We keep estimated Net Present Value [NPV] of US$190 a share for buy-rated PetroChina (PTR) despite losses from price controls on refined products. Financial results reported on a quarterly basis for the first time today indicated a decline of a third in total earnings from a year ago. Though no breakdown by segment was available, management noted a “severe loss in refining and marketing”.
We project improved unlevered cash flow (Ebitda) presuming more normal margins. Today’s news is better for oil and gas production with volume up 6% from the previous year and price up 56%. Notwithstanding allowing for the excise tax on crude oil as well as price controls on natural gas, NPV is supported by projected cash flow capitalized at unlevered multiples (PV/Ebitda) related to reserve life (Adjusted R/P). Punitive taxes and price controls in China add to high oil taxes in Alaska, Alberta, Algeria and Venezuela to drive oil price higher.
Originally published on April 28, 2008.