PetroChina Company Limited (PTR) Q4 2021 Results - Earnings Call Transcript

PetroChina Company Limited (PTR) Q4 2021 Earnings Conference Call March 31, 2022 5:00 AM ET

Company Participants

Chai Shouping - Chief Financial Officer and Board Secretary

Dai Houliang - Chairman

Ren Lixin - Executive Director and Senior Vice President

Tian Jinghui - Vice President

Yang Jigang - Vice President and Chief Engineer

Zhang Minglu - Chief HSE Supervisor

Chai Shouping

Ladies and gentlemen, good afternoon. I am PetroChina’s CFO and Board Secretary, Chai Shouping. I would like to welcome you to our 2021 Annual Results Announcement. First, allow me to introduce the board members and top management present today. Chairman, Mr. Dai Houliang; Executive Director and Senior Vice President, Ren Lixin; Vice President, Tian Jinghui; Vice President and Chief Engineer, Mr. Yang Jigang; Chief HSE Supervisor, Mr. Zhang Minglu.

The presentation today includes four parts: first, review and analysis of 2021 financial performance; next, overview of operational performance; then remarks from the Chairman followed by a Q&A session.

Now, I will walk you through our financial performance of 2021. Last year, we are driving oil prices, steady recovery of Chinese economy and booming demand for oil and gas that followed through on high-quality development requirements and make coordinated progress on business development going at low-carbon transition, reform and innovation, quality and efficiency, HSE and COVID response. Oil and gas industry maintained stable operation. Operation performance was 7-year high.

Realized oil price averaged $55.56 per barrel, up 62.6% year-on-year or up 7.6% versus 2019, with a 2-year average growth of 3.7%; revenue, CNY2.6 trillion, up 35.2% year-on-year, marking a new record high; operating profit, CNY161.15 billion, up 112.2%; net profit attributable to the parent CNY92.17 billion, up 385% year-on-year, up 111.8% versus 2019 with a 2-year average growth of 42%; earnings per share, CNY0.50. We remain committed to prudent, targeted and profitable investments based on oil price changes, operational performance and cash flow. We just did an optimized investment finance structure further enhance investment management to improve returns.

2021 CapEx totaled CNY251.8 billion, up 1.9% year-on-year. The overall scale is reasonable and well controlled. As the foundation of our development, E&P business remains a CapEx priority, which totaled CNY178.26 billion, accounting for over 70%. We steadily improved into growing a low carbon transition, CapEx on new energies, new materials and new business totaled CNY3 billion. In 2022, we plan to invest another CNY10 billion.

Last year, we continue to improve quality and efficiency in health control and achieve notable results. Growth of major cost was far smaller than that of income. Leasing cost in China, $13.06 per barrel, around flat year-on-year adjusted for RMB appreciation. Cash per testing cost CNY166.65 per ton despite higher cost of deals and power. The cost was well controlled, up only 1.7% year-on-year. We will work on fund management, financing costs CNY16.22 billion, down 30.7% year-on-year.

We made rationale investment decisions enhanced asset management for the optimized asset liability structure, financial profile remains sound. By the end of December 31, 2021, total assets CNY2.5 trillion, up 0.6%, interest bearing debt, CNY340.45 billion, down 7.7%. WACC of interest-bearing debt 2.65%, down 0.22 percentage points, the lowest since our funding. Debt-to-asset ratio, 33.7%, down 1.4 percentage points; debt-to-capital ratio, 19.5%, down 1.8 percentage points versus end of last year, the lowest since 2011.

We value cash flow management and saw large rise in free cash flow. Operating cash flow, CNY341.47 billion, up CNY22.89 billion year-on-year or 7.2%. Free cash flow, CNY79.85 billion, up 13.8% mainly due to increased operating cash flow and stronger CapEx discipline. We will further tighten fund management to ensure appropriate and ample cash flow. Operating profit of E&P CNY58.45 billion, up CNY45.36 billion plus changes of oil and gas products at CNY156.27 billion. Changes in sales cut CNY8.46 billion, more sales of natural gas cut CNY7.43 billion, lower sales of crude cut CNY15.89 billion, mainly due to sales declines overseas. OpEx up by CNY102.45 billion, including purchased services and other costs by CNY42 billion, mainly due to higher cost of crude imports. CD&A grew by CNY24.48 billion. Tax, except income tax, went up by CNY13.157 billion, including CNY4.48 billion from the windfall tax.

