On Sep 25, 2014, we issued an updated research report on Chinese energy giant 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.
Additionally, China has implemented fuel price reforms, which has allowed PetroChina to sell its petroleum products close to international prices. The reforms have already helped the company to significantly improve its Refining & Chemicals business during the first half of 2014.
Other Stocks that Warrant a Look
Apart from PetroChina, one can also consider other players in the energy sector like Pioneer Energy Services Corp. (PES), Northern Oil and Gas Inc. (NOG) and Delek Logistics Partners LP (DKL). All the players sport a Zacks Rank #1 (Strong Buy).
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