On Jun 8, 2013, Zacks Investment Research upgraded Chinese energy giant, PetroChina Co. Ltd. (PTR) to a Zacks Rank #2 (Buy).
Why the Upgrade?
PetroChina is the largest integrated oil company in China. The impressive economic growth in China has significantly increased the demand for oil, natural gas and chemicals. This growth momentum presents attractive opportunities for industry players as it can fulfill the country’s fast-growing energy needs. Being one of the two integrated oil firms in China, PetroChina is well-positioned to capitalize on these favorable trends.
Moreover, growing automobile ownership in China is expected to fuel consumption of refined petroleum products. Though PetroChina’s downstream operations are primarily located in China’s relatively poor Northern regions, this is likely to act as an advantage for the company in the long run.
Moreover, we believe that the potentially lucrative growth area for the company is its natural gas business, which is expected to witness strong growth in the coming years as China moves from coal to natural gas. At present, two-thirds of China's electricity is generated by coal-fired power plants, which emit greenhouse gases that lead to pollution.
We also like PetroChina’s recent natural gas deals in Canada and Australia. The Chinese behemoth’s plans – to form a joint venture in Canada's Alberta to develop natural gas/condensates assets and to purchase interests in the proposed Western Australian Browse liquefied natural gas (LNG) project – will provide it with a global resource and market base, making the company a leading international energy player. Additionally, these ventures will also provide a hedge against the uncertain Chinese product pricing policies.
All these positives are reflected in the company’s long-term expected earnings growth of 17.2%. The Zacks Consensus Estimate for 2013 has also increased 1.3% to $12.25 per share over the last 60 days.
Other Stocks to Consider
In addition to PetroChina, there are certain other firms in the energy sector that are expected to perform even better over the next one to three months. These include InterOil Corporation (IOC), Ferrellgas Partners LP (FGP) and Cheniere Energy Partners LP (CQP) – all retaining a Zacks Rank #1 (Strong Buy).
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