PetroChina profit tumbled to the lowest since 1999 as the company reported a 25bn yuan ($3.8bn) writedown amid the crash in energy prices.
Net income at China’s biggest oil and gas producer dropped 67% to 35.5bn yuan from 107bn yuan, according to a statement sent to the Hong Kong stock exchange. Sales fell 24% to 1.73tn yuan. The company warned in January that 2015 profit may fall 60% to 70%.
Brent, the global benchmark, dropped to an average of about $54 a barrel last year, from roughly $99 the year before, prompting global oil energy companies to write down assets, slash earnings and cut capital expenditure plans. Despite the pain, PetroChina and its state-owned parent China National Petroleum Corp won’t resort to laying off frontline oil and gas workers as a way to cut costs, chairman Wang Yilin said this month.
“The worst is over, given the recent oil price rebound and cost cutting initiatives implemented,” said Gordon Kwan, head of Asia oil and gas research at Nomura Holdings in Hong Hong.
“The writedowns are due to the unprecedented fast oil price collapse hurting asset value. Rebounding oil prices in the next few years will raise asset values.” The company’s writedowns came in its upstream sector, which includes oil and gas assets, president Wang Dongjin said at a briefing in Hong Kong after the results were announced, without providing further details.
PetroChina will shut down oil and gas fields that have “no hope” of making a profit under current oil prices, Wang said. Redundant workers will either be transferred to other positions or offered early retirement, he said.
Oil has climbed back from a 12-year low this year on speculation that stronger demand and falling US output will ease a global surplus. The Organisation of Petroleum Exporting Countries and other producers including Russia plan to meet in Doha next month to discuss limiting output to reduce a global oversupply.
PetroChina, which listed publicly in 2000, China Petroleum & Chemical Corp and Cnooc all posted profit or revenue declines for the first nine months of 2015. PetroChina and CNPC sold pipeline assets in November to raise cash to meet their annual profit target. Capital spending this year will be 5% lower at 192bn yuan, following a 31% cut last year. PetroChina sees total production falling 2.7% this year to 1.45bn barrels of oil equivalent as a drop in crude production overwhelms higher gas output. The 3% gain in 2015 was driven by growth in its overseas output, according to the statement.