KUALA LUMPUR (March 17): Fitch Solutions Country Risk and Industry Research expects Petroliam Nasional Bhd (Petronas)’s revenues to remain strong, as the influx of tourists since the re-opening of borders in March 2022 should continue acting as a tailwind for transportation fuel demand, which will aid sales volumes for its downstream (petroleum products) and gas (LNG) segments, together contributing three-fourth of the group’s sales.
In a report on Thursday (March 16), CreditSights, a Fitch Solutions company said that on the other hand, with decelerating global growth/recessionary fears on the horizon, Petronas’s realisations from upstream O&G production may not be as robust this year as they were in 2022.
CreditSights said Brent crude prices have moderated in the current 1Q2023 quarter (current price: US$74.6/barrel) to an average rate of US$83.5/barrel, down 3% versus an average of US$86/barrel in 4Q2022.
“That being said, crude prices still remain high and should help continue generating strong operating cashflows for the firm, which would in turn be enough to fund its capex needs,” it said.
CreditSights retained its “market perform” recommendation on Petronas, and said it was extremely comfortable with the credit (solid balance sheet and robust operating cashflow generation) and expects its earnings to remain buoyant in 1Q2023, coupled with the fact that its bonds trade fairly on a relative value basis.
“The company saw its revenues surge by 49% year-on-year to RM333 billion in FY2022, mainly driven by higher product prices across all divisions, negating the slight dip in sales volumes,” it said.
The firm said Petronas maintains a robust credit profile, a diversified geographical revenue stream and the support of the Malaysian government [as a 100% shareholder].
“The company is vested with the entire oil & gas resources in Malaysia and provides a substantial source of income to the government, hence sharing extremely strong linkages with it.
“Although the company maintains large cash reserves and a net cash position, it is often required to pay dividends to the government, which may pressurise its cashflows,” it said.