Can Natural Gas Development Drive PetroChina Further?
Stephen Simpson, CFA
Stephen Simpson, CFA
Mon, Jan. 4, 6:50 PM
- Moody’s foresees capital spending reductions of at least 20%-25% in 2016 across the oil and gas E&P business, with oilfield services and drilling remaining the most stressed energy segment.
- Moody’s expects M&A activity and industry consolidation in 2016 to increase in a subdued manner given that the timing of a commodity price recovery remains uncertain; the firm notes that Devon Energy (NYSE:DVN) has targeted the sale of $2B-$3B in assets for 2016, Husky Energy (OTCPK:HUSKF) also has reported plans to sell select legacy upstream assets, and ConocoPhillips (NYSE:COP) likely will continue trying to divest select upstream assets in 2016.
- Globally, Moody's expects to see a rise in distressed exchanges and defaults in 2016, and cites Brazil's Petrobras (NYSE:PBR), Mexico's Pemex and Venezuela's PdVSA as three major international companies that are in serious trouble; the ratings agency also sees credit metrics for PetroChina (NYSE:PTR), Sinopec (NYSE:SNP) and Cnooc (NYSE:CEO) continuing to deteriorate through at least 2017, while Russia’s weak ruble will help Rosneft (OTC:RNFTF) withstand low oil prices.
- Moody’s recently projected a "lower for much longer" energy scenario, with average prices of WTI crude at $40/bbl in 2016 - $8 lower than its earlier forecast - $45/bbl in 2017 and $50 in 2018.
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Dec. 23, 2015, 10:18 AM
- A fund run by Macquarie is nearing an agreement to buy more than 40% of Singapore oil storage provider Universal Terminal, possibly as soon as next week, Bloomberg reports.
- The deal reportedly could value Universal Terminal, which is part-owned by PetroChina (NYSE:PTR), at ~$3B including debt.
- Macquarie would buy existing shares of Universal Terminal from Singapore oil trader Hin Leong Trading, which owns 65% of the company.
Dec. 21, 2015, 8:05 AM
- PetroChina (NYSE:PTR) says it plans to lay a temporary natural gas pipeline in Shenzhen in southern China to replace a line that reportedly exploded near the site of a deadly mudslide.
- The ruptured line is part of the massive PTR-operated west-to-east pipeline project that supplies Shenzhen with ~770M cm/year of natural gas and Hong Kong with 400M cm/year.
- At least 90 people were missing after the mudslide spewed out of an overfull dump site in Shenzhen buried 33 buildings.
Dec. 16, 2015, 8:23 AM
- Sinopec (SNP, SHI) soared as much as 10.5% in Hong Kong today after the Chinese government said it would not cut domestic refined fuel prices, in an attempt to discourage rapid growth in oil consumption that would exacerbate air pollution.
- The decision comes a week after Beijing issued its first-ever red alert for pollution and a day after Shanghai warned residents to stay indoors because of “severely polluted” air.
- Sinopec and other state refiners such as PetroChina (NYSE:PTR) are likely to be pleased as long as the crude oil they buy or extract is cheaper than the fixed price of gasoline and diesel they sell, but the potential longer-term problem for the refiners is that the government’s price fix could essentially cap growth in demand for gasoline and diesel.
Dec. 10, 2015, 10:45 AM
- PetroChina (PTR -0.2%) is discussing the sale of a stake in domestic gas pipelines worth ~300B yuan ($47B), in a move seen as a prelude to the Chinese government's plans to break PTR's near monopoly and boost spending on energy infrastructure, Reuters reports.
- Any deal, which would follow Sinopec's (SNP -1%) $17.5B sale this year of its fuel marketing business, could be a step toward Beijing's goal to establish one or more independent pipeline companies that would enable greater access for non-state suppliers.
- PTR produces two-thirds of China's natural gas and controls nearly 80% of the country's bottlenecked patchwork grid of 90K km of gas pipelines.
Dec. 9, 2015, 11:39 AM
- China likely will miss its shale gas production target for this year, Bloomberg reports, as PetroChina (PTR -0.5%) and Sinopec (SNP +0.8%) reduce production amid weakening demand growth and the collapse in energy prices.
- PTR, China’s largest oil and gas company, may produce ~1.6B cm of shale gas this year, lagging behind its stated target of 2.6B cm, and no. 2 SNP may pump ~3.5B cm of shale gas, according to the report.
