petrochina

PetroChina’s Operating Results for 2016 Beat Expectations
Endeavoring to Make Steady Progress,
Achieving Stable Improvement in Performance

2017-03-30   

30 March 2017, Beijing – PetroChina Company Limited ("PetroChina" or the “Company", HKSE: 0857; NYSE: PTR; SSE: 601857) In 2016, the global economy experienced a slow recovery while the situation in China was stabilizing and the operation of the economy as a whole remained within a reasonable range. The global energy industry underwent deep restructuring while the international oil and natural gas prices remained volatile, hovering at low levels. 

Despite the complexity of the current domestic and international economic situation, the Company adhered to steady development, and coordinated and explored both domestic and international resources and markets, focused on the development of the main business of oil and gas. In addition, the Company continued to optimize its production and operations to accommodate market changes, sustained reform and innovation efforts for improving its management model and business operations mechanism. These efforts helped create new revenue streams, cut unnecessary expenses, lower costs and boost efficiency. The Company strengthened its foundation for safe and environment-friendly operations, thereby ensuring the steady production and operations throughout the year.

For the year ended 31 December 2016, based on the International Financial Reporting Standards, the Company achieved revenue from operations of RMB1,616,903 million, down 6.3% from the previous year. It recorded net profit attributable to shareholders of the Company of RMB7,857 million, despite the substantial decline in crude oil prices and sustained downward adjustments in prices of refined oil and natural gas in the domestic market. Especially against a backdrop of low oil prices, the Company attached great importance to cash flow management, adopted a proactive stance, implemented strategies with high precision, and endeavored to strike a balance among maintaining its capital expenditure scale, dividend payment and debt financing. The Company realized free cash flow of RMB84,125 million, up RMB40,563 million from the previous year. In appreciation of the support from shareholders, the Board of Directors has decided to recommend the payment of a special dividend.

Exploration and Production 

In 2016, the Company highlighted its target of securing reserves with economies of scale in its oil and gas exploration and development activities. It strengthened its pre-exploration and precise exploration. It ascertained six uncompartmentalized geological oil reservoirs of 100 million tons each in scale in Changqing, Xinjiang and other regions. Its natural gas exploration achieved outstanding results, with five uncompartmentalized geological reservoirs of over 100 billion cubic meters of gas each ascertained in Tarim Basin and other regions, thereby establishing a firm footing of oil and gas resources. With regards to its oil and gas development activities within China, it proactively adjusted downward its crude oil production capacity and output in response to changes in oil prices and the market, pushed forward with capacity construction in key plots, deepened the precise reservoir description works and implemented precision water injection, thereby effectively controlling natural depletion and ensuring the effectiveness of the overall development operations. With regards to its natural gas business, the Company placed an emphasis on key gas regions, and organized its production and operation in a scientific manner, seeking to maintain steady growth of its natural gas output. It sustained efforts in maintaining an efficient and steady oil and gas equivalent output of above 50 million tons at Changqing oilfield. It completed the Moxi-Longwangmiao gas field project with an annual capacity of 11 billion cubic meters in the Sichuan - Chongqing gas area. It also completed construction of Changning-Weiyuan national-grade shale gas demonstration area. The Company’s overseas oil and gas cooperation activities capitalized on China’s “One Belt, One Road” policy and other opportunities to consolidate the development of five key oil and gas cooperation regions, focusing on seeking high-quality reserves which can be quickly put into production and on efficient  exploration. Production management was strengthened in the development of oil and gas. It pursued key capacity construction to ensure stable operation of oil and gas production. In 2016, crude oil output from the Company’s domestic operations was 763.8 million barrels, representing a decrease of 5.3% compared with the previous year. Domestic marketable natural gas output was 3,008.3 billion cubic feet, representing an increase of 3.6% compared with the previous year. Oil and gas equivalent output reached 1.27 billion barrels, representing a decrease of 1.9% compared with the previous year. Oil and gas equivalent output from overseas operations reached 201.3 billion barrels, representing a decrease of 1.1% compared with the previous year, and accounted for 13.7% of the Company’s total oil and gas equivalent output.

With the unfavorable environment of declining crude oil and natural gas prices, the Company adhered to a low-cost strategy and strengthened management of costs and expenses, contributing to the 10.1% decline in operating costs of oil and gas compared to the previous year. The exploration and production segment’s domestic business continued to optimize its deployment of development solutions, strengthened the dynamic adjustment of output, intensified control of key production processes, reduction of energy usage and wastage to achieve a better efficiency. The segment’s overseas business adopted price-driven sales strategies, optimize investments and other initiatives to broaden revenue sources, reduce costs and improve efficiency. In 2016, the exploration and production segment recorded a profit from operations of RMB3,148 million.

Refining and Chemicals

In 2016, the Company scientifically arranged the direction and production pace of refinery activities according to market demand. It adjusted and optimized the processing resource structure and the product structure. It continued lowering of the diesel to gasoline refinery processing ratio to 1.40 from 1.68 in the previous year. It increased output of high-margin chemical products, launched new chemical products under different labels in the market, and achieved a 3.6% year-on-year growth in output of products. It increased the processing load factor of high-performance equipment, implemented maintenance work on equipment with time and peak output mismatches, thereby realizing safe, efficient and stable operations. The Company grasped opportunities afforded by a turnaround in market conditions, timely adjusted sales strategies for chemical products and added new electronic commerce channels, thereby achieving steady growth in sales volume of high-performance products and high-performance areas. The Company pursued orderly construction of key refinery engineering projects and completed 23 China V standard automobile gasoline and diesel upgrading projects as scheduled. PetroChina Yunnan Petrochemical entered a stage of preparation for full-scale production. In 2016, the Company processed 953.3 million barrels of crude oil, down 4.5% year on year. Of these, 684.5 million barrels were processed from the Company’s self-produced crude oil, accounting for 71.8% of the total processing volume, showcasing good synergy. It produced 86.022 million tons of refined products, down 6.4% year-on-year; and 5.589 million tons of ethylene, up 11.1% year-on-year.

