PetroChina braces for plunging profits

China

BEIJING, January 25, 2017 – Listed CNPC subsidiary PetroChina issued a profit warning on Wednesday, with its net income for 2016 likely to be the lowest reported since 1996.

In a press release, PetroChina succinctly forecast that its profits would fall by 70%-80% compared with 2015. The drastic decline is thought to be the direct result of the mid-2014 drop in oil prices that continued through the first half of 2016 before showing signs of recovery.

In 2015, the average barrel price was USD 54 per barrel, while the price sank to USD 43 per barrel in 2016. The government’s decision to lower the price of natural gas is another variable contributing to PetroChina’s loss of profits.

Even with the dramatic drop, analysts remain buoyed by 2017 prospects. “It’s slightly better than what we were expecting, but overall it’s largely in line with guidance. As oil prices recover, we’ll see a strong recovery in earnings in 2017,” said analyst Neil Beveridge of Sanford C. Bernstein & Co.