Chinese energy giant PetroChina Co. Ltd. (PTR) announced its first-half 2014 earnings of RMB 68.1 billion or RMB 0.37 per diluted share, compared with RMB 65.5 billion or RMB 0.36 per diluted share a year earlier. Earnings per ADR came in at $6.03 (exchange rate: US$1.00 = RMB 6.1, 1 ADR = 100 shares).
PetroChina’s total revenue for the six months increased 4.8% from the year-earlier period to RMB 1,154 billion.
A remarkable improvement in PetroChina’s Refining & Chemicals business, along with a higher oil and gas equivalent output drove the results.
Segmental Performance
Upstream: PetroChina posted strong upstream output growth during the six months ended Jun 30, 2014. Crude oil output – accounting for 65.1% of the total – rose marginally by 0.3% from the year-ago period to 465.6 million barrels (MMBbl), while marketable natural gas output was up 7% to 1,495.5 billion cubic feet (Bcf). PetroChina’s total production of oil and natural gas increased 2.5% year over year to 714.9 million barrels of oil equivalent.
Average realized crude oil price during the first six months decreased 0.4% to $100.14 per barrel compared with the year-ago price of $100.49 per barrel. Moreover, the operating expenses for this unit were recorded at RMB 297.1 billion, representing an increase of 3.7% from the year-ago period.
The segment reported a profit of RMB 102.2 billion, up 3.5% from the year-ago operating income of RMB 98.8 billion, owing to higher production. The profit was, however, partially offset by increased operating expenses.
Downstream: The Beijing-based company’s Refining & Chemicals business registered an operating loss of RMB 3.4 billion, considerably narrower than the year-earlier period’s loss of RMB 15.9 billion. This was mainly possible attributable to PetroChina’s ability to take advantage of the market-friendly fuel pricing policy along with lower operating cost.
PetroChina’s refinery division processed 500 MMBbl during the six-month period, up from 499 MMBbl in 2013. The company produced 3.884 million tons of synthetic resin in the period (a rise of 15.7% year over year) apart from manufacturing 2.395 million tons of ethylene (up 16.3%). It also produced 45.994 million tons of gasoline, diesel and kerosene during the period, against 45.139 million tons a year ago.
Natural Gas & Pipelines: Due to a significant increase in operating expenses, PetroChina’s natural gas business managed a profit of RMB 4.1 billion during the first six months, reflecting a sharp 81.3% fall from the year-earlier level of RMB 21.9 billion.
Additionally, sales for this segment was reported at RMB 135 billion, representing an increase of 27.8% from RMB 105.6 billion, recorded in the year-ago period.
Marketing: In marketing operations, the state-owned group sold 75.23 million tons of gasoline, diesel and kerosene during Jan–Jun 2014, down 5.2% year over year.
However, owing to the considerable improvement of domestic business, the segment’s earnings surged 137.6% year over year to RMB 8.2 billion.
Liquidity & Capital Expenditure
As of Jun 30, 2014, PetroChina’s cash balance was RMB 89.5 billion, while net cash flow from operating activities was RMB 133.5 billion. Capital expenditure for the period totaled RMB 91.1 billion, down 15.8% from the year-ago level.
Zacks Rank
PetroChina currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with 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 Sanchez Energy Corporation (SN), Patterson-UTI Energy Inc. (PTEN) and Cheniere Energy, Inc. (LNG). All these stocks sport a Zacks Rank #1 (Strong Buy).
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