[UPDATED] Petronas posts RM21 bil loss, will continue paying govt RM18 bil dividend

KUALA LUMPUR – Petronas today reported a group loss after tax of RM21.0 billion for the financial year ended December 31, 2020 (FY20) due to net impairment losses totalling RM31.5 billion – its biggest so far – compared to a profit after tax (PAT) of RM40.5 billion a year ago.

Excluding the impairment, the national oil company recorded a PAT of RM10.5 billion for the year, a decrease of 78% from the RM48.8 billion registered in 2019, in line with lower revenue realised, partially offset by lower group costs incurred. 

“I want to emphasise that impairment is not cash flow. In line with the rest of the industry, we have had to make this provisioning because the carrying value of our assets has been staggeringly impacted by the events of last year, and a very depressed outlook for oil and gas prices,” president and group chief executive Tengku Muhammad Taufik Tengku Aziz told a virtual press conference today.

Petronas’ revenue fell to RM178.7 billion from RM240.3 billion in FY19, largely due to the effects of plummeting oil prices, which saw lower average realised prices for all products, along with demand disruption resulting in lower sales volume from processed gas, petroleum products and liquefied natural gas.

Petronas senior vice-president and group chief financial officer Liza Mustapha said FY20’s impairment is about 12% of the group’s total assets at RM574.3 million, down from RM622.4 million a year ago. 

“On comparative measures, most of our peers, which are international majors, recorded an impairment of between 12% and 16% of their assets.”

In response to the strong headwinds from reduced demand and lower oil prices, the company took several prudent measures, including cost compression efforts, which, implemented along with continued tight fiscal disciplines, resulted in the delivery of positive cash flows from operating activities of RM40.7 billion, albeit 55% lower than the RM90.8 billion logged in FY19.

Liza said the firm, which previously earmarked RM50 billion to RM60 billion annually for its capital expenditure (capex), has reduced the allocation to between RM40 billion and RM45 billion per annum for the next five years, in view of projected global oil prices and industry outlook.

“Petronas also plans to spend a higher capex for domestic activities than the international programme. We will increase domestic spending to 55% (of capex), while the international programme will be at 45%.

“In the previous allocation, spending stood at 52% domestic and 48% international.”

Previously, Petronas’ capex declined 22% year-on-year, largely in line with the group’s earlier guidance of lower budgeted capex in FY20, with most of expenditure being incurred upstream and in local investments. 

Tengku Taufik said the company will focus on specialty chemicals, renewable energy and hydrogen.

“We will increase the capex for renewable energy to 9% out of the total FY21 capex from 5% previously, but it doesn’t mean we are taking our foot off completely from exploration, because production continues to be prepared for it.”

Gas and new energy is Petronas’ second-largest area of investment, taking up 22% of the group’s capex.

Tengku Taufik reiterated the company’s commitment to paying a RM18 billion dividend to the government, as announced in Budget 2021.

He said the oil giant has not received additional requests from Putrajaya on a special dividend, adding that any decision on the matter will be based on the firm’s ability to pay.

He emphasised that the group will first have to look into its capex, operating expenditure and ability to service its debts.

“We have to consider the company’s need to have a buffer for volatility, which has been pronounced.

“We always make the decision premised on whether it is affordable to us. If we receive any request, we will present it to the board, and so far, we are content with paying the RM18 billion dividend to the government.”

Last year, it paid a total of RM34 billion in dividends to Putrajaya.

Since the Covid-19 outbreak last March, Petronas’ efforts and initiatives to combat the virus are valued at almost RM44 million. 

As of December 31, medical equipment, personal protective equipment, hand sanitiser, disinfectant and masks, as well as food supplies, worth some RM5.3 million, were distributed to communities in its domestic and international operations, including in Azerbaijan, Brazil, Brunei, Canada, Gabon, India, Indonesia, Iraq, Mexico, Myanmar, South Sudan and Suriname. – Bernama, February 26, 2021