PetroChina needs special gains to avoid breaking dividend tradition, analysts say
Energy giant posted first quarterly loss this year
PetroChina, the nation’s largest oil and gas producer, may not be able to pay an interim dividend for the first time since its listing in 2000 if oil price remains depressed until the mid-year unless it can book non-recurring gains from asset disposals or restructuring, analysts said.
The state-controlled energy titan, which posted its first-ever quarterly net loss of 13.78 billion yuan (HK$16.45 billion) for the three months to the end of March 31, will struggle to offset the first-quarter loss in the second quarter so that it can pay an interim dividend, Jefferies Securities head of Asia oil and gas research Laban Yu said.
This was because the Brent oil benchmark had traded between US$38 and US$48 a barrel since April 1, while PetroChina, traditionally one of the top contributors to Beijing’s coffers, was estimated to break-even when Brent averaged US$43 a barrel.
“PetroChina bent over backwards to declare a year-end dividend [last year],” Yu wrote in a research note. “It needs to find a way to declare an interim dividend [this year]. We believe PetroChina is under tremendous pressure to fund state budgets.”
To maintain relatively stable dividends despite lower profits, rival China Petroleum & Chemical (Sinopec) raised its dividend payout ratio to 56.4 per cent of net profit last year from 50 per cent in 2014, while offshore oil producer CNOOC raised its to 100 per cent from 33.6 per cent.
Yu said PetroChina, which has persistently paid 45 per cent of its profits as dividends in the past 15 years, was likely to have to sell stakes in its vast network of oil and gas pipelines this year in order to generate asset-disposal gains so that it could declare a dividend.
PetroChina did not respond to queries seeking comment.
The company was able to pay 11.43 billion yuan of dividends last year largely because it booked 22.8 billion yuan of gains from the restructuring of its pipeline assets, which boosted its net profit to 35.65 billion yuan, down two-thirds from 2014.
Such restructuring required an independent valuation of the assets, allowing it to book accounting gains.
PetroChina is tipped to see net profit dive a further 60 per cent for the whole of this year to 14.4 billion yuan, which would be lowest since its listing, based on the average forecast of 21 analysts polled by Thomson Reuters.
Sanford Bernstein senior analyst Neil Beveridge said the energy giant was likely to complete this year a stake sale in PetroChina Pipelines, a unit that in December consolidated its stakes in three gas pipelines stretching from northwest China to eastern and southern China, which he said was valued at 281 billion yuan with a net profit of 16.3 billion yuan last year.
The sale of city natural gas distribution firm Kunlun Gas by PetroChina to its Hong Kong-listed gas logistics unit Kunlun Energy for 14.83 billion yuan announced in late December would probably see PetroChina book a 3.5 billion yuan disposal gain in the first half of this year, Yu said.