By Stephanie Jacob
National oil company Petronas will not be looking at laying off employees or divesting from its assets to deal with the impact of low oil prices for now, said its senior vice president of Corporate Strategy and Risk Adif Zulkifli.
Last week Petronas announced that it would have to dip into its cash reserves to meet its dividend commitments, including RM26 billion dividends to the federal government.
Wan Zulkiflee Wan Ariffin
“I do not expect our cash flow from operations this year to meet our capital expenditure and dividend commitments.This means we will have to persevere through with more austerity measures and will have to draw on our cash reserves,” said Petronas chief executive officer (CEO) Wan Zulkiflee Wan Ariffin last week during a briefing for Petronas’ second quarter (2Q15) results.
Petronas posted RM11.1 billion in profit after tax for 2Q15, down 47% year-on-year (y-o-y), as revenue for the quarter fell 28% y-o-y to RM61.3 billion.
Crude oil prices has collapsed in the last 12 months, falling by more than 50% from highs of over US$100 per barrel in the middle of last year to below US$50 levels currently.
Over the next year, Petronas will instead focus on enhancing its efficiencies first, Adif added.
With regards to using Petronas’ cash reserves, Adif said that more importantly past prudence in spending had helped the company build a strong amount of reserves which presented an opportunity for it to take advantage of the lower oil prices because it has the capacity to invest.
“If you have the ability to invest during the down cycle than you can benefit when things turnaround…we have been prudent in past years and during the good days built our cash reserves. So this will come in handy now,” Adif said.
Adif Zulkifli
Adif was speaking at the Economist Events’ Southeast Asia Summit today in Kuala Lumpur. The conference was attended by more than 170 leaders from government, academia, multilateral institutions and non-governmental organisations (NGOs) in the region.
Discussing how Petronas was evaluating which projects to prioritise, Adif said “at Petronas we have a very disciplined process of evaluation. All our projects are captured (in this evaluation process) whether on shore, deep sea or other projects.
We measure the cost against whatever assumption we use as the oil price, to make sure a project meets our threshold (requirements) and that is how we prioritise the projects whether in Malaysia or overseas.”
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