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China's state-owned energy conglomerate PetroChina Company Limited (PTR - Analyst Report) is looking forward to invest an additional $3.7 billion in Australian oil and natural gas assets. In fact, the company is looking to put in about $60 billion in the next 10 years for the same.
China’s biggest oil and gas producer has planned this move to provide for the country’s growing energy demand. This will also boost PetroChina’s growth prospects in Australia by adding to its already significant interests in the country.
In Dec 2012, PetroChina entered into a deal with BHP Billiton Ltd. (BHP - Analyst Report) to acquire some stake in the Browse liquefied natural gas (LNG) venture in Western Australia. The contract will result in PetroChina getting an estimated 10.23% interest in the overall Browse LNG project for $1.63 billion.
Last month, PetroChina also acquired stakes in 2 exploration assets in Western Australia from ConocoPhillips (COP - Analyst Report). In the first set of accords, ConocoPhillips will offload a 20% working interest in the Poseidon offshore discovery in the Browse Basin. The second set involves the divestment of a 29% working interest in the Goldwyer Shale, onshore Canning Basin.
But we remain concerned by PetroChina’s high-priced gas imports in the face of artificially low domestic gas sale prices. Sluggish oil production growth prospects and heavy exposure to significantly mature producing areas remain near-term headwinds as well, in our view.
Additionally, PetroChina’s results are heavily levered to changes in the overall energy price environment, which are inherently volatile and subject to complex market forces. Realized prices could differ significantly from our estimates, thereby affecting the company’s revenues, earnings and cash flows.
PetroChina retains a Zacks Rank #4 (Sell). However, there is another stock in the oil and gas industry, YPF S.A. (YPF - Snapshot Report), which holds a Zacks Rank #2 (Buy) and appears more attractive.
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