Petronas to pay $9.5 bil­lion div­i­dend as oil out­put de­clines

The Pak Banker - - Company& -

KUALA LUMPUR: Malaysian state oil com­pany Petro­liam Na­sional Bhd. will pay the govern­ment a div­i­dend of about 30 bil­lion ring­git ($9.5 bil­lion) this fis­cal year and fo­cus in­vest­ment on ex­tend­ing the life of the nation's re­serves, Chief Ex­ec­u­tive Of­fi­cer Sham­sul Azhar Ab­bas said.

The div­i­dend-ap­proach­ing the $10.5 bil­lion pay­out by Royal Dutch Shell Plc, a com­pany with sales al­most four times larger-will be un­changed from the past two years. Af­ter net in­come fell 23 per­cent in the 12 months ended March 31 be­cause of de­clin­ing en­ergy prices, Sham­sul said the com­pany needs to in­vest more to boost do­mes­tic oil and gas pro­duc­tion.

"We ex­pect to main­tain the div­i­dend at the same amount for the cur­rent fi­nan­cial year end­ing March 2011," Sham­sul, 58, said on Nov. 8 in an e-mailed re­ply to ques­tions from Bloomberg News. "Over the years, we have been able to up­hold our obli­ga­tions to re­turn value to our share­hold­ers while at the same time main­tain­ing healthy cap­i­tal ex­pen­di­ture lev­els."

Petro­liam Na­sional, known as Petronas, man­ages all the petroleum re­sources in the coun­try, South­east Asia's biggest oil and gas pro­ducer af­ter In­done­sia. Sham­sul said on July 1 he plans to in­crease cap­i­tal spend­ing 7.8 per­cent this year to 40 bil­lion ring­git, fol­low­ing two years of fall­ing pro­duc­tion.

Malaysia's govern­ment, which had a bud­get deficit at a 22-year high of 7 per­cent of gross do­mes­tic prod­uct last year, de­pends on oil and gas rev­enue for 40 per­cent of its in­come, ac­cord­ing to a fi­nance min­istry re­port on Oct. 15.

Shell, based in The Hague, paid its 2009 div­i­dend on sales of $278.2 bil­lion. Kuala Lumpur-based Petronas re­ported 12-month sales equal to about $70 bil­lion.

If it can't cover its div­i­dends and in­vest­ment spend­ing from its cash-flow this fi­nan­cial year and next, "then we'll take this as an in­di­ca­tion that the govern­ment may strip Petronas's cash re­serves in the event of a sov­er­eign cri­sis," Arnon Musiker, a Syd­ney­based Fitch Rat­ings an­a­lyst, said in a tele­phone in­ter­view. "We could re­duce Petronas's for­eign cur­rency rat­ing by one notch to the Malaysian sov­er­eign." Malaysia has crude oil re­serves to last 24 years and nat­u­ral gas for 38 years, the fi­nance min­istry said on Oct 15. Pro­duc­tion fell to the equiv­a­lent of 1.63 mil­lion bar­rels of oil a day in the year to March 31 from 1.66 mil­lion a year ear­lier, ac­cord­ing to Petronas's 2010 an­nual re­port.

"Our do­mes­tic in­vest­ments are pri­mar­ily aimed at boost­ing the coun­try's ma­tur­ing re­serves, main­tain­ing our pro­duc­tion rate and pro­long­ing our re­serves life," said Sham­sul. Sham­sul be­came CEO in Fe­bru­ary, re­plac­ing Has­san Mar­i­can, who led the com­pany for 15 years. He joined Petronas in 1975 and holds a mas­ter's de­gree in en­ergy man­age­ment from the Uni­ver­sity of Penn­syl­va­nia in Philadel­phia. Sham­sul stepped down in Jan­uary 2009 as chief ex­ec­u­tive of sub­sidiary MISC Bhd., the world's biggest owner of liq­ue­fied nat­u­ral gas tankers. MISC shares rose 44 per­cent on the Kuala Lumpur stock ex­change dur­ing Sham­sul's ten­ure, seven times faster than the bench­mark KLCI in­dex. In­vestors re­gard Petronas's debt to be a riskier bet than sim­i­larly-rated Cono­coPhillips, the third­largest U.S. oil pro­ducer, the spreads on the state-owned ex­plorer's bonds and cred­it­de­fault swaps show. Petronas and Cono­coPhillips are rated A by Fitch, the sixth-high­est rank, and one level above the Malaysian govt it­self.

S&P ranks Petronas's debt A-, the same as Malaysia and its sev­enth-high­est in­vest­ment grade.

The com­pany's stand-alone credit pro­file, or its rat­ing in­de­pen­dent of the sov­er­eign, is three notches higher. -Bloomberg

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