- The combined production of the two companies of 5.1B cm would come in well short of China's previously announced 2015 production target of 6.5B cm.
Dec. 4, 2015, 10:24 AM
- Iran's government has agreed to extend contracts with its top two Chinese buyers, refiner Sinopec (NYSE:SNP) and trader Zhuhai Zhenrong, to sell ~505K bbl/day in 2016, and is talking to other potential buyers in China about term deliveries next year, Reuters reports.
- Iranian oil officials also have met with traders at PetroChina (NYSE:PTR) and Cnooc (NYSE:CEO), which runs a petrochemical complex with Royal Dutch Shell, according to the report.
- While it is to be expected that Iran, once OPEC's number two exporter, would seek to regain market share as sanctions are lifted, Reuters' Clyde Russell says the significance is that it shows OPEC members now view each other more as competitors than as partners in the global oil market.
- When the Saudis talk about an output cut, what they really mean is targeting the oil that flows to Asia from the Middle East and Russia, Russell writes; there is a price war in Asia between Saudi Arabia, Iraq and Russia, and the three likely will be joined by Iran in 2016.
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Nov. 30, 2015, 11:49 AM
- Chinese and Australian regulators are expected to give the green light to Royal Dutch Shell’s (RDS.A, RDS.B) takeover of BG Group (OTCQX:BRGXF, OTCQX:BRGYY) before Christmas, according to The Telegraph, which reports that Shell CEO Ben van Beurden recently had direct meetings with the president of China’s ministry of commerce.
- China was originally believed to be viewing the deal as an opportunity to renegotiate long-term contracts between Shell and the country’s top energy producers, but Cnooc (NYSE:CEO) and China National Petroleum (NYSE:PTR) have pledged broad support in return for continued co-operation with Shell on projects around the world.
Nov. 30, 2015, 10:27 AM
- Iran names Total (NYSE:TOT), Royal Dutch Shell (RDS.A, RDS.B) and Lukoil as global energy majors that have selected oil and natural gas deposits to develop in the country, and Eni (NYSE:E) also is looking to invest.
- Iran is pitching 70 oil and natural gas projects valued at $30B to foreign investors at a conference in Tehran as it prepares for the end of sanctions that have hampered its energy production.
- Iran, which is introducing its new 20-year energy contracts framework at the conference, could sign its first development contract in March or April, according to a top official at National Iranian Oil Co.
- Also, Iran is giving priority to China National Petroleum (NYSE:PTR) for the second phase of the development of its onshore North Azadegan oil field.
Nov. 26, 2015, 4:34 AM
- China's "national team" owns at least 6% of the mainland stock market following the summer rescue to prop up prices, putting even more of the $4.2T bourses into state hands, FT reports.
- Government rescue funds were corralled into buying shares when the equity markets went into meltdown over summer. The intervention seems to have succeeded so far - the Shanghai Composite has since recovered by 28% from its last low point in late August.
- Top ten purchases in Q3 by China Securities Finance Corp: Bank of China (OTCPK:BACHY), Industrial and Commercial Bank of China (OTCPK:IDCBY), Agricultural Bank of China (OTCPK:ACGBY), China Construction Bank (OTCPK:CICHY), Bank of Communications (OTCPK:BCMXY), China Petroleum & Chemical Corp (NYSE:SNP), China Everbright Bank (OTC:CBVHY), China Minsheng Banking (OTCPK:CMAKY), BOE Technology Group and PetroChina (NYSE:PTR).
- Shanghai -0.3% to 3,636.
Nov. 25, 2015, 8:43 PM
- PetroChina (NYSE:PTR) says it plans to sell a 50% stake in a pipeline company for as much as 15.5B yuan ($2.4B), as parent company China National Petroleum seeks to complete asset sales before year-end to meet government-set annual profit goals.
- The decision comes as China’s oil companies try to shore up their balance sheets amid lower oil and gas prices that have weighed heavily on earnings this year; it also marks the start of long-awaited industry reforms that aim to make China’s energy giants leaner and more profitable through divestment of pipeline and potentially other assets.
- PTR also discloses the resignation of CFO Yu Yibo, to be replaced by Zhao Dong, who ran a unit of CNPC.
