Asian oil producer in lavish dividend
• PetroChina passes on to investors the benefits of higher global prices
PetroChina 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 ($1.9bn) in dividends, the Beijing-based company said on Thursday.
While seen as a one-time payout, and small relative to international majors, the move raised expectations of more investor rewards in 2017 from China’s state-owned giants.
Earnings by the biggest explorers including Royal Dutch Shell and Chevron, improved as oil prices in the first half averaged about 30% higher than a year ago, near $53 a barrel. That has helped them generate enough cash to meet investors’ expectations of taming debt while sustaining dividends.
Similar surprise payouts by state-owned enterprises such as China Mobile and coal miner China Shenhua Energy signal a new-found interest in luring investors and a possible trend of shifting cash back to state coffers. PetroChina is 86%-owned by its unlisted parent, China National Petroleum, which is 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.
“PetroChina’s growth will continue into the second half of the year as it finds a way to keep cutting operation costs.”
PetroChina’s payout policy is not likely to last, according to Tian and Hao Hong, chief strategist at Bocom International Holdings in Hong Kong.
“It’s welcome news for investors, but … I would say that this is a one-off,” Hao said.
“For this year, the guidance for state-owned enterprises is to increase the contribution to the government,” he said.
Steady dividends are one of the primary attractions for oilcompany investors. Exxon has increased its payout for 35 consecutive years, while Shell and BP have even borrowed money to maintain them during oil’s three-year downturn.
CASH PAYMENTS
PetroChina’s $1.9bn 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 $12.5bn in 2016. Chevron paid about $8bn.
While the decision to pay all profits as dividends was a surprise, the annualised 3.3% yield was only “moderately generous”, said Laban Yu, the head of Asia oil and gas equities at Jefferies Group.
PetroChina’s dividend policy in 2017 was based on its improved cash flow and operations, president Wang Dongjin said at a briefing on 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.” / Bloomberg