Introduction

Importance of PetroChina Company in Economy

Chinas impressive economic growth has significantly increased its demand for oil and chemicals. It is
believed that PetroChina the largest integrated oil company in China is well positioned to capitalize on
the countrys favorable trends.
Currently, the company is expected to outperform the broader U.S. equity market over the next one to
three months.
Another lucrative growth area for PetroChina is its natural gas business, which is likely to see a boom in
the coming years as China moves from coal to natural gas. At present, two-thirds of China's electricity is
generated by coal-fired power plants, which emit greenhouse gases that lead to pollution.
Moreover, strong growth in Chinas middle class and in automobile ownership is expected to fuel
consumption of refined petroleum products. Though PetroChinas downstream operations are primarily
located in Chinas relatively poor Northern regions, this would be an advantage in the long run.
Additionally, China has implemented fuel price reforms, which has allowed PetroChina to sell its
petroleum products close to international prices. The reforms have already helped the company to
significantly improve its Refining & Chemicals business during the first half of 2014. [1]

Company Profile
PetroChina Company Limited (PTR) is the largest integrated oil company in China.
The company's activities include: the exploration, development, production and sale
of crude oil and natural gas, the refining, transportation, storage and marketing of
petroleum products, the manufacture and sale of chemical products, and the
transmission of natural gas, crude oil and refined products.
PetroChina was established in November 1999 as a part of a restructuring of China
National Petroleum Corporation (CNPC), a state-owned entity, which currently holds
a majority stake of 86.35% in PetroChina. The company operates in four segments:
Exploration & Production, Natural Gas & Pipelines, Refining & Chemicals, and
Marketing.
Company's Registered Chinese Name:
Company's English Name: PetroChina Company Limited
Company Secretary: Wu Enlai

Executive Profile

Products
Refined products
Diesel, Gasoline, Fuel Oil, Naphtha, Jet fuel, Lubricants, Asphalt, Paraffin.
Chemical products
Basic petrochemicals

Derivative petrochemicals
Polyolefin

Fibers

Ethlene
Propylene
Benzene

Polyethylene
Polypropylene
ABS

Terylene fiber
Polyacrylic fiber
Polypropylene fiber

Other chemicals

Intermediates

Rubber

Urea
Ammonium nitrate

PTA
Glacial acetic acid
Alkylbenzene
Octanol
Synthesized ethanol
Buty alcohol
Purified methenol

Butadiene styrene rubber

Polybutadiene rubber
Acrylonitrile-butadiene rubber
Ethylene-propylene rubber

Services
Oil/gas Transportation Service

PetroChina holds and operates an oil and gas product pipeline network and storage
system covering 26 provinces, municipalities and autonomous regions across China
that are as below:
Natural gas pipeline
Crude oil pipelines
Oil products pipeline
Chemical Sales and Technology Center
The Company's chemical products are marketed directly or indirectly through a
network of sales personnel and agents dedicated to its chemical operations.
Currently, the Company has six sales and technical service centres, each
responsible for marketing and providing after-sales services in respect of plastics,
fibres, rubbers, fertilisers, organic chemical feedstock and catalysts and additives,
respectively.
Fuel Card
PetroChina fuel card system is a gigantic IC card application project with transinstitutional and inter-regional capacity. An electronic product oil retailing system, it
aims at providing nationwide refueling convenience to cardholders with better and
more satisfying service. [2]

Competitors
CNOOC Limited
Sinopec Shanghai Petrochemical Company Limited
CHEVRON CORPORATION

Credit Rating
Credit rating of Petrochina as of 28-Oct-2014 is A+. It is the highest recognized
credit rating and this shows that this company has a very strong fundamental
strength compared with that of its global peers. [3]
3

Technical Analysis
Yea
rs
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3

RMB in Millions
Sales/Rev
Net
Total
enue
Profit
Assets
505,632 131,699
711,489
595,734

127,683

859,390

771,025

127,702

1,018,107

722,571

99,808

1,202,343

982,797

131,897

1,356,651

1,287,823

126,429

1,543,576

1,337,157

103,429

1,740,634

1,362,289

134,356

1,843,650

Interpretation
In eight years earning history, Sales/Revenue of PetroChina Co. is increasing
each year.

