PETRONAS maintained a resilient earnings performance in the first half of FY2026 (1HFY26), with its upstream and gas businesses helping to cushion weakness in the downstream segment.
It’s first half of financial year 2026 (1HFY26) delivered a core profit of RM23.2 bil, which was flattish year-on-year.
The upstream division was the star performer of 1HFY25 with higher average realised prices of crude achieved while the capital expenditure (capex) for this segment only amounted to RM9 bil during the period under review.
Its gas & maritime division also saw higher topline underpinned by higher LNG and processed gas volume in addition to higher realised prices.
Downstream division was the key drag for the 1HFY26 despite higher average realised prices for its products as Petronas has signed a share sale agreement with Aramco to acquire Aramco’s 50% stake in Pengerang Refining Company Sdn Bhd and Pengerang Petrochemical Sdn Bhd, collectively PRefChem.
“There was no disclosure of value transacted but the value of the deal could be at USD7 bil if we were to refer to Aramco’s previous investment into PRefChem, which is consistent with its reported capex of RM26 bil in its downstream division,” said Kenanga.
1HFY26 capex by the group exceeded expectations at RM41.4 bil of which RM26 bil was from PRefChem stake acquisition from Aramco, this implies that only RM15.4 bil capex was spent in its existing businesses mainly on upstream.
Kenanga believes there is potential upside to Petronas dividend on top of the announced RM20 bil due to higher expected petrol and diesel subsidy cost to be borne by the government as mogas and diesel prices have surged since March 2026.
Notwithstanding, Kenanga noted early signs of turnaround in upstream spending in 2027 onwards as Petronas has restructured its upstream asset portfolio by bringing in more foreign ownership: establishment in Searah which results in joint ownership over multiple assets, farm-out agreements with Enquest involving 4 PSCs in Malaysia.
“We believe these exercises will be short-term negative upstream activities but from 2027 onwards it could be positive for activities as these upstream assets could receive more funding from its owners for more development while not being bogged down by the Petronas group’s ongoing legal case with PETROS,” said Kenanga.
The research house switched their top pick to DIALOG from PETDAG as the group has upside in its upcoming PSCs and small field assets in its upstream asset portfolio for longer term growth trajectory while it has already moved on from its EPCC cost struggles.—Sept 1, 2026
Main image: oilandgasmiddleeast.com
