Petrochina 0857

[millionairemind]

PetroChina in talks on UK investment

By Ed Crooks in London

Published: June 18 2009 22:46 | Last updated: June 19 2009 08:00

PetroChina, China’s biggest oil company, is in talks about making its first move into refining in Europe, discussing an investment in the Ineos refinery at Grangemouth in Scotland, according to local politicians.

Ineos, a heavily-indebted private chemicals group, has been in talks with several other companies about investing in Grangemouth.

Angus MacDonald, a Scottish National party councillor, said an Ineos manager had confirmed at a community meeting on Tuesday that PetroChina, the world’s biggest company by market capitalisation, was one of the companies involved in the talks.

Ineos on Thursday refused to comment on the negotiations, other than to say it was talking to ”a number of potential partners about growth opportunities in Grangemouth.”

It added: ”These preliminary discussions, are exploratory and may or may not lead to investment in Grangemouth.”

Ineos, which had debts of €7.5bn at the end of 2008, last month reached an agreement with its lenders to defer tests of its banking covenants until July 17.

In its statement, Ineos implied it was not seeking to sell Grangemouth to cut its debts, saying that the complex ”continues to be a core part of the Ineos group”.

Chinese companies have become increasingly active investors in oil assets in recent months, although most have been interested in upstream oil production businesses rather than refineries.

However, PetroChina, which includes both oil production and refining businesses, has been moving into refining outside China. In May it paid $1bn for a 45.5 per cent stake in a company that part-owns one of the biggest refineries in Singapore.

Prices of oil products in China are tightly regulated, exposing refiners to losses when crude oil prices rise.

Last year PetroChina’s refining and marketing division lost Rmb83bn ($12bn).

Mr Macdonald said he believed the local community would welcome an investment by PetroChina.

”Securing investment isn’t easy at the moment, as Ineos well knows,” he said. ”If PetroChina is one the major investors out there that can secure the future of the refinery, then that’s got to be acceptable.”

PetroChina said on Friday it did not have any comments on its potential investment in Scotland.

The news came as the company announced plans to buy two pipelines in western China from its state-owned parent for $1.4bn, as part of efforts to expand its refining business.

In May, PetroChina agreed to buy 45.5 per cent of Singapore Petroleum Company in the first major Chinese offshore acquisition of a downstream energy company.

[winston]

PetroChina Profit Tops Analyst Estimates; Acquisitions Planned

Aug. 29 (Bloomberg) -- PetroChina Co., the world’s most valuable company, posted profit that beat analysts’ estimates on record earnings from oil refining after the government raised fuel prices and China’s economic recovery spurred demand.

Second-quarter net income rose 26 percent to 31.5 billion yuan ($4.6 billion), derived by subtracting earnings for January to March from first-half figures announced in Hong Kong yesterday. The Beijing-based oil producer and refiner joins China Petroleum & Chemical Corp., known as Sinopec, in reporting higher profit.

The gains contrast with earnings declines at Exxon Mobil Corp. and Royal Dutch Shell Plc after the global recession cut U.S. and European consumption. PetroChina, Sinopec and Cnooc Ltd., the nation’s biggest oil companies, this week pledged to step up acquisitions of energy reserves and refineries overseas to take advantage of lower valuations after oil prices slumped.

“The global crisis hasn’t bottomed out yet and there are still assets with attractive valuations,” Jiang Xinmin, a deputy director of energy market research at the National Development and Reform Commission, China’s top economic planner, said by telephone from Beijing yesterday. “Domestic fuel demand will likely rebound with the economic recovery, potentially boosting sales at the nation’s oil producers.”

PetroChina Shares

Shares in PetroChina, which overtook Exxon as the world’s biggest company by market value in May, fell 0.2 percent to HK$8.81 in Hong Kong before the results announcement. The stock, which has climbed about 30 percent this year, lagged behind the 42 percent increase in Sinopec and Cnooc Ltd.’s 43 percent gain.

