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PETALING JAYA: Moody's Investors Service which affirmed Petroliam Nasional Bhd's (Petronas) 'A1' rating, today flagged potential changes in government policies for oil and gas sector as credit negative for the group, which is currently being challenged as the sole owner of the country's oil and gas resources.
The Sarawak government is making a play for direct authority over oil and gas resources in the state. In July, the Gabungan Parti Sarawak-led State Assembly passed the Oil Mining (Amendment) Bill 2018 which requires only one licence for exploration, prospecting and mining of oil and gas.
After Petronas failed in June to get the courts to declare it as the sole owner and authority of oil and gas resources in the country, it has been silent on the matter.
The federal government has thus far not weighed in on the issue.
Moody's senior vice-president Vikas Halan said in a statement that potential changes to government's policies for the oil and gas sector could affect Petronas' position as the sole owner of the country's petroleum resources, and increase the royalties paid on its upstream oil and gas production.
“While these changes could be credit negative for Petronas, their implementation will take time and we expect the group to have the financial flexibility to reduce dividends and capital spending to minimise any adverse impact on its credit profile,” Halan said.
Nevertheless, he said Petronas' financial profile and liquidity position are stronger than those of its higher rated global peers, and it thus has a cushion to absorb some deterioration in its credit metrics before its ratings face downward pressure.
Petronas' gross financial leverage, as measured by its total debt/ earnings before interest, taxes, depreciation, and amortisation (ebitda), improved to 0.7 times for the 12 months ended March 2018 from about 1.0 times for 2016.
Moody's said it expects Petronas to maintain its gross financial leverage below 0.8 times-1.0 times for the next two to three years.
The company's total debt/ total capitalisation remains conservative at below 15% as of March 2018 and Moody's expects this to be maintained at 15% to 20% over the next two to three years compared to its downgrade threshold of above 30% to 35%.
The company's net adjusted cash position, which had increased to RM90 billion as of March 31, 2018 from RM42.8 billion on Dec 31, 2016, will likely be maintained at a level of RM80 billion to RM100 billion over the next two to three years based on Moody's current oil price assumption of US$45 to US$65 per barrel through 2019.
Moody's said this also incorporates its expectation of gradual increase in dividends to the government to RM25 billion by 2020.
The rating agency has affirmed the A1 rating on the senior unsecured notes issued by Petronas Capital Ltd, the (P) A1 rating on the US$15 billion (RM61.6 billion) medium-term note programme and the A1 rating on the sukuk issued through Petronas Global Sukuk Ltd.
Moody's said the rating affirmation indicates that the group will maintain its strong operating profile, credit metrics and liquidity as it continues to generate free cash flow in an improved oil price environment and as it nears the end of its capital spending cycle.
Moody's said the stable outlook also reflects its expectation that Petronas will maintain its strong credit profile over the next 12 to 24 months. It further reflects Moody's expectation that the group will continue to adjust its spending on operating and capital expenditure to protect its financial position.
The national oil company's rating is supported by its large-scale hydrocarbon reserves; strong financial metrics; conservative financial policies; and solid liquidity profile.
SINGAPORE: The Southeast Asian offshore natural gas assets of US oil and gas producer Hess Corp, estimated to be worth as much as US$5 billion (RM22.05 billion), have attracted takeover interest from firms including Thailand's PTTEP PCL and Austrian energy group OMV AG, people familiar with the matter said.
Hess, which has a collection of gas fields in North Malay Basin in offshore Malaysia and in the Malaysia-Thailand Joint Development Area (JDA) with 50% equal partner Petroliam Nasional Bhd (Petronas), has not yet decided whether to sell the assets, according to financial and industry sources.
Their estimated market value would be US$4 billion to US$5 billion, the sources said. They declined to be identified because the takeover interest had not previously been made public.
The interest in Hess' assets, among the few long-term and sizeable projects in the region, comes as cashed-up firms such as PTTEP are buying overseas assets, while the likes of OMV and Kuwait Foreign Petroleum Exploration Co have been scouring for acquisitions in Asia.
Hess, which hasn't reported a profit since 2014, has been under pressure from investors to make money. It posted a smaller-than-expected loss in April-June, but many of its peers have turned profitable after the oil price crash two years ago, fuelling questions as to why Hess has not followed suit.
The firm is developing large offshore oil projects in South America and US shale oil. In 2014, it sold its Thai assets to PTTEP for US$1 billion and also sold its Indonesian assets.
“We don't comment on rumours but we continue to believe that our Malaysia assets are an important part of our portfolio and our value creation strategy,” Hess spokeswoman Lorrie Hecker said in a statement.
“JDA and North Malay Basin are significant long-term, low-cost cash generators, producing stable production and free cash flows, which provide funding for our compelling, long-term opportunities in Guyana and the Bakken (in the United States).”