Operating profit of refining chemicals, CNY49.74 billion, up CNY51.57 billion. Operating profit from refining, CNY37.73 billion, up CNY50.53 billion. Higher refining margin adds to profit by CNY53.45 billion, while crude run at CNY1.54 billion, higher OpEx caused a profit by CNY4.46 billion.

For chemicals business, operating profit was CNY12.01 billion, up CNY1.04 billion year-on-year. Price changes added profit by CNY53.64 billion, mainly due to upward chemicals market in China and PetroChina optimized product mix and boosted the development, production and marketing of high-end and high value-added chemicals and raw materials. Changes in sales at CNY2.09 billion, higher OpEx had profit by CNY54.69 billion, mainly due to increased purchase service and other costs.

For marketing business, operating profit, CNY13.28 billion, up CNY16.18 billion, operating profit of marketing business in China, up CNY0.27 billion, up CNY15.87 billion, CNY15 billion from higher margins; CNY2.17 billion from increased sales, yet higher OpEx had CNY1.3 billion, international trade from operating profit of CNY8.01 billion, up CNY310 million year-on-year. Operating profit of natural gas and pipeline business, CNY43.97, down CNY28.44 billion, which is around a good growth adjusted for pipeline restructuring.

Natural gas and pipeline business saw profit of CNY32.21 billion, down CNY9.38 billion, mainly due to lower profits from transmission. Natural gas marketing price in China averaged CNY1809.04 per KCM at 6.5%. Net loss from gas imports CNY7.21 billion, down CNY6.95 billion year-on-year. City gas business saw profit of CNY12.6 billion, up CNY5.45 billion, pipeline restructuring and others had CNY24.51 billion. Considering our operation and financial performance and cash flow to reward our shareholders, the Board recognized a year end dividend of CNY0.09622 per share, CNY17.61 billion in total. Annual dividends are up to CNY0.22662 per share, totaling CNY41.48 billion, reaching a new high since 2015. Payout ratio stands at 45%.

Now, let’s welcome Executive Director and SVP, Mr. Ren Lixin, to review the company’s operational performance.

Ren Lixin

Now, I will brief you on our operational performance of 2021. Last year, the world economy remains augmented but due to COVID-19, different economies from divergent path, crude demand rebounds rapidly and macro economy in China recovers so that refined products demand and gas demand is still growing fast. We remain committed to strategies of innovation, resource market internationalization with low carbon, with assets delivering carbon neutrality promoted business development, performance innovation, quality and efficiency, ESG efforts and so on. Oil and gas industry maintained stable operations. New energy and new business took a head start with management operational performance improved a lot. All four business segments registered positive profit. Domestic E&P gained super results. In 2021, we will unlock on adding reserves and production. Exploration made 5 strategic breakthroughs on 15 major countries totaling 33 achievements. In multiple businesses, such as Ordos, Tarim, Sichuan and Shanghai, major breakthroughs were made in new zone areas and layers. In some areas in Ordos Basin, Tarim were ordered and Sichuan and [indiscernible] were identified. Newly added oil and gas results in China marked a new high with SEC crude reaching 221%, highest since our listing.

[indiscernible] went deeper, we focus on legacy fields, stable production and contradictive capacity building in new areas. Gas is taking ever larger share in our production mix, major areas for production [indiscernible] Southwest saw an increase of 3.4%, 2.1%, 5.8% and 12.1% respectively. Overseas corporations saw marked success. [indiscernible] block from new oil formation in [indiscernible]. Some exploration wells in the new section of total [indiscernible] all proved successful in Kazakhstan, 5 exploration wells to the east of the Caspian Sea made oil and gas discoveries. Development projects were well underway, pushing for improved portfolio overseas.

