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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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Your Weekly Update: 13 - 17 May 2019

Market Watch

Headline crude prices for the week beginning 13 May 2019 – Brent: US$70/b; WTI: US$61/b

  • Crude oil prices are holding their ground, despite the markets showing nervousness over the escalating trade dispute between the USA and China, as well as brewing tensions in the Middle East over the Iranian situation
  • China retaliated against President Trump’s decision to raise tariffs from 10% to 25% on US$200 billion worth of Chinese imports by raising its own tariffs; crucially, China has also slapped taxes on US LNG imports at a time when American export LNG projects banking on Chinese demand are coming online
  • In the Middle East, Saudi Arabia reported that two of its oil tankers were attacked in the Persian Gulf, with the ‘sabotage attack’ near the UAE speculated to be related to Iran; with the US increasing its military presence in the area, the risk of military action has escalated
  • The non-extension of US waiver on Iranian crude is biting hard on Iran, with its leaders calling it ‘unprecedented pressure’, setting the stage for a contentious OPEC meeting in Vienna
  • In a move that is sure to be opposed by Iran, Saudi Arabia has said it is willing to meet ‘all orders’ from former Iranian buyers through June at least; Saudi Aramco is also responding to requests by Asian buyers to provide extra oil
  • The see-saw trend in US drilling activity continues; after a huge gain two weeks ago, the active US rig count declined for a second consecutive rig, with the loss of two oil rigs bringing the total site count to 988, below the equivalent number of 1,045 last year
  • There is considerably more upside to crude prices at the moment, with jitters over the health of the global economy and a delicate situation in the Middle East likely to keep Brent higher at US$71-73/b and WTI at US$62-64/b


Headlines of the week

Upstream

  • Occidental Petroleum and Warren Buffet have triumphed, as Chevron bowed out of a bidding war for Anadarko Petroleum; Occidental will now acquire Anadarko for US$57 billion, up significantly from Chevron’s US$33 billion bid
  • The deal means that Occidental’s agreement to sell Anadarko’s African assets to Total for US$8.8 billion will also go through, covering the Hassi Berkine, Ourhoud and El Merk fields in Algeria, the Jubilee and TEN fields in Ghana, the Area 1 LNG project in Mozambiuqe and E&P licences in South Africa
  • BP has sanctioned the Thunder Horse South Expansion Phase 2 deepwater project in the US Gulf of Mexico, which is expected to add 50,000 boe/d of production at the Thunder Horse platform beginning 2021
  • Africa is proving to be very fruitful for Eni, as it announced a new gas and condensate discovery offshore Ghana; the CTP-Block 4 in the Akoma prospect is estimated to hold some 550-650 bcf of gas and 18-20 mmbl of condensate
  • In an atypical development, South Africa has signed a deal for the B2 oil block in South Sudan, as part of efforts to boost output there to 350,000 b/d
  • Shell expects to drill its first deepwater well in Mexico by December 2019 after walking away with nine Mexican deepwater blocks last year

Midstream & Downstream

  • China’s domestic crude imports surged to a record 10.64 mmb/d in April, as refiners stocked up on an Iranian crude bonanza due to uncertainty over US policy, which has been confirmed as crude waivers were not renewed
  • Having had to close the Druzhba pipeline and Ust-Luga port for contaminated crude, Russia says it will fully restore compliant crude by end May shipments, including cargoes to Poland and the Czech Republic
  • Mexico’s attempt to open up its refining sector has seemingly failed, with Pemex taking over the new 340 kb/d refinery as private players balked at the US$8 billion price tag and 3-year construction deadline
  • Ahead of India’s move to Euro VI fuels in April 2020, CPCL is partially shutting down its 210 kb/d Manali refinery for a desulfurisation revamp
  • China’s Hengli Petrochemical is reportedly now stocking up on Saudi Arabian crude imports as it prepares to ramp up production at its new 400 kb/d Dalian refinery alongside its 175 kb/d site in Brunei
  • South Korea’s Lotte Chemical Corp expects its ethane cracker in Louisiana to start up by end May, adding 1 mtpa of ethylene capacity to its portfolio
  • Due to water shortage, India’s MRPL will be operating its 300 kb/d refinery in Katipalla at 50% as drought causes a severe water shortage in the area

