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PetroChina (PTR) 2018 Earnings Up 130.7% Y/Y on Upstream Power

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PetroChina Co. Ltd. PTR reported 2018 earnings of RMB 52,585 million or RMB 0.29 per share compared with RMB 22,793 million or RMB 0.12 in the year-earlier period. The profit reflected a massive jump of 130.7% year over year, primarily on the back of solid upstream contribution. Higher realized prices and increased output aided its exploration and production unit’s profit to skyrocket 375% year over year. Moreover, China’s dominant oil and gas producer’s total revenues during the year jumped 16.8% from the 2017 level to RMB 2,353,588 million.

Following the robust results, PetroChina has decided to boost 2019 capital expenditure. The company projects 2019 capital budget at RMB 300,600 million, up 17.4% from the invested amount in 2018.

PetroChina followed another big energy name from the country — Sinopec SNP — in reporting encouraging results. Sinopec’s profit surged more than 22% in 2018 on the back of higher natural gas production and refinery throughput volumes. Another Chinese oil explorer, CNOOC Limited CEO also reported a 113% surge in 2018 profits, thanks to production and pricing gains.

12-Month Segmental Performance

Upstream: PetroChina, one of the world's largest oil companies in terms of market value, posted higher year-over-year upstream output during the 12-month period ended Dec 31, 2018. The company’s total production of oil and natural gas increased 2.3% to 1,491.7 million barrels of oil equivalent (MMBoe) from the year-ago figure of 1,457.8 MMBoe. In particular, crude oil output — accounting for 59.6% of the total production — scaled up a nominal 0.4% from the year-ago period to 890.3 million barrels (MMBbl). Its marketable natural gas output was up 5.4% from a year ago to 3,607.6 billion cubic feet.

Further, average realized crude oil price during 2018 was $68.28 per barrel, 34.8% higher than the year-ago level. This buoyed results of the upstream (or exploration & production) segment, which remain the chief profit contributor for the company, to a huge extent. PetroChina posted an operating income of RMB 73,519 million compared with profit of RMB 15,475 million in 2017, representing a whopping jump of 375%.

Downstream: The Beijing-based company’s ‘Refining & Chemicals’ business generated an operating income of RMB 42,756 million. This marks a 7% increase from the year-earlier earnings of RMB 39,961 million. The improvement in the downstream division was due to a 23.5% year-over-year increase in revenues of RMB 874,125 on the back of greater sales volumes and higher prices of refined and chemical products, along with optimized product structure.

PetroChina’s refinery division processed 1,122.8 MMBbl of crude oil during the 12-month period, up 10.4% from 2018. It also produced 105,342 million tons of gasoline, diesel and kerosene compared with 92,715 million tons in the year-earlier period.

However, production of synthetic resin and ethylene declined 2.5% and 3.4% year over year to 9.049 million tons and 5.569 million tons, respectively.

Natural Gas & Pipelines: Revenues rose 22.6% on a year-over-year basis to RMB 362,626 million owing to higher natural gas sales volumes. As such, the group’s natural gas business’ income came in at RMB 25,515 million in 2018, reflecting a 62.6% increase from the year-earlier profit of RMB 15,688 million.

Marketing: The state-owned group sold 177.5 million tons of gasoline, diesel and kerosene during January to December 2018, depicting an increase of 4.7% year over year. Higher volumes were accompanied by improved product prices, due to which the division’s sales were up 20.6% year over year to RMB 2,003,105 million.

However, a number of adverse factors such as spiraling operating expenses and fierce competition resulted in a loss of RMB 6,450 million for the segment against prior year’s profit of RMB 8,279 million.

Liquidity & Capital Expenditure

At the end of 2018, the stock’s cash balance was RMB 85,598 million and long-term debt amounted to RMB 435,222. The company’s debt-to-capital ratio was 23.6%. Cash flow from operating activities was RMB 351,565 million. Capital expenditure during the year was RMB 255,974 million, up 18.4% from the year-ago level.

Zacks Rank & Key Pick

Currently, PetroChina holds a Zacks Rank #4 (Sell). Meanwhile, investors interested in the energy space can consider a top-ranked company such as Antero Resources Corporation AR. Headquartered in Colorado, this natural gas player sports a Zacks Rank #1 (Strong Buy) and has a VGM Score of A. The company has a long-term expected earnings growth rate of 20%. You can see the complete list of today’s Zacks #1 Rank stocks here.

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