We are maintaining our Neutral recommendation on PetroChina ADRs.
Going forward, the main growth driver will likely be its leverage
to the fast-growing Chinese market and the ever-expanding
market/resource base. Being one of two Chinese integrated oil
companies, PetroChina is well-positioned to capitalize on the
country's favorable trends. It is also successfully expanding its
footprint in strategic locations like Canada, Australia and Iraq.
However, we are concerned about prospects for the company's oil
production growth, considering its heavy exposure to significantly
mature-producing areas. Other near-term headwinds include limited
international exposure and an ambitious investment program.
PetroChina Company Limited (PTR) is the largest integrated oil
company in China. The company's activities include: the
exploration, development, production and sale of crude oil and
natural gas, the refining, transportation, storage and marketing of
petroleum products, the manufacture and sale of chemical products,
and the transmission of natural gas, crude oil and refined
PetroChina was established in November 1999 as a part of a
restructuring of China National Petroleum Corporation (CNPC), a
state-owned entity, which currently holds a majority stake of
86.35% in PetroChina. The company operates in four segments:
Exploration & Production, Natural Gas & Pipelines, Refining
& Chemicals, and Marketing.
Exploration & Production: PetroChina is one of the largest
producers of crude oil and natural gas in the world, with 2012
production of 916.5 million barrels of crude oil and 2,558.8
billion cubic feet (Bcf) of marketable natural gas. As of year-end
2012, the company had approximately 22.3 billion BOE in proved
reserves (essentially flat year-over-year), of which approximately
50% was liquids (67% proved developed) and the rest natural gas
(47% proved developed).
Most of PetroChina's crude oil and natural gas reserves and
production-related assets are located in China, principally in
northeastern, northern, southwestern and northwestern China. The
Songliao basin, located in Heilongjiang and Jilin provinces in
northeastern China, including the Daqing and Jilin oil regions,
accouns for approximately 40% of the company's proved crude oil
reserves and production. The company also has significant crude oil
reserves and operations in the area around the Bohai Bay, including
the Liaohe, Dagang, Huabei and Jidong oil regions, which makes up
roughly 20% of its proved crude oil reserves and production.
PetroChina's proved natural gas reserves and production are
generally concentrated in northwestern and southwestern China,
specifically in the Erdos, Tarim, and Sichuan basins.
Natural Gas & Pipelines: PetroChina is the largest
transporter and seller of natural gas in China in terms of sales
volumes. The company sells natural gas primarily to fertilizer and
chemical companies, commercial users and municipal utilities owned
by local governments. Its existing natural gas pipelines form
regional natural gas supply networks in northwestern, southwestern,
northern and central China, as well as the Yangtze River Delta.
PetroChina's midstream assets include a vast network of natural gas
pipelines, with a total length of roughly 21,304 kilometers,
representing the bulk of China's onshore natural gas pipelines. A
major midstream project is the 4,843-kilometer west-to-east
pipeline II that transports gas produced in the company's natural
gas fields in the western and southwestern regions of China to
large potential markets in eastern China. In October 2004,
PetroChina completed the construction of the main line of the
west-to-east pipeline and commenced commercial operation in
December 2004. Since then, it has built 3 connecting pipelines for
this project. As of December 31, 2012, the company owned and
operated a crude oil pipeline network of 14,782 kilometers, natural
gas pipeline network of 36,116 kilometers, and refined product
pipeline network of 9,334 kilometers.
Refining & Chemicals: PetroChina's refining operations
include 2.58 million barrels per day in refining capacity.
PetroChina operates 26 refineries located in eight provinces, four
autonomous regions and one municipality. The company's operations
include the refining, transportation, storage and marketing of
crude oil, and the wholesale, retail and export of refined
products, including gasoline, diesel, kerosene, lubricant,
paraffin, and asphalt. In 2012, PetroChina's refineries processed
1,012.5 million barrels of crude oil and produced approximately
91.02 million tons of gasoline, diesel and kerosene.
The company is also the second largest manufacturer of chemicals
in China, producing and selling a wide range of basic and
derivative petrochemical products and other chemical products
through 13 chemical plants and 4 chemical products sales companies.
PetroChina's chemical plants and sales companies are located in six
provinces, three autonomous regions and two municipalities under
the direct administration of the central government in China.
Marketing: The firm's marketing operations include a
distribution network of 17,262 retail sites, 23 regional sales and
distribution branch companies, and one lubricants branch company.
Additionally, the company markets a range of refined products,
including gasoline, diesel, kerosene and lubricants, through a
network of sales personnel and independent distributors and a
wholesale and retail distribution system across China.
PetroChina Company Limited - ADR (PTR): Read the
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PETROCHINA ADR (PTR): Free Stock Analysis
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