On Jul 8, 2014, we issued an updated research report on PetroChina Co Ltd. (PTR). China’s impressive economic growth has significantly increased its demand for oil and chemicals. We believe that PetroChina− the largest integrated oil company in China − is well positioned to capitalize on the country’s favorable trends. The positive is reflected in PetroChina’s current Zacks Rank #2 (Buy) – implies that the company is expected to outperform the broader U.S. equity market over the next one to three months.
Another lucrative growth area for PetroChina is its natural gas business, which is likely to see a boom 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.
Moreover, strong growth in China’s middle class and in automobile ownership 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 would be an advantage in the long run.
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 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.
Other Stocks that Warrant a Look
Apart from PetroChina, one can also consider other players in the energy sector like Energy Transfer Partners LP (ETP), ConocoPhillips (COP) and Matrix Service Company (MTRX). All these stocks sport a Zacks Rank #1 (Strong Buy).
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