PetroChina Set to Boost Acquisitions After Buying Arrow Energy
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By Bloomberg News
March 26 (Bloomberg) -- PetroChina Co. Chairman Jiang Jiemin plans to step up overseas oil and gas acquisitions after teaming up with Royal Dutch Shell Plc to buy Australia’s Arrow Energy Ltd. for $3.2 billion this week.
“We will take advantage of opportunities in developing oil, gas and energy sources in all areas of the world,” Jiang said at a media briefing in Hong Kong yesterday, after the Beijing- based company reported a 9.7 percent decline in full-year profit.
The Arrow deal followed at least $5 billion of purchases in Canada, Kazakhstan and Singapore in 2009 to meet demand in the fastest-growing major economy. PetroChina has risen 36 percent in Hong Kong in a year, regaining its position as the world’s most valuable company from Exxon Mobil Corp., as investors bet acquisitions and higher oil prices will boost profit.
“China’s energy security and rising domestic demand require leading operators like PetroChina to acquire resources globally,” said Andrew Chan, a Hong Kong-based analyst at the Daiwa Institute of Research Ltd. “The company will benefit over the long term as they target a sizable increase in overseas operations in eight to 10 years, or even longer.”
PetroChina last year purchased a stake in a Canadian oil sands project for $1.7 billion, a refinery in Singapore and spent about $1.4 billion on a stake in an oil venture in Kazakhstan. The acquisition of Arrow marked China’s entry to Australia’s coal-seam gas industry.
The company’s gas business will grow as China uses more of the cleaner-burning fuel, Jiang said.
Earnings Outlook
PetroChina’s net income declined to 103.4 billion yuan ($15 billion) from a restated 114.5 billion yuan in 2008 because of lower oil prices. The median profit estimate of 14 analysts surveyed by Bloomberg News was 106.3 billion yuan. Revenue dropped 4.7 percent to 1.02 trillion yuan. PetroChina didn’t give fourth-quarter figures.
Exxon’s profit fell 23 percent to $6.05 billion as the global recession weighed on fuel demand and prices. Crude averaged $62 in 2009 and $99.75 a year earlier, declining from a record $147.27 on July 11, 2008.
PetroChina may post a 28 percent increase in profit this year, according to a survey of 14 analysts’ estimates compiled by Bloomberg. The company sells most of its oil products in the domestic market, where the economy expanded 10.7 percent in the fourth quarter, the fastest pace since 2007.
China overtook the U.S. last year to become the world’s biggest auto market, sparking demand for motor fuels. The country’s crude oil processing rate rose to a record daily rate in February, according to government data.
‘Huge Potential’
“The main advantage that PetroChina has over other international oil majors is China itself,” said Neil Beveridge, an energy analyst at Sanford C. Bernstein Ltd. in Hong Kong. “While other companies are struggling, you have increasing demand for oil and a huge potential demand for gas.”
China led the world out of recession last year as economic growth accelerated after the government’s $586 billion stimulus package and record lending. The nation’s oil demand may increase 5 percent this year, PetroChina’s state-controlled parent, China National Petroleum Corp., said last month.
“This year’s earnings outlook is much more positive,” said Gordon Kwan, head of regional energy research at Mirae Asset Securities in Hong Kong, who has a “buy” rating on the stock. “They’ll accelerate acquisitions in the coming six months with targets in Africa, Australia and Central Asia.”
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