PetroChina Earnings Falter on Collapsing Crude, Cuts Capex - Analyst Blog
Chinese energy giant PetroChina Co. Ltd. PTR announced 2014 earnings of RMB 107.2 billion or RMB 0.59 per diluted share, compared with RMB 129.6 billion or RMB 0.71 per diluted share a year earlier. Earnings per ADR came in at $9.62 (exchange rate: US$1.00 = RMB 6.13, 1 ADR = 100 shares), lower than the Zacks Consensus Estimate of $9.71. The negative comparisons can be primarily attributable to the sharp drop in oil prices.
However, China’s dominant oil and gas producer’s total revenue for the year edged up 1.1% from 2013 to RMB 2,283 billion, driven by higher output.
Importantly, PetroChina has decided to peg its 2015 capital budget at RMB 266 billion, down 8.8% from what it invested in 2014 as it focuses on controlling costs amid plummeting crude realizations. The group follows other big energy names from the country – CNOOC Ltd. CEO and China Petroleum & Chemical Corp. SNP – in pledging spending cuts to stay afloat.
Twelve-Month Segment Performance
Upstream: PetroChina, the world's third-largest oil company by market value after Exxon Mobil Corp. XOM and Chevron Corp., posted strong upstream output growth during the twelve months ended Dec 31, 2014. Crude oil output rose 1.4% from the year-ago period to 945.5 million barrels (MMBbl), while marketable natural gas output was up 8.1% to 3,028.8 billion cubic feet (Bcf).
But average realized crude oil price during 2014 was $94.83 per barrel, representing a 5.6% decrease from $100.42 per barrel in the previous year. This pushed down the upstream (or exploration & production) segment profit by 1.5% to RMB 186.9 billion.
Downstream: The Beijing-based company’s ‘Refining & Chemicals’ business incurred an operating loss of RMB 23.6 billion, slightly narrower than the year-earlier period loss of RMB 24.4 billion. The modest improvement in the downstream division was due to PetroChina’s cost control initiatives and operational flexibility to adjust to market conditions. This was partially offset by drop in refined oil selling price and a weak chemical market.
PetroChina’s refinery division processed 1,010.6 MMBbl during the twelve-month period, up from 992.3 MMBbl in 2013. The company produced 7.951 million tons of synthetic resin in 2014 (a rise of 21.6% year over year), besides manufacturing 4.976 million tons of ethylene (up 25% from 2013). It also produced 92.7 million tons of gasoline, diesel and kerosene during the period, as against 90.3 million tons a year earlier.
Natural Gas & Pipelines: While stronger gas demand led to a 8.2% increase in imports, these came at high prices. Moreover, the company was forced to sell the commodity at controlled domestic prices. As a result, PetroChina’s natural gas business reported an income of RMB 13.1 billion in 2014, more than halving the year-earlier profit of RMB 28.9 billion.
Marketing: In marketing operations, the state-owned group sold 160.88 million tons of gasoline, diesel and kerosene during Jan–Dec 2013, an increase of 1.1% year over year. However, weaker growth in the domestic economy and tepid refined products demand meant that PetroChina's segment profit fell 28.3% year over year to RMB 5.4 billion.
Liquidity & Capital Expenditure
At the end of 2014, this Zacks Rank #2 (Buy) stock’s cash balance was RMB 73.8 billion, while cash flow from operating activities was RMB 356.5 billion. Capital expenditure for the period reached RMB 291.7 billion, down 8.5% from the year-ago level.
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