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KUALA LUMPUR, Aug 14, 2015:

Petroliam Nasional Bhd (Petronas) is bracing for challenging times ahead with its pretax profit in the second quarter dented by 47% and with no reprieve from the low oil prices seen in the near future.

For the second quarter ended June 30, 2015, it posted a pre-tax profit of RM14.61 billion compared with RM28.06 billion in the same quarter last year.

Petronas’ prudent cash management practices had provided sufficient financial reserves to weather the effects of the low oil price.

“However, Petronas is bracing itself for more challenges ahead as low oil prices persist,” said president and group chief executive officer Datuk Wan Zulkiflee Wan Ariffin today.

Revenue decreased 28% to RM61.3 billion from RM85.36 billion due to lower average realised prices recorded across all products.

The fall in the revenue was in line with the significant downward trend of key benchmark prices of Dated Brent and Japan Crude Cocktail, coupled with the impact of lower crude oil sales volume and liquefied natural gas (LNG).

The three-month average reported a decrease of 14% in LNG prices where average price for LNG in the second quarter was at US$57 per barrel compared with US$66 in the previous quarter.

“Overall, it has been an unrelenting difficult period.” Wan Zulkiflee said the lower pre-tax profit and revenue was somewhat cushioned by better operational efficiencies, average Brent price in the second quarter increasing 15% to US$62 per barrel from the previous quarter and stronger refining margins.

In the first quarter the average price was US$54 per barrel.

The group also notched several operational and project milestones such as first hydrocarbons from three greenfields (two in Malaysia and one from the Bukit Tua field in Indonesia), Petronas Floating Liquefied Natural Gas – 2 (South Korea) in June and PNW Integrated LNG Project (Canada).

On the downstream business, Petronas has started construction of the Pengerang Integrated Complex in the last quarter.

He said the refinery and petrochemical integrated development project was expected to be completed by Q1 of 2019, with commercial operations to begin in Q2 of 2019 as planned.

Operationally, Petronas’ domestic refineries and petrochemical plants continue to chart excellent performance levels, with overall equipment effectiveness at 94.1% and 89.5% respectively.

On industry outlook, Wan Zulkiflee said Petronas did not foresee a reprieve from the low oil prices soon.

Wan Zulkiflee called on the Malaysian oil and gas industry to join forces for the greater good in this pervasive low oil price environment.

“There are ample opportunities in the market for consolidation, leading ultimately to an increase in cost efficiency and competitiveness across the industry.”

Petronas’ pretax profit for the first six months of 2015 decreased to RM31.56 billion versus RM55.28 billion in the same period a year ago. Revenue contracted to RM127.50 billion against RM169.41 billion.

Reuters reported that Petronas said cash from operations will cover neither capital expenses nor committed dividends for 2015, forcing the state-owned oil firm to draw on reserves and further cost savings.

Still, “all the plans are in place” to meet the RM26 billion dividend promised to the government this year, Wan Zulkiflee said.

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