PetroChina’s 2022 Results Within Expectations

PetroChina’s 00857 2022 net profit of CNY 149.4 billion, up 62% year on year, is in line with its preliminary guidance. We cut our fair value estimate to HKD 4.80 per H-share (CNY 4.22 per A-share) from HKD 4.92 (CNY 4.28) after incorporating our latest energy price and foreign exchange assumptions. We think PetroChina’s H-shares are currently fairly valued, although the estimated 2023 dividend yield of about 8% should continue to support share prices. CNOOC remains our top pick in the sector given its cost efficiency and oil and gas output growth, while its H-shares also provide more than 8% estimated dividend yield in 2023.

PetroChina’s 2022 payout ratio of 52% surprised us, and we have raised our explicit payout ratio forecast to 50% from 45%. We think this is positive for shareholders, and we expect it to be supported by the firm’s robust operating cash flow. PetroChina is also proposing share buybacks for both H-shares and A-shares. We believe this will be welcomed by investors and indicates management’s commitment to reward shareholders.

We think PetroChina’s overall operating performance in 2022 is in line with peers. Upstream operating profit was up 142% year on year on the back of higher energy prices and stringent cost control. PetroChina’s lifting cost of USD 12.42 per barrel was flattish year on year, compared with the 40% rise in its average realized crude oil price. Meanwhile, marketing operating profit was up 8% year on year, but the refining and chemicals segment saw operating profit fall 18% year on year. The trend is similar to Sinopec, but we note that for the chemicals division, PetroChina’s CNY 598 million operating loss was lower than Sinopec’s CNY 14.1 billion operating loss in 2022, probably due to Sinopec’s larger chemicals operation. PetroChina’s natural gas marketing segment saw operating profit fall 71% year on year due to the absence of gain from the restructuring of pipeline assets a year ago and higher raw material costs.