PetroChina, CNPC plan pipeline, refinery sales

PetroChina and its state-owned parent CNPC are planning to sell assets before the end of the year that may include stakes in pipelines and refineries as the country’s biggest oil and gas producers seek to shore up their balance sheets, according to people with knowledge of the situation.

BloombergBeijingPetroChina Co and its state-owned parent are planning to sell assets before the end of the year that may include stakes in pipelines and refineries as the country’s biggest oil and gas producers seek to shore up their balance sheets, according to people with knowledge of the situation.PetroChina and China National Petroleum Corp may announce the stake sales as early as this week, said the people, who declined to provide details and asked not to be identified because the information isn’t public. CNPC is seeking to use proceeds from the sale to meet annual income growth targets set by China’s state asset regulators, according to the people.PetroChina gained 0.4% to HK$5.65 at the close in Hong Kong, compared with a 0.4% decline in the city’s benchmark Hang Seng Index. The stock has dropped 37% in the past year, compared with a 5.1% fall in the benchmark.“Many investors would prefer they cash in on some assets rather than running the assets themselves,” Laban Yu, head of Asia oil and gas equities at Jefferies Group in Hong Kong, said by phone. “Investors have given almost zero valuation to PetroChina’s assets such as pipelines. Any asset sales right now are good news for the company and could help its share price.”  CNPC’s press office in Beijing wasn’t able to immediately respond to an e-mail seeking comment. Mao Zefeng, PetroChina’s Beijing-based spokesman, said he was unable to immediately provide comment. The slump in energy prices has pushed energy companies to shed assets and cut staff to survive the downturn. PetroChina’s third-quarter profit fell 81% to the lowest since Bloomberg started compiling the data in 2007. China Petroleum and Chemical Corp, the country’s No 2 producer known as Sinopec, posted a 92% decline in profit.The sales by PetroChina and CNPC make sense in the light of China’s move to lower natural gas prices, Sanford C Bernstein & Co analyst Neil Beveridge said in an e-mailed comment. China has cut the price industrial users pay by an average 28% to boost the use of the fuel in its energy mix and reduce pollution.   “While PetroChina is likely to continue acting as operator, there is little strategic sense for PetroChina to maintain ownership of its pipeline network,” Beveridge said. “The risk and return profile of these assets mean that other asset managers would see more value in these.” China is also looking at stripping its biggest energy companies of their oil and gas pipelines to allow fair access to all gas producers and distributors, Bloomberg reported in May.The sale would be the first major divestment by either company since PetroChina sold a 20bn yuan ($3.1bn) pipeline stake to institutional investors in 2013. Saudi Arabian Oil Co, the world’s largest oil exporter, hired Deutsche Bank to advise on the potential acquisition of some marketing, retail and refining assets from CNPC that could be worth several billion dollars, Bloomberg reported in October.Income at both companies has dropped “dramatically” this year, adding pressure to meet growth targets, Wang Dongjin, a deputy general manager at CNPC and president of PetroChina, said in a statement posted on CNPC’s website this month. CNPC will try to raise profit through an “asset-light” strategy, Wang said, without elaborating. PetroChina is 86.5% owned by CNPC and accounts for about 90% of the parent company’s proven oil and gas reserves, according to the Fitch report. PetroChina’s 2015 profit is expected to drop about 55% from a year ago to 47.9bn yuan, according to estimates compiled by Bloomberg.