Petronas, Malaysia's national oil and gas company, has executed a significant financial move by issuing $5 billion in senior notes, marking the largest oil and gas debt instrument sale in Asia since 2020. This transaction also stands as the most substantial international bond market deal from Asia since 2021. The issuance comprises three tranches with varying maturities, attracting overwhelming investor interest that allowed Petronas to increase the size of the offering and tighten pricing. Proceeds will be utilized for general corporate purposes.
The financial performance of Petronas in 2024 saw a decline in profit after tax by 31.74% compared to 2023 due to lower prices despite higher sales volumes. The company produced 2.45 million barrels of oil equivalent per day, slightly up from the previous year. Revenue and cash flow from operating activities also showed decreases, partly influenced by the divestment of its stake in Engen Group.
Record-Breaking Bond Issuance Details
Petronas successfully issued $5 billion in senior notes across three tranches with different maturity periods. The oversubscription reached approximately 3.4 times, reflecting strong investor demand. This allowed the company to adjust pricing favorably and expand the issuance size. The bonds were distributed globally among top-tier investors.
In a strategic financial maneuver, Petronas issued $5 billion in senior notes divided into three segments: $1.6 billion maturing in 5.75 years, another tranche worth $1.8 billion maturing in 10 years, and a final tranche of $1.6 billion maturing in 30 years. Each tranche was priced based on US Treasury yields plus a specified basis point spread, resulting in coupon rates ranging from 4.950 percent to 5.848 percent. JP Morgan and Morgan Stanley acted as joint global coordinators, while HSBC, Maybank, and MUFG served as joint bookrunners. The robust investor response enabled Petronas to enhance pricing conditions and increase the issuance from an initial $3 billion to the final $5 billion, underscoring the company's strong credit standing and market confidence.
Financial Performance Amidst Market Dynamics
Despite challenging market conditions, Petronas maintained operational growth but experienced declines in key financial metrics. The divestiture of its majority stake in Engen Group impacted consolidated financial statements significantly. However, the company's robust cash reserves and current assets position it well for future endeavors.
For the fiscal year 2024, Petronas reported a decrease in profit after tax by 31.74% compared to 2023, primarily due to lower commodity prices offsetting increased sales volumes. The production levels rose slightly to 2.45 million barrels of oil equivalent per day, driven by enhanced liquid and natural gas production efforts both domestically and internationally. Revenue fell by 6.88%, and earnings before interest, taxes, depreciation, and amortization dropped by 11.28%. Cash flow from operating activities also witnessed a decline of 10.25%. These figures were further affected by the disposal of Petronas' 74% stake in Engen Group to Vitol, leading to de-consolidation losses amounting to RM2.4 billion. Despite these challenges, Petronas ended 2024 with MYR 20.06 billion in borrowings and MYR 290.43 billion in current assets, including MYR 188.48 billion in cash and cash equivalents, indicating a solid financial foundation for upcoming projects and investments.