PetroChina's Profit Growth Slumps as Gasoline Prices Lag Behind Crude Oil
Profit growth at PetroChina Co., Asia’s biggest company by market value, slumped in the second quarter after government controls on gasoline and diesel tariffs curbed gains from higher crude oil prices.
Net income rose 4 percent to 32.8 billion yuan ($4.8 billion), according to calculations made by subtracting first- quarter earnings from six-month profit reported by the company in Hong Kong today. Spokesman Mao Zefeng said he couldn’t immediately comment on the derived figure. Profit surged 71 percent in the first three months.
China raised fuel tariffs once this year after five increases in 2009 as it sought to limit inflation in the world’s fastest-growing economy. PetroChina bought stakes in two Canadian oil-sands projects and teamed up with Royal Dutch Shell Plc to acquire an Australian coal-seam gas producer to counter a slump in refining margins.
“PetroChina has already concluded quite a few sizable takeover deals over the past few months and more are expected in the future,” said Yin Xiaodong, chief analyst at Beijing-based Citic Securities Co. “Its global expansion in oil and gas field assets will offset tighter refining margins when oil is high.”
The Beijing-based energy producer plans to spend at least $60 billion in the next decade on overseas takeovers after paying at least $6.2 billion in the past year for refineries and reserves in Australia, Canada, Singapore and Central Asia.
Overseas Acquisitions
PetroChina completed the C$1.9 billion ($1.8 billion) stake purchase in two Alberta oil-sands projects in February and the acquisition of Brisbane-based coal-seam gas producer Arrow Energy Ltd. with Royal Dutch Shell Plc for A$3.5 billion ($3.1 billion) this week.
The shares rose 0.7 percent to close at HK$8.51 in Hong Kong before the earnings announcement. PetroChina has declined 3.8 percent in the past 12 months, compared with the 0.8 percent gain in the benchmark Hang Seng Index.
Profit climbed 29 percent to 65.3 billion yuan in the first half, China’s second-largest refiner said in a statement to the Hong Kong stock exchange. That’s less than the 68.7 billion yuan median estimate of nine analysts surveyed by Bloomberg.
Government curbs on fuel prices meant Chinese refiners couldn’t fully pass on crude oil costs to customers, limiting profits. Crude in New York averaged $78.46 a barrel in the first six months compared with $51.69 a year earlier.
Cnooc Ltd., China’s largest offshore energy explorer, more than doubled its first-half profit partly because it doesn’t operate refineries. China Petroleum & Chemical Corp., known as Sinopec, posted a 6.7 percent gain. The nation’s biggest refiner gets 80 percent of its revenue from producing and selling fuels.
Exxon Mobile Corp., not bound by government fuel-price controls, recorded a gain of 63 percent. Shell, based in The Hague, posted a 35 percent increase in first-half net income.
Refining Margins
Gains from processing crude fell in the first half, the company said in the earnings statement without giving a figure. Sinopec’s refining margins slumped 45 percent in the period.
The average selling price for crude oil rose about 71 percent to $72.42 a barrel, boosting PetroChina’s operating income from exploration and production by 95 percent to 73.4 billion yuan.
International crude oil prices may vary “drastically with high frequency” in the near future because of factors including fluctuations in the value of the U.S. dollar, PetroChina said.
Crude oil in New York rose 0.8 percent to $73.12 a barrel at 12:41 p.m. London time as the dollar weakened against all but two of its 16 most-traded peers, boosting the investment appeal of commodities. The dollar traded at $1.2715 per euro, down from $1.2659 yesterday.
Exploration & Production
Exploration and production remain the most important contributor to earnings, PetroChina said. Spending on developing oil and gas fields may reach 161.4 billion yuan in 2010, according to the statement.
First-half overseas oil and gas output rose 8.3 percent. Central Asia and the Middle East will be a focus for PetroChina’s global exploration this year, the company said.
“PetroChina’s second-half performance will grow steadily,” President Zhou Jiping said at a media briefing in Hong Kong today.
Full-year profit may rise 28 percent to 132.3 billion yuan, a median estimate of 15 analysts surveyed by Bloomberg shows.
--Wang Ying and John Duce in Hong Kong. With assistance from Winnie Zhu in Shanghai and Chu Baizhen in Beijing. Editors: Ryan Woo, Amit Prakash.
To contact the Bloomberg News staff on this story: Wang Ying in Hong Kong at wang30@bloomberg.net; John Duce in Hong Kong at Jduce1@bloomberg.net
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