Nov. 19, 2015, 7:57 AM
- Royal Dutch Shell's (RDS.A, RDS.B) proposed tie-up with BG Group (OTCQX:BRGXF, OTCQX:BRGYY) secured clearance yesterday from one of two Australian regulators but still requires approval from China, but Reuters reports that Chinese regulators are pressing the company to sweeten long-term gas supply contracts, which could cast new doubt on the near-term benefits of the deal.
- As the Chinese regulatory approval process entered its third and final 60-day phase earlier this month, the government asked Shell to review prices in LNG contracts worth tens of billions of dollars annually with China National Petroleum (NYSE:PTR), Cnooc (NYSE:CEO) and Sinopec (NYSE:SNP), according to the report.
- Shell officials are said to fear that a revision of the terms of the contracts could create a ripple effect around the world, further eroding gas prices.
Oct. 29, 2015, 12:57 PM
- The plunge in crude oil prices wreaked havoc on Q3 profits at PetroChina (PTR -2.3%), the country’s biggest oil and gas producer, and Sinopec (SNP -1.7%), its largest oil refiner.
- PTR reported its worst quarterly profit on record, with Q3 net income plunging 81% Y/Y to 5.2B yuan ($818M), less than half of analyst estimates, as sales dropped 29% to 427B yuan.
- "It’s a pretty weak performance across all segments,” says Bernstein's Neil Beveridge. “PetroChina is struggling in the low crude environment and needs to find a way to stop the bleeding.”
- SNP's Q3 profit plunged 92% Y/Y to 1.64B yuan ($258M), also far short of expectations, as lower oil prices and production dwarfed an increase in refining revenue.
- "We thought Sinopec would have better leverage in refining to counter the crude-price drop,” says BOC International Holdings' Lawrence Lau. “Inventory losses could be a reason for the sharp profit decline, and it may help Sinopec in the fourth quarter if the crude price rebounds.”
- Earlier: Cnooc's Q3 oil output surges even as revenue falls (Oct. 28)
Oct. 21, 2015, 1:15 PM
- BP (BP +1.2%) announces some major deals with Chinese energy companies as part of Pres. Xi's visit to the U.K., including a framework agreement with China National Petroleum (PTR -1.1%) that the company expects will add several billion dollars in future trade to its business in China, WSJ reports.
- The strategic partnership covers potential shale gas opportunities in China’s Sichuan Basin and future fuel retail ventures in the country as well as other international partnerships.
- BP also agrees to supply up to 1M tons/year of liquefied natural gas to China Huadian, the country’s largest gas-fired power generator, over the next 20 years in a deal the company says is worth up to $10B.
- China's energy production is expected to increase 47%, while consumption is estimated to jump 60% by 2035, BP China President Edward Yang says.
Oct. 20, 2015, 10:40 AM
- BP (BP -0.4%) and China National Petroleum Corp. (PTR -0.4%) are set to announce plans for closer cooperation this week, which are expected to include an outline of specific areas of focus for the two companies within China as well as a broader commitment for international cooperation, Dow Jones reports.
- BP’s main focus in China for now is its investment in petrochemical projects, retail fuel stations and infrastructure to import liquefied natural gas; it has deals to supply LNG to Cnooc (CEO +0.2%) starting from 2019 and a joint venture with Sinopec (SNP +0.2%) provides fuel to the shipping industry, and it completed the expansion of a petrochemicals project in southern China.
- But Sanford C. Bernstein Research analyst Teng Ben says China is not a priority for oil companies looking for E&P opportunities because the country’s oil is relatively expensive to pump.
- Earlier: Reuters: BP, China's CNPC to unveil oil alliance (Oct. 16)
Oct. 16, 2015, 8:58 AM
- BP and China National Petroleum (NYSE:PTR) next week will unveil a strategic alliance to develop oil resources in Iraq and other places, Reuters reports.
- The deal, expected to be one of several high profile deals to be signed during a visit by Chinese Pres. Xi to London, will seek to raise cooperation between the two companies in Iraq, where they are developing the Rumaila oil field, which produced 1.34M bbl/day in 2014.
PetroChina Co. Ltd. engages in the exploration, development, production and sale of crude oil and natural gas. The company also involves in the refining of crude oil and petroleum products, production and marketing of primary petrochemical products, derivative chemical products and other... More
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Industry: Major Integrated Oil & Gas
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