Oil giant posts record profit for China

PetroChina's profits are the most ever for a mainland company but may be tough to reproduce

By Staff and wire reports

HONG KONG, China -- China's largest oil company, PetroChina, saw its profits double when it reported annual earnings Monday.

The result is a record profit for a company based in mainland China.

Beijing-based PetroChina said net income rose 104.6 percent to $6.7 billion, or 55.2 billion yuan. That continues a good string of results for Chinese oil companies and was above analysts' expectations.

China's second-largest oil producer, Sinopec, had already posted a gain of more than 300 percent with its 2000 earnings. The third-largest producer, CNOOC, saw its profits rise 150 percent.

PetroChina's shares were trading up 1.3 percent at HK$1.53 on Tuesday morning.

Oil prices, cost cutting explain growth

This was the first full year of results for PetroChina as a public company. It was spun off from state-owned China National Petroleum Corp and first offered shares to the public in April 2000.

The company said about 80 percent of the growth in profits came from higher oil prices. PetroChina also benefited from a cost-cutting program that saw it lay off 38,400 workers in 2000.

The company expects the job cuts to save it $92 million (760 million yuan) a year. PetroChina plans to shed another 13,900 jobs in 2001.

PetroChina said it is 41 percent through its $725 million cost-cutting plan for its exploration and production - or "upstream" - operations.

It announced its restructuring plan, which will cut costs by $1 billion in all, when it went public. A similar $157 million savings plan for its refinery operations is 60 percent done, the company said.

Because PetroChina has little control over oil prices, analysts have focused their attention on the company's cost-cutting and exploration efforts.

Results tough to reproduce

But with the price of oil, which rose as high as $36 a barrel in 2000, coming down, analysts say it will be hard for the company to duplicate its profit leap.

"We think that 2000 represents the peak of the commodity price cycle, which means for an upstream focused company like PetroChina, year 2000 will likely be peak profitability," said Tom Hilboldt, an oil analyst with Salomon Smith Barney.

The company's chairman, Ma Fucai, said profits for 2001 "will not be lower than last year's."

Higher refinery profits should compensate for the reduced production earnings caused by lower oil prices, the company said.

PetroChina is the fourth-largest listed oil company in the world. It added reserves of about 1.4 billion barrel-of-oil equivalents, or BOEs, in 2000, roughly the size of CNOOC's entire reserves.

PetroChina also said its "West-East" natural-gas pipeline project had received bids from 19 multinationals, including BP Amoco, ExxonMobil and Royal Dutch/Shell. It plans to announce the winning bids in June.

The pipeline will span China from Xinjiang in the far west to Shanghai in the east. PetroChina said the winning bidders will likely be able to buy stakes in the project.

Reuters contributed to this report.

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