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PetroChina: A Surprisingly Solid 7% Yield Ruined By Too Much Geopolitical Risk

Oct. 04, 2021 3:12 AM ETPetroChina Company Limited (PCCYF)10 Comments
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  • Whilst income investors often turn to the household oil and gas names like BP, other less known companies like PetroChina still offer investors a high 7% dividend yield.
  • Despite the turmoil of 2020, their operating cash flow only decreased around a modest 11% year-on-year, and improving operating conditions should help their dividend coverage in the future.
  • They have a very healthy financial position with both very low leverage and very strong liquidity, although the latter comes about because they are a state-controlled company.
  • This poses one big problem for foreign investors since it creates very high geopolitical risks, which have already seen their sister oil and gas company, CNOOC, delisted from the NYSE.
  • Whilst their fundamentals are surprisingly solid, disappointingly there is too much geopolitical risk and thus I only believe that a neutral rating is appropriate.

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Whilst the household names in the oil and gas industry such as BP (BP) receive the most interest from income investors, when looking across towards the East, there are other less thought-about options available, such as the

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I am no longer active, as I am taking a hiatus from finance to pursue business ventures in other sectors.  I hope that my analysis was helpful to investors across the years, thank you.

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Comments (10)

firstaidkit profile picture
I agree with Daniel this time, and would add something about fish in the sea but...
walter scott profile picture
I have to agree. PTR has a big geo risk attached and could get delisted from US exchanges, or worse.

I think we may have as long as a couple of years to unwind a significant position, but if we are suckered into a shooting war over Tiwhan tomorrow, kiss your PTR goodby, plus a lot more.

In the mean time, it was up 6%+ today.

Not available outside of China?
PianoCat profile picture
What risk is there? They are like a monopoly in China. They make the same oil as everybody else. All of their oil get sold to China which has insatiable demand for energy.
@PianoCat Exactly. They have a captive market.
I’m not going to invest into a communist company let the Chinese figure their own energy worries out as the American companies are far ahead of them right now it’s time we bring jobs back to America as the Chinese one only one thing that’s world domination
Too much political risk? I'm inclined to think US and its companies face more risk internationally after threatening, destabilising countries and murdering people for how many years now? US State Department is gutted and their only policy is bombing people into the stone age. US government don't even know how to treat its own citizens properly.
george the animal steele profile picture
@BooBooGao I agree Obama and Biden droned a lot of innocent children
@BooBooGao While Biden and Blinken are pretty bad at their job internationally, they aren't nearly as bad as Xi has been for China domestically. US states drive the bulk of the domestic policy, so there's only so much damage Biden can do. Those on the inside of the CCP know exactly how bad Xi's anti-corporate ideas and dangerous military experiments have been, even more than the population or most of those in the west.

Xi didn't appear to understand that knocking over Chinese tech and Hong Kong autonomy dominoes would lead to the China Evergrande domino possibly falling. He does not appear to understand what dominoes will fall next. He also took grave risks with the Chinese population and economy in allowing Wuhan to undertake highly dangerous gain of function virus experiments, and for what? Generals advising him this was a good idea are madmen who dream of World War 3.

The USA will fix the Biden problem after 2024. There will be a sneak preview of that in November 2022. When will China fix its Xi problem?
@donfdraper Hope you are right about 2024. Agree that Xi is very bad for business.
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