages include, but are not limited to, sanctions, armed conflicts, political disputes, labor actions, natural disasters, and unplanned maintenance. Unplanned outages can be short-lived or last for a number of years, but as long as the production capacity is not lost, EIA tracks these disruptions as outages rather than lost capacity.

Loss of production capacity includes natural capacity declines and declines resulting from irreparable damage that are unlikely to return within one year. This lost capacity cannot contribute to global supply without significant investment and lead time.

Voluntary cutbacks are associated with OPEC production agreements and only apply to OPEC members. Voluntary cutbacks count toward the country’s spare capacity but are not counted as unplanned production outages.

EIA defines spare crude oil production capacity—which only applies to OPEC members adhering to OPEC production agreements—as potential oil production that could be brought online within 30 days and sustained for at least 90 days, consistent with sound business practices. EIA does not include unplanned crude oil production outages in its assessment of spare production capacity.

As an example, EIA considers Iranian production declines that result from U.S. sanctions to be unplanned production outages, making Iran a significant contributor to the total OPEC unplanned crude oil production outages. During the fourth quarter of 2015, before the Joint Comprehensive Plan of Action became effective in January 2016, EIA estimated that an average 800,000 b/d of Iranian production was disrupted. In the first quarter of 2019, the first full quarter since U.S. sanctions on Iran were re-imposed in November 2018, Iranian disruptions averaged 1.2 million b/d.

Another long-term contributor to EIA’s estimate of OPEC unplanned crude oil production outages is the Partitioned Neutral Zone (PNZ) between Kuwait and Saudi Arabia. Production halted there in 2014 because of a political dispute between the two countries. EIA attributes half of the PNZ’s estimated 500,000 b/d production capacity to each country.

In the July 2019 STEO, EIA only considered about 100,000 b/d of Venezuela’s 130,000 b/d production decline from January to February as an unplanned crude oil production outage. After a series of ongoing nationwide power outages in Venezuela that began on March 7 and cut electricity to the country's oil-producing areas, EIA estimates that PdVSA, Venezuela’s national oil company, could not restart the disrupted production because of deteriorating infrastructure, and the previously disrupted 100,000 b/d became lost capacity.

July, 18 2019