Petronas announced an improvement in its earnings for the first half of 2019 compared to the same period last year, driven by the Group’s continued focus on commercial and operational excellence as well as efforts to maximise cash generation despite more challenging market conditions and lower commodity prices.
The first half of 2019 has been dominated by greater price volatility in the oil and gas sector, geopolitical upheavals and protracted trade disputes that threatened to slow economic growth faster than previously expected.
The Group posted RM121.1 billion in revenue, an increase of RM3.9 billion from RM117.2 billion in the first half of 2018, mainly attributed to higher sales volume for petroleum products and liquefied natural gas (LNG) as well as the effect of the weakening Ringgit against the US Dollar exchange rate.
This, however, was partially offset by lower average realised prices for petroleum and petrochemical products during the period.
Profit After Tax (PAT) rose 9.0 per cent to RM28.9 billion, from RM26.6 billion in the corresponding period last year. The improved results were delivered on the back of higher revenue, but the increase was partially offset by higher product costs.
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) stood at RM54.7 billion, an increase of 5.0 per cent, from RM52.2 billion in the previous corresponding period, in line with the higher profit before tax.
Total assets rose to RM644.2 billion as at 30 June this year, as compared to RM636.3 billion as at 31 December 2018.
Shareholders’ equity increased to RM381.5 billion as at 30 June 2019 compared to RM380.5 billion as at 31 December 2018, primarily due to the profit generated during the period. This was partially offset by the final dividend declared during the year.
Return on Average Capital Employed (ROACE) increased marginally to 12.4 per cent as at 30 June 2019, from 12.0 per cent as at 31 December 2018, in line with the higher profit recorded.
The gearing ratio stood at 21.1 per cent as at 30 June 2019, from 19.7 per cent as at 31 December 2018, primarily due to the recognition of additional lease liabilities, following the adoption of a new accounting standard, MFRS 16 Leases.
Capital investments (CAPEX) for the first half of 2019 was RM15.7 billion, attributable largely to Upstream projects.
Compared to the corresponding quarter in 2018, PETRONAS’ revenue for the second quarter in 2019, was at RM59.1 billion, a marginal decrease from RM59.2 billion. The slight reduction was mainly due to lower average realised prices for petroleum products and LNG. This was partially offset by higher sales volume for crude oil and condensates, as well as LNG, coupled with the effect of the weakening Ringgit against the US Dollar.
PAT increased 8.0 per cent to RM14.7 billion from RM13.6 billion, attributed to the effect of the weakening Ringgit against the US Dollar, and partially offset by higher product costs.
EBITDA was at RM26.9 billion, a decrease of 1.0 per cent, from RM27.2 billion in the corresponding quarter in 2018, due to lower revenue.
CAPEX during the second quarter of this year was RM7.5 billion, primarily attributable to Upstream projects.
The oil and gas market is expected to continue to be volatile in the second half of 2019, amid protracted trade issues that have spread beyond the United States and China, sluggish oil demand growth as well as the slowing global economy. Nationalism around the world, is expected to remain at the fore, with protectionist policies detrimental to growth prospects.
These prevailing uncertainties are expected to pose challenges to the overall year-end performance of the PETRONAS Group. The Group will remain focused on ensuring continuous overall business improvement as well as driving commercial and operational excellence.
Tan Sri Wan Zulkiflee Wan Ariffin, PETRONAS President and Group CEO said, “PETRONAS continues to deliver a healthy financial performance for the first half of 2019 despite persistent challenging market conditions.
“The results are positive outcomes of the organisation’s rallied commitment to constantly strive towards improvements in our operational efficiencies and commercial excellence, while maintaining fiscal discipline throughout the Group.
“Our growth journey will continue to be guided by our three-pronged strategy and we will progress with our efforts to build the organisation’s resiliency in facing anticipated prolonged market volatility and changing energy landscape.”
Operational Highlights – 1H2019
•Total production rate for the first half of 2019 was 2,418 thousand barrels of oil equivalent (boe) per day, higher than the 2,383 thousand boe per day in the same period last year, mainly due to higher natural gas production from Malaysia, partially offset by lower crude oil from Iraq.
•PETRONAS via its wholly-owned subsidiary PETRONAS Carigali Sdn Bhd (PCSB), signed four Production Sharing Contracts (PSC) to date, for four blocks – PM407, PM415 and PM419 offshore Peninsular Malaysia as well as SB Block 3K offshore Sabah – and two operatorships transferred for Deepwater Block R offshore Labuan and from SHELL to PCSB, for Block SK8 in Sarawak.
•Eleven projects achieved first hydrocarbon, adding 63 thousand boe per day of new production for the first half of the year, comprising nine Brownfields in Peninsular Malaysia, Sarawak, Iraq and South Sudan, as well as one Greenfield in Sarawak and one Unconventional project in Argentina.
