KUALA LUMPUR: Petronas Nasional Bhd (Petronas) will not have to wait long to post a significant rebound after tripping into its first interim losses since the fourth quarter of 2015, economists said.
They said Petronas' huge losses and revenue plunge in the second quarter (Q2) ended June 30 2020 had been expected given the global oil price slump and economic damages inflicted by the Covid-19 pandemic.
"This is fine but expect Petronas' revenue and earnings to bounce back very sharply. Its profit will go up in the third and fourth quarters," IQI chief economist Shan Saeed told the New Straits Times.
Petronas on Friday reported a RM21 billion net loss in Q2, dragged by huge impairments on assets.
In the same quarter last year, the national oil company posted RM14.7 billion net profit.
Group revenue for the quarter under review dropped 42 per cent to RM34 billion from RM59.1 billion recorded in Q2 2019.
For the first six months, Petronas posted RM16.5 billion net loss. This is against the net profit of RM28.9 billion recorded in the same period last year.
Its revenue in the first half declined 23 per cent to RM93.6 billion from RM121.1 billion a year ago.
This was largely driven by lower average realised prices for all products and lower sales volume mainly from processed gas and liquefied natural gas (LNG).
Excluding the impairments, Petronas said it would record RM7.7 billion net profit during the period.
During the second quarter, oil prices continued to slide with the dated Brent averaging US$29.20 per barrel compared to US$68.83 per barrel in Q2 2019.
For the six months, the dated Brent average was US$39.73 per barrel compared to US$66.02 per barrel in the previous corresponding period.
Shan expects oil prices to hover around US$45 to US$55 a barrel in three to six months.
"Obviously, higher oil price will help Petronas in boosting its balance sheet. This will also help the government to bolster its balance sheet which is very significant. Once Petronas makes higher profits (again), they will be able to contribute to the government (in the form of dividends).
"I think for now, the energy market is quite hot, and Petronas is moving quite aggressively in reaching out to more customers. LNG is the future of Asia and the future is natural gas," he said.
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said Petronas' weak results were not surprising since the WTI benchmark prices had been negative on April 20.
"There is also oversupply condition which neccesitates supply cuts by the OPEC+ countries," he added.
Afzanizam said the industry outlook was challenging as the global economy was expected to be in recession this year.
"In that sense, demand for oil may not be forthcoming. Perhaps, next year would be much better as the global economy is anticipated to recover following massive economic stimulus introduced by governments and central banks all over the world.
"If the expected recovery happens, oil prices should pick up its pace next year and beyond. Otherwise, for now, the uncertainties in respect to the pandemic remain elevated which could put a lid on the upside potential for the crude oil prices," he added.
AxiCorp chief market strategist Stephen Innes agreed that the results were hardly a surprise.
This is given the decline in oil prices that had cut into margins and the impairments cost around exploration that Petronas needed to write down.
Innes added that the national oil company would need to venture deeper into greener energy.
Petronas' results reflect a devastating year for oil markets and the global economy at large as the world continues to battle Covid-19.
Saudi Arabia's oil giant Aramco recorded a 50 per cent fall in net income to US$23.2 billion for the first half of the year from US$46.9 billion over the same period in 2019.
Royal Dutch Shell also reported a deep financial loss after a record writedown on the value of its oil and gas assets due to the collapse in global market prices triggered by the pandemic.
The Anglo-Dutch oil giant revealed a net loss of US$18.3 billion for Q2 2020, down sharply from a net profit of US$3 billion over the same period and US$2.7 billion in the first three months of 2020.