KUALA LUMPUR: Petroliam Nasional Bhd may maintain its net cash position over the next four years albeit with narrowing net cash balances, Fitch Ratings said.
Petronas had readily available cash of RM123 billion against total debt of around RM55 billion at end-2019, the rating agency said.
Fitch also expects the national oil company’s free cash flow (FCF) after capex and dividend payments to continue to remain negative in 2020 and 2021.
This would be driven by weaker operating cash flows in light of Fitch’s low oil-price assumptions, capex estimates and continuing dividends.
“Petronas’ FCF is likely to improve over 2022-2023 and be neutral to marginally negative, supporting its net cash position,” Fitch said in its statement on Tuesday revising Petronas’ issuer default ratings (IDRs) to negative from stable.
The firm affirmed Petronas’ long-term foreign and local-currency IDRs at “A-”, and its short-term foreign-currency IDR at '“F1”.
Fitch also affirmed Petronas' foreign-currency senior unsecured rating and the rating on debt issued by subsidiary Petronas Capital Ltd and guaranteed by it at “A-”.
The rating actions follow the revision of the outlook on Malaysia's “A-” IDR to negative from stable on April 9.
Fitch believes the government would support Petronas to maintain a healthy credit profile due to its importance to national revenue and its expansion to sustain and improve earnings.
Consequently, it expects the Petronas board to factor in the impact on its financial profile even as it considers the government's additional dividend requests to support Covid-19 stimulus.
“Petronas has declared dividends of RM24 billion for 2020; the company's net cash position as of end-2019 can support some incremental dividends, though, in our view, any large special dividends like in 2019 are unlikely.”
Fitch expects Petronas’ dividend payment to fall in 2021 following weak earnings due to low oil prices and declining volumes on the disruptions from the coronavirus.
“The government has allowed Petronas to cut dividends to maintain its financial profile. Petronas reduced dividends to RM16 billion a year in 2016 and 2017 on weaker earnings from lower oil prices.
“We estimate dividends will rise to around RM22 billion-RM25 billion over 2022-2023, subject to crude oil prices and investments,” it said.