As per media releases, Chinese energy giant PetroChina Co. Ltd. PTR found over 100 million tons of tight oil reserves from the Changqing field, located in the Ordos basin.
Most importantly, this is the first tight oil discovery – of more than 100 million tons of tight oil – in the history of China. However, there might technically be significantly lower recoverable reserves in the field.
According to the sources, the production capacity of tight oil in the Ordos basin is more than 1 million tons. It is to be noted that during first-quarter 2015, total production from the Changqing field was 6 million tons of crude oil.
PetroChina is the largest integrated oil company in China. It was established in Nov 1999 as part of a restructuring of China National Petroleum Corporation, a state-owned entity, which currently holds a stake of 86.35% in PetroChina.
Being one of the two integrated oil companies in China, PetroChina is well positioned to capitalize on favorable market trends. We are optimistic about the company’s robust portfolio of assets and strong balance sheet, which make it better suited to handle volatile market conditions than most of its peers.
However, the crude oil pricing environment has been weak since last July. Moreover, we don’t expect any immediate spike in crude prices in the coming months with the commodity being over supplied in the face of lackluster global demand. These are expected to considerably hamper PetroChina’s upstream businesses as it will not be able to generate sufficient cash flows after selling crude at low prices.
This is reflected in PetroChina’s current Zacks Rank #3 (Hold), which implies that the stock will perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, better-ranked players in the energy sector include Pembina Pipeline Corporation PBA, LRR Energy LP LRE and Transmontaigne Partners LP TLP. All these stocks sport a Zacks Rank #1 (Strong Buy).
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