Petronas complained of cash shortage despite raising record amounts of debt
by Ganesh Sahathevan
Petronas is being lauded for issuing Asia’s second largest corporate dollar bond in 2015:
Petroliam Nasional Bhd (Petronas) issued some US$5 billion (RM22 billion) worth of trust certificates and global medium-term notes (GMTN) in March 2015, making it Asia’s second largest corporate dollar bond issuance since Alibaba Group’s US$8 billion issuance in November 2014. The programme was launched in March 2015, when Petronas issued US$1.25 billion in trust certificates and US$3.75 billion of GMTN under a Global MTN Programme. Petronas will eventually issue up to US$15 billion of GMTNs.
| Fri Aug 14, 2015 6:04am EDT
UPDATE 1-Malaysia's Petronas says operations won't cover 2015 dividend, capex demands
* Will need to draw on cash reserves, savings
* Net profit down 47 pct on lower crude prices, sales
* On track to pay government dividend (Adds CEO comments, context)
KUALA LUMPUR, Aug 14 Malaysia's Petroliam Nasional Bhd (Petronas) on Friday said cash from operations will cover neither capital expenses nor committed dividends for 2015, forcing the state-owned oil firm to draw on reserves and further cost savings.
Petronas contributes almost half of Malaysia's oil revenue. But weak global prices have depressed income, leaving the country with a devalued currency and at risk of a credit-rating downgrade, while debts mount at state investment fund 1MDB.
"We will have to persevere with more austerity measures," said Petronas President and Group Chief Executive Wan Zulkiflee Wan Ariffin at an earnings briefing.
Petronas said net profit fell 47 percent to 11.1 billion ringgit ($2.73 billion) in April-June due to weaker crude oil prices as well as lower sales of oil and liquefied natural gas.
Still, "all the plans are in place" to meet the 26 billion ringgit dividend promised to the government this year, Wan Zulkiflee said.
He said cost savings reached 600 million ringgit in the first half of 2015, and that oil prices will likely remain low for the rest of the year. "There's growth in demand, but growth in supply is a lot bigger," he said.
Petronas booked its first quarterly loss in five years at the end of last year, but returned to profit in January-March.
In February, the firm said it would cut capital expenditure by 15 percent this year to cope with lower oil prices, and its dividend to the government by around 10 percent.
CANADA
Petronas in June said it would move forward with its Pacific NorthWest liquefied natural gas project in British Columbia if it gains approval from Canada's environmental regulators.
"We are at the tail end of the process and are confident of the outcome," said Wan Zulkiflee said on Friday.
The $11 billion project has come up against opposition from Canadian aboriginal groups. The Lax Kw'alaams First Nation Band rejected an offer of C$1 billion ($765.99 million) in May in return for supporting the project, saying the development threatens salmon habitat next to the project's terminal site.
Petronas has received agreements from four of five groups it has been talking to, Wan Zulkiflee said. ($1 = 4.0730 ringgit) ($1 = 1.3055 Canadian dollars) (Reporting by Al-Zaquan Amer Hamzah and Emily Chow; Editing by Christopher Cushing)
Petronas is being lauded for issuing Asia’s second largest corporate dollar bond in 2015:
Petroliam Nasional Bhd (Petronas) issued some US$5 billion (RM22 billion) worth of trust certificates and global medium-term notes (GMTN) in March 2015, making it Asia’s second largest corporate dollar bond issuance since Alibaba Group’s US$8 billion issuance in November 2014. The programme was launched in March 2015, when Petronas issued US$1.25 billion in trust certificates and US$3.75 billion of GMTN under a Global MTN Programme. Petronas will eventually issue up to US$15 billion of GMTNs.
Despite the record borrowing ,Petronas CEO Wan Zulkiflee Wan Ariffin said in August 2015 that Petronas will have to dip into its cash reserves and savings to finance its 2015 dividend to the Government, as well as capital expenditure commitments(see report below).
When the bonds were issued in March last year Petronas had already announced that it was going to slash exploration and production expenditure. The cash shortage comes therefore despite deep cuts to existing business operations.
Where then has the borrowed money gone to,or have these been quarantined ,kept separate for some specific purpose? If not, Petronas would seem to have spent its freshly raised debt capital for operational purposes as well as paying part of its dividend to the Government.This cannot be considered good business practice, and one needs to ask what it is that may have driven the Government of Malaysia, its sole and ultimate shareholder, to this level of desperation.
