Petronas reports decrease in profit

For the first quarter ended 31 March 2020, the Group recorded a revenue of RM59.6 billion, a 4% decrease from RM62 billion in the same period last year, mainly attributable to the impact of lower average realised prices recorded for LNG, petroleum products and crude oil and condensates. The decrease was partially offset by the impact of higher sales volume mainly for petroleum products coupled with the effect of the weakening Ringgit against the US Dollar exchange rate.

Profit after tax (PAT) for the quarter stood at RM4.5 billion (US$1.03 billion), 68% lower than the RM14.2 billion posted 1Q19, primarily due to net impairment on assets and lower revenue recorded. However, these were partially offset by lower tax expenses.

PAT excluding impairment, however, stood at RM9.2 billion, a 35% decrease from RM14.1 billion compared to the first quarter last year.

EBITDA dropped 27% to RM20.3 billion from RM27.8 billion in the corresponding quarter last year, in line with lower Profit Before Tax (PBT).

Cash flows from operating activities for 1Q20, decreased by 24% as compared to 1Q19 mainly due to lower cash operating profit and net negative working capital changes partially offset by lower taxation paid.

Total assets increased to RM630 billion as at 31 March 2020, compared to RM622.4 billion recorded as at 31 December 2019, mainly due to higher CAPEX and the effect of the weakening Ringgit against the US Dollar exchange rate.

As at 31 March 2020, shareholders’ equity decreased to RM374.1 billion compared to RM389.1 billion as at 31 December 2019, primarily contributed by the final dividend declared for the financial year ended 31 December 2019. This was partially offset by profit generated during the period and an increase in foreign currency translation reserve due to the effect of the weakening Ringgit against the US Dollar exchange rate.

Return on Average Capital Employed (ROACE) decreased to 6.6% as at 31 March 2020, from 8.7% as at 31 December 2019, in line with the lower profit recorded.

Gearing ratio increased marginally to 19.9% as at 31 March 2020 from 19.4%, as at 31 December 2019, mainly due to higher borrowings following the impact of the weakening Ringgit against the US Dollar exchange rate.

The Group’s capital investment during 1Q20 was RM8.5 billion, mainly attributable to upstream projects.

Outlook

Petronas is operating in unprecedented market conditions driven by a combination of severe demand destruction due to Covid-19 pandemic and global oil market glut, which are testing the resilience of oil and gas players globally. In mitigating the negative impact on its profitability and liquidity, the Group is taking steps to optimise its planned international capital investments and operating expenditures. While the Group continues to invest domestically, it anticipates that there will be constraints in the supply chain as a result of the pandemic. The Board expects the overall financial year performance will be significantly affected by these factors.

Tan Sri Wan Zulkiflee Wan Ariffin, President and Group CEO, Petronas, said:

“We anticipate a very challenging outlook for the rest of 2020, with economic activities expected to only gradually recover in the second half of the year. Industry players, including Petronas, will be adversely impacted if the current market situation persists and oil prices remain low.

Against this challenging backdrop, our focus is to preserve cash and maintain our liquidity, continue our cost compression efforts and respond to changing market conditions with pace. We will also continue to uphold the health and safety of our people and communities where we operate as well as contribute towards efforts in overcoming the global pandemic.

In the longer term, we remain committed to our 3-pronged growth strategy to maximise cash generators, expand core business, and stepping out to future proof the organisation and ensure Petronas’ long-term sustainability.”

Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/22052020/petronas-reports-decrease-in-profit/