PetroChina Company Limited (“PetroChina” or “the Company”, HKSE: 0857; NYSE: PTR; SSE: 601857) announced on August 26, 2010 that it continued to implement its “resources, market and internationalization” strategies in the first half of 2010 despite a complicated macro-economic environment. Net profit attributable to owners of PetroChina for the six months ended 30 June 2010 was up 29.4% to RMB65,330 million from the same period in the preceding year, based on International Financial Reporting Standards (IFRS). Basic earnings per share were RMB0.36, representing an increase of RMB0.08 from the same period in the preceding year. The Board of PetroChina has resolved to pay an interim dividend of RMB0.16063 per share (inclusive of tax), or a payout ratio of 45% based on the interim net profit under IFRS.
During the period, PetroChina proactively kept abreast of market changes, strengthened the balance of production, transportation, sales and storage, and achieved stable and fast growth in oil and gas production in China. PetroChina facilitated the construction of key oil and gas projects, and had made breakthroughs in strategic oil and gas passways and in deployment adjustment of the overall planning of refining and chemicals operations. PetroChina had made progress in the consolidation and expansion of international co-operation, and stepped up its efforts to develop new overseas oil and gas projects, moving forward with international oil and gas co-operation and expanding the scale of its international operation. PetroChina also had enhanced protection work in the areas of health, safety and the environment (HSE), stringently implemented energy saving, and emissions reduction in a bid to create an energy-efficient and environmentally friendly enterprise, and to further improve the quality and profitability of its business. During the period, the Company’s production and operation grew steadily with good momentum. There was a big improvement in the Company’s operating performance compared to the previous year. Progress and achievements were made in areas all of its business.
Exploration and Production
During the period, the Company focused on resources as a strategy and continued to implement the “High Growth in Oil and Gas Reserves Program”. PetroChina further deepened its integrated geological studies, enhanced the exploration of mature oilfields, actively pushed ahead with risk exploration of new areas, and made great strides towards the exploration and development integration. In respect of oil and gas exploration, the Company achieved a series of major discoveries in Tarim Basin, Erdos Basin, Bohai Bay Basin, Junggar Basin, Sichuan Basin and Qaidam Basin, all with promising prospects.
Oil and gas field development was closely tied to market changes and the production target for 2010. PetroChina had made great efforts to overcome the adverse impact caused by extreme weather such as severe cold and snow, and ensured a safe, stable and effective oil and gas operation. In the first half of 2010, the Company produced 425 million barrels of crude oil, representing an increase of 1.7% from the same period in 2009, the strongest growth in recent years. Marketable natural gas output amounted to 1.15 trillion cubic feet, representing an increase of 12.9% as compared with the same period in 2009. In a further sign of rapid growth, total oil and gas production reached 617 million barrels of oil equivalent, representing an increase of 4.9% as compared with the same period in 2009.
During the period, the average realized crude oil price of the Company was US$72.4 per barrel, representing an increase of 70.6% as compared with the same period in the preceding year. Profit from operations of the Exploration and Production segment was RMB73.37 billion, representing an increase of 94.9% over the previous year. It continues to be the most important profit contributor to the Company.
Refining and Chemicals
In the first half of 2010, taking advantage of a recovery in the refined products market, the Company improved the organization of its production, optimized the allocation of crude oil, adjusted plans on the processing volume of petrochemicals in response to market changes, and maintained the safe and steady operation of its key facilities, with processing utilization remaining at above 90% and a continued improvement in technical and economic indicators. In the first half of 2010, the Company’s refineries processed 439 million barrels of crude oil, representing an increase of 12.8% from the same period of the preceding year, and produced 9.056 million tons of chemical products, representing an increase of 10.6% over the same period.
