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PetroChina (PTR) Q1 Earnings Edge Up on Upstream Strength

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Chinese energy giant PetroChina Co. Ltd. (PTR - Free Report) announced first-quarter 2019 earnings of RMB 10.3 billion or RMB 0.056 per diluted share compared with RMB 10.2 billion or RMB 0.055 per diluted share a year earlier.

Earnings per ADR came in at around 81 cents. Moreover, China’s dominant oil and gas producer’s total revenue for the quarter rose 8.9% from the year-ago period to RMB 591 billion.

The positive comparisons can be primarily attributable to higher oil and gas production and drop in lifting costs, which helped its exploration and production unit profit surge 47%. This was partly offset by weaker downstream earnings.

PetroChina Company Limited Price, Consensus and EPS Surprise


PetroChina Company Limited Price, Consensus and EPS Surprise

PetroChina Company Limited price-consensus-eps-surprise-chart | PetroChina Company Limited Quote

Segment Performance

Upstream: PetroChina posted higher upstream output during the three months ended Mar 31, 2019. In particular, crude oil output – accounting for 57% of the total – rose 4.6% from the year-ago period to 223.4 million barrels. Meanwhile, marketable natural gas output was up by 8.9% to 999.9 billion cubic feet. As a result, PetroChina’s total production of oil and natural gas increased 6.4% year over year to 390.1 million barrels of oil equivalent.

However, average realized crude oil price during the first quarter of 2019 was $59.53 per barrel, 5.8% lower than the year-ago period. Natural gas realizations – at $6.63 per thousand cubic feet – increased 4.7%.

Despite lower oil prices, the upstream (or exploration & production) segment posted an operating income of RMB 14.3 billion, rising significantly from the year-ago profit of RMB 9.7 billion on production growth and incremental gas realizations. A tight leash on oil and gas lifting cost, that decreased 1.5% compared with the same period of last year, also helped results.

Downstream: The Beijing-based company’s ‘Refining & Chemicals’ business generated an operating income of RMB 3 billion. This is down 64.5% from the year-earlier period earnings of RMB 8.4 billion. The decline in the downstream division was due to adverse inventory effects, the impact of internal price marketization and lower chemical profits.

PetroChina’s refinery division processed 291.6 MMBbl of crude oil during the three-month period, up 3.3% from 2018. The company produced 2,479 thousand tons of synthetic resin in the period (a rise of 4.6% year over year), besides manufacturing 1,560 thousand tons of ethylene (up 6.6%). It also produced 27,708 thousand tons of gasoline, diesel and kerosene during the period against 26,181 thousand tons a year earlier.

Natural Gas & Pipelines: Transportation and sales optimization, together with the coordination of resources (including local gas, imported gas and LNG) helped the Chinese behemoth’s segment earnings. And though PetroChina lost money to the tune of RMB 3.3 billion on the sales of imported natural gas and liquefied natural gas (LNG) from Central Asia and Burma, the losses were narrower compared with the first quarter of 2018.

All these factors drove the group’s natural gas business’ income to RMB 12.6 billion in the period under review, improving from the year-earlier profit of RMB 11.2 billion.

Marketing: In marketing operations, the state-owned group sold 42,057 thousand tons of gasoline, diesel and kerosene during the quarter, edging down 0.8% year over year. However, the effects of lower volumes were more than offset by higher refined product margins and improving profitability from various marketing initiatives. This aided PetroChina to post a profit of RMB 3.5 billion compared to RMB 1.9 billion recorded in the same period last year.

Liquidity & Capital Expenditure

At the end of the quarter, the group’s cash balance was RMB 116 billion, while cash flow from operating activities was RMB 62 billion. Capital expenditure for the three months reached RMB 58.9 billion.

Zacks Rank & Stock Picks

PetroChina, which is planning a $53 billion megaproject in Iraq with ExxonMobil (XOM - Free Report) currently carries a Zacks Rank #5 (Strong Sell). Meanwhile, investors interested in the energy space could look at some better options like Continental Resources, Inc. (CLR - Free Report) and ConocoPhillips (COP - Free Report) that sport a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Over 30 days, the Oklahoma City-based Continental Resources has seen the Zacks Consensus Estimate for 2019 and 2020 increase 25.6% and 17.9%, to $2.80 and $3.49 per share, respectively.

ConocoPhillips has a 100% track of outperforming estimates over the last four quarters at an average rate of 10.5%.

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