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Overview: Chinese oil industry

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oil_barrel1 May 16, 2013 (Chinavestor)  The following information and analysis concerns Petrochina (NYSE:PTR), China Petroleum & Chemical Corp/Sinopec (NYSE:SNP) and China National Offshore Oil Corporation (NYSE:CEO) financial performance for the year ending 31-12-12.

Petrochina (NYSE:PTR) increased revenues 9.6% from 2011 to RMB 2195,296 million. This was attributable to a rise in average realised prices for products coinciding with an increase in sales volume. PTR reported net profits fell for 2012 by 13.3% to RMB 115, 326 million. An increase in operating expenses could be at the forefront of net profit decrease. The expenses amounted to RMB 1,821,382 million, an increase of 10.9% from 2011.

PTR_Rev_segment

Fig. 1

Petrochina’s (NYSE:PTR) operating revenues for each segment of operation is represented in Fig.1. PTR’s Exploration & Production segment accounts for 16% of the company revenues with an increase of 1.9 % from 2011 to RMB 789,818. The company made a number of key explorations in Sichuan and Tarim Basin with regards to oil and a notable discovery in Dongping with natural gas. Overseas oil and gas production reached 136.9 million barrels. This was an increase of 13.3% compared to the previous year. Crude oil output topped out at 916.5 million barrels, which was exceptional compared to recent years. This is a 3.4% rise over the output from 2011. The expenses associated with the Exploration & Production segment of PTR, however, increased from 2011 due to an associated increase in the Depreciation, Depletion and Amortisation. These could be due to undeveloped oil and gas reserves which would subsequently increase these charges. The Refining & Chemicals segment increased to RMB 883,218 million which is an increase of 4.2% from 2011. The segment of operations also represents 8% of Petrochina (NYSE:PTR) revenues. An increase in operating expenses for the segment is due to regulations on the prices of domestic crude oil which coincided with a decrease in the Refining & Chemicals segment. The loss for the business was RMB 43, 511 million. The decrease in demand for refined products resulted in a decrease in profits for the Marketing segment of 20.6% compared to the previous year. Compared with international operations which continued steady growth, domestic operations slowed down due to regulations imposed on the domestic market for oil and gas. Natural gas however improved operations over 2011, primarily due to increased demand for imports of LPG and an increase in natural gas. As well as representing 5% of PTR’s revenue, the company’s pipeline as of the end of 2012 measured 66,776 km.

SNP_Rev_segment

Fig. 2

CEO_Rev_segment

Fig. 3

Both Sinopec (NYSE:SNP) and CNOOC Ltd (NYSE:CEO) also realised increases in revenues of 11.2% and 2.7% respectively. Whilst net profits for SNP decreased from the previous year by 6.5% due to increases in operating expenses. Most of the products produced by SNP, Crude oil and natural gas, were used by its Refining and Chemical segment, with only a small portion sold externally. These external sales amounted to a 13.1% increase, which, just like PTR’s increase in sales, is due to the increase in demand for oil and gas and also attributable to price rises. CNOOC Ltd (NYSE:CEO) realised increases in revenues due to production increases in North America with regards to Shale Oil. CEO’s Exploration & Production segment represents 79& of revenues, which includes the natural gas unit. However, the company remains small in terms of oil production and sales with regards to SNP and PTR.

net_income_Chinaoil

Fig. 4

revenue_Chinaoil

Fig. 5

It is apparent from Fig.4 and Fig.5, that in terms of revenue, Sinopec (NYSE:SNP) and Petrochina (NYSE:PTR) surpass that of CNOON Ltd (NYSE:CEO) revenues by quite some margin. CEO operations are primarily based offshore with operations in offshore China and Bohai Bay key to the company’s profit. The company specializes in Exploration and Production, with no segment dedicated to Refinery. However, whilst PTR and SNP, who are major players in the Refinery and Chemicals segment, the profit margin ratio of CEO is 26% compared to PTR’s and SNP’s, 5% and 2%, respectively. It is estimated that CEO will grow to be profitable due to its $15.1 billion acquisition of Canadian based Nexen Inc. PTR will develop upon its overseas zones whilst exploring new projects. PTR’s target for the year 2013 is 1387.8 million barrels of Oil and Natural gas.

 



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