Petronas Sees Crude Staying Above $100/Barrel as Profit Jumps

Petroliam Nasional Bhd., Malaysia’s state oil and gas company, said fiscal third-quarter profit jumped 74 percent, buoyed by gains from the sale of shares in its units and higher crude prices.

Net income in the three months ended Dec. 31 increased to 21.2 billion ringgit ($7 billion) from 12.2 billion ringgit a year earlier, Petronas, as the company is known, said in a statement in Kuala Lumpur late yesterday. The group booked a 9.3 billion-ringgit gain from share sales in the quarter.

Petronas is on track to reach its pretax profit target of 80 billion ringgit for the year to March 31, Chief Executive Officer Shamsul Azhar Abbas told reporters. “It should be achievable looking at the current price of oil, which should easily stay over $100 per barrel in the next two months,” he said.

Petronas’s petrochemicals unit, Petronas Chemicals Group Bhd. (PCHEM), raised 12.8 billion ringgit in November in the Southeast Asian nation’s biggest initial public offering. Malaysia Marine & Heavy Engineering Holdings Bhd., the rig-building arm of Petronas’s MISC Bhd. (MISC), had a 2 billion-ringgit share sale a month earlier.

Worldwide demand for gasoline, diesel and jet fuel rose 3.5 percent during the last three months of 2010, driven by economic expansion, the International Energy Agency said in a Jan. 18 report.

Higher Crude

Oil futures in New York averaged 12 percent higher in the fourth quarter than a year earlier, according to data compiled by Bloomberg. Crude oil on the New York Mercantile Exchange has risen 26 percent in the past year.

Petronas’s sales climbed 12 percent to 60 billion ringgit in its third quarter, it said. The group’s key challenge will be to maintain production, Shamsul said.

The company needs to spend as much as 55 billion ringgit annually over the next five years for exploration and improving recovery, he said. That’s up from a projected 40 billion ringgit in the current year, Shamsul said.

“We need to go for growth and we need to replace aging assets,” he told reporters. “We’ve been neglecting growth for a while now. Aging assets are also costing more.”

Petronas has paid 30 billion ringgit in dividends to the government for the first nine months of this fiscal year, the company said.

“To spend on capital expenditure without eating into the cash reserves, that’s our challenge,” Shamsul said. “We are not in the mood of going to the bank and start borrowing just to pay dividend to the government.”

The group may invest in unconventional oil and gas assets in China, Myanmar, Indonesia and Australia, he said.

To contact the reporter on this story: Chong Pooi Koon in Kuala Lumpur at pchong17@bloomberg.net

To contact the editor responsible for this story: Barry Porter at bporter10@bloomberg.net

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