DuPont Analysis
Years
Net Profit
Margin
Total Assets
Turnover
Equity Multiplier

2006
26.05
%
71.07
%
1.43

2007
21.43
%
69.32
%
1.37

2008
16.56
%
75.73
%
1.38

2009
13.81
%
60.10
%
1.52

2010
13.42
%
72.44
%
1.56

2011
9.82%

2012
7.73%

2013
9.86%

83.43
%
1.65

76.82
%
1.78

73.89
%
1.74

Return on Equity
(ROE)

26.40
%

20.32
%

17.32
%

12.64
%

15.16
%

13.54
%

10.55
%

12.65
%

duPont
30.00% 26.40%
20.32%

20.00%
ROE

17.32%

12.64%

15.16% 13.54%

10.00%

10.55% 12.65%

ROE

0.00%
2006

2007

2008

2009

2010

2011

2012

2013

Years

Interpretation
As benchmark is not available so trend analysis is done of PetroChaina
Companys Return on Equity (ROE) over 8 years. The trend shows decline in
ROE because of drop in net profit margins and an increase in the equity
multiplier. Asset turnover has been somewhat consistent.

Future Perception
Every year earning is increasing and as of Feb 14, 2015, the consensus
forecast amongst 25 polled investment analysts covering PetroChina
5

Company Limited advises investors to hold their position in the company.

This has been the consensus forecast since the sentiment of investment
analysts deteriorated on Jan 12, 2015. The previous consensus forecast
advised that PetroChina Company Limited would outperform the market. [4]

Opportunity
The current situation is relatively moderate those who own share(s) should
hold and there can be a good opportunity for new investors if PetroChina
company outperforms.

Summary
This document majorly presents a model for the financial analysis of
PetroChina Co. Ltd. based on Technical and DuPont system of financial
analysis. PetroChina is the largest integrated oil company in China. It has a
significant impact on China's economy due to the increasing demand for oil.
PetroChina has A+ credit rating. The company is focusing on increasing its
Sales since last eight years, although there is also a decline in 2009 but the
company has brought up a remarkable boost in Sales in next four years i.e.
from 2010 -2013. PetroChina return on equity is decomposed into net profit
margin, total assets turnover and the equity multiplier. The DuPont analysis
shows the performance of The PetroChina Co. over the years from 20062013. Beginning with 2006, PetroChina had high return on equity as well as
net profit margin as compared to other years under study. As moving
forward, after 2006 until 2013, the return on equity is gradually declined
except for the years 2010 and 2013 where a little up gradation in ROE is
seen. Similarly, net profit margin exhibits regular turn down for the period
from 2007 to 2012 except 2013 in which a little growth in profit margin has
occurred. Total Assets Turnover is almost stable over eight years apart from
2011 in which a good increment is seen. The equity multiplier also show
6

almost stable indicators over the whole time frame along with a more ups
and less downs which indicates that PetroChina had some financial leverage
in the recent years, which means the company is relying on debt to finance
its assets somehow. Net profit reached approximately 26.05 percent with an
average 14.84 percent, total asset turnover of about 83.43 percent and an
average of 72.85 percent, and the equity multiplier leveled out at max with
the figure 1.78 with average of 1.55. New investors should watch over as the
company outshines.

References
[1]http://www.zacks.com/stock/news/139654/petrochina-looks-impressiveon-improving-chinese-economy
[2] http://www.petrochina.com.cn/
[3] https://www.fitchratings.com/gws/en/esp/issr/82320901
[4]
http://markets.ft.com/research/Markets/Tearsheets/Forecasts?
s=601857:SHH

Appendix
7

The group: China National Petroleum Corporation

The company: PetroChina Company Limited

8 years balance sheets and income statements