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PetroChina Profit Falls 33% on Refining Losses, Gas Imports

PetroChina’s Third-Quarter Profit Falls 33%, Misses Estimates
PetroChina Co. storage tanks stand on Jurong Island in Singapore. Photographer: Munshi Ahmed/Bloomberg

PetroChina Co., the nation’s biggest oil and gas producer, posted its lowest third-quarter profit in at least five years because of refining losses and natural-gas import costs.

The world’s largest publicly traded oil producer saw net income fall 33 percent to 24.9 billion yuan ($4 billion) from 37.4 billion yuan a year earlier, the Beijing-based company said in a statement yesterday. That missed the 27.3 billion-yuan mean estimate in a survey of eight analysts compiled by Bloomberg.

PetroChina incurred losses on refining as the state kept retail fuel prices low to fight inflation. Two price increases in August and September failed to return the unit to profit.

“Because of government’s control on retail fuel prices, the company lost 30.02 billion yuan in the refining sector in the first three quarters,” PetroChina said in the statement. “The loss was 11.52 billion yuan less than the same period of last year.”

PetroChina shares fell 2 percent to HK$10.58 at 9:36 a.m. Hong Kong time. The stock has gained 3.1 percent in the past year, compared with a 8.4 percent increase in Hong Kong’s benchmark Hang Seng index.

Worst Performer

PetroChina is the last of China’s three oil majors to report earnings for the period. Third-quarter profit at China Petroleum & Chemical Corp., or Sinopec, fell 9.4 percent to 18.3 billion yuan, Asia’s biggest refiner reported on Oct. 28. The figure beat analysts’ estimates.

Cnooc Ltd., the country’s biggest offshore oil and gas explorer, posted a 4.7 percent increase in oil and gas revenue on Oct. 24. The company didn’t report profit for the quarter.

“PetroChina is absolutely the worst performer in China’s three oil companies in terms of third-quarter earnings,” said Neil Beveridge, a Hong Kong-based energy analyst at Sanford C. Bernstein & Co.

“It’s a significant loss in the refining and petrochemical segment, which is in contrast to Sinopec where we actually saw its operating margins turned positive in the quarter,” Beveridge said. “PetroChina still has this major headwind from gas imports, where they are losing a lot of money.”

Nine-month operating profit at the gas and pipeline unit dropped to 885 million yuan from 13.23 billion yuan a year earlier, the company said in the statement, citing losses at its liquefied natural gas business and from importing gas from Central Asia. The company didn’t provide details of the losses.

Gas Reform

PetroChina President Zhou Jiping said in August that the National Development and Reform Commission, China’s economic planner, indicated it may relax price controls on gas in the second half of the year. That may allow PetroChina to sell its imported gas at a profit.

The reform may not come before next March, said Sonia Song, a Hong Kong-based energy analyst at Nomura Holdings Inc.

“My impression is the reform will not get going until China elects new leadership by next March,” she said. “So PetroChina really has to rely on improving upstream production and cutting costs to achieve better quarterly performance.”

Crude production rose 2 percent in the first nine months of the year to 683 million barrels, and natural-gas output increased 8.3 percent to 1,879 billion cubic feet, according to the statement.

Realized crude prices fell 0.2 percent to $103.62 a barrel, while realized gas prices rose 5.5 percent to $5.02 per thousand cubic feet.

Brent crude, the benchmark for more than half of the world’s oil, averaged $112.20 a barrel in the nine months, according to data compiled by Bloomberg. Brent averaged $111.27 a barrel in the same period a year earlier.

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