In 2021, oil and gas totaled 1.625 billion BOE in production. Domestic production, 1.475 billion BOE, up 2.4%. Crude production in China, 753 million barrels. Natural gas in China, up 5.7%. In China, gas is taking ever larger share of the total production. Hydrocarbon mix further improved. R&D transformation and upgrades gains were down, refining focused on cutting fuels and adding chemicals. Yield of refined products went down by 1.6 percentage points. Diesel gasoline ratio down to 0.98. Refined products production totaled 109 million tons key projects like non-integrated plants advanced at quicker pace. Chemical plants maintained high run-rate and increased the production of high value-added chemicals, chemical commodity, up 6.7%, synthetic resin, synthetic rubber up by 5.6% and 4.3% respectively.

We work on new materials, enhanced R&D and output of new materials served significantly. We weren’t allowed to explore chemical markets and continue to transform from supplier to trader with proprietary technologies, Changqing and Tarim large-scale ethylene plants were brought online. These two national demonstration projects are the new profit drivers in our chemical business. Marketing of refined products growing both volume and profits. Sales of refined products, up 1.3%. Sales within China, up 6.2%. By the end of 2021, we operate a total of 22,800 service stations. Non-oil business reached 4.58 in terms of margin, a historical high. Sales on domestic and international resources and markets, we achieved 426 million tons in trade volume, up 7.3%. Gas marketing expanded in volume and efficiency, the gas sales increased by 10.1%, including 194 BCM, up 12.7%. Key projects came online as scheduled, including Tangshan LNG terminal and Jiangsu LNG terminal Phase 3 and some branch pipelines, green low-carbon transition to the head start.

I mean as carbon peak and around 2025 and near zero emissions at around 2050, we acted on the green and low carbon development strategy and build out green transition. We have developed new energy development plans to promote the integrated growth of geothermal, wind, solar and gas power, push for hydrogen agenda across the value chain, boosted fixed U.S. deployments and transitioning us into an integrated energy company with oil, gas, geothermal, power and hydrogen.

Our ESG made notable progress. We have setup an ESG management system where the board is in charge, specialized committee overseas, departments and branches to implement, which has the committee under the board what we named Sustainability Committee and further enhanced the management on the company’s ESG efforts. PetroChina also issued its ERC report today, updating progress in our governance, environmental protection and CSR and I refer you to the ESG report for more details.

Solid steps we are taking in new energies drive. New energies business is a new driver of our bringing our low carbon transition. We have moved faster to build 6 new energy bases in Beijing, Tianjin, Hebei, [indiscernible]. 39 new energy projects came online in 2021 adding 3.5 million TCE yield capacity. Our new energy businesses got off our quick path 200-megawatt PV project came online and the geothermal heating based in Beijing, Tianjin, Hubei and many wind solar power generation and U.S. projects with solid progress, many hydrogen refueling battery swap and PV stations and the first refueling robots came online. We delivered on action plan for carbon peak and neutrality to energy savings as a fossil fuel and strive to cause energy emission. We aim for 6.5 million tons of fuel to injection per year by 2025 if economically viable.

Q4 results in science and innovation in 2021, major projects were initiated and R&D breakthroughs made on core technologies. We got 3 state science progress awards and set two international standards. We have innovated geological service and E&P technologies in deep and ultra-deep layers. Technologies were applied and eased into ethylene plants and to produce high end synthetic rubber. We launched several projects on digital transformation and smart development. We setup research institutes in Shenzhen and Shanghai, strive to build R&D and innovation center for new energies and materials and gained a competitive in energy and chemical innovation.

This slide shows operational performance in 2021 and our targets for 2022 for your reference. Ladies and gentlemen, in 2022, we will follow the deployments of the board and start to build a world class international energy company. We will take the initiative and work hard to deliver excellent performance to reward our shareholders and give back to the society. Thank you.

