Friday, February 26, 2016
Petronas set to reveal more cost cuts amid oil price slump
The grim outlook for state-owned Petroliam Nasional Bhd puts more pressure on Southeast Asia's third largest economy, as the company accounts for nearly a third of the government's oil and gas-related revenue and provides a large number of jobs to Malaysians.
Malaysia's only Fortune 500 company is due to report fourth-quarter earnings on Monday, and analysts expect it to reverse last year's loss - its first in five years - and notch a net profit of less than 1 billion ringgit ($237.2 million),supported by its downstream business.
But Petronas is also expected to announce details of a sweeping overhaul, already disclosed internally, that could see spending cut by as much as 50 billion ringgit over four years.
The company has already said it would cut its 2016 dividend to the government by almost 40 percent to 16 billion ringgit($3.8 billion), a figure analysts said could shrink further.
"Can Petronas still pay up such a high price? I don't know,"Vikas Halan, Singapore-based vice president for Moody's told Reuters, referring to the dividend.
Earlier this week, the credit ratings agency said Petronas was at risk of a downgrade as oil prices languish, drying up operating cash and inflating debt.
On Tuesday, Chief Executive Wan Zulkiflee Wan Ariffin is due to speak to staff about the belt-tighening measures, which local media have said could also see a reduction in working hours, and pay, for staff.
A Petronas spokesman told Reuters there were no current plans for implementing a four-day working week, and that there would be no salary cuts. The spokesman, however, said the company was reviewing contract positions that were not critical to its core business.
In February, Petronas shelved a joint venture risk-sharing contract with compatriot oil and gas service provider Dialog Group Bhd, blaming depressed oil prices.
Analysts say it is likely to stick with large-scale projects, namely the RAPID refining and petrochemical complex in Malaysia's southern state of Johor and the construction of a liquefied natural gas (LNG) export terminal in Canada.
The Canadian project, however, could be delayed due to worries about marine life, analysts said.
"Given the amount of environmental concerns the project has,plus local opposition to it and the well supplied nature of the global LNG market, I'm bearish on the project's prospects," said analyst Peter Lee from BMI Research Singapore.($1 = 4.2035 ringgit) (Editing by Miral Fahmy)
Posted by wikisabah at 4:50:00 PM