China oil giants seek­ing to join spree of global energy deals

The Pak Banker - - COMPANIES/BOSS -

PetroChina Co., the coun­try big­gest oil and gas pro­ducer, sig­naled it's look­ing to join a wave of global energy deals as crude's col­lapse makes it the right time to buy and sell as­sets.

"Low crude prices are a good op­por­tu­nity for ac­qui­si­tions," Wang Dongjin, the com­pany's pres­i­dent, said at a brief­ing on Thurs­day af­ter it re­ported a 63 per­cent slump in prof­its dur­ing the first half of the year. "Tim­ing is re­ally im­por­tant now. We have been track­ing some as­sets for a while and are wait­ing for the time to come."

Oil's col­lapse to a six-year low has prompted a wave of ac­qui­si­tions across the energy in­dus­try. Three of the last five quar­ters have ex­ceeded $160 bil­lion in deal vol­ume, sur­pass­ing even the late 1990s, a pe­riod when many of the world's largest energy cor­po­ra­tions were formed, ac­cord­ing to data com­piled by Bloomberg. While China's big three oil com­pa­nies have sat out this latest round, China Petroleum & Chem­i­cal Corp. also said Thurs­day it's seek­ing over­seas as­sets, sig­nal­ing that at least two of them are now ready to join the spree.

PetroChina's net in­come dropped to 25.4 bil­lion yuan ($4 bil­lion), or 0.14 yuan a share, in the six months ended June 30, from 68.1 bil­lion yuan, or 0.37 yuan, a year ear­lier, the Bei­jing-based com­pany said Thurs­day in a state­ment to the Hong Kong stock ex­change. The av­er­age of three an­a­lysts es­ti­mates com­piled by Bloomberg was a profit of 30.3 bil­lion yuan.

While the fall in prices is pre­sent­ing an op­por­tu­nity for deals, its been a drag on prof­its as the com­pany de­pends on ex­plo­ration and pro­duc­tion for most of its rev­enue. Crude has tum­bled as pro­duc­ers sus­tain out­put to pro­tect mar­ket share, wors­en­ing a global over­sup­ply, amid con­cern that de­mand growth from China is stalling. Brent, the bench­mark for about half the world's crude, av­er­aged about $59 a bar­rel in the first half of the year, down 45 per­cent from the same pe­riod in 2014.

"The global oil price is likely to keep fluc­tu­at­ing at a low level," the com­pany said in its earn­ings re­lease. "The growth of do­mes­tic de­mand for oil and gas will slow down and the mar­ket com­pe­ti­tion will get tougher."

PetroChina pro­duced 736 mil­lion bar­rels of oil equiv­a­lent in the first half, up 2.9 per­cent from a year ear­lier. The com­pany's av­er­age re­al­ized crude price fell 45 per­cent, while av­er­age nat­u­ral gas prices rose 0.4 per­cent. Sales dropped 24 per­cent to 878 bil­lion yuan, ac­cord­ing to the state­ment. Cap­i­tal ex­pen­di­ture de­clined 33 per­cent to 61.7 bil­lion yuan. The Bloomberg Com­mod­ity In­dex of 22 raw ma­te­ri­als fell to a 16-year low this month and is down 17 per­cent this year as a glut of raw ma­te­ri­als from oil to iron ore meet cool­ing de­mand from China, the world's big­gest con­sumer of energy, met­als and grains.

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