PETROCHINA Co, the world's second biggest publicly traded oil company, is set to sell minority stakes in oil and gas fields as well as gas pipeline projects in west China to raise cash for overseas acquisitions, said a person familiar with the plans.
Some agreements may be announced in the next few months, the person said. The pipelines offer near double-digit investment returns, the person said without identifying the assets. Talks are taking place with several parties and their investments will be in the billions of yuan, the person said, declining to be more specific or identify who the company is in discussions with.
PetroChina needs more private capital in the company's domestic oil and gas businesses to relieve its financing burden, chairman Zhou Jiping said on May 23 in Beijing. It had 505 billion yuan (US$82 billion) in interesting-bearing debt at the end of 2012, from 350 billion yuan in 2011, according to its annual report published in April.
"PetroChina can use the cash to buy more assets or expand its overseas projects that over time will provide higher returns than what domestic projects can currently provide," said Simon Powell, an oil and gas analyst at CLSA Ltd Hong Kong. Of course, what the market will be looking at is what price PetroChina can get for the assets, he said.
The company's profit fell to 115 billion yuan in 2012 from 133 billion yuan in 2011 and 140 billion yuan in 2010. Capital spending is forecast to rise to 355 billion yuan this year from 352 billion yuan in 2012 and 284 billion yuan in 2011.
PetroChina's debt-to-equity ratio was about 10 percent in 2007, the same level as oil explorer CNOOC Ltd, though much lower than around 60 percent at China Petroleum and Chemical Corp, according to a research note by Neil Beveridge, Hong Kong-based head analyst for oil and gas in the Asia-Pacific region at Sanford C. Bernstein & Co.
The ratio surged to 47 percent by the end of March and may break 50 percent by 2015, Beveridge said in the note published on May 2.
"PetroChina will increasingly have to make the choice between growth, dividend or raising additional capital to fund growth," Beveridge said. "Give the infrastructure investment over the next decade on gas, pursuit of overseas growth and unconventional growth, it seems inevitable PetroChina will have to make some unpleasant choices ahead."
