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pww.comPetroChina Company Limited, Q3 2020 Earnings Call, Oct 30, 2020 - SEHK:857

SEHK:857

Xing Chong [Executives] 💬

Xing Chong, identified as Deputy Director of Investor Relations and Deputy Chief Representative in Hong Kong for PetroChina Company Limited, made the following statements during the Q3 2020 Earnings Call:

  1. Opening Remarks

    • Welcomed attendees on behalf of PetroChina and thanked them for participating in the company’s 2020 third quarter results analyst conference call.
    • Introduced himself as Xing Chong Brian and noted the presence of Mr. Wei Fang, Assistant Secretary to the Board and Head of Investor Relations, and Madame Yun Hong, Deputy Director of Financial Disclosure and IR team in Beijing.

  2. Introduction of Wei Fang

    • Invited Mr. Wei Fang, Assistant Secretary to the Board, to provide opening remarks.

  3. Brief Introduction of PetroChina's 2020 Third Quarter Results

    • Provided a summary of the company's financial performance for the first three quarters of 2020, highlighting the impact of COVID-19 and lower oil prices on the global economy and international oil markets.
    • Noted that the international crude oil price witnessed a significant drop followed by a sluggish rebound, fluctuating at low levels.
    • Mentioned that the domestic economy showed signs of improvement from quarter-to-quarter, transitioning from negative to positive growth.
    • Discussed the financial highlights for the third quarter of 2020, including revenue, profit from operations, and net profit attributable to owners of the company.
    • Commented on the turnaround in revenue and profit for the first nine months of 2020.
    • Provided details on the average realized prices for crude oil and natural gas, as well as the decrease in unit oil and gas lifting costs and selling and administrative expenses.
    • Offered insights into the performance of the Exploration and Production, Refining and Chemicals, Marketing, and Natural Gas and Pipeline segments.

  4. Pipeline Asset Restructuring Transaction

    • Discussed the successful completion of the pipeline restructuring transaction with PipeChina, involving the disposal of target assets including major oil and gas pipelines, certain gas storage, LNG terminals, and some paving oil and gas in exchange for PipeChina’s equity interest and cash consideration.
    • Highlighted the approval of the transaction by the Extraordinary General Meeting (EGM) of the company and the satisfaction of all conditions precedent.
    • Provided details on the total assets sold, net assets attributable to the owners of the company, and the transaction value.
    • Noted the recognition of a long-term equity investment in PipeChina and cash consideration, as well as the profit before tax and net profit after tax from the transaction.
    • Emphasized the significance of the transaction for PetroChina and the oil and gas industry, contributing to sustainable and healthy development and positive operating results in the long term.

  5. Closing Remarks

    • Concluded by thanking everyone for their participation and opened the floor for questions.

Xing Chong's remarks primarily focused on providing an overview of PetroChina's financial performance and key events, including the significant pipeline asset restructuring transaction.

Wei Fang [Assistant Secretary of the Board] 💬

Wei Fang, the Assistant Secretary to the Board of PetroChina Company Limited, made several remarks during the Q3 2020 Earnings Call:

  1. Opening Remarks:

    • Wei Fang thanked everyone for attending the third quarter results conference call and webcast.
    • He expressed gratitude to the research teams, portfolio managers (PMs), and shareholders for their long-term support of PetroChina.
    • He acknowledged the unprecedented challenges posed by COVID-19 and lower oil prices, noting that the company has taken active steps to respond to these challenges, including coordinating pandemic control measures and ensuring smooth operations.
    • He highlighted the company's efforts to improve quality and efficiency, as well as its careful budgeting and production optimization to mitigate the impacts of COVID-19 and low oil prices.

  2. Third Quarter Highlights:

    • Wei Fang noted that PetroChina has made significant progress in the third quarter, with encouraging signs of recovery.
    • Production and business operations have returned to normal, and business performance has improved month-by-month since the second quarter.
    • The net profit in the third quarter was CNY 40 billion, marking a sharp turnaround and profit increase of CNY 53.8 billion quarter-over-quarter (QoQ) and CNY 31 billion year-over-year (YoY).
    • The overall financial position remains solid, with strengthened capital expenditure (CapEx) and cost controls. Leasing costs are around $10 per barrel, down by 10.7% YoY, which is significantly lower than domestic and global peers.
    • Selling, general, and administrative (SG&A) expenses were down by 7.9%.

