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PetroChina Expands Overseas Operations, Raises Production to Meet Demand

PetroChina Co., Asia’s biggest company by market value, expanded overseas operations and ramped up production in the first quarter as domestic demand rebounded.

“The scale of operations continued to expand and rapid growth in the overseas oil and gas business was achieved,” PetroChina said yesterday as the country’s largest energy company reported a 71 percent jump in first-quarter profit.

Chinese energy companies are set to outpace their global peers as they boost production to supply the world’s fastest- growing major economy. BP Plc expects output to decline in 2010, and Royal Dutch Shell Plc may match last year’s production, trailing PetroChina’s 3 percent growth estimate.

“Production was stronger than other international oil majors, the main factor being increased gas production,” said Anna Yu, an analyst at Taifook Securities Group in Hong Kong. “China will still need to rely on imports though to help meet increasing demand.”

PetroChina’s first-quarter crude output rose 2.1 percent from a year earlier as oil prices more than doubled from last year’s low in February to $82 a barrel. Natural gas production surged 17 percent, the Beijing-based company said.

To help boost output, PetroChina plans to spend at least $60 billion in the next decade on overseas acquisitions. The company and Shell last month agreed to pay A$3.5 billion ($3.2 billion) for Arrow Energy Ltd., marking China’s entry in Australia’s coal-seam gas industry.

The shares rose 37 percent in Hong Kong trading in the past 12 months, compared with the 43 percent gain in the Hang Seng index. PetroChina fell 1.9 percent to HK$8.93 at 10:26 a.m. local time today as credit-rating downgrades of Greece and Portugal pushed the benchmark 1.3 percent lower.

First-Quarter Profit

“The sentiment worldwide in markets is down over the past couple of days, but these are good figures from PetroChina,” said Wang Aochao, head of China energy research at UOB-Kay Hian in Shanghai. “I can’t see any negatives here.”

First-quarter net income rose to 32.5 billion yuan ($4.8 billion) from 18.97 billion yuan a year earlier, PetroChina said in a statement to the Hong Kong stock exchange yesterday. That beat a median estimate of 30.9 billion yuan in a Bloomberg survey of six analysts.

Profit may rise 34 percent to 138 billion yuan this year, a median estimate of 14 analysts compiled by Bloomberg shows.

PetroChina also gained from increases in oil-product prices. The government last raised gasoline and diesel prices by as much as 4.6 percent on April 14. China has now adjusted prices 10 times since introducing a mechanism in December 2008 that allows the state to revise prices when crude-oil costs change more than 4 percent over 22 working days.

Rising Domestic Demand

“The prospects are good for the company this year and I can see profit rising about 35 percent,” Wang said. “If oil continues to trade between $80 and $90 a barrel, the company’s refining segment should also continue to make money. It should be a good year.”

The Chinese economy grew 11.9 percent in the first three months, the fastest in almost three years, spurring energy consumption. Oil demand may increase 5 percent this year, China National Petroleum Corp., PetroChina’s state-controlled parent, said in February.

PetroChina’s revenue jumped 75 percent to 318.8 billion yuan in the first quarter. Fuel sales climbed 27 percent to 27.05 million metric tons, while crude oil processing rose 16 percent to 215 million barrels.

“These were good results and a little above consensus,” Wang said. “It’s a reflection of how China’s economy has recovered, with more demand for oil products.”

Twenty out of 33 analysts surveyed by Bloomberg rate PetroChina shares as a buy. Five rate the stock as a sell.

To contact the reporter on this story: John Duce in Hong Kong at Jduce1@bloomberg.net

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