•PETRONAS has made four exploration discoveries for the first half of the year – one in Malaysia and three internationally in Mexico, Egypt and Indonesia.
•PICL (Egypt) Corporation Limited (PICLE), a subsidiary of PETRONAS, jointly with BG Delta Limited, a subsidiary of Shell, through a 50:50 partnership, successfully acquired two offshore blocks, namely Mediterranean Block 4 of North Sidi Gaber and Block 6 of North El Fanar in Egypt, reinforcing PETRONAS’ Upstream portfolio in the Middle East.
•A Digital Fields platform provides PETRONAS Upstream actionable insights which assist in enhancing field operations, management and production optimisation to improve decision-making. Digital Fields aims to maximise production, reduce operational cost and ensure assets are safe and reliable.
Gas & New Energy
•Total LNG sales volume for the first half of 2019 was 5.0 per cent higher at 15.23 million tonnes as compared to the first half of 2018, mainly attributed to higher volume from PETRONAS LNG Complex (“PLC”) in Bintulu and higher trading activities.
•Overall Equipment Effectiveness (OEE) for the GNE business stood at 97.9 per cent across all business segments with LNG assets and domestic operations recording an OEE of 97.5 percent and 99.5 percent respectively.
•PETRONAS achieved another major technical milestone with the successful relocation of the world’s first Floating LNG Production Unit, PFLNG Satu, to Kebabangan (Sabah) in early June 2019. Since the relocation, PFLNG has successfully delivered two cargoes during the period.
•PETRONAS Gas Berhad continues to strengthen its gas market growth by signing two sales and purchase agreements with Polyplastics Asia Pacific Sdn Bhd (PAP) in April 2019 for the supply of steam and extension of current electricity supply for 22 years.
•As an Integrated gas solutions provider, PETRONAS recently diversified into creative solutions such as the Gassing Up Cooling Down (GUCD) service at RGT Pengerang, to serve warm LNG vessels after ship dry-docking and also pursued LNG break-bulking via ship-to-ship transfer in Malaysian waters. These solutions solidify PETRONAS’ position as a progressive LNG solutions partner with a focus on customer-centricity.
•Acquisition of a leading Singapore-based company with a portfolio of distributed, renewable energy assets in Asia, Amplus Energy Solutions Pte Ltd (M+) marks PETRONAS’ international entry into renewables. With the current capacity of 500MW under operation and development, M+ can serve 150 commercial and industrial customers at over 200 locations across India and Middle East.
•Domestically, market reforms are currently on track with market-parity gas pricing achieved for non-power sector effective July 2019. Market-driven gas pricing is critical to provide the right economic incentives for Malaysia’s long-term energy supply security, through sustained indigenous production and supplemented by LNG imports.
•Downstream business remained resilient and delivered a strong operational performance across all business segments compared to the same period last year.
•Overall Equipment Effectiveness (OEE) for Downstream business stood at 91.2 per cent across all business segments with both domestic refineries and the refinery in Durban, South Africa, recording an OEE of 93.2 per cent and 88.9 per cent respectively.
•The Petrochemical business sustained its Plant Utilisation above best-in-class recording 98.7 per cent, with overall production volume recorded at 5.5 million metric tonnes, higher than the same period last year contributed by an excellent plant performance as well as better plant reliability.
•Through PETRONAS Chemicals Group Berhad (PCG), PETRONAS has recently completed its first acquisition of a specialty chemicals company, Da Vinci Group B.V. (Da Vinci), making it a wholly-owned subsidiary. The acquisition aims to diversify our product portfolio in specialty chemicals into silicones, and enhance our competitive position in attractive end-markets such as personal care, construction, paints and coatings, electronics, automotive and healthcare, particularly in Asia Pacific Region.
•Overall marketing sales volume increased compared to the same period last year, with a total sales volume of 12.5 billion litres. More than 50 per cent of this volume was contributed by PETRONAS Dagangan Berhad as well as the improved sales of PETRONAS Lubricants International. Retail business improved by 7.7 per cent compared to the same period last year, mainly contributed by higher sales in Mogas, better plant performance and higher sales of Base Oil.
•PETRONAS Dagangan Berhad recently introduced ROVR, Malaysia’s first mobile refueling service which extends PDB’s coverage area beyond the extensive network of PETRONAS stations nationwide to provide a seamless experience to customers. ROVR has been serving commercial customers (B2B) since its pilot programme in October 2018, and has since delivered over 1 million litres of fuel. In addition, Setel, Malaysia’s first e-payment solution for fuel purchases has achieved a milestone of 1 million transactions since its beta launch in 2018.
•The Pengerang Integrated Complex (PIC) is on track to achieve commercial operations in Quarter 4, 2019, with the overall progress of 99.7 per cent as at 30 June 2019.