PetroChina profit dips as oil & gas earnings slide

Bloomberg

PetroChina Co. posted a 77 percent decline in third-quarter profit as a suppressed international oil market and lower domestic natural gas prices eroded earnings at the country’s biggest producer.
Net income fell to 1.2 billion yuan ($177 million) in the July-September period, the Beijing-based company said in a statement to the Hong Kong stock exchange on Friday. Higher earnings from refining and chemicals were overwhelmed by losses on production and weaker performance from its natural gas and pipelines units. Revenue dropped 3.8 percent to 411.4 billion yuan.
“PetroChina has done a good job controlling costs and managed to get a small profit despite lower crude prices in the third quarter,” said Gordon Kwan, head of Asia oil and gas research at Nomura Holdings Inc. in Hong Kong. “Oil prices should be significantly higher in the fourth quarter, which will help improve PetroChina’s profit in the winter, especially if the government raises natural gas prices.”
The state-owned Chinese company is not alone among international peers struggling with a global crude glut that triggered the worst energy crash in a generation. Also on Friday, Exxon Mobil Corp. extended its longest streak of profit declines in almost three decades, while France’s Total SA posted a 25 percent drop in third-quarter profit.
PetroChina dominates the oil
and gas industry of the world’s largest energy consumer. It pumps more crude than its domestic rivals, China Petroleum and Chemical
Corp. and Cnooc Ltd., and is the country’s second-biggest refiner. It imports the bulk of the country’s natural gas and operates a pipeline system that stretches from China’s western borders with Central Asian nations to the population centers along the east coast.

‘Decrease Substantially’
During the third quarter, the company swung to an operating loss of 1.5 billion yuan from exploration and production, according to Bloomberg calculations based on the company’s half-year and nine-month data. PetroChina doesn’t release third-quarter operational figures. Earnings from natural gas and pipeline operations fell 39 percent to 6.4 billion yuan, while refining, chemicals and marketing surged to a 9 billion yuan gain from a 5.4 billion yuan loss a year ago, Bloomberg calculations showed.
As the country’s largest natural gas producer and distributor, the company is vulnerable to changes in government-set prices. The administration of President Xi Jinping cut prices twice last year in an effort to encourage consumption, most-recently in November when they were lowered by roughly one-quarter.
PetroChina, which posted its first-ever quarterly loss in the January-March period this year, barely managed to break even in the first half of the year even after booking a 24.5 billion yuan one- gain from pipeline sales. Net income during
the first nine months of the year
fell 94 percent to 1.73 billion yuan, the company said Friday. Full-year results are expected to “decrease substantially” from 2015, it said in the statement.

Sliding Output
Brent oil, the global oil benchmark, averaged about $47 a barrel during the third quarter, down roughly 8 percent from the same
period a year ago. PetroChina in August cut its domestic crude output target for this year to 103 million tons (about 755 million barrels), from 106 million tons set at the beginning of the year, as it shut some high-cost fields.
Total oil and gas production in the third quarter dropped about 4 percent from the same period last year to 353 million barrels of oil equivalent, according to Bloomberg calculations. The company refined 224.5 million barrels of crude, down 8.7 percent from a year ago.
China’s total crude output fell
6.1 percent in the first nine months of the year, helping spur record-
high imports as the country’s reliance on overseas supply rises. Output by the world’s biggest consumer after the U.S. will stabilize with prices around $50 a barrel and may not rebound until they are above $60, Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein, said earlier this month.
PetroChina’s domestic crude production in the third quarter slid
almost 7 percent at 189.9 million barrels, Bloomberg calculations showed, while production during
the first nine months of the year
totaled 575 million barrels, down
5.1 percent.
Capital expenditures during the third quarter dropped 27 percent to 63 billion yuan, according to Bloomberg calculations. Spending during the first three quarters totaled 114 billion yuan, down 23 percent from the same period last year, according to the statement Friday. Lifting costs during the nine-month period were down 9.9 percent to $11.56 a barrel, while the company’s realized oil price during that period was down 30 percent at $35.79 a barrel, it said in filing Friday.
PetroChina shares fell 0.6 percent to HK$5.38 before the release of its earnings. The stock has gained 5.9 percent this year, compared with a 4.8 percent rise in the city’s benchmark Hang Seng Index.
China Petroleum, known as Sinopec, said Thursday that third-quarter profit rose sixfold to 10.2 billion yuan as refining gains helped overcome deepening losses from oil and gas production.
Cnooc, China’s biggest offshore
oil and gas producer, reported Wednesday a 15 percent fall in third-quarter sales as output and capital spending declined.