Large asset impairment and demand disruption lead Petronas to first quarterly loss since 4QFY15, revenue fell 42%

KUALA LUMPUR (September 4): Petroliam Nasional Bhd (Petronas) posted an after-tax loss of RM21 billion for the second financial quarter ended June 30 (2QFY20) due to the sharp contraction in oil demand of up to 22 million barrels per day in April, not thanks to the Covid-19 pandemic.

The quarterly loss was also amplified by a net deterioration of RM20.77 billion, a qualitative jump from RM179 million a year ago, due to the collapse in oil prices.

The quarterly loss is the first since 4QFY15. The latest quarterly loss contrasts with a net profit of RM14.7 billion a year ago and RM4.52 billion in the previous quarter (1QFY20).

Quarterly revenue fell 42.4% to RM34.03 billion compared to RM59.1 billion in 2QFY19. The national oil company’s revenues had also declined for two consecutive quarters. Its quarterly revenue fell RM 53.5 billion in the January-March quarter of this year compared to RM 64 billion in 4QFY19.

Meanwhile, the national oil company posted earnings before interest, taxes, depreciation and amortization (Ebitda) of RM 29.4 billion in 2QFY20 compared to RM 54.7 billion a year earlier.

For the six months ended June 30 (1SFY20), Petronas posted a net loss of RM16.5 billion versus RM28.9 billion in the corresponding prior period.

Cumulative revenue fell 22.7% to RM 93.6 billion from RM 121.11 billion in 1HFY19.

Despite the net loss, the national oil company generated an operating cash flow of RM26.26 billion in 1HFY20. Petronas’ cash pile was RM156.86 billion as of June 30.

Speaking at the quarterly earnings briefing, Petronas’ newly appointed group president and CEO Tengku Muhammad Taufik Tengku Aziz noted that the group’s annual earnings will be “severely impacted” by the Covid-19 outbreak.

Petronas is not the only one in the oil and gas industry to have suffered massive asset value impairments. Large asset impairments as a result of falling crude oil prices are common among large international oil companies such as Exxon Mobil Corp and Shell in the second quarter.

Muhammad Taufik said that demand could recover to pre-pandemic levels in the second half of next year, but stressed that the outlook remains uncertain.