Robust Upstream Rescues PetroChina - Analyst Blog
April 30 2012 - 10:43AM
Zacks
Chinese energy giant PetroChina Co. Ltd. (PTR)
announced its first quarter 2012 earnings of RMB 39.2 billion or
RMB 0.21 per diluted share, compared with RMB 37.0 billion or RMB
0.20 per diluted share in the year-earlier period. Earnings per ADR
came in at $3.33 (exchange rate: US$1.00 = RMB 6.3, 1 ADR = 100
shares).
The positive comparisons can be primarily attributable to
improved performance from the Beijing-based company’s ‘Exploration
and Production’ segment on the back of higher commodity prices and
stronger volumes amid robust domestic energy demand. However, this
was largely offset by government caps on fuel prices that eroded
refining margins.
PetroChina’s total revenue for the three months totaled RMB
525.6 billion, an increase of 17.9% from the year-earlier
period.
Upstream
PetroChina, which last year overtook Exxon Mobil
Corp. (XOM) as the world's biggest listed oil producer,
posted strong upstream output growth during the three months ended
March 31, 2012. Crude oil output rose 3.6% from the year-ago period
to 227.0 million barrels (MMBbl), while marketable natural gas
output was up 11.2% to 710.9 billion cubic feet (Bcf).
Average realized crude oil price during the first three months
of 2012 was $105.48 per barrel, representing an increase of 14.8%
from $91.85 per barrel in the corresponding period of the previous
year. Average realized natural gas price was $4.87 per thousand
cubic feet (Mcf), 9.9% above the year ago level of $4.43.
The rising crude oil and natural gas output/prices drove the
upstream (or exploration & production) segment profit by 31.6%
to RMB 60.4 billion.
Downstream
PetroChina’s refinery division processed 257.1 during the
three-month period, up from 250.1 MMBbl in 2010. The company
produced 1.536 million tons of synthetic resin in the period (a
rise of 2.8% year over year), besides manufacturing 921 thousand
tons of ethylene (flat from the first three months of 2011). It
also produced 23.03 million tons of gasoline, diesel and kerosene
during the period, as against 22.00 million tons a year
earlier.
However, the company’s ‘Refining & Chemicals’ business
registered an operating loss of RMB 10.8 billion, as against a much
narrower year-earlier period loss of RMB 3.7 billion, hurt by
PetroChina’s inability to shift the burden of rising oil costs to
its consumers, as mandated by the state policy of keeping a lid on
gasoline and diesel prices.
In marketing operations, the group sold 36.50 million tons of
gasoline, diesel and kerosene during January - March 2012, an
increase of 15.5% year over year.
Liquidity & Capital
Expenditure
As of March 31, 2012, PetroChina’s cash balance was RMB 99.2
billion, while net cash flow from operating activities was RMB 21.8
billion. Capital expenditure for the period reached RMB 71.0
billion, up 33.9% from the year-ago level.
Rating & Recommendation
PetroChina is the largest integrated oil company in China. The
firm’s activities include: exploration, development, production and
sale of crude oil and natural gas, refining, transportation,
storage and marketing of petroleum products, manufacture and sale
of chemical products, and transmission of natural gas, crude oil
and refined products.
Going forward, the main growth driver for PetroChina will likely
be its leverage to the fast-growing Chinese market and the
turnaround in commodity prices. Being one of two Chinese integrated
oil companies, PetroChina is well-positioned to capitalize on these
favorable trends.
However, we are concerned about prospects for the company’s oil
production growth, considering its heavy exposure to significantly
mature-producing areas. Other near-term headwinds include
high-priced gas imports in the face of low domestic gas sale
prices, policy uncertainty and an ambitious investment program.
As such, we see the ADR performing in line with the broader
market and maintain our long-term Neutral recommendation, supported
by a Zacks #3 Rank (short-term Hold rating).
PETROCHINA ADR (PTR): Free Stock Analysis Report
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