PetroChina Co. Ltd. PTR announced 2017 earnings of RMB 22,793 million or RMB 0.12 per diluted share compared with RMB 7,900 million or RMB 0.04 per diluted share a year earlier. Moreover, China’s dominant oil and gas producer’s total revenue for the year jumped 24.7% from 2016 to RMB 2,015,890 million.

The positive comparisons can be primarily attributable to higher oil prices, which helped its exploration and production unit to report a jump in profitability. Interestingly, the company has decided to pay all of its annual profit of RMB 22,793 million as interim dividend to its stockholders – something it did in the first half as well.

PetroChina followed another big energy name from the country — Sinopec SNP — in reporting encouraging results. Sinopec also saw its profit surge as the largest petroleum and petrochemical company in Asia managed to generate strong petrochemical margins.

Following the robust showing, PetroChina has decided to boost 2018 capital expenditure. The group pegged its 2018 capital budget at RMB 225,800 million, up 4.4% from what it invested in 2017 as it focuses to cash in on the recovery in crude prices.

However, the Chinese energy giant’s earnings per ADR came in at $1.90, unable to match the Zacks Consensus Estimate of $2.82 on higher expenses and losses from gas imports.

12-Month Segment Performance

Upstream: PetroChina, one of the world's largest oil company by market value, posted disappointing upstream output during the twelve months ended Dec 31, 2017. In particular, crude oil output – accounting for 61% of the total – fell 3.7% from the year-ago period to 887 million barrels (MMBbl). This was partly offset by marketable natural gas output, which was up 4.5% to 3,423.4 billion cubic feet (Bcf). As a result, PetroChina’s total production of oil and natural gas declined by a marginal 0.6% year over year to 1,457.8 million barrels of oil equivalent.

However, average realized crude oil price during 2017 was $50.64 per barrel, 33.3% higher than the year-ago period. This buoyed the upstream (or exploration & production) segment results, which posted an operating income of RMB 15,475 million compared to a much smaller operating profit of RMB 3,148 million in 2016.

Downstream: The Beijing-based company’s ‘Refining & Chemicals’ business generated an operating income of RMB 39,961 million. This marks a slight increase from the year-earlier period earnings of RMB 39,026 million. The improvement in the downstream division was due to cost control initiatives, higher share of high valued-added chemical products and operational flexibility to adjust to market conditions.

PetroChina’s refinery division processed 1,016.9 MMBbl of crude oil during the twelve-month period, up 6.7% from 2016. The company produced 9.284 million tons of synthetic resin in the period (a rise of 2.3% year over year), besides manufacturing 5.764 million tons of ethylene (up 3.1%). It also produced 92.715 million tons of gasoline, diesel and kerosene during the period against 86.022 million tons a year earlier.

Natural Gas & Pipelines: Revenue rose 19.5% to RMB 295,786 million on higher natural gas sales volumes. Still, PetroChina lost money to the tune of RMB 23,947 million on the sales of imported natural gas and liquefied natural gas (LNG) from Central Asia and Burma. This pulled down the group’s natural gas business’ income to RMB 15,688 million in 2017, a 12.3% decline from the year-earlier profit of RMB 17,885 million.

Marketing: In marketing operations, the state-owned group sold 169.5 million tons of gasoline, diesel and kerosene during Jan–Dec 2017, an increase of 6.5% year over year. Higher volumes were accompanied by improved product prices due to which sales for the division were up 27.6% to RMB 1,660,456 million.

However, a number of adverse factors – spiraling operating expenses and fierce competition – meant that the segment reported a profit of RMB 8,279 million – lower than the prior year’s RMB 11,048 million.

Liquidity & Capital Expenditure

At the end of 2017, the stock’s cash balance was RMB 122,777 million, while cash flow from operating activities was RMB 366,655 million. Capital expenditure for the year was RMB 216,227 million, up 25.4% from the year-ago level.