PetroChina First-Quarter Net Falls, Trailing Analyst Estimates

By John Duce

April 28 (Bloomberg) -- PetroChina Co., the world’s second- largest company by market value, posted a profit that trailed analysts’ estimates for the first quarter of what will be its “most challenging” year.

Net income declined 35 percent to 18.96 billion yuan ($2.8 billion) from 29.3 billion yuan a year earlier, the Beijing- based company said in a statement to the Shanghai exchange yesterday. That’s worse than a median estimate of 19.5 billion yuan in a Bloomberg survey of three analysts.

China’s economy grew at its weakest pace in nearly a decade in the first quarter, and PetroChina faces “huge difficulties” in 2009 as the global financial crisis reduces demand for oil products, it said last month. Asia’s biggest crude producer said it will cut costs and reduce risk in the second quarter, and China passed a $585 billion stimulus package to revive growth.

“We believe earnings have bottomed in the first quarter,” Gordon Kwan, an analyst at Mirae Asset Securities in Hong Kong, said in e-mailed comments. Higher returns from the refining business and rising oil prices will help boost profits later this year, he said.

PetroChina fell 2.5 percent in Hong Kong trading to HK$6.64 before the results were announced. Ten out of 22 analysts surveyed by Bloomberg have a “buy” rating on PetroChina’s shares. Seven rate the stock as a “hold” and five recommend selling the shares.

Production Falls

PetroChina’s crude oil production declined 5.7 percent to 205.7 million barrels, and natural gas output rose 7.9 percent to 523.4 billion cubic feet in the first three months, it said.

The Beijing-based producer processed 185.4 million barrels of oil in the period, 15 percent less than last year’s level, it said. Its fuel output declined almost 14 percent to 16.4 million tons, and sales fell 2.8 percent to 21.3 million tons.

PetroChina’s windfall tax payment fell in the first quarter, the company said without giving specific numbers.

Under China’s revised pricing system, gasoline and diesel prices will be adjusted when global crude-oil costs change by more than 4 percent over 22 straight working days. Refiners will be allowed a profit margin of at least 5 percent, PetroChina President Zhou Jiping said in March.

The company’s refining business will be a “major contributor this year and in the future,” Zhou said then.

Refining Losses

Refining losses widened fourfold to 83 billion yuan last year as government curbs on fuel prices prevented PetroChina from passing on higher costs to consumers. Crude oil rose to a record $147.27 a barrel in July last year. Prices that have tumbled 69 percent from July’s record.

PetroChina’s full-year profit may fall 27 percent to 83.3 billion yuan, according to the median of seven analyst estimates compiled by Bloomberg. The benchmark crude oil price in New York may average $51.30 a barrel in 2009, according to an April 16 forecast by Macquarie Group Ltd. Oil averaged $99.75 in 2008.

The world’s second-most valuable company after Exxon Mobil Corp., PetroChina said March 25 it plans to cut crude production 4.4 percent this year.

First-quarter sales fell 30 percent to 181.6 billion, with crude oil selling for less than half as much as the year-earlier period. Profit per share was 0.10 yuan compared with 0.16 yuan a share a year earlier.

The nation’s economy has shown signs of rebounding as a 4 trillion yuan stimulus plan revives factory production and investment. Urban fixed-asset investment surged by almost a third in March and industrial-output growth accelerated, according to government reports on April 16.

To contact the reporter on this story: John Duce in Hong Kong at Jduce1@bloomberg.net