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China's biggest oil and gas producer PetroChina said it would adjust its previously approved capital expenditure (CAPEX) for this year as Chinese state oil majors join other oil firms in the world in cutting capital budgets amid cratering oil prices and oil demand.
For the first time in years, PetroChina avoided disclosing a firm budget estimate for 2020 in its annual 2019 results release, which showed that its 2019 net profit dropped by 13.9 percent on the year, worse than analyst expectations.
Previously, PetroChina had approved 2020 CAPEX of US$41.7 billion (295 billion Chinese yuan), which is now no longer valid.
“Considering the impact of Coronavirus Disease 2019 ("COVID-19") and changes in international oil prices, the Group will follow the principle of positive free cash flow, dynamically optimize and adjust the capital expenditures for 2020,” the Chinese giant said in a statement.
PetroChina has created an anti-COVID-19 steering team to work, among other things, on “reducing expenditure as well as cutting costs and enhancing profitability, controlling the capital expenditures and costs, optimizing debt settlement structure.”
“The decline in international crude oil prices has adversely affected the Group's sales revenue and profits, the Group actively takes measures to deal with the risks of crude oil price fluctuations, and strives to maintain stable and healthy development of production and operations,” PetroChina said.
The company is also working on a plan to link CAPEX on projects with the price of oil, chief financial officer Chai Shouping said on the teleconference call, as carried by South China Morning Post.
PetroChina is not the only Chinese company planning capital budget cuts as oil prices tanked and made many operations, based on $60 oil, unsustainable.
Earlier this week, China National Offshore Oil Corporation (CNOOC) said it would “significantly” slash CAPEX and reduce its oil and natural gas production guidance for 2020.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.