KUALA LUMPUR (March 14): Petroliam National Bhd (Petronas) is expecting stronger headwinds in the second half of 2017, as the recent decline in oil prices brings renewed fear that the worst is not yet over for the oil and gas industry.

“I am not sure if the worst is over. Petronas is preparing for an uncertain second half of this year,” Petronas president and group CEO Datuk Wan Zulkiflee Wan Ariffin, who is better known as Wan Zul, told the press at the financial result briefing today.

Wan Zul reiterates that Petronas’ dividend for this year will remain at RM13 billion. “Our dividend policy has never affected our capex (capital expenditure) and other costs. Our shareholders are very understanding,” he said.

Wan Zul expressed his concern on rising US crude inventories that had recently offset quotas in the OPEC agreement to cut oil supply since last year.

“We are not sure whether the OPEC agreement to cut oil production will continue in 2H17,” Wan Zul said. Petronas has said it will cut oil production by 20,000 barrels per day, costing the national oil firm slightly under US$1 million in revenue per day.

The surge in US crude inventories data this month has brought the oil price down to its lowest since the beginning this year.

However, there remains a small cushion for Petronas, which had planned its operations based on oil price at US$45/barrel — lower than the Brent crude index’s current “magic number” of US$50/barrel.

Looking forward, Petronas said it will continue to focus on cost optimisation and increase its productivity, but will carry on with its existing projects. “Our capex for this year is RM60 billion, so we are not going to defer any of the (already) sanctioned projects.

“At the same time, projects are held to more stringent hurdle base, and only projects that pass our assessment will be sanctioned,” Wan Zul said.

Petronas’ capex stood at RM50.4 billion last year. “We cut between RM15 billion to RM20 billion for FY15 alone,” Wan Zul said, following Petronas’ decision to reduce its capex and opex to cut costs.

Net profit for Petronas in 4QFY16 stood at RM9.42 billion, a significant improvement from a net loss of RM4.7 billion a year ago on the back of better margins. Revenue was slightly lower at RM58.6 billion, down 2.5% from RM60.1 billion a year ago.

For the full FY16, Petronas registered a profit of RM16.95 billion, up 28% from RM13.16 billion in FY15. Revenue was down 17.26% to RM204.91 billion from RM247.66 billion in FY15.