PetroChina in talks to sell minority stakes in projects
Oil giant says capital raised will fund overseas acquisitions, with first assets to be sold difficult-to-develop oil reserves, old oil and gas fields
PetroChina is in talks with potential investors to sell minority stakes in its projects, in a bid to ease its tight cash-flow position and mounting debt burden amid state control on fuel prices.
The nation's largest oil and gas producer recently adopted a strategy to "lighten" its asset investment burden by selectively opening up its oil and gas exploration and development projects, refineries, petrochemical plants and oil and gas pipelines to investment by domestic and overseas partners.
"In the past, all of our major investment projects were 100 per cent owned by us … By allowing other investors to participate, we can reduce our capital expenditure outlays and improve our cash-flow position," said PetroChina spokesman Mao Zefeng.
The first stakes to be offered for sale will be in difficult-to-develop oil reserves, along with oil and gas fields in decline. PetroChina would retain operatorship and the partners would provide funding, Mao said.
Capital raised from partners would not only fund overseas acquisitions but also cut the firm's capital expenditure commitment and debt ratio.
A person familiar with PetroChina's operations said it was in talks with several potential investors and might sell minority stakes in assets worth tens of billions of yuan. Mao would not comment.
The firm's net debt-equity ratio rose to 41.5 per cent at the end of March from 30 per cent a year earlier and 18 per cent two years earlier. Net profit dropped to 115.3 billion yuan (HK$146 billion) last year from 133 billion yuan in 2011 and 140 billion yuan in 2010.
The company lost 41.9 billion yuan on gas imports from Australia and Qatar last year. Domestic gas prices were kept at levels lower than the international market prices, as part of efforts to tame inflation and avoid social unrest.
The firm's oil refining business lost 33.7 billion yuan last year because of state control of fuel prices.
Beijing reformed the way petrol and diesel prices are set in March, in a move that allowed domestic prices to be more closely linked to international prices, giving refiners bigger margins.
The central government said margins would be squeezed when crude oil traded at between US$80 and US$130 a barrel and that major losses were expected when prices exceeded US$130.
A Macquarie Securities report estimated that PetroChina's free cash flow - cash flow from operations minus capital expenditure for capacity expansion - would remain negative unless mainland gas prices were doubled by 2016.
Baosteel Group and the National Social Security Fund are partly funding PetroChina's third west-to-east pipeline.