END
Industries |
Malaysia's Petronas says operations won't cover 2015 dividend, capex demands
* Will need to draw on cash reserves, savings
* Net profit down 47 pct on lower crude prices, sales
* On track to pay government dividend (Adds CEO comments, context)
KUALA LUMPUR, Aug 14 Malaysia's Petroliam Nasional Bhd (Petronas) on Friday said cash from operations will cover neither capital expenses nor committed dividends for 2015, forcing the state-owned oil firm to draw on reserves and further cost savings.
Petronas contributes almost half of Malaysia's oil revenue. But weak global prices have depressed income, leaving the country with a devalued currency and at risk of a credit-rating downgrade, while debts mount at state investment fund 1MDB.
"We will have to persevere with more austerity measures," said Petronas President and Group Chief Executive Wan Zulkiflee Wan Ariffin at an earnings briefing.
Petronas said net profit fell 47 percent to 11.1 billion ringgit ($2.73 billion) in April-June due to weaker crude oil prices as well as lower sales of oil and liquefied natural gas.
Still, "all the plans are in place" to meet the 26 billion ringgit dividend promised to the government this year, Wan Zulkiflee said.
He said cost savings reached 600 million ringgit in the first half of 2015, and that oil prices will likely remain low for the rest of the year. "There's growth in demand, but growth in supply is a lot bigger," he said.
Petronas booked its first quarterly loss in five years at the end of last year, but returned to profit in January-March.
In February, the firm said it would cut capital expenditure by 15 percent this year to cope with lower oil prices, and its dividend to the government by around 10 percent.
CANADA
Petronas in June said it would move forward with its Pacific NorthWest liquefied natural gas project in British Columbia if it gains approval from Canada's environmental regulators.
"We are at the tail end of the process and are confident of the outcome," said Wan Zulkiflee said on Friday.
The $11 billion project has come up against opposition from Canadian aboriginal groups. The Lax Kw'alaams First Nation Band rejected an offer of C$1 billion ($765.99 million) in May in return for supporting the project, saying the development threatens salmon habitat next to the project's terminal site.
Petronas has received agreements from four of five groups it has been talking to, Wan Zulkiflee said. ($1 = 4.0730 ringgit) ($1 = 1.3055 Canadian dollars) (Reporting by Al-Zaquan Amer Hamzah and Emily Chow; Editing by Christopher Cushing)
UPDATE 1-Malaysia's Petronas says operations won't cover 2015 dividend, capex demands
* Will need to draw on cash reserves, savings
* Net profit down 47 pct on lower crude prices, sales
* On track to pay government dividend (Adds CEO comments, context)
KUALA LUMPUR, Aug 14 Malaysia's Petroliam Nasional Bhd (Petronas) on Friday said cash from operations will cover neither capital expenses nor committed dividends for 2015, forcing the state-owned oil firm to draw on reserves and further cost savings.
Petronas contributes almost half of Malaysia's oil revenue. But weak global prices have depressed income, leaving the country with a devalued currency and at risk of a credit-rating downgrade, while debts mount at state investment fund 1MDB.
"We will have to persevere with more austerity measures," said Petronas President and Group Chief Executive Wan Zulkiflee Wan Ariffin at an earnings briefing.
Petronas said net profit fell 47 percent to 11.1 billion ringgit ($2.73 billion) in April-June due to weaker crude oil prices as well as lower sales of oil and liquefied natural gas.
Still, "all the plans are in place" to meet the 26 billion ringgit dividend promised to the government this year, Wan Zulkiflee said.
He said cost savings reached 600 million ringgit in the first half of 2015, and that oil prices will likely remain low for the rest of the year. "There's growth in demand, but growth in supply is a lot bigger," he said.
Petronas booked its first quarterly loss in five years at the end of last year, but returned to profit in January-March.
In February, the firm said it would cut capital expenditure by 15 percent this year to cope with lower oil prices, and its dividend to the government by around 10 percent.
CANADA
Petronas in June said it would move forward with its Pacific NorthWest liquefied natural gas project in British Columbia if it gains approval from Canada's environmental regulators.
"We are at the tail end of the process and are confident of the outcome," said Wan Zulkiflee said on Friday.
The $11 billion project has come up against opposition from Canadian aboriginal groups. The Lax Kw'alaams First Nation Band rejected an offer of C$1 billion ($765.99 million) in May in return for supporting the project, saying the development threatens salmon habitat next to the project's terminal site.
Petronas has received agreements from four of five groups it has been talking to, Wan Zulkiflee said. ($1 = 4.0730 ringgit) ($1 = 1.3055 Canadian dollars) (Reporting by Al-Zaquan Amer Hamzah and Emily Chow; Editing by Christopher Cushing)
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