“A number of parties have looked (at the Hess assets) and have teams working on this,” said one financial source.
“Increasing numbers of companies believe a sale is probable,” said the person, adding that Hess' project would also appeal to private-equity backed players and mid-sized energy firms.
He said PTTEP was working with a financial adviser for its interest in the assets.
Another source said some parties had done preliminary work on the assets and were waiting to see if Hess would start a sale process.
OMV and Kuwait Foreign Petroleum Exploration Co declined to comment.
This month, OMV won regulatory approval to buy Royal Dutch Shell's upstream assets in New Zealand for US$578 million. OMV said in March that the acquisition was a key step to develop Australasia into a core region in line with its new strategy.
Petronas declined comment while PTTEP said it was focused on expanding in Southeast Asia.
“PTTEP is interested in M&A deals with particular focus on assets located in PTTEP's region of experience such as South East Asia, which is PTTEP's areas of expertise and the operating risk is moderately low,” the Thai company told Reuters, declining to comment specifically on Hess assets.
KUALA LUMPUR: T7 Global Bhd, which believes its diversification effort into aerospace manufacturing will break even in three to four years, is positive about the prospects moving forward with the oil price stabilising and more contract awards from Petroliam Nasional Bhd (Petronas).
T7, formerly Tanjung Offshore Bhd, is principally involved in providing comprehensive services to the oil and gas (O&G) industry. It has an order book of RM800 million to keep it busy for the next few years and a tender book of RM2 billion to sustain the group’s operations and diversification plans.
Executive deputy chairman Tan Sri Tan Kean Soon said O&G is still its core business, constituting 80% of its revenue.
“Over the past few years, oil price plunged low but as of today, we’re hitting over US$70 per barrel, hence more and more projects will be coming from Petronas. We’re also bidding for a number of tenders, hopefully by year end or next year, things will look up for the O&G industry,” he told a press conference after its EGM today.
Tan said T7 is banking on its three businesses – O&G, aerospace and infrastructure & construction.
On its diversification into aerospace, the group expects its factory in Serendah to be operational by year-end and for it to obtain the necessary accreditation by the first quarter next year, before getting customer approvals and subsequently the aerospace contracts. It is partnering Kilgour Aerospace Group, a UK high value manufacturing company to set up the surface metal treatment facility.
Chairman Datuk Seri Dr Nik Norzrul Thani said an aerospace contract has a tenure of 30-40 years and provides a good margin, generally better than O&G contracts. He said there is a backlog on supply, adding that the government is also interested to push the agenda for aerospace.
“Our aim is to become a high value manufacturing company. We aim to depend less on O&G ultimately, but growing it at the same time.”
On dividends, Nik said the group is tightening its belt now to invest for the future.
“If you’re willing to wait and have staying power for the long term, we’re all involved. It’s our aim to make sure the value (of the company) goes up, by being in an industry and having projects that make money. We feel aerospace is one of them.”
Meanwhile, he explained that the review of the East Coast Rail Link by the government will not affect T7 as they are just bidding for the work packages at this stage.
KUALA LUMPUR, Aug 20 — Moody’s Investors Service has affirmed the A3 foreign and local currency issuer ratings of Petronas LNG Ltd (PLL) with a stable outlook. “PLL’s A3 ratings are positioned two notches below the A1 ratings of its ultimate…
PETALING JAYA: United Plantations Bhd’s net profit declined 22.4% to RM87.2 million in the second quarter ended June 30 from RM112.4 million in the previous corresponding quarter.
Revenue for the quarter decreased 12.8% to RM309.9 million compared with RM355.26 million in the same period last year mainly due to lower revenue from the plantations and refinery segments.
For the six months period, its net profit fell 1.8% to RM187.7 million against RM191.3 million a year ago, while revenue tumbled 13.5% to RM635.47 million from RM734.5 million previously.
On its prospects, the group said it anticipates that the production of biodiesel this year will exceed 2017.
“With mineral oil prices having recovered to above US$70 per barrel combined with lower vegetable oil prices, the case for further increases of biodiesel production is highly likely thereby putting a floor to the downtrend in vegetable oil prices.”
However, it said that any changes in policies and production of biodiesel must be monitored closely as it will have a direct impact on the vegetable oil price complex going forward.
KUALA LUMPUR, Aug 20 — Crude oil price could potentially reach US$100 (RM410) per barrel by year-end or early 2019 due to a significant reduction in Iranian output and lower spare capacity due to geopolitical risks, said global information…
KUALA LUMPUR, Aug 20 — Global crude oil price could top US$100 (RM410.20) if the US strictly enforces sanctions against Iran, said a vice president at the IHS Markit international consultancy. “The Trump administration is adamant on imposing a…