PetroChina Crashes Into Red in First Half on Plunging Oil Prices, Demand

PetroChina Co. Ltd., the listed arm of state-owned energy conglomerate China National Petroleum Corp., reported a net loss of 29.98 billion yuan ($4.36 billion) in the first half, according to an interim report filed to the Hong Kong Stock Exchange on Thursday.

Revenue plunged 22.3% year-on-year to 929 billion yuan in the first six months, due largely to a particularly challenging second quarter, in which revenue slumped 30.2% year-on-year, compared with a 14.4% decline in the first quarter.

The company attributed its poor performance to the crash in global oil markets, along with slow sales, including a 35.2% drop in sales of kerosene and a 13.5% decline for gasoline. The report showed that the average price of crude oil sold by PetroChina fell 37.9% in the first half of 2020 to $39.02 per barrel.

“Adversely affected by the sharp drop in international oil prices and a severe contraction of domestic oil and gas demand, the Group’s production and operations have experienced unprecedented shocks and challenges,” said the report.

PetroChina’s profit nosedived in the first half, from making a profit of 28.4 billion yuan to losing 29.9 billion in the first half. It suffered more in the first quarter, when it made a loss of 16.2 billion yuan, narrowing to a net loss of 13.8 billion yuan in the second quarter.

Despite low prices, the company’s crude oil output ticked up 5.2% to 475.4 million barrels, with natural gas output up 9.4% to 2.149 trillion cubic feet, in line with the company’s strategy to ramp up production as China seeks to reduce its reliance on imports due to energy security concerns.

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However, crude oil throughput declined 4.9% in the first six months to 568.2 million barrels.

China employs a domestic oil price control scheme which requires money made by oil companies from selling at prices higher than the international market to be deposited in a risk prevention reserve, which resulted in the reserve growing to nearly 13 billion yuan as of June according to a PetroChina financial officer in a Thursday meeting.

The officer also said that by the end of June, the company had nearly recouped inventory losses, after recording a 7.9 billion yuan inventories write-down in the first quarter.

PetroChina also said it will invest 1 to 2 billion yuan each year in exploring green energy including solar power, hydrogen power and geothermal energy, and could further step up its investment to 10 billion per year in the next five-year plan period from 2021 to 2025. It also aims to reach near-zero emissions by 2025, said Duan Liangwei, the company’s CEO.

Contact reporter Lu Yutong (yutonglu@caixin.com) and editor Gavin Cross (gavincross@caixin.com)

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