Hong Kong company reporting season

PetroChina, CNOOC post better than expected interim results, lift dividends

The oil majors report increases in first-half earnings on the back of price rebound

PUBLISHED : Thursday, 24 August, 2017, 7:04pm
UPDATED : Thursday, 24 August, 2017, 11:00pm

PetroChina, the nation’s largest oil and gas producer, posted a higher than expected interim profit, which soared on the back of cost cutting and reduced output from major global producers that saw oil price rebound from loss making levels last year.

Net profit came to 12.67 billion yuan (US$1.9 billion) for the year’s first six months, up from 531 million yuan in the first half of last year, the state-backed energy titan said in a filing to Hong Kong’s bourse after market close on Thursday.

It was ahead of the 9.96 billion yuan (US$1.5 billion) average estimate of two analysts polled by Bloomberg, and well above the high end of its own projection of between 9 billion and 10 billion yuan announced late last month.

It amounted to 43.7 per cent of the analysts’ full year profit forecast of 29 billion yuan.

Total interim dividend – including a special dividend – of 6.93 fen per share was proposed, equivalent to all of its earnings, compared to a payout of 2.13 fen last year.

Its upstream oil and gas production operation booked a first half operating profit of 6.92 billion yuan, turning around a loss of 2.42 billion yuan in the year earlier period, thanks to a 50 per cent year on year jump in average oil selling price to US$49.7 a barrel and a one per cent rise in average natural gas price.

First half oil output fell 7.4 per cent to 435.8 million barrels, while gas production edged up 4.4 per cent.

The firm has maintained its full year target for oil output to fall 4.5 per cent and that of gas to rise 1 per cent.

The cash operating cost – excluding fixed costs like depreciation – to lift each barrel of oil declined 4.2 per cent year on year to US$10.85.

“We will continue to rein in costs, especially our core upstream operations, and we are targeting further reductions [until 2020],” vice chairman Wang Dongjin told reporters.

Asked why the actual interim profit was much higher than the firm’s own projection a month ago, he said this reflected management’s “conservatism”.

He also played down concerns of PetroChina’s joining other state-backed firms in following Beijing’s order to amend their articles of association to set up Communist Party committees to advise their boards on operational, personnel and strategic matters.

“This does not change the way we operate ... it will enhance our governance in terms of risk management, anti corruption effort and senior management appointments,” he said.

Meanwhile, CNOOC, the nation’s dominant offshore oil and gas producer with no downstream operation, Thursday unveiled a first half net profit of 16.25 billion yuan, a turnaround from a 7.74 billion yuan loss in the year earlier period.

It was better than the 10.1 billion yuan Bloomberg consensus estimate, and amounted to 75.2 per cent of the analysts’ full year forecast of 21.6 billion yuan.

An interim dividend of 20 HK cents was proposed, compared to 12 cents last year.

Total first half oil and gas production fell 1.5 per cent year on year to 237.9 million barrels of oil equivalent (boe).

Although CNOOC’s first half output was ahead of its target, the management nonetheless decided to maintain its goal announced in January to produce 450 million to 460 million boe this year.

It was five to seven per cent lower than projections made a year earlier, as it prioritised profitability over production volume amid depressed energy prices.

First half “all-in” oil production cost that include both fixed and variable costs, fell 9 per cent year on year to US$31.7 a barrel.

Chief executive Yuan Guangyu said even if demand and costs of oilfield services would rise in the future, the management was confident that CNOOC will continue to be among the lowest cost producers globally.

Shares of PetroChina have fallen 16.2 per cent year to date, while those of CNOOC have fallen 6 per cent, trailing a 25.1 per cent rise of the Hang Seng Index.