(EnergyAsia, August 18 2015, Tuesday) — After announcing a 47.3% plunge in second quarter profit, the CEO and president of Malaysia’s state-owned energy firm Petronas said he expects the company to tap into cash reserves this year to help pay for on-going operations, capital investments and mandated dividends to the government.
Wan Zulkiflee Wan Ariffin said sharply lower oil and gas prices and sales sent net profit falling to RM11.1 billion in the April-June quarter from RM21.06 billion the same quarter last year. Revenue was off nearly 27% from RM86.36 billion to RM63.1 billion.
Brent crude traded at an average of more than US$60 a barrel in the second quarter, compared with around US$105 for the same period a year ago. Analysts expect oil and gas prices to remain depressed through at least next year.
While promising to continue its RM26 billion dividend payment to the cash-strapped Malaysian government, Wan Zulkiflee said Petronas will “persevere with more austerity measures” to maintain profitability at the company which provides as much as 45% of the state budget.
“I do not expect our cash flow from operations this year to meet our capital expenditure and dividend commitments. This means that we…will have to draw on our cash reserves,” he said.
“Cost management and efficiency will continue to be a key focus across the organisation. The next phases will really test the organisation’s stamina and endurance.”
In February, Petronas announced plans to reduce this year’s capital expenditure by 15% and dividend payment by around 10%.
The Malaysian economy badly needs Petronas’s cash as domestic political instability and reduced energy earnings have caused the ringgit to plunge by a third to a 17-year low of 4.15 against the US dollar over the past year.