PetroChina, CNPC said to consider pipeline, refinery sales

The slump in energy prices has pushed energy companies to shed assets

PUBLISHED : Monday, 23 November, 2015, 8:55pm
UPDATED : Monday, 23 November, 2015, 8:55pm

PetroChina and its state-owned parent are planning to sell assets before the end of the year that may include stakes in pipelines and refineries as the country’s biggest oil and gas producers seek to shore up their balance sheets, according to sources.

PetroChina and China National Petroleum may announce the stake sales as early as this week, the sources said. CNPC was seeking to use proceeds from the sale to meet annual income growth targets set by China’s state asset regulators, they said.

PetroChina gained 0.4 per cent to HK$5.65 at the close in Hong Kong, compared with a 0.4 per cent decline in the city’s benchmark Hang Seng Index. The stock has dropped 37 per cent in the past year, compared with a 5.1 per cent fall in the benchmark.

“Many investors would prefer they cash in on some assets rather than running the assets themselves,” Laban Yu, head of Asia oil and gas equities at Jefferies in Hong Kong, said. “Investors have given almost zero valuation to PetroChina’s assets such as pipelines. Any asset sales right now are good news for the company and could help its share price.”

The slump in energy prices has pushed energy companies to shed assets and cut staff to survive the downturn. PetroChina’s third-quarter profit fell 81 per cent. China Petroleum and Chemical Corp, the country’s No 2 producer known as Sinopec, posted a 92 per cent decline in profit.

The sales by PetroChina and CNPC made sense in the light of China’s move to lower natural gas prices, Sanford C. Bernstein analyst Neil Beveridge said. China has cut the price industrial users pay by an average 28 per cent to boost the use of the fuel in its energy mix and reduce pollution. 

“While PetroChina is likely to continue acting as operator, there is little strategic sense for PetroChina to maintain ownership of its pipeline network,” Beveridge said. “The risk and return profile of these assets mean that other asset managers would see more value in these.”

China is also looking at stripping its biggest energy companies of their oil and gas pipelines to allow fair access to all gas producers and distributors.

The sale would be the first major divestment by either company since PetroChina sold a 20 billion yuan pipeline stake to institutional investors in 2013.