Now, let’s give the floor to Chairman, Dai Houliang.

Dai Houliang

Dear investors and friends from the media, ladies and gentlemen, good afternoon. I am glad to virtually join once again. On behalf of the Board, top management and entire staff of PetroChina, let me begin by expanding sincere appreciation for the long-term support. My colleagues just briefed you on our financial and operational performance in 2021. The past year has been quite extraordinary for us to map in our future and in securing outstanding results in pursuing high-quality growth. Facing pandemic and changes both on [indiscernible] we work together to forge ahead, which is pioneer reactions and made historical breakthroughs and landmark results with many indicators reaching record time.

Oil and gas value chains remain stable and efficient, green low carbon transition to [indiscernible] size and iteration for pull through results, quality and efficiency saw material progress. HSE and COVID control made steady progress. We fulfilled CSR and furthermore governance system and capabilities. Our works on every front took a fresh look in the first year of the 14th 5-year plan period. Right now, we still see our recent pandemic and major changes in international environment, especially the far-reaching impact from Russia-Ukraine conflict.

There are more uncertainties in global recovery and profound adjustments in energy landscape with oil prices remain high and involved swings. They have been a prevailing trend to find alternative energies, carbon emissions and tackle climate change as digital and smart growth will shift the industry, all of this call for our continued efforts to further boost corporate value. In meanwhile, we are also aware that PetroChina remain an important period for strategic opportunity, with favorable conditions for growth. Chinese economy will sustain long-term growth with strong resilience and vitality. China continues to deepen reform and opening up, expand domestic demand, improve business climate and support real economy, creating an enabling environment for the company’s growth with solid base and comparable strength, in oil and gas resources, management, technology and talent. We have every confidence for our future growth.

The year 2022 is important for us to act on the 14th 5-year plan and pursue high-quality growth, committed to 5 strategies for innovation, resources, market, internationalization, green low carbon. We will take full strategic steps. We will focus on core businesses, including new energies, enhanced governance, reform and innovation, improve quality and efficiency, pursue green business transition and prevent risks. We strive to meet all targets and deliver good performance, opening up new prospects for high-quality growth. We will push for new developments in E&P. We will enhance domestic E&P, stabilize production and boost profitability in material oil fields and blocks and promote sizable and cost-effective capacity building in new ones, ensure stable oil outputs and fast growing gas.

We will optimize overseas portfolio as well as regional development priorities, further improving our capability in accessing quality resources and development quality will lift overall profit-making capacity of RMC for coordinate production targets and sales and move to transition and upgrade R&C business, well-organized key projects such as Guangdong Petrochemical projects. More efforts will be made in new material R&D and production and more featured refining products and lucrative chemicals will be produced. We will better coordinate supply production in sales. We will coordinate resources and market, polish marketing strategies, boosting marketing and value-creation capacity for refined products and chemicals for international trading, capacity building in services, marketing and transactions will be enhanced to lift the value of industry chain and risk of resilience.

While boost gas marketing, we’ll plan on resources and costs, optimize market layouts, client structure, sales flow and strategies. We’ll go all out to develop lucrative market and carry out precision marketing, further expanding profit-making capabilities and ensure stable supply to the market. Both for green and low carbon transition, clean production will be announced with tighter control or energy consumption intensity and demand. We will also manage VOCs and meet the emissions to achieve energy conservation as well as pollution and emission reduction, integrated new energy spaces on wind, solar, gas storage will be built and 2 summer projects set up in Beijing-Tianjin-Hebei and Shandong province in an effort to supply clean and low carbon energies.

We will boost science, technology and innovation. Research on key technologies will be enhanced and major research projects in energy and chemicals will be initiated, priming the way for our core businesses to sustain high-quality growth, improve quality and efficient and gain our competitive edge and help the company to transition itself.

