China energy giant rewards investors after oil buoys profit

HONG KONG: PetroChina Co took a page from the playbook of global peers known for generous dividends by deciding to pay shareholders its entire half-year net income. China’s biggest oil producer passed on to investors the benefits of higher global prices with almost 12.7 billion yuan (US$1.9bil) in dividends, the Beijing-based company said Thursday as it reported earnings that beat estimates. While seen as a one-time payout, and small relative to international majors, the move raised expectations of more investor rewards this year from China’s state-owned giants. PetroChina shares in Hong Kong rose as much as 4.6% yesterday before closing up 3.7% at HK$5, the highest since Aug 9. The city’s benchmark Hang Seng Index gained 1.2%. Rival Chinese oil producer Cnooc Ltd, which also reported estimate-beating profit Thursday, jumped as much as 4.2%. Earnings by the biggest explorers including Royal Dutch Shell Plc, Exxon Mobil Corp and Chevron Corp improved as oil prices in the first half averaged about 30% higher than a year ago, near US$53 a barrel. That’s helped them generate enough cash to meet investors’ expectations of taming debt while sustaining dividends.

Meanwhile, similar surprise payouts by state-owned enterprises such as China Mobile Ltd and coal miner China Shenhua Energy Co signal both a newfound interest in luring investors as well as a possible trend of shifting cash back to state coffers. PetroChina is 86% owned by its unlisted parent, China National Petroleum Corp, which is ultimately controlled by the government.

“The generous dividend payout was a gesture to please shareholders in a subdued oil market,” said Tian Miao, a Beijing-based senior analyst at Sun Hung Kai Financial Ltd.

“CNPC will pocket a nice payment as well. PetroChina’s growth will continue into second half of the year as it finds a way to keep cutting operation costs.”

PetroChina’s interim and special dividends totaled more than 0.069 yuan per share, nearly triple the forecast for almost 0.025 yuan for the period. Its earnings beat an expected 10.6 billion yuan profit based on the average of three estimates compiled by Bloomberg. The payout policy likely won’t last, according to Tian and Hao Hong, chief strategist at Bocom International Holdings Co in Hong Kong.

“It’s welcome news for investors, but at the same time I would say that this is a one-off,” Hong said. “For this year, the guidance for state-owned enterprises is to increase the contribution to the government.”

Steady dividends are one of the primary attractions for oil-company investors. Exxon has increased its payout for 35 consecutive years, while Shell and BP Plc have even borrowed money to maintain them during oil’s three-year downturn.

PetroChina’s US$1.9bil in half-year dividends is dwarfed by Exxon, one of the global leaders among oil companies in cash payments to investors, which gave out almost US$12.5bil last year, according to data compiled by Bloomberg. Chevron paid about US$8bil.

And while the decision to pay all profits as dividends was a surprise, the annualised 3.3% yield is only “moderately generous,” said Laban Yu, head of Asia oil and gas equities at Jefferies Group LLC in Hong Kong.

PetroChina’s dividend policy this year is based on its improved cash flow and operations, President Wang Dongjin said at a briefing Thursday in Hong Kong. “We will pay more attention to shareholders interests in dividend payout in future, and our payout policy will be more flexible.”