PetroChina Matches Exxon as Most Valuable Company

By Bloomberg News

May 25 (Bloomberg) -- PetroChina Co. briefly overtook Exxon Mobil Corp. as the world’s most valuable company after China’s stimulus plan caused a surge in the nation’s stocks this year.

State-controlled PetroChina’s Shanghai-traded shares rose as much as 3 percent to 13.25 yuan today for a market value exceeding $336 billion, surpassing Exxon’s $335.9 billion as of May 22. The gain came as China’s largest oil producer agreed to pay as much as $2.2 billion to buy Singapore Petroleum Co.

“If you have to buy an energy stock, you want to buy the dominant one in China,” said Gordon Kwan, head of energy research at Mirae Asset Securities Co. in Hong Kong. “China’s fuel demand is growing, while in Northern America and Europe demand is actually falling.”

PetroChina shares have advanced 29 percent this year as government spending has increased fuel consumption in China, while the worst recession since the Great Depression curbs demand in the U.S. China’s benchmark Shanghai Composite Index has surged 43 percent this year on optimism that the $586 billion economic stimulus and record bank lending will counter a slump in exports and boost growth. The Standard & Poor’s 500 Index has dropped 1.8 percent.

Exxon rose 0.6 percent to $68.83 in New York trading on May 22, and has declined 14 percent this year. PetroChina was listed in Hong Kong in 2000 and became the world’s first trillion- dollar company after selling shares in Shanghai in November 2007, when it first passed the U.S. oil company. The stock ended at 13.10 yuan in Shanghai, making the capitalization $333.6 billion.

PetroChina Reserves

Exxon, which traces it roots to the 1880s and John D. Rockefeller’s Standard Oil Trust, had regained the top ranking in March last year after PetroChina’s Shanghai stock slumped by more than 50 percent as exploration costs climbed and government controls prevented the company from increasing fuel prices.

PetroChina’s reserves surpassed those of Exxon last year after the Chinese company added the equivalent of 890 million barrels of oil through discoveries and acquisitions. Exxon’s reserves declined by 3 percent in 2008 to the equivalent of 21.1 billion barrels, enough to sustain output for almost 15 years.

China agreed to give Russia, Kazakhstan, Brazil and Venezuela $49 billion in loans this year in exchange for oil supplies. The government is tapping its $1.95 trillion foreign- exchange reserves to buy energy assets made cheaper by oil’s decline from a record in $147.27 a barrel in July.

Singapore Purchase

PetroChina will buy 45.5 percent of the Singapore Petroleum for S$1.47 billion ($1 billion), or S$6.25 a share, from Keppel Corp., a premium of 24 percent to the last-traded price of S$5.04 at the May 22 close. The transaction, when completed, will trigger a general offer for the remaining shares, the Beijing-based oil company said yesterday.

PetroChina last month agreed to buy a 50 percent share in AO Mangistaumunaigas for as much as $1.4 billion after China agreed to lend $10 billion to Kazakhstan, the largest energy producer in the former Soviet Union after Russia.

PetroChina’s status as a state-controlled entity allows it to accept lower returns from oil-rich nations in exchange for access to reserves under terms Exxon would find unacceptable, said Douglas Ober, who helps manage $550 million at Petroleum & Resources Corp. in Baltimore, including Exxon shares.

“PetroChina’s state orientation lets it look at things differently than Exxon does,” Ober said. “Exxon has a more strictly economic interest, so if their returns are going to be reduced by requirements to build highways or hospitals or schools so they can drill off the coast, they’re going to take that into consideration.”

Sudan Fields

China National Petroleum Corp., PetroChina’s parent, is the largest foreign developer of oil fields in Sudan, accused by the U.S. of supporting genocide in the African nation’s western Darfur region.

PetroChina’s 14 percent return on capital is less than half of Exxon’s 36 percent return, the highest among the world’s biggest 10 oil companies by sales, according to data compiled by Bloomberg. Exxon is bigger by sales and profit.

The U.S. company raked in $425 billion in sales last year, or $60.45 for every man, woman and child on the planet. Exxon’s 2008 profit of $45.22 billion was the most ever for a U.S. corporation, marking the fourth consecutive year of record- setting results. PetroChina’s net income was 114 billion yuan ($16.7 billion) last year on sales of 1.1 trillion yuan.

Ober of Petroleum & Resources said he doesn’t own shares of PetroChina or any other Chinese energy firms because of concern their accounting may not measure up to U.S. standards. PetroChina executives aren’t as accessible to U.S. investors as management from American and European companies, which also limits the appeal of the stock, he said.

“I have no doubt that over time, China’s companies should grow to be among the world’s largest,” said Victoria Mio, a Hong Kong-based senior portfolio manager at Robeco Group, which had about $155 billion in assets under management as of Dec. 31. “But it has to be in terms of profitability, rather than inflated market capitalization.”

To contact the reporters on this story: John Liu in Shanghai at jliu42@bloomberg.net; Joe Carroll in Chicago at Jliu42@bloomberg.net