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Petronas ramps up spending as profit surges
[KUALA LUMPUR] Malaysian state energy firm Petroliam Nasional Berhad, or Petronas, pledged on Friday to ramp up its growth and spending plans this year following a sharp rise in profits, even as it cautioned about the sustainability of higher oil prices.
Petronas, like other oil majors, has taken a hit from lower oil prices, but sharp cost cuts - along with some recent stability in oil prices - helped the company boost profits and margins despite lower production.
Net profit for the fourth quarter ended December rose to 18.2 billion ringgit (S$6.14 billion) from 11.3 billion ringgit in the same quarter last year, while revenue rose 13.8 per cent to 61.8 billion ringgit.
The quarterly result helped push full-year profit up 91 per cent to 45.5 billion ringgit - marking a second year of profit growth for the sole manager of Malaysia's oil and gas reserves following a two-year profit slump.
"Petronas is now in stronger position to execute its long term growth agenda," Chief Executive Wan Zulkiflee Wan Ariffin said. "Petronas will explore new business areas, including speciality chemicals and new energy." Petronas will focus on the Asean region, the Indian subcontinent, the Middle East and the Americas for growth, he said, adding that the company will assess opportunities in solar energy.
The company, traditionally conservative with its outlook, said its performance in 2018 will be "satisfactory" subject to the sustainability of the oil price - which the CEO said remains to be seen.
It is budgeting for an oil price of US$52 per barrel in 2018.
Brent crude prices were trading at US$63.99 on Friday.
Wan Zulkiflee said industry wide costs are showing signs of increasing, driven by what he called "premature exuberance" over the oil price recovery.
"It is imperative we do not drop the austerity mindset, and continue to ensure we keep costs under control, increase efficiency and drive up value," he said.
Petronas, a major contributor to Malaysia's budget and one of the country's biggest employers, embarked on a cost cutting drive after Wan Zulkiflee's appointment as CEO in early 2015.
The company said in 2016 that it would reduce expenses by US$12 billion over a four-year period, and has cut thousands of jobs and its dividend payout to its sole shareholder, the Malaysian government.
Controllable costs for 2017 fell 6 per cent to 45.9 billion ringgit, Petronas said.
For 2018, the company said it planned capital expenditure of around 55 billion ringgit, higher than last year's 44.5 billion ringgit.
It will also increase its dividend to the government this year to 19 billion ringgit, from 16 billion ringgit last year.
Total production volume - the sum of Malaysia's oil and gas output and Petronas' international output - fell 2 per cent to 2.32 million barrels of oil equivalent per day, while sales of liquefied natural gas (LNG) rose two percent to 30.7 million tonnes.