PetroChina Falls Most in 7 Months After Profit Slumps

By Bloomberg News

Oct. 29 (Bloomberg) -- PetroChina Co., the world’s second- most valuable company, had its biggest decline in seven months in Hong Kong trading after earnings missed estimates.

The shares dropped as much as 5.9 percent to HK$9.36, the steepest decline since March 30, and traded at HK$9.46 at 12:20 p.m. local time. PetroChina has climbed 39 percent in Hong Kong this year, lagging behind the 48 percent gain in the benchmark Hang Seng Index.

The Beijing-based oil producer and refiner yesterday posted a 24 percent drop in third-quarter profit to 30.8 billion yuan ($4.5 billion) as crude slumped from a record. The median estimate of five analysts surveyed by Bloomberg was for a profit of 35 billion yuan. Sales fell 12 percent to 267.7 billion yuan.

Earnings may rebound this quarter as China’s economy leads the world out of recession, boosting oil prices and demand for gasoline and diesel. The government has relaxed controls on fuel prices and may raise them to reflect higher crude costs, benefiting PetroChina as it boosts investment in refineries.

“Refining margins are down as increases in prices of refined products have not kept up with crude,” Wang Aochao, a Shanghai-based analyst at UOB-Kay Hian Ltd., said today. “I’m confident that as oil rises, the government increases prices and demand strengthens, the prospects for the company are good.”

Refining Margin

Wang estimates PetroChina’s refining margin slumped to $3 a barrel in the third quarter from $7.50 in the preceding three months. The company didn’t publish figures for gains from processing oil into fuels.

Sales of refined products accounted for 80 percent of PetroChina’s revenue in 2008 and oil exploration the rest.

Oil, down 42 percent last quarter from a year earlier, has climbed 73 percent in 2009.

Goldman Sachs Group Inc. on Oct. 26 reaffirmed its forecast for crude oil to reach $85 a barrel by the end of this year on “robust” demand for diesel in China.

The world’s fastest-growing major economy expanded 8.9 percent in the third quarter, the quickest pace in a year.

“The fourth quarter will compare favorably,” said Gordon Kwan, the Hong Kong-based head of energy research at Mirae Asset Securities. Kwan forecasts PetroChina’s net income will climb 63 percent to 34 billion yuan in the three months ending Dec. 31 from a year earlier.

Energy Stocks Fall

Shares of Asian energy companies also fell as crude futures declined for a second day after an increase in U.S. crude and gasoline inventories raised concern that fuel demand has yet to recover. Oil for December delivery dropped as much as 43 cents, or 0.6 percent, to $77.03 a barrel, and traded at $77.20 at 12:38 p.m. Hong Kong time on the New York Mercantile Exchange.

The 43 member MSCI Asia Pacific Energy Index fell as much as 3.1 percent, the most since Aug. 17. China Petroleum & Chemical Corp., the country’s second-largest oil company and biggest refiner, fell as much as 2.4 percent to HK$6.56 and traded at HK$6.62. The company known as Sinopec is reports earnings today.

PetroChina’s Shanghai-listed shares fell as much as 2.8 percent and traded at 13.18 yuan.

China, the world’s second-biggest energy user, raised fuel prices four times and cut them three times this year, compared with two adjustments in 2008, after the introduction of a pricing mechanism in December to adjust oil-product prices for changes in crude costs and ensure refiners a profit.

Net income declined from 31.5 billion yuan in the second quarter, when it rose 26 percent on record earnings from oil refining after the government raised fuel prices.

Nine-Month Profit

Average gasoline prices in China in the third quarter fell about 1.6 percent from the second and diesel declined 1.8 percent. Crude prices averaged about 14 percent higher in the same period.

Profit in the first nine months dropped 14 percent to 81.3 billion yuan, while sales declined 20 percent to 683 billion yuan, according to yesterday’s statement.

The average realized price for crude fell almost 50 percent to $49.1 a barrel in the first nine months, while the price of gas declined 1.2 percent to $3.4 per thousand cubic feet, the company said. PetroChina processed 607 million barrels of oil into fuels, down 5.5 percent from a year earlier, and its crude output dropped 3.7 percent to 631 million barrels.

PetroChina joined ConocoPhillips and BP Plc in reporting a drop in third-quarter profit. Earnings at ConocoPhillips slumped 71 percent in the same period, while Europe’s second-largest oil company said Oct. 27 profit excluding one-time items and inventory changes fell 47 percent.

To contact the reporters on this story: John Duce in Hong Kong at Jduce1@bloomberg.net; To contact the reporters on this story: Ying Wang in Beijing at ywang30@bloomberg.net;