China’s biggest oil field posts 1st-half profit on cost cuts

By Aibing Guo on 7/26/2016

BEIJING (Bloomberg) -- China National Petroleum Corp. said its Changqing oil field, the country’s biggest crude and gas producer, rebounded from losses earlier this year to post a first-half profit amid reduced spending.

Oil and gas equivalent output from the field reached 26.5 million tons in the first six months of the year, on its way to meeting the 50-million-ton annual output target, CNPC said in a statement on its website on Tuesday. It said the oil field had losses in January and February, without giving details.

China’s total crude production dropped 4.6% to 101.59 million tons in the first six months of the year, the lowest since 2012, according to data from the National Bureau of Statistics. Brent, the global oil benchmark, averaged near $41/bbl in the first half of this year, about 30% lower than the same period a year ago.

“Changqing is one of the better-quality oil and gas reserves in CNPC’s portfolio, so some effective cost control measures can indeed turn the operation back to profit,” Tian Miao, an analyst with policy researcher North Square Blue Oak Ltd., said by phone. “CNPC can’t turn most other oil fields back to profit unless crude returns to a $60 level” because their production costs are too high.

Oil, Natural Gas

Changqing produced 11.76 million tons of crude during the period (about 473,630 bpd), less than half the field’s total, while gas production reached 18.52 Bcm. CNPC improved single-well output at Changqing and controlled production costs in the first half by investing the “lowest possible” amount in exploration for new reserves, the company said in the statement. Changqing is the biggest gas and oil contributor to PetroChina Co., CNPC’s flagship listed unit.

PetroChina may break even in the first half on one-off gains and higher oil prices in the second quarter, Citigroup Inc. analysts including Graham Cunningham wrote in a July 15 research note. PetroChina posted a 13.8 billion yuan loss in the January to March period, its first-ever quarterly loss since listing in 2000.

PetroChina closed 1.3% lower at HK$5.28 on Tuesday, compared with a 0.6% gain in the city’s benchmark Hang Seng Index.

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