Earlier today, PetroChina Company Ltd. (PTR) reported results for the six months ended June 30, 2009. Net income for the period was 50.5 billion yuan ($7.4 billion), down more than 7% from 54.4 billion yuan ($7.7 billion) a year earlier. The downward revision in net income was due to lower volumes and crude prices. The average realized crude price in the first half was $42.46 per barrel, down 54.6% from $93.45 per barrel in the year-earlier period.
Total production was 588 million barrels of oil equivalent, down nearly 1% from the earlier year. Crude oil production was 418 million barrels, down 4.8% year over year. Natural gas production was 1,021 billion cubic feet, up 10.6% year over year.
The Exploration and Production segment generated profit from operations of 37.6 billion yuan ($5.5 billion), compared to 131.3 billion yuan ($18.6 billion) in the year-earlier period. This drastic fall was primarily due to a substantial decline in crude oil prices. The lifting cost for the period was $8.59 per barrel, down 1.8% from $8.75 per barrel in the first half of 2008.
The Refining and Chemicals segment experienced a significant profit following improved demand and increased gasoline and diesel prices. The profit from operations amounted to 17.2 billion yuan ($2.5 billion), compared to a loss of 59.8 billion yuan ($8.5 billion) in the year-earlier period.
The Marketing segment posted a profit of 7.3 billion yuan ($1.07 billion), compared to 7.5 billion yuan ($1.06 billion) in the year-ago period. The Natural Gas and Pipeline segment posted a profit of 9.9 billion yuan ($1.45 billion), compared to 8.4 billion yuan ($1.19 billion) in the same period last year.
At the end of the first half of 2009, PetroChina’s cash balance stood at 89.2 billion yuan ($13.1 billion). Cash flow from operating activities was 130.1 billion yuan ($19.1 billion). The company paid an interim dividend of 0.12417 yuan (2 cents) per share (inclusive of tax) for the six months ended June 30.
We believe that the results may improve in the second half of the year with a turnaround in oil prices and increased refining investments after the Government relaxed controls on fuel prices. However, we are concerned about PetroChina’s oil production growth prospects as the company is heavily exposed to significantly mature producing areas. Rising costs and special levies on domestic crude oil sales also remain an issue. As such, we maintain our Neutral recommendation.
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