China’s big three oil companies have recently reported earnings that are significantly below expectations. PetroChina Co. Ltd. (NYSE: PTR), China Petroleum & Chemical Corp. (NYSE: SNP) (aka Sinopec) and Cnooc Ltd. (NYSE: CEO) are all suffering from low crude prices.
Cnooc’s revenue fell 4.6% year-over-year in the third quarter. It sold its crude oil production at $99 a barrel, down nearly 7% compared with the year-ago price. The company’s 2013 acquisition of Canada’s Nexen is making a difference in the company’s volume production. The company also said it would reduce its capex in 2015 to levels below this year’s spending, which should help cash flow.
Sinopec, which is Asia’s largest refiner and second largest producer, posted a third-quarter profit decline of 12% year-over-year. Operating profit in the company’s E&P business fell 11%, according to Bloomberg, while refining profit rose 67%. It is unlikely that the company will be able to hold onto those big refining margins in the fourth quarter.
PetroChina is the company’s largest producer of crude, and it was hit hard by the falling price of crude. The company has cut its capital spending this year in an effort to cut costs and boost margins, but unless it increases its production the company will continue to struggle.
The sharp drop in crude prices has forced these Chinese companies to rein in spending, just as it has done with other international companies.
The Chinese government continues to buy crude oil to top up its strategic reserves, but the increases are coming mainly from the Middle East and the purchases at the current low prices are doing nothing to help out the company’s own producers.