PetroChina's Net Income Falls 32% on Fuel-Price Curbs

PetroChina Co., the nation's biggest oil producer, said first-quarter profit fell 32% as losses at its refineries and a tax on oil sales eroded earnings from record crude prices.

Net income dropped to 28.9 billion yuan ($4.1 billion), or 0.16 yuan a share, from 42.1 billion yuan, or 0.24 yuan a share, a year earlier, Beijing-based PetroChina said in a statement to Hong Kong's stock exchange today. Sales rose 42% to 259 billion yuan.

PetroChina joins China Petroleum & Chemical Corp., or Sinopec, in reporting profit pared by sales of fuels at below- cost prices and windfall taxes on oil sold for more than $40 a barrel. China limits energy prices to curb their impact on inflation that's near an 11-year high.

The result ``reflects high oil prices, which averaged $97 a barrel during the first quarter, up 67% from the first quarter of 2007, along with the government price caps on refined products like gasoline and diesel,'' Michael Yuk, a Hong Kong- based oil analyst at Sun Hung Kai Financial, said before the earnings announcement.

PetroChina fell 0.5% to close at HK$11.60 in Hong Kong trading. The stock has declined 17% this year, compared with the 7.7% drop in the benchmark Hang Seng Index. The announcement came after the market closed.

PetroChina's market capitalization has slumped to $421 billion since it became the world's first $1 trillion company on listing in Shanghai on Nov. 5. The company was reporting quarterly earnings for the first time. The results were unaudited, it said.
Refining Losses

Sinopec's first-quarter profit plunged 69% to 6.06 billion yuan, as its refineries posted an operating loss of 20.64 billion yuan compared with a profit of 4.38 billion yuan a year earlier, the state-controlled company said yesterday.

PetroChina will receive ``an appropriate subsidy'' from the government starting this month to compensate for losses on processing oil, it said April 20.

To aid the Beijing-based company and Sinopec, Asia's largest refiner, the government will refund value-added taxes on 3.5 million metric tons of fuel imported by their parent companies in the second quarter.

A windfall tax levied on crude oil sold by domestic producers also eroded earnings. The tax's trigger level of $40 a barrel is ``too low,'' causing Chinese oil companies to face ``heavy'' operational pressures, Hu Weiping, oil and gas director at the National Development and Reform Commission, said April 24. Crude oil has surged 81% in the past year to a record $119.93 a barrel in New York today.

Production Increase

PetroChina's capital expenditure in the first quarter fell to 19.5 billion yuan compared with 28.2 billion yuan a year earlier. It plans to increase full-year spending by 15% to 207.9 billion yuan, the company said last month.

PetroChina's production rose 6.9% to the equivalent of 296.8 million barrels of oil in the first quarter, the company said today. Oil output climbed 3.3% to 216 million barrels and natural gas production jumped 18% to 484.7 billion cubic feet.

The oil producer sold its crude oil for 63% more than a year earlier, at an average $87.93 a barrel in the first quarter. It sold gas for 25% more at $3.15 a thousand cubic feet.

Retail Stations

Oil processing at PetroChina's refineries rose 7.4% in the quarter to a record 217 million barrels. The company added 21 retail stations in the first quarter, bringing the total to 18,406.

The company aims to boost oil and gas output by 7% to the equivalent of 1.189 billion barrels of oil this year, Vice President Li Hualin said at the time.

Oil output will reach 871.6 million barrels while gas production will be 1.907 trillion cubic feet, he said. The company plans to process 854.9 million barrels of crude oil this year, he said.

Net income last year rose 2.4% to 145.6 billion yuan, PetroChina said March 19.
Smaller rival Cnooc Ltd. said today sales rose 62% to 24 billion yuan in the first quarter because of surging oil prices. Oil production gained 3.7% to 392,722 barrels a day. (Bloomberg)