EVEN if the Malaysian Government has requested PETRONAS to up the quantum of its dividend pay-out, the national oil corporation is unlikely to be financially drained considering it can expect bumper earnings for its FY2022.

Kenanga Research is least concerned by any additional payout as the research house feels that the increased dividend commitments should not hamper PETRONAS’ capex (capital expenditure) spending ability.

“This (the Government’s request) is not too surprising considering PETRONAS is set to post record profits in FY2022 barring any major crash in oil prices in 2H FY2022 coupled with its current strong net-cash position of RM103 bil which is the highest since 2018,” opined analyst Steven Chan who reiterated his “overweight” outlook in an O&G sector update.

“With an anticipated further ramp-up in capex by PETRONAS in 2H FY2022, we are expecting the upcoming quarters to see a continued recovery trajectory in local activity levels.”

On Tuesday (Aug 30), PETRONAS which reported a 140% yoy jump in its profit after tax (PAT) for its (2Q FY2022) – lifted by higher oil & gas (O&G) prices – had announced a dividend of RM50 bil or double that of RM25 bil it paid the Government last year.

This will be the highest dividend pay-out by PETRONAS since 2019 when it paid a total of RM54 bil in dividends.

PETRONAS group saw its 1H FY2022 core PATAMI of RM44 bil more than doubled year-on-year (yoy) from RM16 bil in 1H FY2021 largely due to favourable average realised prices for all products.

As reference, Brent crude oil price averaged at US$104/barrel in 1H FY2022 versus US$67/barrel in 1H FY2021.

RHB Research also expressed belief that PETRONAS is capable of stomaching the RM50 bil dividend payout due to its solid financial performance without significantly deteriorating its balance sheet.

“After the RM9 bil dividend payment in 2Q FY2022 (1H FY2022: RM12 bil), its net cash continued to strengthen (+14% quarter-on-quarter ([qoq]) to RM103 bil underpinned by stronger operating cash flow (+24% qoq),” noted analyst Sean Lim.

RHB Research which is also “overweight” on the O&G sector has maintained its 2022-2023F crude oil prices at US$108-US$85/barrel. “The downside risks to our sector call is weaker oil prices and demand as well as lower spending by clients,” added the research house. – Sept 1, 2022