HONG KONG - PetroChina Co., China's largest listed oil company by capacity, said Thursday it is actively seeking acquisitions in central Asia, East Africa, Australia and Canada as it seeks to feed the growing energy demand in the country and strengthen its international presence.
Vice Chairman and President Zhou Jiping told reporters in Hong Kong at the company's results briefing that international oil companies are in the process of optimizing their world portfolios and there are "favorable opportunities for acquisitions" in different parts of the world.
Mr. Zhou said the company has earmarked 100 billion yuan ($15.7 billion) for investments overseas in oil and gas assets this year and will accelerate its acquisition strategies through cooperation with partners overseas and buy oil-and-gas assets directly.
He said the company plans to boost its overseas oil and gas output to 50% of its total output in five to eight years from 9% at present.
"Internationalization is a very important long-term strategy for our company. We remain very committed to expand our presence overseas," Mr. Zhou said.
The ambitious acquisition plan came after the Chinese oil giant posted a worse-than-expected 6% decline in first-half net profit, hit by losses in its refining business. Net profit for the six months to June fell to CNY62.03 billion from CNY66.01 billion a year earlier, according to international accounting standards. It is below the average CNY67.82 billion forecast of six analysts polled earlier by Dow Jones Newswires.
The weak profit came on the heels of disappointing results from domestic peer Cnooc Ltd., China's largest offshore energy producer, which reported a 19% decline in net profit to CNY31.87 billion due to lower oil-and-gas output.
Unlike Cnooc, however, PetroChina is more exposed to government-mandated price controls at home because of its significant downstream operations in refining and natural gas.
"Controlled product prices, and related segmental refining losses are also a major factor in weak first-half earnings, but even a rebound in this will not be enough to justify current valuations in our view," JPMorgan said in a note Thursday.
PetroChina's profit from upstream operations rose 9.7% as average crude-oil selling prices rose 6.3% in the first half, but a loss from the refining and chemicals business widened to CNY28.88 billion from CNY20.99 billion due to weak demand for petrochemical products and government caps on domestic fuel prices, which prevented it from passing on higher crude costs to consumers.
PetroChina also reported a profit of just CNY1.64 billion for its natural gas and pipeline business, down 85% on year due to higher imports of natural gas from Central Asia and purchases of liquefied natural gas.
"As far as I know the National Development and Reform Commission has indicated that it will facilitate the price reform of refined products and natural gas in the second half of this year. I think we will see a better situation after the reform," Mr. Zhou said.
However, analysts said they don't expect the long-waited reform of refined products and natural gas prices until after leadership changes in the government this year.
"We maintain the view that significantly higher gas prices in China will take time, as low prices will incentivize demand and help government meet target of more natural gas in the primary energy mix," JPMorgan said.
Copyright (c) 2012 Dow Jones & Company, Inc.
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