RM15b Q3 profit

NATIONAL oil company Petroliam Nasional Bhd (Petronas) has warned of possible lower dividend next year as its net profit for the third quarter ended September 30 fell 12.3 per cent to RM15 billion on weaker oil prices, liquefied natural gas (LNG) sales and unfavourable foreign exchange.

Revenue for the quarter was down 1.3 per cent to RM80.37 billion from RM81.41 billion in the same period last year, it said.

The lower profit follows plunging oil prices and “unfavourable” US dollar exchange rate, even as output, mainly from its Iraq and Malaysian fields, increased.

Petronas, the country’s only Fortune 500 company, said fourth quarter earnings were also expected to be “considerably lower” amid a further decline in oil prices.

“If the decline persists, it will continue to have an impact on our revenue going forward.

“We have managed to mitigate the impact of low oil price through higher production, but we remain prepared for further impacts and shocks,” said Petronas president and group chief executive officer Tan Sri Shamsul Azhar Abbas at a media briefing on the group’s third quarter financial performance, here, yesterday.

“If we are to maintain the dividend, it will have a significant impact on our growth plans. This is the message we are conveying to the government,” he said.

Shamsul Azhar said if oil stays around US$75 a barrel, payments to the government could be 37 per cent lower next year at RM43 billion, with dividend at RM17 billion, tax at RM17 billion and royalty at RM9 billion.

The projected payment this year is RM68 billion, with dividend at RM29 billion, tax at RM26 billion and royalty at RM13 billion.

Brent crude fell 1.8 per cent to US$71.30 a barrel yesterday after the Organisation of the Petroleum Exporting Countries opted not to reduce production to stem a slide in prices.

Every dollar change has a RM1 billion impact on Petronas’ pre-tax profit.

Shamsul Azhar said Petronas would reduce its 2015 capital expenditure (capex) allocation by 15 to 20 per cent on the back of persistent softening of global crude oil prices.

“We will make adjustments of between 15 and 20 per cent for the 2015 capex by reviewing our portfolio and strengthening the balance sheet,” said Shamsul Azhar.

“All servicing companies will be impacted by this. Therefore, it is advisable for more consolidations to take place among the players.”

He also said those projects that had not been awarded final investment decisions (FID) would also be impacted, but stressed that the much-discussed LNG project with Canada’s British Columbia government, of which FID had not been finalised, was progressing positively.