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PetroChina Net Rises on Higher Output, One-Time Asset Sale

PetroChina Co. (857), the country’s biggest oil and natural gas producer, posted a 5.6 percent gain in first-half profit, saying gas price rises will boost earnings this half by 10 billion yuan ($1.6 billion).

Net income increased to 65.5 billion yuan, or 0.36 yuan a share, from 62 billion yuan, 0.34 yuan, the Beijing-based company said yesterday in a statement. The result, which included an undisclosed one-time gain from asset sales, compared with expectations of 63.2 billion yuan, according to the average of seven estimates compiled by Bloomberg.

China’s government raised non-residential gas prices by 15 percent last month, which will boost net profit by 20 billion on an annual basis, President Wang Dongjin said. The company will also benefit from higher oil prices, according to Sanford C. Bernstein & Co.

“There are reasons to believe that we are close to a near term bottom in the stock with improvement in near term earnings,” Neil Beveridge, a Hong Kong-based oil and gas analyst at Sanford C. Bernstein, wrote in an e-mailed research note yesterday that rated PetroChina outperform with a share price target of HK$12.

PetroChina slipped 0.6 percent to HK$8.65 at 10:44 a.m. in Hong Kong, taking its decline for the year to 21 percent.

Underlying Earnings

Underlying earnings were 49.5 billion yuan in the first half after stripping out the gains from asset sales, according to Bernstein. PetroChina made an undisclosed gain from the sale of a 50 percent stake in a Chinese pipeline joint venture to Taikang Asset Management Ltd. and Beijing Guolian Energy Industry Investment Fund in June.

PetroChina alluded to the asset sale saying introduction of “strategic investors” helped improve profit at its natural gas and pipeline business. The company gave a value of 20 billion yuan when it announced the sale in June.

Oil and gas production rose 4.4 percent to 697.2 million barrels of oil equivalent in the period from a year earlier, while the average realized crude price dropped 6.9 percent to $100.49 per barrel.

Losses from refining narrowed to 7.8 billion yuan from 23.3 billion yuan a year ago. The chemicals business lost 8.1 billion yuan in the first six months, 2.5 billion yuan more than from a year earlier, because of the weak market, according to the statement.

Domestic Focus

PetroChina will focus on domestic exploration and production, including natural gas and pipelines, Wang said, without giving a time frame.

Capital spending was 108.2 billion yuan in the first half. Of that more than 90 percent was spent on domestic and overseas exploration and production, according to the earnings statement. The company didn’t break down spending on Chinese and international projects.

“Production cost at domestic oil and gas fields are still much lower than that of international projects,” Wang said. “We have to give priority to develop domestic upstream resources because this is our base for development and this is where our advantage lies.”

To contact the reporter on this story: Aibing Guo in Hong Kong at aguo10@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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