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Abu Dhabi, UAEWednesday 19 December 2018

PetroChina's surging profits a lucky break for shareholders

As net income more than doubles, firm to pay dividend of 0.0888 yuan per share - with eight being a lucky number in China

A gas injection site run by PetroChina in Chongqing, China. Earnings for the firm have soared. Reuters
A gas injection site run by PetroChina in Chongqing, China. Earnings for the firm have soared. Reuters

PetroChina is rewarding shareholders with a higher - and symbolic - payout after its best half-year profit in more than three years.

The nation’s biggest oil and gas producer raised total dividends for the first six months by almost one-third to 0.0888 yuan per share. The lucky payout - eight is widely considered an auspicious number in China - rounds out a banner earnings season for China’s three oil majors as crude’s rally allowed them to return more money to shareholders.

PetroChina’s earnings, released Thursday, follow higher results from state-owned peers China Petroleum & Chemical and Cnooc, driven by a global crude price rally and deep cost cuts. Benchmark Brent crude averaged 35 per cent higher in the first six months at $71 a barrel.

“The recovery of crude price was the biggest driver for its strong performance,” said Tian Miao, a Beijing-based analyst at Everbright Sun Hung Kai. “PetroChina may continue to benefit from a rise in the price in the second half.”

China Petroleum, known as Sinopec, boosted dividends by 60 per cent to 0.16 yuan a share when it announced record earnings on Sunday. Cnooc will pay HK$0.30 a share, 50 per cent more than the previous year.

Parent China National Petroleum (CNPC), along the other two state giants, are under a mandate by President Xi Jinping to ramp up domestic oil and gas output amid a trade dispute that threatens to curb shipments from the US. For the first six months of the year, oil and natural gas output increased 1.5 per cent to 736.3 million barrels of oil equivalent from a year ago.

PetroChina said net income jumped to 27.1 billion yuan (Dh14.54bn) in the first six months, from 12.7bn a year ago, according to a filing to the Hong Kong stock exchange Thursday. That’s the highest semi-annual profit since the second half of 2014, according to data compiled by Bloomberg.

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The company had already flagged last month that profits would more than double, citing improved operations and higher realised prices of crude oil, products and natural gas.

The Beijing-based energy giant will pay out an interim dividend of 0.0666 yuan per share, as well as a special dividend of 0.0222 yuan. Last year, it declared a total of 0.069 yuan a share for the first half, which included a 0.038 yuan special dividend.

Shares closed unchanged at HK$6.07 in Hong Kong before the earnings statement, while the Hang Seng Index dropped 0.9 per cent. The stock has risen about 11 per cent this year, compared with the 5.9 per cent loss in the city’s benchmark.

While the company’s dominance in the world’s top energy user allows it to better benefit from higher oil prices and a nationwide drive to boost gas demand, it also bears the burden of having to resell overseas gas supply at lower regulated rates domestically. Losses from gas imports deepened to 13.4bn yuan in the first half, from 11.8bn yuan

CNPC has set out a new pricing strategy for winter gas supply between November and March that proposes to raise prices by as much as 40 per cent for some users, according to an Energy Observer report this month. Morgan Stanley said the hikes will be a “material positive catalyst” for PetroChina.

Operating profits from its exploration and production unit climbed to 29.9 billion yuan from 6.9 billion a year ago, while the refining and chemicals division gained to 23.2bn yuan from 15.8bn.

On a quarterly basis, PetroChina made a profit of 16.9bn yuan in the three months ended June, the highest since the second quarter of 2015, compared with 6.98bn yuan a year ago, according to data compiled by Bloomberg.