While enhanced quality and efficiency to create value, encouraging lean management will make continued efforts in financial performance, market supply, management and operation, innovation and side for steady increase in profit, in innovation and efficiency and quality development. We will continue to guard against and defuse risks. Mindful of the worst-case scenario, we will identify and manage risks, improve QHSE and COVID control, operates in compliance with laws and regulations and ensure sound production, operation and corporate development.

We will promote the common development of the company and society. We respect employees’ principal role and count on them to develop. We will fulfill CSR and support public service, engaging global energy governance and work to build a community with shared interest for energy corporation. ESG efforts will be further enhanced to deliver win-win for both the company and all shareholders.

Ladies and gentlemen, dear friends, in 2022, PetroChina will follow the pursuit of green development and reliable energy supply to power customers’ growth and [indiscernible]. We will seize the momentum and strive to reward all investors and shareholders with better performance and achieve the sustainable development of the company, the environment, society and all stakeholders together. We sincerely hope to have your continued support, and I look forward to joining hands with you to scale new heights. Thank you all.

Chai Shouping

Thank you, Chairman Dai for PetroChina’s annual results announcement part. Now, we will have our Q&A session with consecutive integrating available. [Operator Instructions] And now the floor is open for questions.

Question-and-Answer Session

Operator

[Operator Instructions] The first question is Hong Xiang from 21st Century Business Herald.

Unidentified Analyst

Congratulations on the stellar results of PetroChina in the year 2021. I’ve got two questions. First question is concerning the press conference out by the Ministry of Foreign Affairs and some journalists asked about the three oil companies in China potential purchasing of Russian assets, and I’m wondering about what is the impact of the Russian and Ukraine situation on the international oil and gas market and also on PetroChina’s International Corporation. The second question is concerning your green and low-carbon transition. In the year 2021 through our arduous efforts to stabilize crude production and increase natural gas production, PetroChina has managed to cut CO2 emission by 260 million tons, which is remarkable. Could you please give us more color on the new progress in your green and low carbon transition strategies?

Chai Shouping

I invite our Chairman, Mr. Dai Houliang, to take these two questions.

Dai Houliang

Hi. Thank you, my friend from the Twenty First Business Herald for your questions. And these are two quite big questions, and I can only give you very brief answers.

The Russia and the Ukraine situation has profound impact globally and especially on the international energy market, impacted by multiple factors. The international crude price went up by 50% to 70%. And currently, it is still fluctuating at a very high level. Global energy, especially natural gas and crude oil, is now facing risks in supply. PetroChina has been following closely the changes in the energy market and as a public company will bear ESG in mind, actively fulfill our social and environmental responsibilities. We have taken several measures to our utmost to ensure the supply in the natural gas and crude oil market. And currently speaking, the supply is right on track, but the cost inflation is also significant.

For many intake, the following three aspects of measures to guarantee the supply: first, we are working on the international exploration and production to try to increase the effective supply of natural gas and crude oil in the Chinese market, including increasing our CapEx, optimizing operation plans, increase in reserve and production. Second, we are intensifying trade activities. For many years, PetroChina has maintained sound partnership with many natural gas and crude oil producers, and there’s multiple long-term contracts being executed right now. And currently speaking, our business is normal.

And third, we are focusing more on long-term and green and low carbon transition, we intensified to our investment in new energy sector including wind power, solar power, geothermal, hydrogen, etcetera. And our new energy investment in this year is expected to grow by more than 2x, and we wish to increase the effective supply of our total energies in order to ensure to meet the energy demand for our social and economic development.

And I’ll take your second question. The green and low carbon is one of our five development strategies, green and low carbon transition and development is a requirement for PetroChina to adapt to the growth energy transition, but also an intrinsic requirement for us to achieve high-quality and sustainable development. Hydro China has actively responded to the government’s requirement to achieve carbon neutral and carbon peak targets and we aim to achieve peak carbon by around 2025 and near zero emissions by around 2050, but working to intensify and deepen the implementation of our green and low-carbon development strategies.