  3. Micro-environment and Market Recovery:

    • Wei Fang mentioned that the company is facing a better micro-environment, with China's economy showing good momentum for further improvement.
    • Domestic refined oil product and natural gas markets have gradually recovered, and demand has returned to normal levels.

  4. Positive Factors and Outlook:

    • Wei Fang expressed optimism about the future, stating that with the positive factors in mind, PetroChina will continue to enhance quality and efficiency.
    • He invited Dr. Xing Chong to provide a quick update on the third quarter results and concluded by thanking everyone for attending the call.

  5. Pipeline Restructuring Transaction:

    • Wei Fang provided details about the pipeline restructuring transaction with PipeChina, emphasizing the significance of the transaction for PetroChina and the oil and gas industry.
    • He explained that the transaction was reviewed and approved by the Extraordinary General Meeting (EGM) of the company, with a supporting rate of 99.9963%.
    • The transaction involved the disposal of major oil and gas pipelines, certain gas storage, LNG terminals, and some of the paving oil and gas assets in exchange for PipeChina's equity interest and cash consideration.
    • Wei Fang mentioned that the total assets sold in the transaction amounted to CNY 354 billion, with a net asset attributable to the owners of the company of CNY 201.43 billion and a transaction value of CNY 247.2 billion.
    • The company recognized a long-term equity investment of CNY 149.5 billion in PipeChina and received a consideration in cash of CNY 97.75 billion.
    • Wei Fang stated that the transaction has a profound meaning for PetroChina and is conducive to the sustainable and healthy development of the company, achieving sustainable and positive operating results in the long term.

  6. Green Development Strategy:

    • Wei Fang discussed PetroChina's focus on green development, outlining the company's commitment to developing upstream oil and gas exploration and downstream business emissions by 2050.
    • He mentioned that PetroChina will continue to implement its strategies of innovation, resources, market, internationalization, and green and low-carbon development.
    • Wei Fang highlighted the company's aim to achieve green and low-carbon transformation and generate greater value for shareholders.

  7. Pipeline Transaction Clarification:

    • Wei Fang addressed a question about the differences between the July announcement and the recent announcement regarding the pipeline transaction.
    • He explained that the differences in the transaction value and book value were due to factors such as PetroChina's dividend payout, changes in the volume and prices of initial oil and gas in the pipeline, and other adjustments.

  8. Fourth Quarter Outlook:

    • Wei Fang expressed optimism about the fourth quarter results, citing the recovery of the domestic economy and the potential for higher winter gas prices.
    • He mentioned that the company is maintaining a positive earnings and cash flow outlook even at a $40 oil price environment.

  9. Green and Low-Carbon Development:

    • Wei Fang provided details about PetroChina's green and low-carbon development strategy, mentioning a three-step plan that includes clean alternatives, strategic replacement, and green transition.
    • He indicated that PetroChina's goal is to build a low-carbon energy ecosystem with integrated development of fossil fuels and clean energy.
    • Wei Fang mentioned that the company plans to spend approximately CNY 10 billion on green and low-carbon transition over the next five years.

  10. Dividend Policy:

    • Wei Fang addressed a question about the dividend policy, stating that despite the yearly losses, PetroChina issued a total dividend of CNY 16 billion, representing CNY 0.087 per share, up 12% YoY.
    • He affirmed that PetroChina will continue to uphold a prudent and pragmatic dividend payout policy, considering the company's performance, financial profile, cash flow, and major mergers and acquisitions (M&A) projects.

  11. Closing Remarks:

    • Wei Fang thanked everyone for attending the call and summarized the company's achievements and resilience in the face of challenges.

    • He expressed confidence in the company's ability to seize favorable opportunities and implement measures to improve quality and efficiency.

    • Wei Fang mentioned the upcoming Extraordinary General Meeting (EGM) focusing on the renewal of continuing connected transactions with China National Petroleum Corporation (CNPC) for the next three years.

    • He requested support from shareholders for the resolution and expressed hope to meet everyone in person in the near future.

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