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PetroChina Co., Ltd. 04 July 2008

Update Report – 1Q 08 results

Higher hydrocarbon prices to negatively impact margins

Common HOLD Fundamental research indicates a 9% upside in the common stock over the next 6–12 months. We
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continue to month
take a 6–12 the full reporthorizon
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stock asat
the commodities market in which
Stock the company operates is highly cyclical and therefore trends can be captured more accurately with a
http://www.iirgroup.com/researchoracle/viewreport/show/20198
shorter investment horizon.
Ticker: 0857.HK
Target price: HK$10.39
Current price: HK$9.55 We reiterate the common stock a HOLD with a 6–12 month target price of HK$10.39

ADR HOLD The ADR is expected to increase approximately 8% over the next 6-12 months. The 9 percentage point
fundamental upside is further offset by 1 percentage point downside attributable to reduction of
current premium of the ADR stock over the same period1. The Hong Kong dollar is currently pegged to
Ticker: PTR the US dollar (see ‘Currency impact for US investors’ below). Therefore, we do not anticipate any
currency impact on the ADR over our investment horizon.
Target price: US$133.28
Current price: US$123.89
We reiterate the ADR (1 ADR = 100 common shares) a HOLD with a 6-12 month target price of
US$133.28

Supervisor: Nirav Shah

Analyst: Mayur Agarwal Investment horizon – short term actionable trading strategies
Editor: Matthew Bridle This report addresses the needs of strategic investors with a long term investment horizon of 6-12 months. If
Global Research Director: this report is provided to you by your broker under the Global Settlement, you may now also access (free of
Satish Betadpur, CFA charge) the short term trading outlook that we publish from time to time for this issuer, looking at the coming
5-30 days for readers with a shorter trading horizon. These are available online only at
Next news due: www.researchoracle.com.
2Q 08 results, August 2008
Report summary
PetroChina Co., Ltd. (PetroChina) reported strong revenue growth in 1Q 08, reflecting increased sales
volumes and higher realized crude oil prices. We are optimistic about of revenue growth within the
Exploration & Production (E&P) and the Refining and Marketing segments given an anticipated
increase in hydrocarbon prices coupled with the company’s efforts to increase its refining capacity.
Furthermore, the Chinese government has provided several tax benefits which are likely to benefit the
bottom-line, going forward. However, as domestic fuel prices, controlled by the Chinese government,
are significantly lower than international crude oil prices, Chinese oil companies are incurring
substantial losses in their refining units. Although on 19 June 2008 the Chinese government
announced that it will raise prices for gasoline and diesel fuel by 16% and 18% respectively, even with
a rise in domestic fuel prices, they remain significantly lower than international levels. As a result, we
are not confident that the company will be able to pass on higher input costs to consumers through
higher prices, negatively impacting margins. Therefore we hold a neutral view on PetroChina’s common
stock over our investment horizon.

Currency impact for US investors

The Hong Kong dollar is currently pegged to the US dollar in the range of HK$7.75-HK$7.85. We are
assuming a constant exchange rate to value this stock over our investment horizon. The company
reports in RMB. Therefore, we have calculated the common stock target price using the 03 July 2008
closing HK$/RMB exchange rate or RMB0.8777. The ADR target price has been calculated using the
03 July 2008 closing US$/HK$ exchange rate of HK$7.7992.

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