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PetroChina Co. Ltd.

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Even though it has been a volatile year so far for the energy market, PetroChina has outperformed the Zacks categorized 'Oil & Gas-International Integrated' industry across the past three- and 6 month periods. Being one of the two Chinese integrated oil firms, PTR is well-positioned to capitalize on the country’s favorable trends. In particular, we like its robust portfolio of assets and strong balance sheet, which make it better suited to handle erratic market conditions than most of its peers. But there's no ignoring that the crude price slump has adversely affected the group’s earnings and cash flows, particularly at its upstream unit. Adding to the woes is China’s decision to cut natural gas prices for industrial users that reduced margins in PTR’s gas-wholesale business. Considering these factors, we see limited upside from current levels and maintain our cautious stance on PTR.

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