petrochina

PetroChina Records Profit in First Half of 2016
Adheres to Principle of Steady Development 
Reforms and Innovations Boost Quality and Profitability

2016-08-24   

24 August, 2016, Beijing – PetroChina Company Limited ("PetroChina" or “the Company", HKSE: 0857; NYSE: PTR; SSE: 601857) today announced that the Company mitigated the impact of the plunge in oil and natural gas prices on its profitability, maintained stable and controllable production and operations, achieved improved financial results month-by-month and recorded profit on an overall basis in the first half of 2016. Its achievement took place amid a challenging environment arising from further slump in international oil prices, weak domestic demand for oil and gas and intensified market competition in the first half of 2016. During the period, the Company faced the most difficult period for its production and operation since its listing, with the realized crude oil price and natural gas price decreasing by 36.5% and 24.5% compared to the same period in 2015, respectively. Under such circumstances, the Company proactively adapted to the “New Normal” of economic development, adhered to the guiding principle of steady development, and continued to improve quality and profitability through reforms and innovations. As a result, the Company achieved satisfactory results relative to its international peers, outperforming most of them in some major indicators such as oil and gas output and natural gas reserves.
As of 30 June 2016, based on the International Financial Reporting Standards, the Company recorded profit from operations of RMB34.54 billion and net profit attributable to shareholders of the Company of RMB 531million, signaling that profit from operations was declining at a lower rate than the fall in oil prices. Of the operational indicators, capital expenditures decreased by approximately 46% compared with historical highs, with the investment structure further emphasizing quality and profitability. The major cost indicators continuously trended downward, resulting in the oil and gas lifting cost per unit falling more than 10% compared with the same period in 2015. The product structure was optimized according to market demand, reducing the diesel-to-gasoline ratio to 1.42 from 1.75 for the same period in 2015. Remarkable results were achieved in broadening revenue sources, reducing costs and improving profitability. The Company maintains a healthy financial position with the debt-to-asset ratio decreasing by 0.2 percentage point compared with the beginning of the period, with free cash flow remaining stable and increasing by about RMB22.7 billion compared with the same period in 2015 to RMB29.9 billion.

Exploration and Production


In the first half of 2016, the Company emphasized quality and profitability in its oil and gas exploration and development business. The domestic exploration business focused on key basins and scalable and profitable reserves, strengthened comprehensive geological research, and endeavored to achieve breakthroughs in engineering technologies. In terms of oil exploration, six discoveries were made in the Junggar Basin and Tarim Basin, indicating large-scale reserves at the levels of 100 million tons or 10 million tons of original oil in place. In terms of natural gas exploration, several reserve zones with over 100 billion cubic meters of gas resources each were discovered in the Tarim Basin and other regions. In its overseas oil and gas exploration, the Company focused on seeking quality reserves which can be quickly recovered, and achieved breakthroughs and progress in several regions. In terms of development and production, the Company planned its production based on the trends of international oil prices and production efficiency, adjusted crude oil production plans in a timely manner, and continued to optimize its production plans as well as output structure. The Company reduced production lines and workloads with low margin or no profitability, supporting production stimulation measures. In the first half of 2016, crude oil output from domestic operations was 385.3 million barrels and domestic marketable natural gas output was 1,528.4 billion cubic feet. Oil and gas equivalent output from overseas operations reached 108.1 million barrels. The oil and gas equivalent output exceeded half of the full-year target in the first half of 2016, accounting for 14.4% of the Company’s total oil and natural gas equivalent output.
In the first half of 2016, the domestic exploration and production segment stepped up efforts to broaden revenue sources, reduce costs and improve efficiency. It adopted a number of measures to vigorously control and reduce losses, resulting in effective control of investments and costs. The overseas businesses established a mechanism linking costs and oil prices, so as to respond to market changes and oil price fluctuations in a timely and effective manner, as well as to maintain the stable and effective growth of the business. Under the adverse impact of depressed international oil prices, the Exploration and Production segment recorded a loss from operations of RMB2,419 million.

Refining and Chemicals


For the Refining and Chemicals segment in the first half of 2016, the Company carried out overall planning in terms of managing profitability, markets and resources. It also allocated more resources to the refining and chemical integrated complex and more profitable enterprises. The Company also increased its chemical production workload, accelerated the research and development, production and sales of new products, and strengthened optimization of resources allocation and product logistics, with the workload of its key refinery and high-margin chemical plants maintained at high levels. The Company processed 483.4 million barrels of crude oil, and produced 43.436 million tons of refined products. The output of chemical products rose 13.4% over the same period in 2015 to 11.811 million tons, with the proportion of high-margin refinery products such as high-octane gasoline and aviation fuel up 11.6 percentage points, and that of profitable chemical products such as synthetic resin up 7.6 percentage points. Sixteen major technical and economic indicators – including refining comprehensive energy consumption, fuel and power energy consumption in ethylene production– performed better compared with the same period in 2015. The Company optimized resources allocation and product logistics in chemical product sales,with 16 new products achieving mass production and sales. In the first half of 2016, the main facilities of Yunnan Petrochemical entered the trial run stage, while the quality upgrading project of the national standard V gasoline and diesel proceeded as planned.
In the first half of 2016, the Refining and Chemicals segment focused on the principles of market-orientation and profitability, and continued to strengthen product structure as well as control of costs and expenses. As a result, the segment profitability significantly improved, boosting the overall profitability of the Company. During the reporting period, the Refining and Chemicals segment recorded a profit from operations of RMB27.474 billion, representing an increase of RMB22.817 billion over the same period in 2015. Of this, the refining business recorded a profit from operations of RMB21.425 billion, representing an increase of RMB 15.875 billion over the same period in 2015. The chemical business achieved a turnaround and recorded a profit from operations of RMB6.049 billion, representing an improvement of RMB6.942 billion compared with a loss from operations of RMB893 million over the same period in 2015.

