Petronas reports tough start to 2016

Petronas has recorded a group pre-tax profit of RM6.8 billion for 1Q16, 60% lower than the RM17.0 billion posted in 1Q15.

This was posted on the back of a RM49.1 billion revenue, which is 26% lower compared to RM66.2 billion in the previous corresponding period. Profit after tax and impairments were recorded at RM4.6 billion against RM11.4 billion in the previous corresponding quarter.

The reduced revenue was mainly attributed to the lower product prices following the prolonged downward trend of benchmark Dated Brent and Japan Customs Cleared (JCC) prices.

Lower prices across all products and higher net impairment on assets reduced profitability.

Total assets decreased to RM567.6 billion as at 31 March 2016 compared to RM591.9 billion as at 31 December 2015. This was primarily attributable to the impact of a comparatively lower US dollar exchange rate against the Ringgit at 31 March 2016.

Similarly, shareholders’ equity decreased to RM364.7 billion from RM374.9 billion as at 31 December 2015. Gearing ratio decreased to 15.8% as at 31 March 2016, compared to 16.0% as at 31 December 2015. Return on average capital employed (ROACE) was at 3.5% compared to 5.1% as at 31 December 2015.

Cash flows from operating activities decreased by 44%, while capital investments totalling RM11.3 billion.

Upstream production volume in Malaysia and Petronas Group’s international equity production volume rose to 2.45 million boe/d. Production entitlements to Petronas Group were up to 1.82 million boe/d.

Total LNG sales volume decreased 9% to 7.35 million t as compared to the corresponding quarter in 2015 following lower production from Petronas LNG Complex in Bintulu, Sarawak.

Meanwhile, limited trading opportunities reduced the sales volume of petroleum products and crude oil by 3.4 million bbls and 3.0 million bbls to 69 million bbls and 55.3 million bbls respectively. Petrochemical products sales volume grew by 0.1 million t due to higher production.

Concerns on moderate demand outlook and persistent oversupply will continue to pressure crude oil prices. Petronas expects performance to be affected by the volatility of oil prices and foreign exchange rate. Petronas will continue with its cost rationalisation efforts to remain competitive while pursuing efforts to drive operational efficiencies and effective delivery of growth projects that bring value.

Edited from press release by Angharad Lock

Read the article online at: https://www.hydrocarbonengineering.com/refining/18052016/petronas-reports-tough-start-to-2016-3341/