We have set the time line and road map for us to achieve peak carbon, and we have launched a three-step scheme of clean alternatives, strategic replacement and green development. We’re working on the planning of green industries in order to forge a low-carbon energy ecosphere with integrated development of fossil fuels and new energies. We’re also working on building a new situation of many different energies reinforcing each other and build PetroChina into an integrated energy company that provides oil, gas, heat, power and hydrogen.

In the past year, we are implementing our 14th 5-year plan and working on our initiative to stabilize oil production and increase natural gas production. Our domestic natural gas output took about 51.6% of our total oil and gas output in China. And for the whole year, we sold natural gas 194.6 BCM in China, which is equivalent to replacing 259 million tons of standard coal for a reduction of 260 million tons of CO2.

We have been working hard on the integrated development of geothermal, wind power, solar power and gas-fired power and we are working on the full value chain development of hydrogen, including its production, transportation, storage and utilization. And in this past Winter Olympic Games, PetroChina provided hydrogen for vehicles with very high purity that’s hydrogen vehicles and also green hydrogen for the main torch of the Winter Olympic Games, which has our own intellectual property rights.

Efforts have also been made in the planning of CCS and CCUS industry and the new energies industry. We have carried out a series of new energy projects, including 39 projects put into production. And we added the development and utilization capacity of new energies, which is equivalent to 3.5 million tons of standard coal per year, we realized a fast start of the new energy business.

PetroChina is aware that in our efforts to achieve peak carbon and carbon neutral targets, also energy, especially natural gas and crude oil will remain to be very important. So we have intensified our efforts in domestic E&P to ensure supply, and we will fully harness our advantage in natural gas resources to focus on the natural gas business development. And we hope we can see fairly rapid growth of natural gas production in China, and our target is to increase our natural gas percentage in our total output to 55% by 2025.

In the development of clean energy PetroChina will fully utilize our resources of wind, solar and geothermal in the areas where we have the mineral rights and the surrounding areas. We focus on new energy business and our target is to increase the development and utilization volume of new energies equivalent to 23.5 million tons of standard coal by 2025 or 7% of our total production capacity. Few energy, oil and gas are expected to take one-third, respectively, in our portfolio by 2035, and new energy production capacity is estimated to increase to half our total portfolio by 2050. Thank you.

Operator

The next question is [indiscernible] from Credit Suisse. Please go ahead.

Unidentified Analyst

Congratulations on your last year’s excellent performance. I’ve got two questions. First one is concerning your input in natural gas losses, which were better than expectation in 2021 and especially in Q4, the loss even went down quarter-on-quarter. So my question is, how do you look at the import gas losses in the year 2022, especially against the high oil price environment. What measures will the company take to pass through your import costs. And second question is about the company’s dividend. And in last year, your dividend payout ratio has been returned to the basic 45% sales ratio and we will see improving cash flow in the year 2022. So I’m wondering about the outlook on the dividend policy in the year ‘22 and beyond.

Dai Houliang

Our CFO, Ren Lixin, will take your question.

Ren Lixin

First on imported the natural gas loss. Last year, PetroChina sold imported gas of about ADBCM with a loss of RMB7.21 billion, which is a reduction of RMB6.59 billion. For the reduction of import gas losses we may have four reasons. The first is our efforts development of high-end markets, including the direct sales and the development of end user market. And second, we have pressed ahead with the natural gas prices to be more market-oriented. We set up a negotiation system for the natural gas purchase and sales contracts and enhanced the trading of online resources, especially extra contract resources and intensified the free choice of both sellers and buyers.

And the third reason is the Chinese government has issued new tax refund policies for imported natural gas. And the tax refund is increased, especially for those long-term contracts signed before the year 2014, which have contributed an additional RMB5 billion. And the last reason is the reduction of import costs because the import gas prices is linked with crude prices and have a 9-month lag.

The imported gas cost is impacted by multiple factors, including the international crude prices foreign exchange rates and the market situation. And in the year 2022, we will arrange our import scale based on the market situation and our resource balance. Thank you.

