China's oil, gas giants 'planning sale of assets'

BEIJING • PetroChina 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 Corporation (CNPC) may announce the stake sales as early as this week, said the people, who asked not to be identified.

CNPC is seeking to use proceeds from the sale to meet annual income growth targets set by China's state asset regulators, the sources said.

The sale would be the first major divestment by either company since PetroChina sold a 20 billion yuan (S$4.4 billion) pipeline stake to institutional investors in 2013.

"Many investors would prefer they cash in on some assets rather than running the assets themselves," Mr 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 was not able to immediately respond to an e-mail seeking 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 per cent to the lowest since Bloomberg started compiling the data in 2007.

China Petroleum and Chemical, the country's No. 2 producer known as Sinopec, posted a 92 per cent 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 of 28 per cent 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," Mr Beveridge said.

"The risk and return profile of these assets means 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.

PetroChina is 86.5 per cent owned by CNPC and accounts for about 90 per cent of the parent company's proven oil and gas reserves, according to the Fitch report.

PetroChina's profit this year is expected to drop about 55 per cent from a year ago to 47.9 billion yuan, according to estimates compiled by Bloomberg.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on November 24, 2015, with the headline 'China's oil, gas giants 'planning sale of assets''. Print Edition | Subscribe