Malaysia's Petronas sees gloomy industry outlook as Q2 profit slumps

Workers stand near palm oil fruits inside a palm oil factory in Sepang, outside Kuala Lumpur, Feb 18, 2014.
Workers stand near palm oil fruits inside a palm oil factory in Sepang, outside Kuala Lumpur, Feb 18, 2014.PHOTO: REUTERS

KUALA LUMPUR (REUTERS) - Malaysian state-owned oil firm Petroliam Nasional Bhd (Petronas) on Monday said low oil prices dragged quarterly profit down 85 per cent, and labelled the industry outlook "gloomy" well into 2017.

Petronas has seen a global slump in oil prices squeeze finances, which make up a third of Malaysia's oil and gas revenue. The benchmark Brent futures price, which hit a 12-year low earlier this year, rose 25 per cent in the second quarter but remains lower than a year earlier.

"We should expect to see volatility continue and Petronas will not bank on optimistic oil prices to ease up on pressure," President and Chief Executive Wan Zulkiflee Wan Ariffin said at a news conference.

"The combined factors of oversupply, growing inventories and slower demand growth point to an ongoing gloomy outlook well into 2017."

Wan Zulkiflee said Petronas planned for an average price this year of US$30 (S$40.3) a barrel, unchanged from its February forecast. Brent crude, after a recent rally, traded at US$49.50 at 1021 GMT (6.21 p.m Singapore time).

For April-June, net profit hit 1.62 billion ringgit (S$540 million) on revenue that fell 21 per cent to 48.44 billion ringgit.

Petronas said highly volatile oil prices had led to impairment charges rising nearly 15 times from a year prior to 7.16 billion ringgit in the second quarter. It said it expects price volatility to lead to more charges, albeit to a lesser degree.

Petronas at the start of the year announced it would cut spending by up to 50 billion ringgit over the next four years in response to the oil price slump.

On Monday, Wan Zulkiflee said Petronas would enforce "fiscal discipline" regardless of oil price movement and that the firm expects to meet its dividend commitment of 16 billion ringgit to the government for this year.

He also said the company has not made any final decision on its liquefied natural gas (LNG) project in western Canada.

Petronas and partners have been waiting about three years for a permit to build the Pacific NorthWest LNG export terminal in northern British Columbia. They are now waiting for the Canadian Environmental Assessment Agency to finish the final leg of its review.

Petronas expects the Canadian authorities to make a decision on the project in September or October, Wan Zulkiflee said. "Until we get the final decision and presumably with the final conditions, we are not able to decide," he said.