THE transformation measures put in place two years ago when the oil and gas industry took a downturn are beginning to show results for Petroliam Nasional Bhd (Petronas).
The national oil company has posted stronger cash position, low gearing and good credit ratings while reducing expenditure by five per cent.
More importantly, Petronas’ net profit more than doubled to RM17.3 billion in the first half of this year from RM6.4 billion a year ago.
This was on the back of RM108 billion revenue compared with RM94 billion in the same period last year.
In a recent interview with NST Business, president and group chief executive officer Tan Sri Wan Zulkiflee Wan Ariffin spoke about the challenges in doing what was right for the company after he took over the helm in April 2015. That was the period when oil prices slumped from US$114 (RM476) a barrel to US$28 a barrel.
He also delved into Petronas’ plans which include building the group’s digital and technological capabilities further, preparing a team of new leaders to ensure its future growth and investment into renewable energy.
Wan Zulkiflee also set the record straight on rumours about Petronas’ layoff plans and divestments of certain assets.
He said Petronas was able to made decisions that drove impactful changes and turned the company into a resilient global oil and gas player.
“We looked at how we were managing our costs, cash generation, talents and project deliveries as well as manpower while simplifying processes, cutting across inefficiencies and overlaps.”
The first thing on Wan Zulkiflee’s mind when oil prices took a dive was how the lower prices would impact the group’s financials.
“One of the major things that we had to do was to cut RM50 billion in our capital expenditure in the next four years at the time. This was essentially the outcome of our deliberation on how we should react to the falling prices.
“We had to revise our budget a few times as the prices kept falling after each revision and we also had a team to scrutinise how the company should react and what steps to take at the time.
“It was a challenging time for the whole group, not to mention the industry and globally.
“We tried our best to understand what was happening to the best of our ability, and we decided and acted on it,” he said.
On what was the most difficult decision he had to make, Wan Zulkiflee said: “It was decisions involving manpower cuts because it involved my friends, the people I know and my colleagues.
“We had to let go of about 2,300 employees due to overlaps so that we could become more efficient and have simplified processes.
“Most of them were contract staff but there were also a few hundred permanent staff we had to release. If you ask me, that was the hardest decision to make.
“However, I am guided to do what is best for the organisation. And I am very clear on that in my mind.”
The group made big adjustments to stay resilient and is determined to fit into a new business model that is profitable.
“We have ‘tempered optimism’ on what crude oil prices will be and it is important that Petronas is profitable at US$100 a barrel of oil or US$80 or even US$50 a barrel.
“That is our business model to be profitable at different oil prices. Maybe we will do different things, such as if the oil price drops. But what is crucial is to have a robust portfolio,” he said.
Wan Zulkiflee said the organisation is preparing itself to have a succession of leaders who can work in any uncertainty, deemed a highly important attribute.
“We want our leaders to be able to cope with that kind of environment.
“If any challenge that is thrown at us and we can manage it, that is the kind of leadership team that Petronas requires. But we have to be prepared for this kind of volatility,” he said.
Large-scale retrenchment not in national oil giant’s plan
PETROLIAM Nasional Bhd (Petronas) president and group chief executive officer (CEO) Tan Sri Wan Zulkiflee Wan Ariffin has denied rumours of the company cutting 5,000 jobs, which were posted on a blog recently.
While consequent management for non-performer employees is always ongoing, a retrenchment of such a big scale is not in the national oil and gas company’s plans.
“I would like to take the opportunity to address a blog post of late about the retrenchment. I do not know where that came from, because we do not have any plans for any retrenchment.
“But I will say that it is an ongoing exercise for the non-performers. However, this is nowhere near the scale of the last manpower optimisation exercise,” he told NST Business.
“We will continue to look at how we can optimise, and if it the right thing for the organisation, we will do it. But it is not 5,000-plus like what was quoted and higher than the previous exercise. It depends on the size, portfolio, where we are as well as the oil prices.”
According to its latest annual report, Petronas has a workforce of 51,034, with 84 per cent serving in Malaysia, followed by 9.1 per cent in Africa, 2.2 per cent in Europe, 1.9 per cent in Middle East, one per cent in North and South America, and 0.1 per cent in Australia and New Zealand.
It has 89 and 38 wholly-owned and partly-owned subsidiaries as well as 20 associate companies globally.
Last year, Petronas slashed up to 1,000 jobs to cope with slumping oil prices. The company offered a voluntary separation scheme. The restructuring exercise was carried out to reduce redundancies as the company aimed for a flatter, leaner and efficient business model.