August 27, 2008 / 10:37 AM / 12 years ago

WRAPUP 2-PetroChina's Q2 succumbs to refining squeeze

* PetroChina profit hit by soaring crude, fuel price cap

* H2 may be better after June fuel price rise

* Producers CNOOC and Woodside reap benefits from $140 crude (Adds executive and analyst comments, details)

By Judy Hua

HONG KONG, Aug 27 (Reuters) - PetroChina Co Ltd (0857.HK), Asia’s top oil and gas producer, reported a sharp fall in quarterly earnings due to a squeeze on refining margins, but soaring crude prices fuelled a surge in profits at two other energy firms in the region.

Global crude oil prices CLc1 jumped by nearly half in January-June to top $140 a barrel, boosting the profitability of oil majors from Exxon Mobil Corp (XOM.N) to Royal Dutch Shell (RDSa.L) to record levels.

But state-run PetroChina and Sinopec Corp (0386.HK) (SNP.N) (600028.SS) have found themselves squeezed between skyrocketing crude prices and state-capped fuel prices, a massive burden for suppliers in the largest fuel market after the United States.

Chinese offshore producer CNOOC Ltd (CEO.N), which has no significant refining exposure, fared much better, beating forecasts with an 89 percent increase in first-half profit.

Underlying earnings at Woodside Petroleum Ltd (WPL.AX), Australia’s No.2 oil and gas producer, rose 86 percent over the same period. [ID:nSYD244523]

Analysts say PetroChina (PTR.N) (601857.SS) faces a better second half after Beijing raised gasoline and diesel prices by 18 percent late in June — provided crude does not ratchet up again.

“Their refining business could stop bleeding,” said Kim Eng Securities analyst Larry Grace. “I don’t see it getting any worse unless crude takes off again, and I don’t think crude will.”

The firm also took a hit on its production side, which increased oil and gas output 6.5 percent in the half. It paid out a whopping 47.8 billion yuan ($7 billion) in special levies on domestic crude oil sales — or windfall taxes, which increase with rises in crude prices.

PetroChina, the largest of China’s energy triumvirate, said its net profit fell 38 percent to 24.74 billion yuan in April-June versus 39.69 billion yuan a year earlier.

The result lagged a consensus forecast for 26.05 billion yuan from five analysts polled by Reuters.

Executives said it had won another government subsidy to compensate for refining losses in the second quarter of this year, but declined to specify the amount.

Chief Finance Officer Zhou Mingchun said the company had not received any government notice of a change to the subsidy policy in the third quarter. The firm posted nearly 60 billion yuan in losses from its refining and marketing division.

GO FORTH

PetroChina is now preparing to buy from parent CNPC the 50 percent it does not own in an international joint venture, but President Zhou Jiping declined to disclose a possible price tag.

In 2005, PetroChina set up the 50-50 venture with state parent CNPC, China’s dominant oil and gas producer with operations in Latin America, Central Asia and Africa.

“When and how we can complete this buyout depends on approval of the Chinese government, as well as communications with the governments of resources countries,” Zhou said.

Seeking new markets, PetroChina unveiled a HK$7.59 billion ($973 million) acquisition of a controlling stake in affiliate CNPC (Hong Kong) (0135.HK) from their mutual parent firm, giving it entry into city gas distribution and other end-user markets.

PetroChina forecast Chinese urban gas demand will rise to 30 billion cubic metres (bcm) by 2010 and double to 60 bcm by 2015.

For CNOOC, China’s No.3 producer, record crude prices and an 8.3 percent increase in net production of oil and gas pushed first half net profit to 27.54 billion yuan from 14.55 billion yuan a year earlier, topping a consensus forecast for 22.9 billion yuan from eight analysts polled by Reuters Estimates.

Woodside’s underlying earnings, which exclude one-time items, nearly doubled to A$1 billion ($862 million). Woodside shares ended 3.4 percent higher on Wednesday, outperforming a flat S&P/ASX 200 Index .

PetroChina results came after the Hong Kong market close.

Shares in PetroChina fell 27 percent in January-June, versus Sinopec's 38 percent fall and CNOOC's 1 percent gain. Hong Kong's benchmark Hang Seng Index .HSI fell 21 percent.

Its shares trade at 12.4 times forecast earnings versus Sinopec’s 15.9, Exxon Mobil’s (XOM.N) 8.5 and BP’s (BP.L) 6. ($1=6.849 Yuan=A$1.17) (Writing by Tony Munroe; Additional reporting by Fayen Wong in PERTH; Editing by Edwin Chan and David Cowell)

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