Petronas' Break Even Oil Price Is US$70 Per Barrell ?

NST BUSINESS

Petronas reduced fully active rigs from 18 to 4 since late last year
shut down 14 projects - industry publication reported, quoting sources

Petronas unable to maintain operation at current oil price
rigs are deepwater, more expensive to run report said

putting break even level at around US$70 a barrel
oil prices plummeted from US$100 to under US$20 now

deepwater projects in Southeast Asia likely to face delays
Limbayong (Msia) Abadi (Indon) block A6 (Myanmar) Kelidang (Brunei) at risk

My comments :

Petronas' production was  already down to 600,000 barrels per day as at December 2019. 

I mentioned earlier that that production volume has since come down to about 300,000 barrels per day (info I got from a friend in the oil and gas industry). 

Shutting down 14 out of 18 active rigs represents  77% of its oil rigs in Malaysia. 

So what is Petronas'  production volume in Malaysia now? 

Oil prices collapsed in 2014. SIX YEARS AGO. I have been predicting oil prices would collapse since much earlier than that. (Because I keep track of the hybrid cars, EV technology, massive improvements in fuel efficiencies on land, sea and air).  

The fact is for the past few years Petronas has actually been selling oil and gas production assets all over the world - in places like Chad, Canada and its other forays overseas. Petronas has also been selling assets in Malaysia. Here is some Petronas news from 2017 (three years ago) :

• Petronas to sell 49% in SK316 offshore gas block in Sarawak
• grapples with oil prices slumped by half over 2 1/2 years
• oil price slide has squeezed cash flows of Petronas
• forced it (in 2016) to announce RM50 billion cut in capex over 4 years

So do Sarawak and Sabah still want to buy a stake in Petronas?
Harga sudah jatuh gila bah. Mahu beli murah boleh.

Here is a chart showing oil prices over the past 10 years. You can click on the link here to go to the chart.  You can move the cursor and see daily oil prices over the past 10 years.

• June 30,  2014  US$105 per barrel.
• 
  
• March 20, 2015 US$46.40 per barrel.
• 
  
• Feb 26, 2016 US$26.21 per barrel.
• 
  
• Oct 20, 2018 US$75.23 per barrel.
• 
  
• April 25, 2020 US$18 per barrel.

Oil prices collapsed after June 30th, 2014. 
From a high of US105 per barrel oil prices hit US$26 per barrel by February 2016. 
There was a recovery to US75 per barrel in October 2018 but it collapsed again after that. Today's price is about US18 per barrel.

If Petronas' breakeven is at US$70 per barrel it means Petronas has been bleeding since 2014.

So how has Petronas been paying the Government that RM24 billion dividends, special dividends, billions in taxes etc?

It does not add up. 

It looks like Petronas has been paying the dividends, special dividends etc from the sale of its assets in Chad, Canada, SK316 block in Sarawak etc.

Since 2014 all those billions of Ringgit dividends paid to the Kleptocrats and since then have come from cashflows generated by selling the family silver.

It is NOT from operations of the oil business. 
They have been selling their oil businesses.

(Just like Khazanah Nasional selling 85 million TNB shares on Thursday and generating over RM1 billion cash).

They are selling the family silver. 

This is the mak nenek business model again.

Well in the case of Petronas they do not have much choice. 
They have to sell those oil assets to raise cash.
And to cut losses.

So my guess is the government will be getting the GLCs to sell even more assets. Which is good in the long run. The government should not have got into business in the first place. It is not the job of government to get into business. The job of the government is to rule the country. Not run businesses for profit. 

So crony middlemen, commission agents etc - you can make another round of killing by helping the government sell its assets to raise cash. Can do the 1MDB land flip model. Or that hospital model. Sell cheap to middle men and then resell to the market at higher price. Selamat berpuasa.