Update: Petronas cuts state dividend as profit plunges on oil drop

[KUALA LUMPUR] Malaysia's Petroliam Nasional Bhd (Petronas) is slashing its 2016 dividend to the government by nearly 40 per cent, after its quarterly profit fell 91 per cent on weak global crude oil prices.

The state-owned oil and gas firm, which brings in nearly half of Malaysia's oil revenue, is being forced to shrink its contributions, compounding woes of the Southeast Asian country that is struggling amid a depreciating currency and political uncertainty caused by heavily indebted state investor 1Malaysia Development Berhad (1MDB).

Petronas said on Wednesday it will pay 16 billion ringgit in dividend to the government next year, down from 26 billion in 2015. Its net profit for July-September tumbled to 1.4 billion ringgit (S$457.4 million) from 15.1 billion in the same period a year earlier.

"Our commitment on dividends is based on our performance for this year," president and group chief executive Wan Zulkiflee Wan Ariffin told reporters at an earnings briefing. The company cut its proposed 2015 dividend in May.

Earnings were dragged down by impairment losses on property, plant and equipment to the tune of nearly 6 billion ringgit and net losses on foreign exchange and derivatives of almost 4.5 billion, a company statement showed.

Revenue for the quarter fell by 25 per cent to 60.1 billion ringgit from 80.4 billion a year ago.

Prime Minister Najib Razak announced in his 2016 budget report that dividend payout sums from Petronas would depend on global oil prices, and estimated Malaysia's oil related revenue at 31.7 billion ringgit in 2016 compared with 44 billion this year.

Global oil prices have more than halved since mid-2014 on a supply glut and are currently hovering around US$48 per barrel. The CEO said Petronas would assume Brent crude will trade at US$48 as their projection for next year's budget.

Unlisted Petronas has reported falling net profits for four out of the last five quarters and a loss in the remaining period as global oil prices have slid.

"We expect our quarter four performances to be similarly affected," said Wan Zulkiflee, adding that the outlook into the first half of 2016 "remains uncertain".

"Global economic growth remains modest at best, compounded by the pending supply surge in the global oil market once sanctions on Iran are lifted." Petronas announced last quarter that its cash from operations wasn't able to cover its capital expenses nor committed dividends for 2015, forcing it to draw on reserves and accelerate cost savings.

REUTERS