Chinese energy giant PetroChina Co. Ltd. (PTR) announced its first half 2013 earnings of RMB 65.5 billion or RMB 0.36 per diluted share, compared with RMB 62.0 billion or RMB 0.34 per diluted share a year earlier. Earnings per ADR came in at $5.71 (exchange rate: US$1.00 = RMB 6.3, 1 ADR = 100 shares).
PetroChina’s total revenue for the six months increased 5.2% from the year-earlier period to RMB 1,101.1 billion.
The improvement can be primarily attributable to higher oil and gas equivalent output, and outstanding operating performance of the Natural Gas & Pipelines unit.
Segmental Performance
Upstream: PetroChina posted strong upstream output growth during the six months ended Jun 30, 2013. It is the world's biggest listed oil producer by volume followed by Exxon Mobil Corp. (XOM). Crude oil output – accounting for 66.6% of the total – rose 2.6% from the year-ago period to 464.2 million barrels (MMBbl), while marketable natural gas output was up 8.1% to 1,397.5 billion cubic feet (Bcf).
Average realized crude oil price during the first six months of 2013 decreased by 6.9% to $100.49 per barrel, as compared to the year-ago period of $107.98 per barrel. Moreover, the operating expenses for this unit were recorded at RMB 286.7 billion, representing a hike of 2.9%, as compared with the year ago period. These lowered the upstream (or exploration & production) segment’s profit by 13.2% to RMB 98.8 billion.
Downstream: The Beijing-based company’s ‘Refining & Chemicals’ business registered an operating loss of RMB 15.9 billion, considerably narrower than the year-earlier period’s loss of RMB 28.9 billion. This was mainly possible due to PetroChina’s ability to take advantage of the market-friendly fuel pricing policy along with lower operating expenses.
PetroChina’s refinery division processed 499.0 MMBbl during the six-month period, up from 489.7 MMBbl in 2012. The company produced 3.357 million tons of synthetic resin in the period (a rise of 14.3% year over year), besides manufacturing 2.060 million tons of ethylene (up 17.0%). It also produced 45.139 million tons of gasoline, diesel and kerosene during the period, as against 43.826 million tons a year ago.
Natural Gas & Pipelines: Due to a significant decrease in operating expenses and controlled transmission cost of the pipeline, PetroChina’s natural gas business incurred a profit of RMB 21.9 billion during the first six months, up by a whopping 1,268.75% from the year-earlier level of RMB 1.6 billion.
Additionally, sales for this segment was reported at RMB 105.6 billion, representing an increase of 7.7% from RMB 98.1 billion, recorded in the year ago period.
Marketing: In marketing operations, the state-owned group sold 79.39 million tons of gasoline, diesel and kerosene during Jan–Jun 2013, a hike of 8.7% year over year. However, owing to refined products’ lower demand and increased operating expenses, the segment’s earnings fell 65.7% year over year to RMB 3.4 billion.
Liquidity & Capital Expenditure
As of Jun 30, 2013, PetroChina’s cash balance was RMB 150.1 billion, while net cash flow from operating activities was RMB 102.1 billion. Capital expenditure for the period reached RMB 108.2 billion, down 3.1% from the year-ago level.
Zacks Rank
PetroChina currently carries a Zacks Rank #1 (Strong Buy), implying that it is expected to significantly outperform the broader U.S. equity market over the next one to three months.
Apart from PetroChina one can have a look at oil field machinery and equipment suppliers like Dril-Quip Inc. (DRQ) and PowerSecure International Inc. (POWR) that offer value. Dril-Quip retains a Zacks Rank #1 (Strong Buy), while PowerSecure International sports a Zacks Rank #2 (Buy).
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