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Chinese energy giant PetroChina Co. Ltd. (PTR - Analyst Report) announced its first quarter 2013 earnings of RMB 36.0 billion or RMB 0.20 per diluted share, compared with RMB 39.2 billion or RMB 0.21 per diluted share a year earlier. Earnings per ADR came in at $3.17 (exchange rate: US$1.00 = RMB 6.3, 1 ADR = 100 shares).
The negative comparisons can be primarily attributable to high natural gas import prices, lower crude realization, as well as weak oil product demand.
However, PetroChina’s total revenue for the three months increased 2.8% from the year-earlier period to RMB 540.3 billion, driven by higher output.
Upstream: PetroChina, the world's biggest listed oil producer by volume ahead of Exxon Mobil Corp. (XOM - Analyst Report), posted strong upstream output growth during the three months ended Mar 31, 2013. Crude oil output – accounting for 65% of the total – rose 1.8% from the year-ago period to 231.0 million barrels (MMBbl), while marketable natural gas output was up 4.8% to 745.3 billion cubic feet (Bcf).
Average realized natural gas price was $5.07 per thousand cubic feet (Mcf), 4.1% above the year ago level of $4.87. But average realized crude oil price during the first three months of 2013 was $103.08 per barrel, representing a decrease of 2.3% from $105.48 per barrel in the corresponding period of the previous year. This pulled down the upstream (or exploration & production) segment profit by 5.6% to RMB 57.0 billion.
Downstream: The Beijing-based company’s ‘Refining & Chemicals’ business registered an operating loss of RMB 4.7 billion, considerably narrower than the year-earlier period loss of RMB 10.8 billion. This was mainly possible due to PetroChina’s ability to take advantage of the newly launched market-friendly fuel pricing policy that better reflects changes in global oil prices.
PetroChina’s refinery division processed 253.5 MMBbl during the three-month period, down from 257.1 MMBbl in 2012. The company produced 1.762 million tons of synthetic resin in the period (a rise of 14.7% year over year), besides manufacturing 1.071 million tons of ethylene (up 16.3%). It also produced 22.76 million tons of gasoline, diesel and kerosene during the period, as against 23.03 million tons a year earlier.
Natural Gas & Pipelines: While stronger gas demand led to a rise in imports, these came at high global prices. Moreover, the company was forced to sell the commodity at controlled domestic prices. As a result, PetroChina’s natural gas business incurred a profit of RMB 1.1 billion in the first quarter, down almost 50% from the year-earlier level of RMB 2.0 billion.
Marketing: In marketing operations, the state-owned group sold 37.44 million tons of gasoline, diesel and kerosene during Jan–Mar 2013, an increase of 2.6% year over year. However, domestic refined products demand was down 4.3% from the year-ago period, which translated into lower sales and gross profit. This meant that PetroChina's segment earnings fell 65.0% year over year to RMB 2.1 billion.
Liquidity & Capital Expenditure
As of Mar 31, 2013, PetroChina’s cash balance was RMB 113.5 billion, while net cash flow from operating activities was RMB 17.1 billion. Capital expenditure for the period reached RMB 65.6 billion, down 7.6% from the year-ago level.
PetroChina currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at other international integrated energy firms like Sasol Ltd. and Braskem S.A. (BAK) as attractive investments. Both these firms – sporting a Zacks Rank #2 (Buy) – offer value and are worth accumulating at current levels.