June 6, 2013 (Chinavestor) Operating income for Petrochina (NYSE:PTR) had increased in 2012 to RMB 182461 million; an increase of 5% in contrast to 2011 figures of RMB 174519 million. The decrease in net income may seem rational considering PTR had to expense out more funds on certain operations. It is also apparent that operating margins decreased after 2012 Q1, represented in Fig 3, coinciding with the decrease in net profit margins.
Whilst operating income has increased steadily over the course of 2012 through 2013 Q1, future profits can only be determined once fair rules are placed on both the domestic and corporate selling and import prices. Inflation rates and the company’s policy on hedging risks, alongside future tax reforms and additional exploration projects will be the determinants for future profit which PTR is also aware of.
Prospective investors should be aware of the oversupply effects of crude oil for both Petrochina (NYSE:PTR) profits and China’s economy. Whilst these domestic gas prices remain low compared to import prices, the threat of oversupply with crude oil is imminent and investors should be aware of this impending risk. As a result of the diminishing demand for crude oil in China, Brent Crude oil prices have declined to nearly $100 a barrel. Projecting PTR’s future growth and prospects will be a daunting task given the severe uncertainty of the import prices and future productions levels. Government regulations take a strong role in moulding state owned enterprises, especially those involved in the upstream operations of oil and gas production. Domestic gas prices need to increase dramatically in accordance with the decline in demand for crude oil. If this regulation is not amended efficiently, China’s state owned oil and gas companies are faced with negative future cash flows. One thing can be made for sure; expenses will increase YOY if China’s concern over a ‘cleaner’ environment takes control of regulations and PTR has to import extra natural gas to meet the government demands. China’s oil consumption levels will automatically affect the way world oil prices, oil futures and hedges are followed through by countries. If 2008 is anything to go by, another increase in demand for crude oil in China will prompt historically high oil prices internationally. Petrochina (NYSE:PTR), given current state of the regulations, carries a fair amount of risk with regards to investment. Future growth is dependent on numerous factors, which may be out of Petrochina’s (NYSE:PTR) hands.