China’s oil companies may use dividends to calm the fears of investors on the heels of the drop in energy prices.
Noting the dip in the price of oil, Tian Miao, an analyst at North Square Blue Oak Ltd. in Beijing said: "At current oil prices, China’s big oil companies have basically nothing but reasonable dividend payouts to keep current investors and attract new ones," adding that paying dividends will be an added strain to the companies, but will nevertheless be necessary if those companies want to remain attractive to investors.
Shares in the country’s three largest oil companies have managed to recover this year as prices have rebounded, but are still down 30 percent from 2014 when oil prices were at their peak. Analysts at Citigroup noted that PetroChina has the potential to break even this year, making money on one-off gains. The company may even see a gain from its sale of its 50 percent stake in the Trans Asia pipeline, which took place in November.
Gordon Kwan, who is the head of Nomura’s Asia oil and gas research commented: “The improved balance sheet means that PetroChina has the capacity potentially to pay a special divided to reward investors. We think PetroChina could become more generous in rewarding investors amid depressed oil prices and trigger out-performance for the stock."
China International Capital Corp. and Morgan Stanley expect that Cnooc Ltd, China’s largest offshore oil producer, may consider a special dividend for investors, even though it is expected to report on Wednesday that lost $1.2 billion in the first half of this year. Last month, Cnooc said that it expected a loss for the first half of 2016 due to the drop in oil prices and asset impairment.
Bloomberg notes that it would be first time the company reported a half-year loss since it began trading in 2000.
Lincoln Brown for Oilprice.com
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