Good progress was made in the strategic structure adjustment of the Refining and Chemical Segment. The Guangxi Petrochemical 10MMt/y refining project – the first such large-scale oil refining project in the coastal area of southern China has been fully completed. It is strategically significant for the improvement of oil products supply in southwestern China. The Urumqi Petrochemical PX facilities have been completed and will start production soon. The project will help facilitate the development of the petrochemical business in Xinjiang. The Tarim Fertilizer facility with the largest single-unit production capacity successfully commenced production. The construction of Sichuan Petrochemical integration project, the large ethylene projects in Daqing Petrochemical and Fushun Petrochemical were also on track.
During the period, the profit margin of the refining operations declined as a result of a rise in crude oil prices. Profit from operations of the Refining and Chemical Segment was RMB5.46 billion, representing a decrease of 68.3% as compared with the same period of the preceding year.
In the first half of 2010, PetroChina adjusted its marketing strategy in a timely manner based on market changes. It also reinforced organization and allocation of resources and developed institutional users. Sales volume and profitability of refined products increased, leading to a steady increase in market share. Sales of refined products reached 59.52 million tons, representing an increase of 26.6% from the previous year. In particular, domestic sales of refined products grew 17.6% to 49.25 million tons from the same period last year. The domestic retail market share rose by 2.9 percentage points to 38.1%.
During the period, profit from operations of the Marketing Segment was RMB7.53 billion, representing an increase of 3.3% from the preceding year.
Natural Gas and Pipeline
In the first half of 2010, significant breakthroughs were achieved in the construction of strategic oil and gas passways and the domestic pipeline network. Main construction works of the Sino-Russia Crude Oil Pipeline came close to completion. Line B of the Central-Asia China Gas Pipeline was in the closeout phase. The second Sebei-Xining-Lanzhou Gas Pipeline (west to Xining) and the Lanzhou-Zhengzhou Section of the Lanzhou-Zhengzhou-Changsha Refined Products Pipeline were completed and commenced operation. Construction works of other pipelines such as the east section of the Second West-East Gas Pipeline were accelerated, and construction works of key projects such as the Dalian and Jiangsu LNG projects progressed smoothly.
In view of a rapidly-growing demand for natural gas, the Company further optimized the operation of its pipeline network, and ensured the safe and steady supply of natural gas for the civil and public utilities sectors, as well as key industrial users and major activities including the World Expo. PetroChina also proactively explored other businesses such as city gas, CNG and LPG.
During the period, profit from operations of the Natural Gas and Pipeline Segment was RMB11.22 billion, representing an increase of 13.7% from a year earlier. Profit contribution from the segment continues to grow.
In the first half of 2010, we proactively consolidated and facilitated the strategic deployment of overseas oil and gas resources, and seized every opportunity for international co-operation. PetroChina also explored the development of new projects. As a result, the scale of the international business continued to grow and the international oil and gas trade developed rapidly.
PetroChina expedited new development projects, made a strategic entry by jointly acquiring coal-seam gas assets in Australia with Shell, secured significant breakthroughs in the heavy crude oil business in South America and made notable progress in the Canadian oil sands project.
New achievements were made in overseas oil and gas exploration. High-yield oil well was discovered in block H in Chad through risk exploration program, laying the foundation for further expansion in the area and increasing reserves.
During the period, overseas oil and natural gas equivalent output of the Company amounted to 55.20 million barrels, representing an increase of 8.3% as compared with the same period of the preceding year, and accounting for 8.9% of the Company’s total production.
Outlook for 2H of 2010
In the second half of 2010, the global economy is expected to continue to recover while China’s economy shows further signs of a strong rebound. The domestic economy is likely to sustain rapid growth, driving the demand for petroleum and petrochemical products. However, as a result of external factors such as international oil prices and domestic policies, the operating environment for the petroleum and petrochemical industry is faced with some uncertainties.
Confronted with a complicated and ever changing macro-economic environment, the Company will continue to carry out its three key strategies of “resources, market and internationalization”, place emphasis on the product quality, and fully leverage its integrated operational advantages. PetroChina will also organize production and operations in a scientific manner, step up the efforts to optimize the structure of the business, with a view to continuously improve its innovation capability, proactively accelerate the transformation of business development, continually enhance corporate management and maintain a fast yet steady development of the Company’s production and operations.