Good harvest performance Is expected to be special dividends from PetroChina

Figure: PetroChina (00857)

Benefiting from the continued rise in oil prices, PetroChina (00857) is expected to see its earnings rise nearly threefold last year, and its current valuation is attractive, coupled with a great opportunity to pay special dividends, with a dividend yield of more than 7%. The stock price moved strongly, hitting a new 52-week high.

Global demand for oil continues to increase, while falling inventories, supply disruptions and other factors have driven oil prices to continue to rise, and market concerns about cold weather and geopolitical factors may lead to unstable oil supplies have heated up, and international oil prices have broken through $90 per barrel, hitting a new high in more than 7 years.

The Organization of the Petroleum Exporting Countries and its allies (OPEC X) agreed to increase production again slightly, by 400,000 barrels per day, but due to years of underinvestment and the difficulty of increasing production after the sharp cuts in the past two years, the fair value of oil is currently expected to be at the level of $85 per barrel; if geopolitical risks escalate, oil prices could rise to $120 per barrel, which is a big benefit for oil stocks.

PetroChina, the largest oil and gas producer and seller on the mainland, benefited from the positive oil prices and the Group's earnings rose significantly, with an earlier profit and is expected to increase its profits by 71 billion yuan (RMB, the same below) to 75 billion yuan in 2021, ranging from 90 billion yuan to 94 billion yuan, an increase of 374% to 395% year-on-year, which is the highest level of the group since 2014. Oil prices are expected to remain above $75 per barrel this year, and PetroChina is expected to make a profit of 100 billion yuan this year.

The Group's dividend policy is generous, with special dividends paid from 2016 to 2019, and since the profit in 2021 has increased significantly, the opportunity to pay special dividends is very large, and the dividend yield is predicted to be as high as 7.6%.

In addition, PetroChina has strengthened its overseas business, and recently signed a cooperation agreement with gas giant Gazprom (Gasprom) to transport 10 billion cubic meters of natural gas from Russia every year through a new pipeline, and the combined supply of new and old pipelines has increased to 48 billion cubic meters per year, an increase of 25% over earlier plans.