PetroChina falls as corruption probe expanded

August 28, 2013

NEW YORK (AP) -- PetroChina's stock dropped in midday trading Wednesday as Chinese authorities expanded a corruption investigation at the country's biggest oil company.

THE SPARK: On Tuesday China's Assets Supervision and Administration Commission said three officials at PetroChina Co. Ltd. are being investigated for "serious discipline violations."

"Discipline violations" is often shorthand in official Chinese announcements for allegations of corruption by a government official or manager of a state company.

PetroChina is a subsidiary of China National Petroleum Corp. The company said that the three being investigated are Li Hualin and Ran Xinquan, both vice presidents, and Chief Geologist Wang Daofu. They have all resigned for personal reasons.

The Tuesday announcement came a day after the Chinese government said a China National Petroleum executive was being investigated for the same reason.

THE ANALYSIS: "It is unclear whether the issues under investigation are related to matters of a purely personal nature or related to the managers' respective duties at PetroChina," Graham Cunningham of Citi Investment Research wrote in a client note.

The analyst anticipates that as long as there's uncertainty surrounding the investigation, the stock will likely be weak.

Cunningham had cut PetroChina's rating to "Sell" from "Neutral" on Friday due to deteriorating earnings.

A representative for PetroChina did not immediately respond to an email seeking comment.

SHARE ACTION: Shares of PetroChina declined $4.50, or 4 percent, to $107.24. The stock has traded in a 52-week range of $99.28 to $146.68. For the year to date, the shares are down 22 percent.