BAKU, Azerbaijan, Sept. 18
By Leman Zeynalova – Trend:
Malaysian PETRONAS's upstream volumes to fall by about 4 percent during 2020 due to weaker demand, Trend reports referring to Fitch.
“Domestic gas sales declined by 17 percent to 2,425 million standard cubic feet per day (mmscfd) during 1H20 while upstream volumes fell by 7 percent to 1.64 million barrels of oil equivalent per day (boe/d).
“We also expect PETRONAS's LNG, downstream petroleum and petrochemical sales volumes to fall by about 3 percent in 2020. We expect an economic recovery in 2H20 to support revival in demand for gas and petroleum products. We expect volumes to return to pre-pandemic levels during 2021, although downside risks from the pandemic remain.
“We expect PETRONAS's EBITDA to fall steeply by 40%-45% in 2020 from MYR87.4 billion in 2019, as weaker demand leads to reduced volumes, low oil and gas prices and weak product spreads. This is likely to undermine the company's operating cash flows, and PETRONAS's free cash flow (FCF) deficit after capex and dividend payments will expand in 2020 from 2019's deficit of MYR13 billion. However, the company's plan to cut its 2020 capex will cushion the impact on FCF from the drop in EBITDA. EBITDA fell by almost 50 percent to MYR29.4 billion in 1H20 from a year earlier.
“Fitch expects PETRONAS to maintain its net cash position over the next four years, but negative FCF during this period will reduce the net cash balance. PETRONAS reported cash and equivalents of MYR157 billion against total debt of around MYR93 billion at end-June 2020. While negative FCF will expand in 2020, we expect lower dividend payouts in 2021 to support the return of FCF to 2019 levels despite similar product volumes and weak prices. We estimate PETRONAS's FCF to be only marginally negative to neutral thereafter, supporting its net cash position.
“We expect capex of MYR45 billion-50 billion a year after 2020, driven mainly by upstream investments, which are critical to arrest falling production at PETRONAS's domestic oil and gas fields and drive growth overseas. PETRONAS plans to increase investments in new energy projects, primarily renewables, to reduce its carbon footprint, but these will remain relatively small over the next two years. Capex in the downstream segment (2019: MYR10 billion) should drop with completion of its refinery and petrochemical integrated development project,” reads the report.
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