PetroChina 3Q Net Profit Down 33%; Below Forecast

HONG KONG - PetroChina Co. on Tuesday posted a 33% decline in its third-quarter net profit, below expectations even as its revenue rose on higher crude oil output.

China's largest oil company by capacity reported a net profit of 24.9 billion yuan ($4 billion) for the three months ended Sept. 30, down from 37.4 billion yuan a year earlier and below average 28.9 billion yuan net profit forecast of six analysts polled earlier by The Wall Street Journal.

PetroChina's revenue rose 3.9% to 551.6 billion yuan from 530.7 billion yuan a year earlier, because of a higher contribution from the company's upstream exploration-and-production operations.

Beijing-based PetroChina, which underperformed smaller rival China Petroleum & Chemical Corp.'s 9.4% decline in net profit for the same period, attributed its weak results to continued losses in its refining and chemicals businesses.

Like its domestic rivals, high crude costs have squeezed PetroChina's downstream refining and chemicals operations as China's fuel-pricing system prevents refiners from passing on higher costs to consumers.

Net profit in the nine months ended Sept. 30 fell 16% to 87 billion yuan from 103.4 billion yuan a year earlier, the company said.

The company's crude oil output rose 2% to 683.2 million barrels in the January-September period, while the average selling price for its crude oil fell 0.2% to $103.62 a barrel.

Operating losses from PetroChina's refining business in the January-September period narrowed to 30 billion yuan from 41.5 billion yuan, after China's government permitted a 6.1%-6.5% increase in the prices of refined products in September.

China's government often pressures the country's two largest refiners--PetroChina and Sinopec--to maintain their prices for refined products even when crude oil prices surge in the global market, as part of Beijing's efforts to keep a lid on inflation.

In addition, operating profit from the natural gas and pipeline business in the January-September period fell sharply to 885 million yuan from 13.2 billion yuan a year earlier, due to higher imports of natural gas from Central Asia and purchases of liquefied natural gas.

Analysts said they expect domestic refining margins to improve in the fourth quarter on expectations that Beijing will implement a new fuel policy in the near term.

"We believe that the current more transparent and market-driven fuel mechanism indicates that the direction for China's energy pricing policy that is irreversible," UOB KayHian analysts said Monday.

CNOOC Ltd., China's largest offshore oil and gas producer by capacity, last week reported a 5.2% rise in third-quarter revenue to 48.96 billion yuan on higher oil and gas output. CNOOC provides only net profit figures for the first half and full year.

Copyright (c) 2012 Dow Jones & Company, Inc.


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