Asian oil giant PetroChina delivers lavish dividend
Hong Kong — 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, Exxon Mobil 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 (CNPC), 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. "CNPC will pocket a nice payment as well. PetroChina’s growth will continue into the 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, which is 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 will not 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," Hong 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 oil-company 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.
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 is only "moderately generous", said Laban Yu, head of Asia oil and gas equities at Jefferies Group.
China’s oil output fell about 5% in the first half of this year, putting it on course to produce the least amount of crude since 2009
The rise year-on-year in oil prices has stabilised profits at China’s state-run producers, but hasn’t proved high enough to reverse declines in the country’s crude fields after state majors shut money-losing wells.As they boost combined spending for the first time in four years, their focus has shifted toward natural gas to meet booming domestic demand amid a push by President Xi Jinping’s government to burn cleaner fuels.
China’s oil output fell about 5% in the first half of this year, putting it on course to produce the least amount of crude since 2009 and increasing its reliance on imported supplies. Natural gas output in the same period rose 8%.
PetroChina is following that trend globally, with total output of the fuel during the first half rising 5.3% year-on-year, while crude production fell 7.4%. Combined oil and gas production slipped 3% to 725.7 million barrels. That’s about 4.01 million barrels a day, according to Bloomberg calculations.
The company’s lifting costs, or the cost of production for each barrel of oil equivalent, fell 4.2% to $11.32. Fellow state-run explorer, Cnooc, which also reported earnings Thursday, said its operation costs slipped 3.5% to $7.16 a barrel of oil equivalent.
Cnooc said Thursday that it swung to a profit of 16.3 billion yuan in the first half, beating an expected profit of 10.47 billion yuan. The company, a pure oil and gas producer, will pay an interim dividend of HK$0.20 a share.
Cnooc’s partners Exxon and Hess Corp. in June approved a $4.4 billion development plan for the Liza project offshore Guyana, which is designed to produce 120,000 barrels of oil a day in the first phase of development and is expected to start 2020. Cnooc, which owns a 25% stake in the project, will book reserves from it when it publishes its next annual report in March, Chairman Yang Hua told reporters Thursday in Hong Kong.
The board of China Petroleum & Chemical Corp., the refining behemoth known as Sinopec, is meeting Friday to approve half-year results. The company is expected to publish results Sunday.