PetroChina is losing the support of analysts who say earnings growth at Asia's biggest oil producer is stunted by its unprofitable natural gas imports.
The average analyst rating fell last week to 3.4, the lowest in three years and the smallest of the world's 15 largest oil and gas firms, according to data from 34 analysts. Buy ratings earn five points, holds get three and sells one. PetroChina had a 4.1 rating in June.
The mainland's growing appetite for gas is squeezing PetroChina more than competitors. The state-controlled firm is being forced to import more natural gas every year for resale at below-market prices in the country, the world's largest energy market. Beijing curbs fuel costs for industries from power generation to fertiliser manufacturing to help limit inflation.
"Loss-making on gas is not likely to slow down for PetroChina, especially in the near term," said Sonia Song, an analyst at Nomura. "It's unlikely the government will increase prices" enough to return gas imports to profit.
PetroChina must double gas imports over the next three years and continue selling at a loss if state-price controls remained, Sanford C. Bernstein analysts Neil Beveridge and Ying Lou said in a report.
In September, the company blamed higher import costs for producing its lowest third-quarter profit in at least five years. Nine-month operating profit at the gas and pipeline unit, which includes selling gas from domestic fields, dropped 93 per cent to 885 million yuan (HK$1.1 billion) from 13.23 billion yuan a year ago.
Even so, PetroChina's total return including dividends to investors this year has been about 11.6 per cent, beating the 4.5 per cent average of the 15 biggest oil companies with full-year data. Thirteen analysts have buy recommendations, five have sell and 16 rate it hold.
The stock closed 1.93 per cent lower at HK$10.14 yesterday, more than the 1.13 per cent drop in the Hang Seng Index. The stock has declined 4.5 per cent in the past 12 months, while the index gained 8.6 per cent.
PetroChina is set to boost profit 1.7 per cent to 135 billion yuan this year, according to analysts. Earnings will be buoyed by sales at market rates of crude that is pumped overseas. It also sells oil from local fields to domestic refiners at prices benchmarked to international prices, benefiting from higher crude rates.