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PetroChina flags US$1.5b writedown while profit doubles 

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PetroChina Co brushed off a US$1.5 billion writedown from the disposal of some assets as it estimated full-year net income more than doubled last year thanks to higher crude prices.

[HONG KONG] PetroChina Co brushed off a US$1.5 billion writedown from the disposal of some assets as it estimated full-year net income more than doubled last year thanks to higher crude prices.

China's biggest oil and gas producer said net income could have jumped as much as 132 per cent in 2018, according to a filing Monday to the Hong Kong stock exchange, which cited Chinese accounting standards. That would take it to 52.8 billion yuan (S$10.58 billion) for the year, according to Bloomberg calculations, compared with a 61 billion yuan (S$12.22 billion) average of 13 estimates that are based on international standards.

That's in spite of a non-recurring loss of as much as 10 billion yuan (S$2 billion), on which the company didn't elaborate beyond saying it disposed of certain oil and gas, as well as fixed, assets that met the conditions to be scrapped under accounting standards. If it weren't for the writedowns, earnings could have risen as much as 149 per cent, PetroChina said.

The profit alert by the state-owned energy giant was broadly anticipated after it reported in August that third-quarter profit surged more than fourfold. The majority of its income comes from exploration and production, so it benefited from global benchmark Brent crude averaging 31 per cent higher in 2018 than the previous year, at almost US$72 a barrel.

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"Despite the significant drop in oil prices in the fourth quarter, the international average crude oil price of 2018 experienced a relatively significant rise," the company said. It also cited increasing demand for natural gas, as well as production optimisation, broadening income sources and cost-cutting as reasons for the profit increase.

PetroChina shares sank to a three-year low earlier this month amid broader fears over an economic slowdown and concerns that trading troubles similar to losses at peer Sinopec, officially known as China Petroleum & Chemical Corp, could be unearthed. Analysts at Morgan Stanley and Sanford C Bernstein & Co have either upgraded the stock or listed it among their top oil and gas picks, citing low valuation and potential benefit from an oil price recovery.

The stock advanced 1.6 per cent to close at HK$5.13 (S$0.888) before the statement, the highest level in a month, and outperforming the 0.4 per cent gain in the city's benchmark Hang Seng Index.

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