PetroChina Co. (857), the country’s biggest oil and gas producer, posted a 4.9 percent decline in first-quarter profit as lower oil prices eroded earnings.
Net income fell to 34.2 billion yuan ($5.48 billion) in the three months ended March 31, from 36 billion yuan a year ago, the Beijing-based company said in a statement to the Shanghai Stock Exchange yesterday. The earnings beat an average of four analyst estimates compiled by Bloomberg of 32.03 billion yuan.
“The profit decline came mostly from the lower realized crude price,” said Laban Yu, a Hong Kong-based analyst at Jefferies Group LLC. Yu said that future quarters could see earnings improve due to higher gas retail prices in China “if production stays at the current level and crude prices don’t go much lower.”
PetroChina is poised to benefit from the most aggressive reforms in more than a decade as China’s President Xi Jinping seeks to increase market forces in the economy. The government raised retail natural gas prices by 15 percent last July and has signaled it will start allowing private companies to invest in areas traditionally dominated by state-owned giants.
The price of crude realized by PetroChina in the quarter declined 2.9 percent to $100.06 a barrel, it said, while oil and gas output rose 2.3 percent to 363.4 million barrels of oil.
Operating profit on exploration and production dropped 7.5 percent to 52.7 billion yuan because of “lower realized crude prices, higher costs and some policy factors in overseas projects,” the company said.
That part of the business will “continue to see margin compression on rising costs” even as refining and sales could improve their margins through the rest of the year, Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co., said in a research note today.
“We see little to get excited about in those results,” said Beveridge.
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