Wednesday, December 03, 2008

Petronas revenue still up!

Despite falling oil prices, national oPeil company Petroliam Nasional Bhd (Petronas) continued to chalk up an impressive growth in net profit on the back of higher average prices of the commodity.

Petronas posted a 46% year-on-year growth in net profit to RM42.68 billion for the first half (1H) of its financial year ending March 31, 2009 from RM29.27 billion, after paying tax expense of RM20.5 billion.

Revenue was sharply higher at RM157.2 billion versus RM102.8 billion a year ago. Pre-tax profit soared nearly 49% to RM63.26 billion from RM42.57 billion previously. Higher earnings boosted Petronas’ cash pile to RM124.6 billion from RM113 billion as at March 31. The group’s other liabilities, however, shot up 47% to RM112.8 billion from RM76.9 billion in the previous corresponding period.

The surge in Petronas’ profit did not come as a surprise given the 64%, or US$49.50 (RM179.68), jump in the average price of Tapis crude to US$126.48 per barrel during the six months under review. The average price of the commodity was US$76.64 in the corresponding period last year.

Tapis crude is the benchmark for Petronas’ production.

However, the national oil company which contributes over 40% of the government’s coffers in the form of petroleum taxes and dividend, is likely to see lower profits in the second half of its financial year in tandem with the drastic drop in crude oil prices since July when the worldwide commodity boom collapsed.

The average price of Tapis fell to US$74.77 in October, down 30% from US$106.92 in September. Yesterday, Bloomberg Asia-Pacific Tapis crude oil spot price was US$50.03 per barrel. The current level is the lowest since January 2005. The price has plunged 67% from the peak of US$153 in mid-July.

The last financial year, ended March 31, 2008, was a record year of profit for Petronas. The operating environment has since turned harsh, for on top of the meltdown in crude prices, the weakening ringgit and increase in production costs will further erode the group’s profitability.
According to Petronas president Tan Sri Mohd Hassan Marican, every 10-sen fall in the ringgit against the US dollar will take away about RM2.5 billion from the group’s profit.
The US dollar has strengthened substantially in recent months due to its standard currency status. The greenback has appreciated to RM3.628 against the ringgit, up almost 13% from the US$3.21 level in July.

International operation is Petronas’ biggest revenue contributor, generating RM68.9 billion or 44% of total revenue, followed by exports with RM56.7 billion or 36%, and domestic opertation, RM31.5 billion or 20%. But domestic operation, including exports, is still the most profitable due mainly to the lucrative production-sharing contracts it has with international oil majors for exploration and production (E&P) activities.

Giving a breakdown, the oil business, including refined petroleum products and crude oil trading, is the most profitable division, accounting for 40% or RM25.7 billion of the company’s operating profit. Gas is the second biggest profit-earner, contributing RM20.8 billion or 32.5% to group operating profit. Next comes E&P with 19% or RM11.9 billion.