Natural Gas/LNG

  • Partners in the US$30 billion Rovuma LNG project in Mozambique now expect to sanction FID by July, even after a recent devastating cyclone
  • Also in Mozambioque, Anadarko is set to announce FID on its Mozambique LNG project on June 18, calling it a ‘historic day’
  • After talks of a joint LNG export complex to develop gas resources in Tanzania, Shell and Equinor now appear to be planning separate projects
  • Gazprom has abandoned plans to build an LNG plant in West Siberia to compete with Novatek, focusing instead on an LNG complex is Ust-Luga
  • First LNG has begun to flow at Sempra Energy’s 13.5 mtpa Cameron LNG project in Louisiana, with exports expected to begin by Q319
May, 17 2019
Shell Eclipses ExxonMobil Once Again

The world’s largest oil & gas companies have generally reported a mixed set of results in Q1 2019. Industry turmoil over new US sanctions on Venezuela, production woes in Canada and the ebb-and-flow between OPEC+’s supply deal and rising American production have created a shaky environment at the start of the year, with more ongoing as the oil world grapples with the removal of waivers on Iranian crude and Iran’s retaliation.

The results were particularly disappointing for ExxonMobil and Chevron, the two US supermajors. Both firms cited weak downstream performance as a drag on their financial performance, with ExxonMobil posting its first loss in its refining business since 2009. Chevron, too, reported a 65% drop in the refining and chemicals profit. Weak refining margins, particularly on gasoline, were blamed for the underperformance, exacerbating a set of weaker upstream numbers impaired by lower crude pricing even though production climbed. ExxonMobil was hit particularly hard, as its net profit fell below Chevron’s for the first time in nine years. Both supermajors did highlight growing output in the American Permian Basin as a future highlight, with ExxonMobil saying it was on track to produce 1 million barrels per day in the Permian by 2024. The Permian is also the focus of Chevron, which agreed to a US$33 billion takeover of Anadarko Petroleum (and its Permian Basin assets), only for the deal to be derailed by a rival bid from Occidental Petroleum with the backing of billionaire investor guru Warren Buffet. Chevron has now decided to opt out of the deal – a development that would put paid to Chevron’s ambitions to match or exceed ExxonMobil in shale.

Performance was better across the pond. Much better, in fact, for Royal Dutch Shell, which provided a positive end to a variable earnings season. Net profit for the Anglo-Dutch firm may have been down 2% y-o-y to US$5.3 billion, but that was still well ahead of even the highest analyst estimates of US$4.52 billion. Weaker refining margins and lower crude prices were cited as a slight drag on performance, but Shell’s acquisition of BG Group is paying dividends as strong natural gas performance contributed to the strong profits. Unlike ExxonMobil and Chevron, Shell has only dipped its toes in the Permian, preferring to maintain a strong global portfolio mixed between oil, gas and shale assets.

For the other European supermajors, BP and Total largely matched earning estimates. BP’s net profits of US$2.36 billion hit the target of analyst estimates. The addition of BHP Group’s US shale oil assets contributed to increased performance, while BP’s downstream performance was surprisingly resilient as its in-house supply and trading arm showed a strong performance – a business division that ExxonMobil lacks. France’s Total also hit the mark of expectations, with US$2.8 billion in net profit as lower crude prices offset the group’s record oil and gas output. Total’s upstream performance has been particularly notable – with start-ups in Angola, Brazil, the UK and Norway – with growth expected at 9% for the year.

All in all, the volatile environment over the first quarter of 2019 has seen some shift among the supermajors. Shell has eclipsed ExxonMobil once again – in both revenue and earnings – while Chevron’s failed bid for Anadarko won’t vault it up the rankings. Almost ten years after the Deepwater Horizon oil spill, BP is now reclaiming its place after being overtaken by Total over the past few years. With Q219 looking to be quite volatile as well, brace yourselves for an interesting earnings season.

