PetroChina Co., Asia’s biggest company by market value, posted a first-half profit that missed analysts’ estimates after increases in state-controlled fuel prices lagged behind gains in crude oil costs. Net income climbed 1 percent to 66 billion yuan ($10.3 billion), or 0.36 yuan per share, from 65.3 billion yuan, or 0.36 yuan, a year earlier, the Beijing-based energy explorer and oil refiner said in a Hong Kong stock exchange filing today. That compares with the 67.3 billion-yuan median estimate of six analysts surveyed by Bloomberg. PetroChina posted a 23.4 billion-yuan loss on refining, eroding gains from higher crude prices and production, the main contributor to earnings. China’s largest energy company plans to spend at least $60 billion this decade to buy oilfields and refineries abroad and to expand its global oil trading business to help diversify from domestic refining. “Pressures from the regulatory environment are dragging earnings,” said Neil Beveridge, a Hong Kong-based senior analyst at Sanford C. Bernstein & Co. “PetroChina is suffering from refining losses.” PetroChina has declined 6.4 percent in Hong Kong trading this year, compared with the 14 percent drop in the benchmark Hang Seng index. The stock rose 1.8 percent to HK$9.51 today, before the earnings announcement. Price Controls Second-quarter net income fell 12 percent to 29 billion yuan, according to calculations made by subtracting first- quarter earnings from the six-month profit reported today. That’s less than the 30.3 billion-yuan median estimate in a survey of six analysts. Beijing-based spokesman Mao Zefeng confirmed the figure. China, which controls fuel prices to curb inflation that has reached a three-year high, raised tariffs by about 10 percent in two adjustments in the first half while crude in New York averaged 26 percent higher from a year earlier. Oil rose to a 30-month high of $114.83 a barrel on May 2 and has since declined to about $86. Higher crude prices increased operating expenses by 44 percent in the first six months, PetroChina said today. China may adjust fuel prices when crude costs change more than 4 percent over 22 working days. The government last raised gasoline and diesel prices by as much as 5.8 percent on April 7. ‘Persistently High’ Prices “Impacted by the persistently high international crude oil prices and the fact that domestic prices in refined products not having been fully adjusted upward to reflect the changes of international crude oil prices, the refining and chemicals segment incurred a loss,” PetroChina said. The company’s refining business swung a loss in the first half from a profit of 3 billion yuan a year earlier, as the cost of processing crude into fuels climbed 3.1 percent to 138.75 yuan per ton, according to the statement. Refining and marketing accounted for 12 percent of operating income last year, while exploration and production had a 78 percent share. Cnooc Ltd. (883), China’s largest offshore energy explorer, boosted first-half net income by 51 percent to a record, partly because oil and gas production accounts for 99 percent of its income and it operates only one major refinery. Profit at Exxon Mobil Corp. (XOM), the only oil and gas company bigger than PetroChina in market value, rose 54 percent in the first half, while Royal Dutch Shell Plc (RDSA) posted a 77-percent increase, the companies said last month. Oil Production PetroChina produced 445.8 million barrels of crude in the first half, up 5 percent from a year earlier, while the average selling price increased 40 percent to $101.62 a barrel. Last year, oil output expanded 1.7 percent to 858 million barrels. Oil-product sales rose 12 percent to 66.8 million metric tons in the first six months. Overall revenue rose 39 percent to 952.2 billion yuan. The Chinese energy producer wants half its oil and gas output to come from overseas by 2020, Chairman Jiang Jiemin said in an interview last year. Less than a tenth of production now comes from abroad. PetroChina paid C$1.9 billion ($1.9 billion) for a 60 percent stake in Athabasca Oil Sands Corp.’s MacKay River and Dover oil-sands projects last year. The Chinese company and Shell also jointly purchased Australia’s Arrow Energy Ltd. for A$3.7 billion ($3.8 billion). The unit of state-controlled China National Petroleum Corp. this year bought a 50 percent stake in the European oil-refining operations of Ineos Group Holdings Plc for $1.02 billion. The offer for holdings in the refineries of Grangemouth, Scotland, and Lavera, France, was part of a joint-venture agreement between PetroChina and Ineos. In June, PetroChina walked away from a C$5.4 billion ($5.5 billion) bid for Encana Corp.’s Cutbank Ridge gas assets after failing to agree on the price. The acquisition would have been its largest overseas deal. PetroChina was overtaken by Apple Inc. as the world’s second-largest by market value last year. Exxon is the biggest. --Chua Baizhen and Guo Aibing. Editors: Ryan Woo, Amit Prakash To contact the reporters on this story: Baizhen Chua in Hong Kong at bchua14@bloomberg.net; Guo Aibing in Hong Kong at aguo10@bloomberg.net To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net.

Source