PetroChina puts 10 pct target on foreign business

PetroChina Co. Ltd. (0857.HK: Quote, Profile , Research), the world's No.2 oil and gas producer, wants its foreign operations to account for 10 percent of its business by 2010, up from 5-6 percent now, a company official told Reuters on Friday.

Confirming remarks made to an analysts' briefing by PetroChina Chairman Jiang Jiemin late on Thursday, the official said the firm had found at least 100 million tonnes of oil at each of two new projects, in Mongolia and Chad, and had 400 billion cubic metres of gas at its Turkmen field.

"In Kazakhstan we also have a block of 3,000 square kilometres. There are three wells with good indications of oil and gas. The name of the block is Hope field," said the official, who declined to be named.

PetroChina already has projects in Kazakhstan, Indonesia and Venezuela.

"To meet the target we could increase production at those existing fields or possibly have some acquisitions in new places," the official said.

He did not say how the 10 percent contribution would be measured, but analysts said it would be in terms of earnings by PetroChina's core exploration and production division.

CLSA analyst Gordon Kwan noted that PetroChina said the new finds could add 25 percent to the company's proven reserves in the coming years following more appraisal drilling.

"I think the 10 percent target is conservative," he said.

However, it remains to be seen how much of the new claims, as well as other recent finds, will translate into proved reserves.

POSITIVE ON RESERVES

Jiang's briefing followed the release of PetroChina's first half results, which surprised analysts by increasing net profit despite a lower oil price during the period, although the bottom line was flattered by an unexpectedly low tax bill.

For a story on PetroChina's results, please click on [ID:nHKG230952].

Jiang also unveiled a plan for a Central Asia Pipeline, which PetroChina aims to build to bring 30 bcm of Turkmen gas a year to China -- more than half its current consumption.

Kwan said the company's outlook for the rest of the year was also encouraging, with a a pledge not to increase lifting costs from $7.1 per barrel in the first half of the year and a promise of more oil and gas production.

The firm also signalled it was confident of finding enough oil to replenish its reserves.

"Management has, for the first time, guided its oil reserve replacement ratio to be higher than 1x," said Morgan Stanley analyst Wee-Kiat Tan.

"This is a major positive, as we believe this signals PetroChina's optimism and aggressive approach toward improving its long-term reserve and production profile."

Goldman Sachs analyst Kelvin Koh said in a research report that the plans to expand overseas suggested the listed firm was likely to gain new projects via asset injections from its state-owned parent, CNPC.

PetroChina plans to fund its expansion, which also includes building refineries, by listing 4 billion shares in an initial public offering in its home market, to complement its New York and Hong Kong listings.

The issue could raise more than $5.6 billion, based on its Hong Kong share price of HK$11.00 on Friday morning, a 0.4 percent fall on the day.

Analysts expect the A-share listing and liquidity from China could also strengthen the share price, potentially triggering a re-rating in the fourth quarter of this year.