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PetroChina's (PTR) 1H18 Earnings Up 114% Chiefly on Crude Rally

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PetroChina Company Limited (PTR - Free Report) announced first-half 2018 earnings of RMB 27,088 million or RMB 0.148 per diluted share compared with RMB 12,676 million or RMB 0.069 a year ago. This reflects a whopping year-over-year surge of around 114% in the first half of 2018. Notably, the company’s second-quarter net income came in at RMB 16,938, which marks the highest quarterly income posted by the Chinese energy giant since 2015.

Moreover, China’s dominant oil and gas producer’s total revenues in the six months rose 13.6% from the year-ago period to RMB 1,109,000 million.

The positive comparisons can be primarily attributable to higher oil prices, which helped its biggest unit — exploration and production — to post 332.7% higher profits than the year-ago level. The company’s Refining & Chemicals business also buoyed the overall results.

PetroChina Company Limited Price, Consensus and EPS Surprise


PetroChina Company Limited Price, Consensus and EPS Surprise | PetroChina Company Limited Quote

PetroChina reported encouraging results, following the likes of other big energy names from the country such as CNOOC Ltd. (CEO - Free Report) and Sinopec (SNP - Free Report) .

Segmental Performance   

Upstream: PetroChina, one of the world's largest oil companies in terms of market value and 35% the size of Exxon Mobil Corporation (XOM - Free Report) , posted improved year-over-year upstream output in the six months ended Jun 30, 2018.

In particular, crude oil, accounting for 59.4% of the total output, marginally increased 0.4% from the year-ago period to 437.7 million barrels (MMBbl). Further, marketable natural gas output was up 3% to 1,791.1 billion cubic feet (Bcf). Overall, PetroChina’s total production of oil and natural gas increased 1.5% year over year to 736.3 million barrels of oil equivalent.

Average realized crude oil price during the first half of 2018 was $65.81 per barrel, representing a 32.5% jump from the year-ago period. This buoyed its upstream (or exploration & production) segment operating income to RMB 29,889 million, reflecting a massive increase from RMB 6,916 million generated a year ago. A tight leash on oil and gas lifting costs that decreased 1.8% from the same period last year, also aided the results.

Downstream: The Beijing-based company’s Refining & Chemicals business generated an operating income of RMB 23,208 million, up 46.5% from the year-earlier period’s earnings of RMB 15,837 million. The improvement can be attributed to higher prices, and sales volumes of refining and petroleum products, mainly gasoline, diesel and oil.

PetroChina’s refinery division processed 551.6MMBbl of crude oil during the six-month period, up 16.1% from 2017. The company produced 20,964 thousand tons of gasoline in the period (reflecting an increase of 22.2% year over year), besides manufacturing 25,728 thousand tons of diesel (up 12.7%) and 4,706 thousand tons of kerosene (up 45.1%). Lower production of ethylene, synthetic resin, urea, along with synthetic fiber raw materials and polymers partly offset the results.

Natural Gas & Pipelines: Revenue rose 21.5% to RMB 173,286 million on improving natural gas prices and volumes. Worryingly, PetroChina lost RMB 13,413 million on sales of imported natural gas and liquefied natural gas (LNG), RMB 1,165 wider than the first half of 2017.

Nevertheless, a rise in natural gas sales and prices aided the Zacks Rank #3 (Hold) company’s segmental earnings, which came in at RMB 16,105 million in the period under review. This reflects a meaningful improvement of 15.6% from the year-earlier profit of RMB 13,934 million. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Marketing:  Revenues from the segment came in at RMB 929,735 million in the first six months of the year, up 15.5% on higher price and sales volume of refined oil. However, operating expenses increased 15.7%, resulting in operating profit of RMB 4,485 million, down 21.1% from the year-ago level amid reduced gross margins and fierce competition.

Dividend, Liquidity & Capital Expenditure

The company has decided to pay an interim dividend of RMB 16,252 million to its stockholders. At the end of the semester, PetroChina’s cash balance was RMB 117,477 million, while cash flow from operating activities was RMB 146,158 million. Capital expenditure in the period was RMB 74,618 million, 19.7% higher than the year-ago level.

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