CreditSights Retains ‘Market Perform’ Call On Petronas , Earning Set To Remain Buoyant In 1Q

CreditSights has retained its “market perform” call on Petroliam Nasional Bhd (Petronas) following the national oil company’s solid balance sheet and robust operating cash flow generation in 2022.

The research house expects Petronas’ earnings to remain buoyant in the first quarter (1Q) of 2023 as its revenue is set to remain strong with the influx of tourists since the reopening of borders in March last year continuing to support transportation fuel demand.

This would aid sales volumes for its downstream (petroleum products) and gas (liquefied natural gas) segments, with both contributing three-fourths of the group’s sales, it noted.

“On the other hand, with decelerating global growth and recessionary fears on the horizon, Petronas’ realisations from upstream oil and gas production may not be as robust this year, as they were in 2022,” said CreditSights in a research note on March 16.

Spurred by elevated oil and gas prices throughout 2022, Petronas posted a record-high full-year net profit and revenue for its 2022 financial year (FY2022).

Petronas’ net profit for FY2022, which came in at RM101.62 billion, was about double the RM50.87 billion it earned in the prior year.

Revenue for the year jumped to RM375.27 billion from RM247.96 billion, largely due to higher average realised prices for all products and favourable foreign exchange impact.

CreditSights noted that Brent crude prices have moderated in the current first quarter to an average rate of U$83.5 per barrel, down 3.0 per cent versus an average of US$86 per barrel in the fourth quarter of 2022.

“That being said, crude prices still remain high and should help to continue generating strong operating cash flows for the firm, which would in turn be enough to fund Petronas’ capital expenditure needs,” said CreditSights.

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