In 2016, the refining and chemicals segment focused on the principle of market orientation and efficiency, and persistently optimized resources allocation and product structure. It overcame more technological hurdles, enhanced equipment efficiency, and increased the production and sale of high-value-added products that satisfied the market need, thereby proactively improving the segment’s profit. The segment strengthened its cost control and achieved better scores in key economic benchmarks than in the previous year, making it a major driver of the Company’s earnings in a low oil price environment. In 2016, the refining and chemicals segment achieved profit from operations of RMB39,026 million, an improvement of RMB34,143 million over the previous year. Of this, refining operations recorded profit from operations of RMB27,565 million, representing an improvement of RMB22,875 million over the previous year. Taking advantage of an improving chemicals market, the chemicals business operations continued to optimize its product structure and increased the sale of highly profitable products. As a result, the chemicals business operations recorded profit from operations of RMB11,461 million, representing an improvement of RMB11,268 million over the previous year.

Marketing

In 2016, the Company proactively responded to unfavorable conditions such as the slowing growth in demand for refined oil products and the lower market prices by planning in tandem the domestic and international markets and by allocating oil product resources in a scientific manner to ensure that the whole business chain operated smoothly for return maximization. The segment proactively accommodated changes in market competition and customer preferences and deepened its model of integrated marketing of refined products, fuel cards, non-oil business and lubricant. It went live with the new smartphone APP “PetroChina Customer e-Station” to promote mobile payments, and to strengthen its sales efforts in the non-oil business. The segment adapted to the reality in the domestic market environment and extended the reach of its network, adding more extended-service stations to enhance the sales capabilities at each station. The year saw the addition of 181 new service stations, bringing the total number of service stations operated by the Company to 20,895. The Company’s international trading operations exploited better synergies as it coordinated and optimized export and import resources, and proactively expanded into the high-end high-margin markets, a move that further enhanced the scale and operational quality of its international trade.

In 2016, faced with unfavorable factors such as declining growth in demand for refined oil in the domestic market and intense market competition, the segment aimed at maximizing the overall value of the Company, and persistently improved the quality of its sales and trading operations so that there was a sustained improvement in profitability. Its domestic operations continued to strengthen the linkage between production and sales and further improved inventory management. The allocation of logistics, transportation and other resources was optimized, and cost and expense control was strengthened, so as to increase the profitability of the non-oil business. Stronger international trade and a better synergy and coordination of upstream, midstream and downstream businesses in the domestic market optimized the import of oil and gas resources and expanded the export of refined resources. The marketing segment recorded a profit from operations of RMB11,048 million in 2016, representing a profit turnaround of RMB11,548 million.

Natural Gas and Pipeline

In 2016, according to market demand and seasonal changes, the Company adjusted the pace of the domestic gas production, optimized the importation of gas and LNG, strengthening its peak-load regulation capacity and ensuring the balance between operations and resources. The segment undertook scientific planning of its oil and gas transportation, optimized the operations and management of its oil and gas pipeline network, and raised the operating efficiency of pipelines. The segment proactively responded to the overall relaxed environment in market resources by adjusting and optimizing its natural gas sales team, and by adopting flexible sales promotion strategies. It continued to develop key, high-margin markets, pushed forward with branch pipelines and the uptake of gas by new customers, relentlessly enhanced its sales quality and effectiveness. The eastern section of the Third West-East Gas Pipeline saw construction completed and commenced operation. Projects such as the Fourth Shaanxi-Beijing Gas Pipeline also commenced construction. The Company pursued system reforms in the natural gas sales and pipeline business, completed integration of end-user utilization, thereby establishing a good foundation for upgrading its natural gas sales capabilities. As at the end of 2016, the Company had 78,852 km of domestic oil and gas pipelines, including 49,420 km of natural gas pipelines, 18,872 km of crude oil pipelines and 10,560 km of refined oil product pipelines.

In 2016, the Natural Gas and Pipeline segment optimized organization of its resources and lowered its integrated procurement cost, adjusted supply and demand by capitalizing in full on price leverage and intensified sales efforts in the high-margin market. As a result, sales of natural gas increased while profit remained steady, achieving a profit from operations of RMB17,885 million. 

Outlook for 2017

The global economy is expected to continue its moderate recovery in 2017. In view of the gradual return to equilibrium in the global oil market, international oil prices are slated for a rebound, albeit with uncertainties. China’s economy is expected to achieve moderate and stable growth, with overall consumer demand for oil and gas in China still on an uptrend. The oil and gas market situation is undergoing profound changes, with major strategies such as the “One Belt and One Road” initiative and reforms to the energy pricing system and to the national oil and natural gas system accelerating growth drivers. This is bringing opportunities for the Company to organize production and develop markets, contributing positively to its long term growth. In a nutshell, the opportunities outweigh the challenges, and the expectations outweigh the difficulties.

The Company will adhere to its principle of steady development. It will endeavor to implement its four pillar strategies of resources, marketing, international development, and innovation. It will focus on the development of the oil and gas business and continue to optimize its business layout and structure. It will enhance the operational efficiency and profitability of its oil and gas business chains, deepen efforts in creating new revenue streams, cutting unnecessary expenses, lowering costs and improving efficiency. It will maintain steady and improving production operations in order to improve its overall competitiveness to survive the steep challenges from low oil prices. The Company will proactively drive its own development, so as to better safeguard the interests of its shareholders.

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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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