Petronas says $5 billion bond issue for CAPEX, possible M&As

Malaysia’s Petroliam Nasional Bhd (Petronas) plans to use the $5 billion it raised in Asia’s largest bond offering so far this year for corporate expenses as well as possible acquisitions, the company said.

The state-owned energy firm, which posted its first quarterly loss in at least five years in the fourth quarter due to the slump in global oil prices, declined to give any details about its potential M&A plans.

It had earlier stated plans to cut capital expenditure by 10 percent and operating expenses by up to 30 percent this year, but still went ahead with the bond and sukuk issue, its first foray into the debt market in six years.

The $5 billion issue comes as the cost of insuring Malaysian sovereign debt has risen the most this year compared to its Southeast Asian peers on concerns about state investor 1MDB’s $11 billion debt burden.

Weak oil prices have also deepened worries about the revenue prospects for Petronas, which contributes about a fifth of the government’s overall income.

The Petronas bond issue was part of an open-ended $17 billion bond and sukuk programme announced by the company this month, after 1MDB’s financing woes put pressure on Malaysia’s sovereign rating and weakened the country’s currency.

“The proceeds raised from the bond offering, including the sukuk proceeds, will be used for general corporate purposes, including capital expenditure,” the company statement said.

Petronas said it was keen to maintain a “comfortable cash balance, to enable us to proceed with important projects and pursue synergistic mergers and acquisitions strategies.”

Petronas has for the last three years bought several overseas assets to shore up future earnings as output slows at home. In 2012, it acquired Canada’s Progress Energy Resources in a $5 billion deal that gave it shale gas properties in northeastern British Columbia.

Petronas’ cash holdings amounted to $39 billion, while total borrowings amounted to $9.9 billion as at end 2014, according to its financial statement.