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    Petronas Plans Cuts and Review To Counter Oil Pric

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    Crystal Biru
    Petronas, Malaysia's state-owned oil and gas company, plans to cut spending by up to $11.4 billion over the next four years and review its business structure in response to low oil prices. The CEO announced in an internal memo that Petronas will undergo another round of expenditure cuts and project delays to target savings of $11.4 billion by 2020, and will also restructure the organization for better efficiency. Lower oil prices have reduced Petronas' profits and forced it to cut its dividend to the Malaysian government, adding pressure to the country's economy. Analysts expect Petronas may need to reduce future dividends further if oil prices remain low.

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    Petronas Plans Cuts and Review To Counter Oil Pric

    Uploaded by

    Crystal Biru
    33 views3 pages
    Petronas, Malaysia's state-owned oil and gas company, plans to cut spending by up to $11.4 billion over the next four years and review its business structure in response to low oil prices. The CEO announced in an internal memo that Petronas will undergo another round of expenditure cuts and project delays to target savings of $11.4 billion by 2020, and will also restructure the organization for better efficiency. Lower oil prices have reduced Petronas' profits and forced it to cut its dividend to the Malaysian government, adding pressure to the country's economy. Analysts expect Petronas may need to reduce future dividends further if oil prices remain low.

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    Petronas Plans Cuts and Review to Counter Oil Pric

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    Petronas, Malaysia's state-owned oil and gas company, plans to cut spending by up to $11.4 billion over the next four years and review its business structure in response to low oil prices. The CEO announced in an internal memo that Petronas will undergo another round of expenditure cuts and project delays to target savings of $11.4 billion by 2020, and will also restructure the organization for better efficiency. Lower oil prices have reduced Petronas' profits and forced it to cut its dividend to the Malaysian government, adding pressure to the country's economy. Analysts expect Petronas may need to reduce future dividends further if oil prices remain low.

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    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    33 views3 pages

    Petronas Plans Cuts and Review To Counter Oil Pric

    Uploaded by

    Crystal Biru
    Petronas, Malaysia's state-owned oil and gas company, plans to cut spending by up to $11.4 billion over the next four years and review its business structure in response to low oil prices. The CEO announced in an internal memo that Petronas will undergo another round of expenditure cuts and project delays to target savings of $11.4 billion by 2020, and will also restructure the organization for better efficiency. Lower oil prices have reduced Petronas' profits and forced it to cut its dividend to the Malaysian government, adding pressure to the country's economy. Analysts expect Petronas may need to reduce future dividends further if oil prices remain low.

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    Petronas plans cuts and review to

    counter oil price slump


    KUALA LUMPUR | BY A. ANANTHALAKSHMI AND ROZANNA LATIFF

    A motorist pumps petrol at a Petronas gas station in Putrajaya outside Kuala Lumpur
    August 26, 2013.

    REUTERS/BAZUKI MUHAMMAD

    Petroliam Nasional Bhd (Petronas) plans to cut spending by up to 50 billion ringgit


    ($11.4 billion) over the next four years and review its business structure in response to the
    profit-sapping slump in oil prices.

    The state-owned Malaysian company brings in nearly half of the Southeast Asian
    country's oil revenue and its woes are bound to add pressure to an economy already
    reeling from a slide in the ringgit and political uncertainty after a scandal surrounding
    state investor 1Malaysia Development Bhd (1MDB).

    Petronas said in November that it would cut its 2016 dividend to the government by
    nearly 40 percent after a 91 percent drop in profit, with analysts suggesting the payout
    could be trimmed back again in future.

    Petronas made its announcement on spending cuts in an internal memo, a copy of which
    was seen by Reuters.

    "We will go through another round of CAPEX (capital expenditure) and OPEX
    (operating expenditure) review to target cuts up to RM50 billion over the next four years.
    This means that we are going to have to defer some of our projects," CEO Wan Zulkiflee
    Wan Ariffin said in the memo dated Monday.

    In February last year Petronas said it planned to cut capital spending by 10 percent and
    operating expenses by up to 30 percent in 2015. It also said at the time that it would cut
    2016 capital spending by 15 percent. Its 2014 capital expenditure was about 65 billion
    ringgit.

    "We have also made a strategic decision to begin a review of Petronas' business operating
    model for better efficiency in response to the external environment," Wan Zulkiflee said
    in the memo. The review will result in a change to the organization's structure, details of
    which will be disclosed in March.

    Contract jobs in the company's non-core businesses will be affected, he said.

    In an emailed statement late on Tuesday, Petronas said it has circulated an internal


    communication on its efforts to cut costs to address the impact of the continuous fall in
    crude oil prices, but it did not provide details.

    MORE DIVIDEND CUTS

    Oil prices have dropped by more than 70 percent in the past 18 months as the world's
    crude producers have exceeded demand by more than a million barrels a day.

    Oil and gas projects worth $380 billion have been postponed or canceled since 2014 as
    companies make drastic cost cuts to survive the oil downturn. The retreat has included the
    axing of $170 billion of projects planned for 2016 to 2020, energy consultancy Wood
    Mackenzie said last week.

    Malaysian Prime Minister Najib Razak, facing lower revenue from the energy sector, is
    expected to make changes to the 2016 budget this month to adjust for falling oil prices..

    The budget assumed oil at $48 a barrel. Global oil benchmark Brent crude is now trading
    near $29.

    Moody's analyst Vikas Halan said that Petronas could be forced to reduce dividends
    further if it reported a loss or forecast more constraints on its cashflow.

    "Given their track record on reducing their dividend substantially, we can assume some
    further reduction, given the extent of decline in oil prices," said Halan.

    Petronas might not exit businesses after the review but it could lower investments in
    some operations, Halan added.

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