China has raised prices of fuels such as gasoline and diesel by as much as 25 percent this year under a new pricing system that tracks crude oil costs and ensures refiners a profit. The policy change helped Sinopec end four years of refining losses and prompted PetroChina to boost investments in oil processing.

PetroChina plans to ramp up output of crude oil and fuels and expects to acquire more overseas refineries after completing its purchase of Singapore Petroleum Co., President Zhou Jiping said today. The oil producer announced a takeover of Singapore Petroleum at an estimated cost of about $2.2 billion in May.

Record Refining

The Beijing-based company’s operating profit at its refining unit reached a record 17.2 billion yuan in the first six months, Zhou said. PetroChina expects second-half refining margins to maintain stable growth and wants to boost its share in the country’s refining capacity to more than 40 percent.

First-half profit fell 7.2 percent to 50.5 billion yuan, according to a statement to the Hong Kong stock exchange. The company restated its net income for the year-earlier period to 54.4 billion yuan. Mao Zefeng, the company’s spokesman, confirmed the second-quarter profit of 31.5 billion yuan calculated by subtracting January-to-March profit from six-month earnings reported today.

“In the second half, the result will be better than the first half,” Shi Yan, an analyst with UOB-Kay Hian Ltd., said by telephone yesterday. “Every time Beijing raises domestic prices in line with global benchmarks, it’s positive for PetroChina.”

PetroChina will maintain double-digit growth in domestic natural-gas output in the coming years to meet China’s rising demand for the cleaner-burning fuel, the company said.

The oil producer will buy the contractual rights for a natural gas block in Turkmenistan from its parent company for $1.19 billion, the company said in a separate statement yesterday.

[winston]

Not vested.

Risk factors

Decline in international crude oil prices
Delay in major projects
Pricing mechanism of refined oil products is not implemented effectively by the Chinese government
The starting threshold of special oil gain levy is not amended


Valuation

As the new pricing mechanism for refined oil products is beneficial to PetroChina, the refining and chemical segment is no longer a burden for PetroChina. This segment is becoming the profit driver for the company. Also, this segment can be the buffer for the overall profit when the international crude oil prices are at low level.

Since the international crude oil prices are around USD70 per barrel, PetroChina's refining profit will be squeezed if the crude oil prices go up further. However, we believe it is still profitable for PetroChina in 2009.

We set the 2009 target PE of PetroChina to be 12.2x. We reiterate our “Hold” rating on PetroChina and our 12-month target price for PetroChina is HK$9.34.

[winston]

DJ Chimbusco Has Huge Losses From Oil Derivatives Trading-Report

SHANGHAI (Dow Jones)--China Marine Bunker (PetroChina) Co. Ltd, a joint-venture between PetroChina Co. (PTR) and China Ocean Shipping (Group) Co., or Cosco, has unrealized losses of billions of yuan from its oil derivatives positions, Caijing magazine reported late Monday.

The contracts were entered into by the Singapore unit of Chimbusco, as the joint venture is known, the report said, citing a source close to Cosco.

Officials from Chimbusco weren't immediately available for comment while a PetroChina spokesman declined to comment.

China's State-Owned Assets Supervision and Administration Commission said last week that some state-owned enterprises had sent letters to unnamed trading counterparties saying they reserve the right to seek payment from and take legal action against counterparties over oil-related structured options contracts.

Newspaper Web site: http://www.caijing.com.cn/

-Jing Yang contributed to this article; Dow Jones Newswires; (8621) 6120 1200; [email protected]

[winston]

Not vested.

DJ MARKET TALK: Citigroup Ups PetroChina Target But Keeps At Sell

1238 [Dow Jones] STOCK CALL: Citigroup raises PetroChina (0857.HK) target price to HK$9.80 from HK$7.06 due to change of valuation method to P/E based, with new target pegged on 12.7X FY10 earnings; house also raises global oil forecast to US$76/bbl, US$85/bbl, US$80/bbl for 2010, 2011, long-term respectively.

