Petronas May Need to Raise Debt, Tap Cash Amid Oil's Slump

  • Malaysia state oil company sees Brent averaging $30 this year
  • Company to announce new organization structure this week

Petroliam Nasional Bhd., Malaysia’s state oil company, said it may need to raise debt and tap its cash reserves to cover capital expenditures and dividend payments to the government.

The company reported its third loss in five quarters as oil’s collapse curbed revenue. The net loss was 4.7 billion ringgit ($1.1 billion) in the three months through December, compared with a loss of 9.9 billion ringgit a year ago, the company said Monday. Revenue fell 24 percent to 60.1 billion ringgit.

“As difficult as 2015 has been for us, the next two years will continue to be challenging," Chief Executive Officer Wan Zulkiflee Wan Ariffin told reporters in Kuala Lumpur. The company’s cash flow from operations is unlikely to be able to cover capex requirements as well as 16 billion ringgit in dividend payments to the government this year. "We will utilize our cash reserves and we may need to raise some borrowings," he said.

Petronas, as the company is known, joins global oil majors including Royal Dutch Shell Plc. in cutting spending as the industry contends with the worst crude downturn in a generation. It’s targeting to lower capital and operating expenditures by as much as 20 billion ringgit in 2016, with a planned reduction of 50 billion ringgit over four years, the CEO said Monday. 

The company projects Brent crude, the global benchmark, to average $30 a barrel in 2016 and it’s factored the impact of lower oil prices into its outlook, Wan Zulkiflee said.

Maintain Output

While the Petronas has prioritized projects within its portfolio and even deferred some, the refining and petrochemicals complex it has planned for Malaysia’s southern Johor state is progressing, Wan Zulkiflee said. It also continues to work toward achieving a final investment decision on its liquefied natural gas export project on Canada’s west coast, he said.

Petronas expects to maintain or increase output this year, Wan Zulkiflee said. Total production rose 3 percent to 2.29 million barrels of oil equivalent a day in 2015, from 2.22 million the previous year, the company said.

Wan Zulkiflee said he will make an announcement on a new organizational structure this week, without giving details. The company had completed a review of its business operating model to boost efficiency levels, he said.

The company has started reviewing the positions of contract workers who aren’t critical to its core business and is expected to make announcements on cost-cutting steps in March, the Edge newspaper reported earlier this month.

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