Chinese energy giant PetroChina Company Limited (PTR) announced its third quarter 2012 earnings of RMB 24.9 billion or RMB 0.14 per diluted share, compared with RMB 37.4 billion or RMB 0.20 per diluted share in the year-earlier period. Earnings per ADR came in at $2.22 (exchange rate: US$1.00 = RMB 6.32, 1 ADR = 100 shares).
The decline can be primarily attributable to a challenging operating environment and persistent refining losses.
However, PetroChina’s total revenue for the three months increased 4.0% from the year-earlier period to RMB 551.6 billion, driven by higher output.
Upstream: PetroChina, which last year overtook Exxon Mobil Corporation (XOM) as the world’s biggest listed oil producer, posted strong upstream output growth during the nine months ended September 30, 2012. Crude oil output rose 2.0% from the year-ago period to 683.2 million barrels (MMBbl), while marketable natural gas output was up 8.3% to 1,879.3 billion cubic feet (Bcf).
Average realized crude oil price during the first nine months of 2012 was $103.62 per barrel, essentially flat with the corresponding period of the previous year. Average realized natural gas price was $5.02 per thousand cubic feet (Mcf), 5.5% above the year-ago level of $4.76 per Mcf.
This pushed up the upstream (or exploration & production) segment profit by 1.6% to RMB 163.3 billion.
Downstream: PetroChina’s refinery division processed 743.5 MMBbl during the nine-month period, up from 725.2 MMBbl in 2011. The company produced 4.329 million tons of synthetic resin in the period (a rise of 3.2% year over year), besides manufacturing 2.604 million tons of ethylene (up 1.7% from the first nine months of 2011). It also produced 67.135 million tons of gasoline, diesel and kerosene during the period, as against 64.302 million tons a year earlier.
The company’s Refining & Chemicals business experienced an operating loss of RMB 37.4 billion, slightly narrower than the loss of RMB 38.4 billion in the year-earlier period. The continued loss in the downstream division was due to PetroChina’s inability to shift the burden of rising oil costs to its consumers, as state policy requires a lid on domestic refined product prices.
In marketing operations, the group sold 113.539 million tons of gasoline, diesel and kerosene during January - September 2012, reflecting an increase of 5.9% year over year.
Liquidity & Capital Expenditure
As of September 30, 2012, PetroChina’s cash balance was RMB 69.6 billion, while net cash flow from operating activities was RMB 168.0 billion. Capital expenditure for the period reached RMB 189.3 billion, up from the year-ago level of RMB 161.1 billion.
PetroChina is the largest integrated oil company in China. The firm’s activities include: exploration, development, production and sale of crude oil and natural gas, refining, transportation, storage and marketing of petroleum products, manufacture and sale of chemical products, and transmission of natural gas, crude oil and refined products.
PetroChina is currently a Zacks #3 Rank (Hold) stock, implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
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