After oil price slump, worries as Petronas slashes dividends, capital expenditure

Malay Mail Online
DECEMBER 2, 2014

KUALA LUMPUR, Dec 2 — The recent global oil price slump has affected both Putrajaya and domestic oil and gas (O&G) industry which depend heavily on Petroliam Nasional Bhd (Petronas), after the local giant decided to slash its dividends and capital expenditure.

In the aftermath of the slump, media reports revealed declines in the ringgit, local stock market, and net worth of industry players including billionaires Tan Sri Robert Kuok and T. Ananda Krishnan, and even Tan Sri Mokhzani Mahathir.

With the US crude oil prices at a five-year low, Petronas Chief Executive Tan Sri Shamsul Azhar Abbas told reporters on Friday after the that payments to the government in the form of dividends, tax and royalties could be 37 per cent lower from the previous year to about RM43 billion in 2015 if oil stays around US$75 (RM275) a barrel.

As a result, Malaysia’s ringgit headed for its biggest two-day decline since the 1997-98 Asian financial crisis yesterday.

According to Bloomberg, the currency weakened 1.6 per cent to 3.43 against US dollar yesterday, the lowest level since February 2010.

It has also dropped 2.7 per cent in two days, the steepest decline since June 1998, Bloomberg added.

Malaysia’s oil-related revenue totalled RM63 billion in 2013, accounting for 29.5 per cent of total government revenue.

The RM63 billion comprised of tax income and royalties of RM36 billion and Petronas dividends of RM27 billion.

Petronas also announced a cut of between 15 and 20 per cent to its annual capital expenditure of RM50 billion, denting the outlook for local companies, which depend on it.

The oil giant’s CEO also announced that the Fortune 500 company will review its projects, with no more marginal oil-field developments unless Brent prices go over US$80 per barrel.

According to Business Times, Petronas’ RM57 billion spending last year helped float the industry when other markets have started struggling.

There are around 40 listed O&G companies and another 4,000 smaller ones that rely on Petronas for jobs, English daily The Star reported previously.

Consequently, the benchmark FTSE Bursa Malaysia KLCI Index of shares fell 2.1 per cent in the worst one-day performance in 22 months yesterday.

Business Times noted some firms suffered two-digit losses, including UMW Oil & Gas suffered (18 per cent), SapuraKencana (10 per cent) Yinson (12 per cent), Dialog (15 per cent) and Bumi Armada (12 per cent).

This has dented the net worth of several tycoons in the industry, according to a report by The Star today, with the value of their shareholdings cut by almost half from RM15.89 billion to RM7.86 billion yesterday.

The Star said that following SapuraKencana Petroleum Bhd’s share price fall of 48.78 per cent over the year, Tan Sri Shahril Shamsuddin’s shareholding value went down from RM4.85 billion to RM2.53 billion.

Another major stakeholder Tan Sri Mokhzani Mahathir, the son of former prime minister Tun Dr Mahathir Mohamad, also saw his shareholding value fall from RM2.95 billion to RM1.54 billion.

According to The Star, the net worth of billionaires Tan Sri Robert Kuok, T. Ananda Krishnan, Tan Sri Ngau Boon Keat and Tan Sri Quek Leng Chan were also affected, resulting from share price drops in PACC Offshore Services Holdings, Bumi Armada Bhd, Dialog Group Bhd, and TH Heavy Engineering Bhd respectively.

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