PetroChina annual profit slips 67 per cent on weaker oil prices

PUBLISHED : Wednesday, 23 March, 2016, 8:45pm
UPDATED : Wednesday, 23 March, 2016, 9:32pm

PetroChina, the nation’s largest oil and gas producer, unveiled plans to cut output, further restructure its gas pipeline assets and shut unprofitable fields as it unveiled its worst profit result in 16 years.

Pummelled by sharply lower oil prices, net profit plummeted 66.7 per cent to 35.65 billion yuan (HK$42.8 billion) last year, the lowest since its Hong Kong and New York stock market listing in 2000 when it had a profit of 55 billion yuan. The result was in line with its own earlier projection of 32.16 billion yuan to 37.52 billion yuan announced late January. The annual result was helped by 22.8 billion yuan of gains from the restructuring of its pipeline assets.

Net profit for the fourth-quarter came in at 5 billion yuan, compare to 11.3 billion yuan in the same period a year earlier.

“My judgement is that it is completely possible for the oil price to average above US$40 a barrel this year and for it to reach as high as US$50, but it would be difficult to average at US$50,” chairman Wang Yilin told reporters.

Oil prices may gradually rebound to US$60 to US$80 a barrel by 2020, but are likely to be capped below US$100 per barrel, he added.

The Brent oil benchmark has traded mostly between US$29 and US$41 a barrel since the start of the year.

Revenue fell 24.4 per cent to 1.72 trillion yuan last year on the back of a 49 per cent fall in average oil selling price to US$48.4 a barrel.

Oil output rose 2.8 per cent to 971.9 million barrels, while that of gas increased 3.4 per cent to 88.7 billion cubic metres.

PetroChina aims to cut oil production by 4.9 per cent and grow gas output by 1.3 per cent this year.

President Wang Dongjin said the oil giant will curtail work volumes at some loss-making oil fields and close down others that are unlikely be profitable in the medium term even at higher oil prices.

He pledged that PetroChina will closely follow Beijing’s policies on reforming state-owned enterprises to make them more efficient, but offered few details on how it will roll out the new strategy, saying that he awaiting direction from regulators.

In the face of adverse market conditions and tighter cash flows,

PetroChina spent 202 billion yuan in capital expenditure last year to maintain or expand production capacity, representing a drop of 30.7 per cent from 2014. The figure was also 24 per cent less than that budgeted a year ago.

PetroChina said it plans to further cut the spending by 5 per cent to 192 billion yuan this year.

The company booked 28.5 billion yuan of asset impairment losses last year, up from 5.6 billion yuan in 2014, as lower oil prices meant less of its reserves were economically viable.

The oil giant made no special levy payments on oil revenues to the government last year, compared to a levy of 64.4 billion yuan in 2014.

The cash operating cost, which excludes assets depreciation, to extract one barrel of oil fell 5.7 per cent to US$12.98, while staff costs decreased 2.3 per cent to 118 billion yuan.

Asked if the state-backed behemoth will lay off staff as it cuts production, president Wang Dongjin said it will make “proper arrangement” such as transferring redundant staff to other subsidiaries or asking them to agree to retire early.

A final dividend of 8.73 fen per share was proposed, down from 26.35 fen in 2014. The payout was maintained at 45 per cent of distributable profit.

Operating profit from oil and gas production dived 81.8 per cent to 34 billion yuan last year, while that of natural gas distribution jumped four-fold to 51.2 billion yuan thanks to the pipeline restructuring and lower import losses.

Oil refining and chemicals production swung to a profit of 4.9 billion yuan, from a loss of 23.6 billion yuan in 2014. The marketing division reported a 500 million yuan loss, compared to a 5.42 billion yuan profit in 2014.