Marketing


In the first half of 2016, the Marketing segment actively coped with slowing demand growth for refined oil products. It capitalized on the market trend, strengthened the links between production, transportation and sales, and optimized resources allocation and logistics. The Company continued to enhance its sales capabilities to end customers, fully implemented themed promotions, and conducted integrated marketing of refined products, fuel cards, non-oil business and lubricants on a regular basis. The Company improved the management of stations with low efficiency and low sales and adopted a new payment method on a trial basis. The Company strived to increase the operating quality of its international trading operations by focusing on synergies, taking advantage of its overseas oil and gas operation centers, and vigorously exploring the high-end and high-profit markets. The Company sold a total of 76.31million tons of gasoline, kerosene and diesel in the first half of 2016. Of this, petrol pump sales increased by 395,000tons,. The Company expanded its quality marketing channels by various means, adding 245 new service stations and reconstructing or expanding 47 stations. Annual retail capacity increased by 1.5 million tons.
In the first half of 2016,the domestic business of the Marketing segment controlled its costs and expenses, explored the market through various channels, and implemented target-specific marketing strategies, with the non-oil business becoming a new growth point, making a positive contribution to the Company’s overall profitability. For international trading, the Company optimized the import of oil and gas resources and expanded the export of self-refined products, achieving a continuous growth in exporting volume. The Marketing segment recorded a profit from operations of RMB4.609 billion, representing an increase of 65.6% over the same period in 2015.

Natural Gas and Pipeline


In the first half of 2016, the Company’s Natural Gas and Pipeline segment proactively responded to rapid changes in the market, and coordinated the utilization of its peak-shaving capabilities. It optimized the operations of the domestic gas and imported gas business and maintained the overall balance of production, transportation, sales and storage. In particular, facing lower-than-expected market demand in the second quarter, the Company put more efforts in the marketing of natural gas, optimized the monthly operational plan of imported gas, increased the storage of gas, made headway in its market expansion and adopted flexible sales tactics in the high-end market and to some of its users under direct supply. At the same time, the Company proactively developed power plant projects in Guangdong, Shandong and Northeast China region as new users, and explored the Caofeidian and regional markets in Southern Hebei. The Company also promoted new users to commence production. These measures led to increased sales and stable profitability. In the first half of the year, the Company sold 66.05 billion cubic meters of natural gas in domestic market, representing an increase of 10.6% over the same period in 2015. The construction of various key projects made steady progress. The Guigang-Yulin and Jintan-Liyang gas pipeline projects were completed and put into operation. The construction of the East Section of the Third West-East Gas pipeline was basically completed, while some projects such as Yunnan refined products pipeline proceeded as planned. The construction of the second China-Russia Oil Pipeline has commenced.
In the first half of the year, facing obvious fall in natural gas prices, the Company’s Natural Gas and Pipeline segment optimized the allocation of resources, reduced comprehensive purchase costs, stepped up marketing efforts, and improved the marketing efficiency and profitability of the pipeline network. The Natural Gas and Pipeline segment recorded a profit from operations of RMB11,431 million. Of this, the segment recorded a net loss of RMB8,006 million on the sale of imported pipeline gas and LNG, narrowing the loss by RMB2,620 million over the same period in 2015.

Outlook for the Second Half of 2016


In the second half of this year, the demand and supply of the domestic and international oil and gas market is not expected to undergo significant change. However, after the proactive response in the first half of the year, the Company has improved its efficiency and profitability. It has started a favorable trend with steady development and is expanding continuously. The Company will further enhance its analysis and assessment of the situation, and capture the opportunities arising from the implementation of country’s major strategies such as supply-side structural reforms and the “The Belt and Road Initiative”. The Company endeavors to keep a foothold on the gas and oil business, focus on improving quality and efficiency, promote reformation and innovation, as well as take advantage of its integrated business model covering all businesses along the industry chain. Meanwhile, the Company will proactively promote the “Ethos of Hard Work” and “Three Truths and Four Cardinals” of the “Daqing Spirit”, striving to achieve all the targets for the year, as well as to promote its high-quality and steady development.


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Additional information on PetroChina is available at the Company's website: 
http://www.petrochina.com.cn   
Issued by PetroChina Company Limited 


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PetroChina Company Limited


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