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Low Oil Prices Eat Into PetroChina, Profit Drops 77%

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Some dismal news for China’s Oil Patch came on Friday as one of its oil majors announced a massive profit drop for last quarter.

Beijing-based PetroChina, the country’s largest oil and gas producer, posted a dismal 76.9% decline in third quarter profit year-on-year, due to low global oil prices. Oil markets are awash in supply while prices have dropped from $115/barrel in mid-summer 2014 to currently hovering in the high $40s to low $50s range. PetroChina’s profits also dropped due to lower natural gas prices.

PetroChina’s profit fell to 1.2 billion yuan (US$177 million) for Q3, the company announced in a statement to the Hong Kong Stock Exchange on Friday. It did post higher earnings from its refining and chemicals sectors but those earnings were overwhelmed by production losses and weaker performance from its natural gas and pipelines units. Consequently, revenue dropped 3.8%to 411.4 billion yuan.

Other oil majors also posted profits losses on Friday. U.S.-based Exxon Mobil extended its longest streak of profit declines in almost three decades, with profits dropping 38% but still beating estimates; while France’s Total SA posted a 25% drop in third-quarter profit.

 Bad news for China’s oil production

PetroChina’s crude output fell to 696.6 million barrels in the first three quarters from 722.9 million barrels for the same period last year. The company produces more crude than its domestic rivals, state-owned Sinopec, and CNOOC (also state-owned) – the country’s second biggest refiner.

In August, PetroChina cut its domestic crude output target for the year to 103 million tons (about 755 million barrels), from 106 million tons set at the beginning of the year, as it shut some high-cost fields.

PetroChina’s domestic crude production in the third quarter slid almost 7% at 189.9 million barrels, according to Bloombergcalculations. PetroChina doesn’t release third-quarter operational figures.

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