And on the dividend policy, since the company got listed, we have maintained very stable payout ratio of 45%. In recent years, we have witnessed to very low crude oil prices and in those years the company has issued special dividends on the back of the 45% payout ratio. Last year, PetroChina has seen stellar results in our operations, and yesterday we hold the Board meeting and the Board are suggest the general shareholder meeting to decide on a 45% payout ratio for last year. Therefore, for the annual dividend, the amount is RMB0.22 per share with a total number of RMB41.5 billion, in total dividend. And the final dividend was RMB0.96.

As you just mentioned, in 2021, our cash flow is quite redundant, and free cash flow was RMB79.5 billion. And as decided on our Board meeting yesterday, our cash flow in addition to dividend will be used in the following three areas. The first is the cash flow will go to green and low carbon transition for high-quality development of the company. And second, it will go to the domestic on gas exploration and development, especially the development of natural gas to ensure stable supply in the market. And third, the money will be – will go to managing down our leverage and to maintain a prudent financial position of PetroChina. Thank you.

Operator

The next question is [indiscernible]. Please go ahead.

Unidentified Analyst

My first question is about your new energies and new materials business. And last year, we have seen quite great achievements in these three regards, and we have seen your establishment of two research institutions and one – and some geothermal projects were put into production. And also, you have made new efforts in the new energies development. I am wondering about your new plans for new energies and new materials in the years ahead. And second question is about the company’s earnings. Last year, your earnings has improved quite a lot. And some say it’s because of the increasing of the crude oil prices, and we can also tell from your annual report that the crude oil price went up by 7.9%, but your earnings improved by 101%. So, I am wondering about the real reasons behind your performance improvement.

Dai Houliang

I invite Mr. Yang Jigang, Vice President and Chief Engineer of the company, to take your questions.

Yang Jigang

I will take your question for the new energies and new materials, which has attracted a lot of attention. And these two areas did require a lot of investment as well. PetroChina is an integrated energy company having both the upstream, midstream and downstream of the oil and gas value chain. And for the chemicals materials, we have our advantages in terms of knowledge, technology experience and our market share. And we have maintained – we have made quite a lot of efforts in developing new energies and new materials. The Chairman of PetroChina now chairs our leading group on the development of new energies and new materials. We have prepared a strategic development plan for the new energy business development and also organized the business management systems. As you mentioned, we have set up a Shenzhen New Energy Research Institute and a Shanghai New Material Research Institute. And in our E&P company and its oil field companies, they all set up a new energy business division and the oil refining chemicals company and our integrated refining and chemical companies in different localities in China, they set up a new materials business division. Our Chairman has made it quite clear about our energy transition initiatives. And it is frankly – frankly speaking PetroChina focused quite a lot on the new power generation of hydrogen and new energies. And we are working on the integrated development of solar power, wind power and gas-fired power plants and storages. And we are working on the western part of China to participate in the government-led initiative of developing wind, solar, power basis, which is surrounding the treatment of [indiscernible]. In terms of development of new materials by focusing on synthetic rubber and performance, synthetic resins and also the new materials used in electronic separation, Medicare and the storage of wind and solar power, in transportation, in aviation and airspace sectors. In the year ahead we will recommence the plants in new energies and new businesses and also the annual plans in the 14th 5-year plan period, we will try to achieve sizable development of multiple new energies, including geothermal, wind power, solar power and gas fired power. And we are working on new energies and new materials on CCS and the new energy supporting and service sectors and we are trying to develop series of new energy development and new materials development technologies. The focus is to press ahead with the development of the six spaces and try to achieve the organizational management, technological support and the industrial systems for new energy, new material and new business. We expect the development and utilization volume of new energies will be equivalent to 23.5 million tons of standard coal by the year 2025, and the capacity will reach 7% of the company’s total and we also expect the percentage of new materials in our total chemicals materials to be above 15% to further enhance our ability to meet the market demand. Thank you.

