KUALA LUMPUR (April 23): Higher energy prices driven by the Middle East conflict are set to lift Petroliam Nasional Bhd’s (PETRONAS) earnings this year, even as supply chain disruptions and costlier crude imports weigh on its downstream business, according to Moody's Ratings, as it affirmed the national oil and gas company’s A2 ratings with a stable outlook.

The global rating agency said it had affirmed PETRONAS’ A2 issuer and senior unsecured ratings, as well as its a2 baseline credit assessment, citing the group’s solid business profile, prudent financial policy and ability to maintain a net cash position through oil price cycles.

“The affirmation of PETRONAS’ A2 ratings reflects its solid business profile and prudent financial policy, which have enabled the company to maintain a net cash position and excellent liquidity through the oil price cycle,” Moody’s vice-president and senior analyst Hui Ting Sim said in a statement on Thursday.

Moody’s estimates PETRONAS’ earnings before interest, taxes, depreciation and amortisation (Ebitda) will rise to between RM120 billion and RM130 billion in 2026, from RM112 billion in 2025, assuming Brent crude averages close to US$80 per barrel this year versus around US$70 last year.

"Higher energy prices in 2026 will support earnings growth at its upstream business, which has historically been the largest contributor to the group's profits.

"Higher crude procurement and logistics costs [arising from the conflict in the Middle East] will weigh on downstream earnings, though we expect overall group earnings to rise as upstream gains more than offset downstream pressures," it added.

The rating agency noted that about half of the crude requirements for Malaysia’s refineries are imported, with nearly 40% transiting the Strait of Hormuz, a key global energy chokepoint.

It added that PETRONAS is expected to maintain broadly neutral free cash flow over the next 12 to 18 months.

As at Dec 31, 2025, PETRONAS’ cash holdings and short-term investments exceeded its total debt by RM90.4 billion, which Moody’s described as "excellent liquidity".

Moody’s said PETRONAS’ rating remains one notch above Malaysia’s sovereign foreign-currency issuer rating of A3, reflecting the group’s strong standalone credit profile, sizeable export and international revenue contribution, and access to global capital markets.

"The company's higher-than-sovereign rating also incorporates the government's long track record of allowing PETRONAS to operate independently, despite the government's 100% ownership of the company," it said.

However, Moody's flagged regulatory risks in Malaysia’s oil and gas sector, including uncertainty surrounding Sarawak’s push for state-owned Petroleum Sarawak Bhd (Petros) to take over gas distribution activities in the state.

"The matter is now undergoing judiciary process to seek legal clarity. As the outcome and timeline remain uncertain, we have not incorporated any potential impact into our forecasts," it said.

According to Moody’s, any government action that materially reduces PETRONAS’ earnings or cash flow would be credit negative.

On rating sensitivities, Moody’s said PETRONAS could face downward pressure if Malaysia introduces unexpected policy changes in the oil and gas sector that significantly reduce the company’s reserves or production entitlements, or if it undertakes a large debt-funded acquisition that weakens its credit metrics.

It added that any downgrade of Malaysia’s sovereign rating would also result in a downgrade of PETRONAS’ ratings.

Conversely, an upgrade of PETRONAS’ ratings to A1 would require an upgrade of Malaysia’s sovereign rating to A2, alongside the company maintaining stronger financial metrics consistent with a higher rating category, Moody’s said.