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PetroChina Q3 Profit Battered by Oil Plunge; Misses Estimate

Chinese energy giant PetroChina Co. Ltd.PTR reported disappointing third-quarter 2015 results.

China's dominant oil and gas producer announced earnings of RMB 5.2 billion or RMB 0.03 per diluted share, compared with RMB 27.9 billion or RMB 0.15 per diluted share in the year-earlier period. Earnings per ADR came in at 47 cents (exchange rate: US$1.00 = RMB 6.35, 1 ADR = 100 shares), failing to beat the Zacks Consensus Estimate of 90 cents. The underperformance can be primarily attributable to the plunge in oil prices , partly offset by higher output.

Moreover, PetroChina's total revenue for the three months decreased 29% from the year-earlier period to RMB 427.5 billion.

Nine-Month Segment Performance

Upstream: PetroChina - one of the country's biggest energy names along with the likes of CNOOC Ltd. CEO and China Petroleum & Chemical Corp. SNP - posted strong upstream output growth during the nine months ended Sep 30, 2015. Total volumes increased 3.6% year over year to 1,104.5 million barrels (MMBbl). Crude oil output improved 3.3% from the year-ago period to 722.9 MMBbl, while marketable natural gas output was up 4.3% to 2,289.0 billion cubic feet (Bcf).

Average realized crude oil price during the first nine months of 2015 was $51.16 per barrel, down 49% from the corresponding period of the previous year. However, average realized natural gas price was $6.40 per thousand cubic feet (Mcf), same as the year-ago level.

The sharp decline in oil prices pushed down the upstream (or exploration & production) segment profit by 68% to RMB 46.5 billion.

Downstream: PetroChina's refinery division processed 741.7 MMBbl during the nine-month period, down from 746.4 MMBbl in 2014. The company produced 5.898 million tons of synthetic resin in the period (essentially flat year over year), besides manufacturing 3.595 million tons of ethylene (down 2.5% from the first nine months of 2014). It also produced 68.802 million tons of gasoline, diesel and kerosene during the period against 68.008 million tons a year earlier.

The company's Refining & Chemicals business recorded an operating profit of RMB 3.1 billion, turning around from the loss of RMB 8.8 billion in the year-earlier period. The recovery in the downstream division reflects PetroChina's efforts to control costs, process load, optimize resource allocation and above all improve efficiency.

Natural Gas & Pipelines: On the back of optimal utilization of gas and an active sales strategy, PetroChina's natural gas business earned a profit of RMB 25.4 billion during the first nine months of 2015, up by a whopping 174.9% from the year-earlier level of RMB 9.2 billion.

Marketing: In marketing operations, the group sold 119.298 million tons of gasoline, diesel and kerosene during Jan-Sep 2015, reflecting a 1.5% year-over-year increase.

However, the segment lost RMB 978 million during the first three quarters of 2015 as against earnings of RMB 10.6 billion a year ago, owing to tepid demand and a fall in refined product prices.

Liquidity & Capital Expenditure

As of Sep 30, 2015, PetroChina's cash balance was RMB 96.8 billion, while net cash flow from operating activities was RMB 199.3 billion. Capital expenditure for the period totaled RMB 147.9 billion, down 22% from the year-ago level of RMB 188.9 billion.

Zacks Rank

PetroChina currently carries a Zacks Rank #5 (Strong Sell). A better-ranked stock in the integrated energy space is Brazil-based Braskem S.A. BAK , which holds a Zacks Rank #2 (Buy).

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PETROCHINA ADR (PTR): Free Stock Analysis Report

CHINA PETRO&CHM (SNP): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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