Chai Shouping

Thank you, Mr. Yang, and I will take the second question. I am CFO, Chai Shouping. In the year 2022, PetroChina’s performance has improved very significantly. Our net income attributable to the parent reached RMB92.17 billion, an increase of 385%. And as stated by our Chairman someday that due to our efforts made by all the employees and also by grasping the good opportunities. First, we have witnessed a very significant increase of crude prices and China’s economy recovered steadily and the demand recovered as well. And second, we have been working on a special program to enhance the quality and efficiency of the company’s development. In terms of our domestic crude oil and marketable natural gas output, the numbers went up by 1.3% and 5.7% respectively. And our domestic refined oil products sales volume, the chemicals commodity volume and domestic natural gas sales volume went up by 6.2%, 6.7% and 12.7% respectively. And third, efforts have been made to implement our low-cost development strategy, we have continuously strengthened cost and fee control and management and the growth of our revenue far outweighs the growth of our costs and fees, especially our weighted average interest rate decreased by 30.7%. Efforts made in quality and efficiency improvement has contributed an earning of RMB10.5 billion, before business segments of the company have all witnessed profits. Thank you.

Dai Houliang

Time is running short, one final question.

Operator

The last question is [indiscernible] Securities. Please go ahead.

Unidentified Analyst

Since the year 2018, the company has been working actively to respond to the government’s call to ensure China’s energy security and the company has made quite considerable and stable CapEx in the upstream sector over the years with a lot of breakthroughs and achievements made in this sector. And in the year 2021, I am wondering about what significant discoveries have you made in your exploration activities in China. And as you know, reserve is the most important core competitiveness of an oil company and last year, PetroChina’s reserve replacement ratio amounted to 2.21, which is really seen in international oil companies, so how do you manage to achieve that. and for the second question is about the oil prices, and in this year 2022, the crude oil supply and demand is quite tight, which has brought up the crude oil prices. So, based on the current pricing mechanism, I am wondering about the impact on your refining chemicals and marketing businesses when crude oil prices stands at $80 to $130 and above $130?

Dai Houliang

I invite Mr. Ren Lixin, Senior Vice President, to take your first question.

Ren Lixin

In the last year, our domestic E&P business has sticked to innovation-driven approach. We have enhanced our efforts in oil and gas exploration and development in China and especially on effective exploration and reserve, and production ramp-up. Last year, we have made five significant, strategic breakthroughs in Junggar basin, Erdos basin, Sichuan basin and Tianan basin. We have discovered multiple reserve zones with sizable reserves and our reserve replacement ratio went up significantly. According to the appraisal of E&M, the independent third-party reserve appraisal agency, in the past year, PetroChina’s domestic oil and gas reserve replacement ratio by SEC standards was 147%, around which crude oil 221%, which is a record high since the company got listed. Thank you. Our Chairman would like to add several information.

Dai Houliang

I want to add that E&P efforts is a long-term process. Since the year 2018, PetroChina has echoed the government’s call to intensify our domestic E&P efforts and we have been working on that continuously. And in the year 2020, we see very low crude prices, but we have maintained our investment in risk-taking exploration. So, many years of efforts will bring benefits in the end. So, these many years of CapEx allocated in our upstream sector has brought up very good output for us to see last year and with improving reserve replacement ratio and more solid foundation in our regional space. Thank you.

Chai Shouping

I am CFO, Chai Shouping. I am taking the second question. The national – the NDRC issued a regulation on crude prices, which prescribes that when the international crude price rise above $80 per barrel, the gross refining margin will start to reduce and until – based on zero profit of processing profit to calculate the crude – the refined oil product prices. When the international crude price goes up above $130 per barrel, and of course, could price above $130 per barrel may not be sustainable. And if that happens, the diesel and gasoline prices in principle will not increase, we will only see very modest increase. From the perspective of PetroChina, we will strictly comply with the national micro regulation policies and on the other hand, also advocating with government authorities to set prices based on market terms in order to ensure stable supply of oil and gas. Thank you.

Chai Shouping

Ladies and gentlemen, that’s the end of today’s result announcement. Thank you for your participation.