On Apr 24, 2014, Chinese energy giant PetroChina Co. Ltd. (PTR) announced first-quarter 2014 earnings of RMB 33.0 billion or RMB 0.19 per diluted share, compared with RMB 36.0 billion or RMB 0.20 per diluted share a year ago. Earnings per ADR came in at $3.11 (exchange rate: US$1.00 = RMB 6.1, 1 ADR = 100 shares).
Moreover, PetroChina’s total revenue for the quarter decreased 2.1% from the year-earlier quarter to RMB 529.0 billion.
The negative comparisons can be primarily attributed to lower crude price realization, which hampered PetroChina’s upstream operations, the primary business of the company.
After the first-quarter 2014 results were announced, PetroChina closed at $112.45 per ADR, reflecting a marginal fall from the previous day’s closing price.
Segmental Performance
Upstream: PetroChina posted strong upstream output growth during the three months ended Mar 31, 2014. Crude oil output – accounting for 63.8% of the total production – rose slightly from the year-ago period to 231.7 million barrels (MMBbl), while marketable natural gas output was up 6.0% to 789.7 billion cubic feet (Bcf).
Average realized natural gas price stood at $6.29 per thousand cubic feet (Mcf), 24.1% above the year-earlier level of $5.07. However, average realized crude oil price during the quarter under review was $100.06 per barrel, representing a decrease of 2.9% from $103.08 per barrel in the corresponding period of the previous year. This pulled down the upstream (or exploration & production) segment’s profit by 7.5% to RMB 52.7 billion.
Downstream: The Beijing-based company’s ‘Refining & Chemicals’ business incurred an operating loss of RMB 2.2 billion, considerably narrower than the year-earlier period’s loss of RMB 4.7 billion. The improvement can be attributed to a favorable pricing policy.
PetroChina’s refinery division processed 254.4 MMBbl during the three-month period, up nominally from 253.5 MMBbl in 2013. The company produced 1.864 million tons of synthetic resin in the period (a rise of 5.8% year over year), besides manufacturing 1.171 million tons of ethylene (up 9.3%). It also produced 23.43 million tons of gasoline, diesel and kerosene during the period, as against 22.76 million tons a year ago.
Natural Gas & Pipelines: PetroChina’s natural gas business recorded a profit of RMB 1.4 billion in the first quarter of 2014, up from RMB 1.1 billion recorded in the year-ago quarter. Significant increase in natural gas prices favored the result.
Marketing: In marketing operations, the state-owned group sold 34.16 million tons of gasoline, diesel and kerosene during the Jan–Mar 2014 period, reflecting a decrease of 8.8% year over year. However, the segment’s earnings rose 56.7% year over year to RMB 3.3 billion despite weak refined products demand.
Liquidity & Capital Expenditure
As of Mar 31, 2014, PetroChina’s cash balance stood at RMB 52.8 billion, while net cash flow from operating activities was RMB 20.6 billion. Capital expenditure for the period reached RMB 74.8 billion, up 14.0% from the year-ago level.
Zacks Rank
PetroChina currently carries a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at better-ranked players in the energy sector like Range Resources Corporation (RRC), Helmerich & Payne Inc. (HP) and Pioneer Energy Services Corp. (PES). All the stocks sport a Zacks Rank #1 (Strong Buy).
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