markets

PetroChina Pays Full Profit as Oil Rally Keeps Cash Churning

Updated on
  • Chinese oil giant proposes divided pay higher than net income
  • Earnings nearly triple as company recovers from worst year

Photographer: Brent Lewin/Bloomberg

PetroChina Co., the country’s biggest oil and gas company, once again rewarded shareholders by paying out its entire net income as dividends.

After a surprise payout from its half-year results in August, the Beijing-based company said Thursday it will send investors dividends that amount to slightly more than its 22.8 billion yuan ($3.6 billion) in 2017 net income.

“Shareholders should be happy that PetroChina once again paid out all of its profit as dividend,” said Anna Yu, a Hong Kong-based analyst at ICBC International Research Ltd. State-owned China National Petroleum Corp. holds almost 83 percent of the company.

PetroChina Profit

Net income almost triples in 2017 on rising energy prices and cost cutting

Source: Bloomberg, company reports

PetroChina is recovering from its worst-ever performance the previous year as a rally in oil prices bolstered its exploration and production segment. Global benchmark Brent crude averaged 21 percent higher in 2017 than a year ago as OPEC and its allies cut output. And while the state-owned giant took a 23.9 billion yuan hit from reselling imported gas domestically below cost, those losses are seen having peaked.

As the country’s biggest natural gas producer and importer, PetroChina is key to President Xi Jinping’s campaign to replace coal with the cleaner-burning fuel. The nation’s gas use surged 15 percent last year, with imports satisfying around 40 percent of that demand, pushing up global prices this winter while leaving some parts of the country short of supply.

Fueling Losses

PetroChina sells imported gas at a loss

Source: Company reports

Note: Figures represent operating losses from imports by Natural Gas & Pipeline segment

PetroChina will hand out dividends totaling 0.06074 yuan per share, including special payments. Given that free cash flow hit a record $24 billion, the dividend payout was “uninspiring,” Aditya Suresh, an analyst at Macquarie Capital Ltd. in Hong Kong, wrote in research note.

Profit in 2017, which almost tripled, compares with the 23.1 billion yuan median estimate in a Bloomberg survey of 10 analysts and the company’s forecast of as much as 23.9 billion yuan in January.

Impairments more than doubled as the company wrote down the value of petrochemical and pipeline assets. Spending, which rose for the first time in five years, overshot its target by 13 percent. PetroChina plans to boost expenditure by about 4 percent this year.

“The conservative capital expenditure implies the free cash flow yield will remain excellent in 2018,” Morgan Stanley said in a note. In terms of dividend yield, PetroChina is less attractive than state-owned peers China Petroleum & Chemical Corp. and Cnooc Ltd., the bank’s analysts wrote.

Shares of PetroChina fell 3.1 percent to HK$5.36 as of 9:44 a.m. in Hong Kong amid a broader equity sell-off as trade tensions escalated between the U.S. and China. The city’s benchmark Hang Seng Index lost 3.4 percent.

(Updates with comments from Morgan Stanley in penultimate paragraph.)
    Before it's here, it's on the Bloomberg Terminal. LEARN MORE