Chinese energy giant PetroChina Co. Ltd. PTR announced 2015 earnings of RMB 35,653 million or RMB 0.19 per diluted share, compared with RMB 107,173 million or RMB 0.59 per diluted share a year earlier. Earnings per ADR came in at $2.97 (exchange rate: US$1.00 = RMB 6.4, 1 ADR = 100 shares), lower than the Zacks Consensus Estimate of $3.15. The negative comparisons can be primarily attributable to the sharp drop in oil prices, partly offset by higher output.
Moreover, China’s dominant oil and gas producer’s total revenue for the year fell 24.4% from 2014 to RMB 1,725.4 billion.
Importantly, PetroChina has decided to peg its 2016 capital budget at RMB 192 billion, down 5% from what it invested in 2015 as it focuses on controlling costs amid plummeting crude realizations. The group follows another big energy name from the country – CNOOC Ltd. CEO – in pledging spending cuts to stay afloat. PetroChina also expects oil production to fall around 5% this year.
Twelve-Month Segment Performance
Upstream: PetroChina, one of the world's largest oil company by market value along with the likes of Exxon Mobil Corp. XOM and Chevron Corp. CVX, posted strong upstream output growth during the twelve months ended Dec 31, 2015. Crude oil output rose 2.8% from the year-ago period to 971.9 million barrels (MMBbl), while marketable natural gas output was up 3.4% to 3,131.0 billion cubic feet (Bcf).
But average realized crude oil price during 2015 was $48.35 per barrel, representing a 49% decrease from $94.83 per barrel in the previous year. This pushed down the upstream (or exploration & production) segment profit by 81.8% to RMB 33,961 million.
Downstream: The Beijing-based company’s ‘Refining & Chemicals’ business reported an operating income of RMB 4,883 million, turning around from the year-earlier period loss of RMB 23,560 million. The improvement in the downstream division – leading to its first profit in 4 years – was due to PetroChina’s cost control initiatives and operational flexibility to adjust to market conditions.
PetroChina’s refinery division processed 998.1 MMBbl during the twelve-month period, down from 1,010.6 MMBbl in 2014. The company produced 8.215 million tons of synthetic resin in 2015 (a rise of 3.3% year over year), besides manufacturing 5.032 million tons of ethylene (up 1.1% from 2014). It also produced 91.9 million tons of gasoline, diesel and kerosene during the period, as against 92.7 million tons a year earlier.
Natural Gas & Pipelines: While stronger gas demand led to a 6.3% increase in imports, these came at high prices. However, this was more than offset by improved marketing ability, plus higher natural gas sales and margins. As a result, PetroChina’s natural gas business reported an income of RMB 51,231 million in 2015, almost quadrupling the year-earlier profit of RMB 13,126 million.
Marketing: In marketing operations, the state-owned group sold 160.10 million tons of gasoline, diesel and kerosene during Jan–Dec 2014, a decrease of 0.5% year over year. Moreover, weaker growth in the domestic economy and tepid refined products demand meant that PetroChina's marketing segment swung to a loss of RMB 500 million.
Liquidity & Capital Expenditure
At the end of 2015, this Zacks Rank #3 (Hold) stock’s cash balance was RMB 72,773 million, while cash flow from operating activities was RMB 261,312 million. Capital expenditure for the year reached RMB 202,238 million, down 30.7% from the year-ago level.
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