Kunlun Energy net profit swoons 98 per cent in 2015

Falling crude oil prices and foreign exchange weakness weighed on the annual result

PUBLISHED : Sunday, 20 March, 2016, 11:02am
UPDATED : Sunday, 20 March, 2016, 11:01am

Kunlun Energy, the natural gas distribution and overseas oil production unit of PetroChina, reported on Friday a sharper than expected 97.6 per cent drop in profit for 2015, helping to send its shares down by more than 2.2 per cent.

Net profit amounted to HK$137 million for 2015, down from HK$5.61 billion yuan in 2014, the firm said in a filing to the Hong Kong stock exchange.

The result was much lower than the 3.68 billion yuan (HK$4.41 billion) average estimate of 15 analysts polled by Thomson Reuters.

“Due to the significant decline of the international price of crude oil, the impairment in relation to the oil and gas properties, and the reform on exchange rate system in Kazakhstan, the exploration and production business incurred a loss which has dragged down the overall performance,” chairman Huang Weihe said.

Kunlun booked a net loss of HK$2.91 billion from oil and gas exploration and production, compared to a profit of HK$1.55 billion in 2014, as its average oil selling price halved to US$43 a barrel from 2014.

It was also hit by HK$1.72 billion of asset impairment loss from its oil assets, and a foreign exchange loss from the sharp depreciation of the Kazakhstani tenge. Kunlun has major oil field assets in the Central Asian nation of Kazakhstan.

Its natural gas sales and gas liquefaction operation posted a net loss of HK$580 million, compared to a profit of HK$415 million in 2014, while net profit from its liquefied natural gas import receiving terminal saw profit sink 46.1 per cent to HK$216 million.

The poor performance was due to a lack of competitiveness of natural gas versus diesel after international oil prices plunged while the regulated domestic gas price did not fall as much.

Its natural gas pipeline transportation segment was the only bright spot, with net profit rising 11.2 per cent to HK$4.03 billion, as throughput rose 10.7 per cent to 34 billion cubic metres. It said throughput will be increased further this year without giving a target.

Kunlun late last year agreed to buy PetroChina’s entire stake in city-gas distribution unit PetroChina Kunlun Gas for 14.83 billion yuan, which will see Kunlun become the latter’s sole natural gas distribution platform and eliminate competition between the two firms in the business.

The deal, which Kunlun said will enhance the business’ efficiency and competitiveness, is expected to be completed in the first-half of 2016.

A final dividend of 6 HK cents per share was proposed, down from 20 HK cents in 2014.