Page 7 - AsiaElec Week 22

AsiaElec COMMENTARY AsiaElec
transport fuels has plummeted following gov- ernment-ordered social quarantine measures amid the coronavirus (COVID-19) pandemic.
“We are trying to cap production from existing fields and [are] reducing capital and operational expenditures for new drilling,” CEO Nicke Widyawati told a parliamentary committee.
State-owned PTTEP announced similar plans on April 30, with 15-20% of its planned 2020 capex budget of $4.61bn on the chopping block.
PTTEP was also forced into the cuts after revealing that first-quarter net profits had tanked by 28% quarter on quarter to $275mn, while revenue slid by 4% to $1.77bn. PTTEP president and CEO Phongsthorn Thavisin said the company would have to be agile and adapt- able rather than simply focusing on lowering unit costs if it was to see growth.
PetroVietnam has said it aims to cut costs by 15-30%, though it has stopped short of saying where savings will be made other than salary cuts. The company warned in April that its first-quarter net profit likely fell 50.8% to VND4.44 trillion ($188.8mn).
What next
Petronas has said it will strive “as far as practi- cally possible” to minimise the impact of the cuts to its Malaysian capex programme, previously planned at MYR26-28bn ($5.97-6.42bn) for this year.
“While the group continues to invest
domestically, it anticipates that there will be constraints in the supply chain as a result of the pandemic.
The board expects the overall financial year performance to be significantly affected by these factors,” Petronas said.
In the longer term, the company has said it remains committed to growth through the max- imisation of cash generators, the expansion of its core business and investing in future-proof- ing the organisation. These are all only terms, however, and will do little to reassure Malaysia’s myriad of oil service providers.
The Southeast Asian country’s service pro- viders were hit hard in the wake of the 2014 oil price crash, with listed companies left struggling for years to recover their footing. These compa- nies had leaned on Petronas for the majority of their contracts and felt the pain as the state major launched a relentless hunt to improve opera- tional efficiencies and reduce its unit costs.
Kenanga Research warned this week that Petronas’ opex cuts would likely put new pres- sure on local services providers such as Dayang and Uzma, while a smaller capex budget meant fabricators such as Sapura Energy and Malaysia Marine and Heavy Engineering would feel the pinch.
“With Petronas announcing cuts in both capex and opex in its efforts for cost compression and cash preservation, we expect the effects to cascade down all value chains across the sector, especially on local-centric players,” the research service said.™
Week 22 03•June•2020 w w w . N E W S B A S E . c o m P7