PetroChina (PTR) is right on track to meet its annual production target from Changqing field in northwestern China.

During the first nine months, total production from this field increased 22% to 22.6 million metric tons of oil equivalent. This includes 11.4 million tons of crude and 14 billion cubic meters of natural gas. In Dec. 2008, the company had set the target of 20% to 30% production increase from this field.

However, PetroChina’s production from the country’s largest and oldest oilfield has been declining. To maintain its production at 40 million tons over the next ten years, the company is presently using new drilling techniques.

On the other hand, PetroChina’s non-petrol business is gaining momentum. During the first nine calendar months of 2009, revenue from this business increased approximately 70% year over year. With greater emphasis on natural gas business, the company remodeled about 2,000 convenience stores for its gas stations. Revenues from these stores have increased more than 50% year over year.

While the outlook for the Chinese economy looks steady and optimistic, the foundation for economic rebound is not well established. The oil and petrochemical markets are also facing uncertainties in their recovery. Being one of the two Chinese integrated oil companies, PetroChina is not above these trends. As such, our Neutral recommendation remains unchanged.
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