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Petronas Expects ‘Difficult’ 2012 After Profit

Petroliam Nasional Bhd. (PET), Malaysia’s state oil company, posted 36 percent lower quarterly profit and predicted a “difficult” 2012 as production declines and it expects a drop in global fuel demand to reduce crude prices.

Net income fell to 13.5 billion ringgit ($4.5 billion) in the three months ended Dec. 31 from 21.2 billion ringgit a year earlier, when the sale of shares in two units boosted earnings, the company known as Petronas said in a statement in Kuala Lumpur yesterday. Excluding the one-time gain, profit increased by 1.1 billion ringgit.

The International Energy Agency cut its 2012 global oil demand forecast for a sixth month on Feb. 10 as a “darkening” economic outlook reduced prospects for growth. Malaysia’s government gets about a third of its revenue from Petronas in dividends and taxes.

“Slower growth in Petronas’s earnings would have an impact on the government’s revenue,” said Azrul Azwar Ahmad Tajudin, Kuala Lumpur-based chief economist at Bank Islam Malaysia Bhd. “The federal government should contain its expenditure and diversify its revenue base.”

Petronas expects its average selling price for crude oil to fall as much as 28 percent this year from the preceding three quarters, Chief Executive Officer Shamsul Azhar Abbas said today.

“This is going to be a very difficult year,” Shamsul said at a media briefing on the earnings. “We see massive demand destruction for oil and gas because of the impact of the world economy growth.”

Oil Prices

The Malaysian company expects to sell oil at an average price of $85 to $90 a barrel this year, Shamsul said, compared with $118 in the previous financial year, which was shortened to nine months as Petronas migrates to a new reporting timetable to match the calendar year.

Crude oil prices in New York averaged $94.06 a barrel in the three months ended Dec. 31 and were 10 percent higher than a year earlier. Sales at Petronas rose 30 percent to 78 billion ringgit in the quarter.

Petronas accounted for about a third of the Malaysian government’s estimated 183 billion-ringgit revenue in 2011, according to the finance ministry. The company’s dividend and direct taxes on petroleum products totaled 56 billion ringgit.

Dividend Payment

The oil producer agreed to pay 30 billion ringgit in dividend for the last financial year, unchanged from the previous two years. The Kuala Lumpur-based group’s ability to maintain dividend payments may be curbed as it increases spending to 300 billion ringgit over five years to find new energy sources.

The company may switch to a payout ratio of 30 percent of profit, Shamsul said on June 8.

Pretax profit in the nine months ended Dec. 31 reached 82.7 billion ringgit, exceeding the company’s projection of as much as 70 billion ringgit, while net income rose 10 percent to 48.9 billion ringgit from a year earlier.

Petronas had a one-time gain of 9.3 billion ringgit in the last quarter of 2010 after initial public offerings in two units. Petronas Chemicals Group Bhd. (PCHEM) raised 12.8 billion ringgit in November 2010 and 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.

Output Decline

The company plans to increase spending on discovering new energy reserves to help reverse a decline in production.

Malaysia’s oil and gas production has fallen for three straight years, declining to the equivalent of 1.61 million barrels of oil a day in the year ended March 31, 2011, from 1.63 million a day a year earlier, according to Petronas’s annual report.

The government has offered companies incentives to explore deeper and less-profitable fields to increase reserves as energy demand rises.

Petronas, which manages all of Malaysia’s energy reserves, announced Jan. 16 a $12 billion joint investment plan with Royal Dutch Shell Plc (RDSA) over 30 years to recover oil off Malaysia’s Sarawak and Sabah coasts as the Southeast Asian nation seeks to extend the life of its diminishing reserves.

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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