Supermajor Financials: Q1 2019

  • ExxonMobil – Revenue (US$63.6 million, down 6.7% y-o-y), Net profit (US$2.35 billion, down 49.5% y-o-y)
  • Shell - Revenue (US$85.66 billion, down 5.9% y-o-y), Net profit (US$5.3 billion, down 2% y-o-y)
  • Chevron – Revenue (US$35.19 billion, down 5% y-o-y), Net profit (US$2.65 billion, down 27.2% y-o-y)
  • BP - Revenue (US$67.4 billion, down 2.51% y-o-y), Net profit (US$2.36 billion, down 9.2% y-o-y)
  • Total - Revenue (US$51.2billion, up 3.2% y-o-y), Net profit (US$2.8 billion, down 4.0% y-o-y)
May, 15 2019
EIA revises its crude oil price forecast upward as supply expectations change

monthly average Brent crude spot price

Source: U.S. Energy Information Administration, Short-Term Energy Outlook, January, April, and May 2019 editions

In its May 2019 edition of the Short-Term Energy Outlook (STEO), EIA revised its price forecast for Brent crude oil upward, reflecting price increases in recent months, more recent data, and changing expectations of global oil markets. Several supply constraints have caused oil markets to be generally tighter and oil prices to be higher so far in 2019 than previous STEOs expected.

Members of the Organization of the Petroleum Exporting Countries (OPEC) had agreed at a December 2018 meeting to cut crude oil production in the first six months of 2019; compliance with these cuts has been more effective than EIA initially expected. In the January STEO, OPEC’s crude oil and petroleum liquids production was expected to decline by 1.0 million b/d in 2019 compared with the 2018 level, but EIA now forecasts OPEC production to decline by 1.9 million b/d in the May STEO.

Within OPEC, EIA expects Iran’s liquid fuels production and exports to also decline. On April 22, 2019, the United States issued a statement indicating that it would not reissue waivers, which previously allowed eight countries to continue importing crude oil and condensate from Iran after their waivers expired on May 2. Although EIA’s previous forecasts had assumed that the United States would not reissue waivers, the increased certainty regarding waiver policy and enforcement led to lower forecasts of Iran’s crude oil production.

Venezuela—another OPEC member—has experienced declines in production and exports as a result of recurring power outages, political instability, and U.S. sanctions. In addition to supply constraints that have already materialized in 2019, political instability in Libya may further affect global supply. Any further escalation in conflict may damage crude oil infrastructure or result in a security environment where oil fields are shut in. Either situation could reduce global supply by more than EIA currently forecasts.

In the May STEO, total OPEC crude oil and other liquids supply was estimated at 37.3 million b/d in 2018, and EIA forecasts that it will average 35.4 million b/d in 2019. EIA assumes that the December 2018 agreement among OPEC members to limit production will expire following the June 2019 OPEC meeting.

annual changes in global liquids production

Source: U.S. Energy Information Administration, Short-Term Energy Outlook, January, April, and May 2019 editions

U.S. crude oil and other liquids production is sensitive to changes in crude oil prices, taking into account a lag of several months for drilling operations to adjust. As crude oil prices have increased in recent months, so too have EIA’s domestic liquid fuels production forecasts for the remaining months of 2019.

U.S. crude oil and other liquids production, which grew by 2.2 million b/d in 2018, is forecast in EIA’s May STEO to grow by 2.0 million b/d in 2019, an increase of 310,000 b/d more than anticipated in the January STEO. In 2019, EIA expects overall U.S. crude oil and liquids production to average 19.9 million b/d, with crude oil production alone forecast to average 12.4 million b/d.

Relative to these changes in forecasted supply, EIA’s changes in forecasted demand were relatively minor. EIA expects that global oil markets will be tightest in the second and third quarters of 2019, resulting in draws in global inventories. By the fourth quarter of 2019, EIA expects that inventories will build again, and Brent crude oil prices will fall slightly.

More information about changes in STEO expectations for crude oil prices, supply, demand, and inventories is available in This Week in Petroleum.

May, 15 2019