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Last Updated: August 26, 2017
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Kuala Lumpur, 25 August 2017 - PETRONAS today announced strong earnings for the first half of 2017, contributed by higher average realised prices, better margins and boosted by the on-going transformation initiatives to reduce cost and increase efficiency.

The Group's revenue grew to RM108.1 billion, up 15 per cent from RM93.7 billion in the first half of 2016, benefitting from the upward trend of key benchmark prices and foreign exchange rate, but was partially offset by lower sales volume.

Profit after tax (PAT) rose more than a 100 per cent to RM17.3 billion from RM6.4 billion in the corresponding period last year, notably due to higher average realised prices as well as lower net impairment on assets and well costs.

The increase however was partially offset by higher amortisation of oil and gas properties, tax expenses, net foreign exchange losses and costs related to the non-Final Investment Decision (FID) for the Pacific NorthWest LNG (PNW LNG) Project in Canada.

Earnings before interest, tax, depreciation and amortisation (EBITDA) was RM45.2 billion, a 35 per cent increase compared to RM33.6 billion recorded during the same period last year.

The Group's cash flows from operating activities also increased by 55 per cent to RM39.8 billion compared to RM25.6 billion in the same corresponding period in 2016.

Capital investments totalled at RM21.3 billion, mainly attributable to the Refinery and Petrochemical Integrated Development (RAPID) project in Pengerang, Johor.

Meanwhile year-to-date crude oil, condensate and natural gas entitlement volume was 1,778 thousand barrels of oil equivalent (BOE) per day while total production volume was 2,342 thousand BOE per day.

Total assets decreased to RM596.6 billion as at 30 June 2017 from RM603.4 billion as at 31 December 2016 primarily due to the impact of the strengthening of the Ringgit against the US Dollar.

Shareholders' equity of RM375.8 billion decreased by RM4.6 billion mainly due to the approved dividend of RM13.0 billion for the financial year ended 31 December 2016 and the foreign exchange rate impact, partially offset by profit generated during the period.

Gearing ratio decreased to 17.1 per cent as at 30 June 2017 from 17.4 per cent as at 31 December 2016.

Quarter on quarter, PETRONAS' performance for Q2 of 2017 also improved, largely driven by the upward trend of key benchmark prices and better margins.

PAT was registered at RM7.0 billion compared to RM1.7 billion in Q2 of 2016, a significant improvement mainly due to lower net impairment on assets and well costs, coupled with higher average realised prices recorded across all products. This was partially offset by higher net foreign exchange losses, amortisation of oil and gas properties and non-FID costs for PNW LNG in Canada.

The PAT was posted on the back of a RM 51.6 billion revenue, a 10 per cent increase from RM46.9 billion from the corresponding quarter last year as a result of higher average realised prices and foreign exchange rate impact.

EBITDA increased by 16 per cent to RM20.6 billion from RM17.8 billion in the corresponding quarter last year.

The Group's cash flows from operations also grew by 37 per cent to RM21.8 billion from RM15.9 billion in the corresponding quarter last year due to higher average realised prices.

Outlook

Despite higher prices compared to a year ago, the industry remains volatile tempering the company's optimism. PETRONAS continues to focus on internal transformation initiatives, effective cash management and cost optimisation.

The Board expects the overall year-end performance of PETRONAS Group to be fair.

Datuk Wan Zulkiflee Wan Ariffin, President and Group CEO PETRONAS

'We have closed out the first half of the year with stronger financials compared to the same period in 2016. While the price of oil was a significant factor, I also view this as tangible results of PETRONAS' transformation measures taken in response to the industry downturn. And I attribute this to the employees of PETRONAS. They continue to drive impactful changes, which create ripple effects that, as you can see, have positively improved the bottom-line.'

Operational Highlights

Upstream

• PETRONAS has made significant progress in re-basing its cost in the Upstream business. In 2017, PETRONAS expects further reduction in unit production cost to an average of US$6.8 per barrel through efficiency across its value chain.

• The total production volume for the first half of 2017 was 2,342 thousand BOE per day compared to 2,391 thousand BOE per day in the corresponding period last year. This was mainly due to lower Iraq production entitlement, lower activities in Canada and higher decline rate in the Malaysia-Thai Joint Development AREA and Egypt, partially offset by the increase in production in the MLNG supply system. Five new and infill projects were brought on-stream in the second quarter of 2017, contributing to 44,000 barrels equivalent per day of production. Total production entitlement improved to 1,778 thousand BOE from 1,731 thousand BOE in the corresponding period.

• LNG sales recorded a two per cent increase in volume compared to the corresponding period last year, mainly attributable to the higher volume from Train 9 and Egyptian LNG. In addition, the PFLNG Satu has delivered two cargoes to India and Taiwan, respectively.

• Despite the decision not to proceed with the PNW LNG project, PETRONAS remains committed to monetise the natural gas resources in the North Montney area in Canada. At 22.3 trillion cubic feet of proven resources, Canada holds the second largest gas resources in PETRONAS' portfolio after Malaysia. To-date, Progress Energy Canada Ltd, a wholly owned subsidiary of PETRONAS, is producing around 540 million standard cubic feet of gas per day to the domestic market, generating revenue of CA$261 million (approximately RM861 million) for the first two quarters in 2017.

• As part of the company's portfolio high-grading efforts, PETRONAS has decided to divest its position in Algeria and not to proceed with the extension of the Block 1 and 2 Production Sharing Contract in Vietnam. In addition, PETRONAS has secured a third exploration block in Mexico, namely Block 6, in the recently concluded bid round. To-date, PETRONAS has accumulated a total of 5,491 sq kms of exploration acreages in the highly prospective Mexico offshore blocks.

Downstream

• For the first half of 2017, Downstream business recorded an increase in PAT attributable to better petrochemical product spreads as well as higher trading and marketing margins.

• Higher volume recorded from petrochemicals was 4.0 MMT for the first half of 2017 compared to 3.5 MMT in the corresponding period last year, following the commissioning of PETRONAS Chemical Fertiliser Sabah Sdn Bhd (also known as SAMUR) further supported Petrochemical business in capturing favourable products spreads.

• Healthy trading and marketing margin for Crude and Petroleum products mainly driven by focused trading strategies towards high-value activities.

• PETRONAS' key downstream project continues to progress well with the Pengerang Integrated Complex (PIC) project achieving 70 per cent completion at 30 June 2017 with seven per cent progress during the second quarter of 2017.

• PETRONAS, through its lubricants business unit, the PETRONAS Lubricants Marketing (Malaysia) Sdn Bhd has successfully secured a four-year Supply Contract Renewal from Mercedes Benz through Cycle and Carriage Bintang Berhad.

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Asia infographic, as described in the article text


Source: U.S. Energy Information Administration, International Energy Outlook 2020 (IEO2020)
Note: Click to enlarge.

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