[HONG KONG] The plunge in crude prices all but killed profits at China's top energy producer and its largest oil refiner.
PetroChina Co on Thursday reported its worst quarterly profit on record, with net income for the three months ended September plunging 81 per cent from a year ago to 5.2 billion yuan (S$1.15 billion). An increase in refining revenue failed to stanch a 92 per cent drop in earnings at China Petroleum & Chemical Corp. Net income at Asia's biggest refiner, known as Sinopec, was 1.64 billion yuan. Both posted less than half what analysts expected.
"Falling oil prices really put those companies under tremendous pressure," Neil Beveridge, an analyst at Sanford C Bernstein & Co, said by phone from Hong Kong.
"Moving forward, they have to continue to find ways to cut costs and improve efficiency and make themselves more competitive." PetroChina shares in Hong Kong declined as much as 4 per cent to HK$5.94 and traded at HK$6.10, while Sinopec fell as much as 2 per cent to HK$5.51 and traded at HK$5.59 as of 1:41 pm local time. The city's benchmark Hang Seng Index dropped 0.3 per cent.
Damage from dropping oil prices has been almost inescapable for the industry as prices slumped more than 40 per cent in the past year during the worst oil bust in a generation. The collapse in revenue by China's state-run energy giants is being echoed globally, with Royal Dutch Shell Plc posting its biggest loss in more than a decade and taking a charge of almost US$8 billion, while Marathon Oil Corp. in the US cut dividends.
Meanwhile, China is curtailing commodities consumption as its economy grows at the slowest pace in 25 years. The government plans to cut natural gas prices for industrial users as well as on-grid power tariffs to stimulate demand in the world's biggest energy consumer.
Smaller rival Cnooc Ltd on Wednesday reported a 32 per cent drop in third-quarter revenue as it boosted production by 24 per cent while slashing spending 44 per cent.