Still, keeps stock at Sell as says "gas price hike is priced in, resource tax hike is not;" expects resources tax will be reformed, raising on-shore levy from about US$0.6/bbl to average 3%-5% of oil revenue; assuming 4% average rate, says this would reduce PetroChina's earnings by 11% in FY10, FY11. Stock last +1.4% at HK$10.22.

Source: Dow Jones Newswire

[winston]

Not vested. From Phillips:-


Investment Strategy

Being China's biggest oil and gas producer and supplier, we believe that PETROCHINA shares are low risk. However, we see poor cost control as the income from the Exploration and Production (E&P) segment increased slower than the cost, especially in 2009 where income dropped 49% but cost only decreased 11.7%, leaving a gross margin decrement of 15.4% yoy.

As a matter of fact, this cost control issue has been a trend since 2006. Changes in gross margin have been in the negative zone since 2006; yet, we do not expect to see significant improvement in 2010.

Total cost control has seen some improvement in 2009H1, mainly due to the refining and marketing segment: these showed a 29.9% increase in gross margin yoy, with a 20.8% drop in income and a 54% drop in cost.

PETROCHINA's crude oil reserves have dropped 9.4% and 3.4% on 2006's basis for Proved Developed Reserves and Proved Developed and Undeveloped Reserves respectively. Natural gas total Proved Developed and Undeveloped Reserves have increased 4.3% on 2006's basis. As we mentioned before, we expect PETROCHINA to win more from the natural gas market, benefiting from the rise in price and demand.


Valuation

Stock return of PETROCHINA is weaker than CNOOC and COSL yet stronger than SINOPEC. This is inline with both the estimated EPS and expected P/E among these four companies. Currently, PETROCHINA is trading a bit under its historical mean P/E.

With an estimated growth rate of 33% in 2010, we expect PETROCHINA to trade higher than its mean P/E, at 12.80, lying in between the oil field service companies and the downstream focused companies. Thus, we give PETROCHINA a “BUY” recommendation with a target price of HK$10.62.

[profittaker]

FT: PetroChina world's most valuable company
By Xie Jingwei (chinadaily.com.cn)
Updated: 2010-05-31 14:15

For the first time, a Chinese company has overtaken Exxon Mobil as the world's most valuable company, according to a ranking released by Financial Times May 30.

PetroChina, China' biggest oil and gas producer, made the top of the British newspaper's latest annual ranking with a market capitalization of $329.3 billion.

The 14th annual ranking of the Financial Time Global 500 provides a yearly snapshot of the world's largest companies. The total market capitalization of the Global 500 companies has increased by 50 percent from $15.6 billion to $23.5 billion.

Three Chinese companies made the top 10: PetroChina at No 1, Industrial & Commercial Bank of China at No 4 and China Mobile at No 10 on the list.

Twenty-one mainland enterprises were on this year's Global 500 list, down from 27 last year. The three companies that were on last year's list, but not among this year's rankings, are Shanghai Electric, Datang International Power Generation Co Ltd and Zijin Mining.

"PetroChina has benefited a lot from China's economic environment," said Dong Xiucheng, deputy director of the Business and Management School at the China University of Petroleum.

Dong said Exxon Mobil and Shell's market values were dragged down by the prolonged financial crisis grinding Europe and the United States, while PetroChina made more headway in China.

However, Dong added that market value has less weight than sales volume when it comes to judging a company's overall strength.

[kennynah]

For the first time, a Chinese company has overtaken Exxon Mobil as the world's most valuable company, according to a ranking released by Financial Times May 30.

i suppose it now can be considered a world dominator?

so, time to but it?

[winston]

Ha Ha .. Do u based your buy decision on market cap? Higher market cap could also mean a relatively high PE

[kennynah]

i based my decision.....on the roll of a dice.....