Industry Trend Analysis - Capex To Grow On Natural Gas, Downstream Plans - OCT 2017

BMI View : Debt reduction, cost discipline and enhancing efficiency will continue to feature prominently in the long-term strategies of the Chinese state-owned oil and gas firms, despite the modest recovery in global oil prices. Capital spending by these SOEs will continue to grow at a steady pace over the coming years, primarily to boost natural gas production and improve downstream and petrochemicals capabilities.

After a challenging FY 2016, we expect the performances of China's three state-owned oil and gas giants PetroChina, Sinopec and CNC to improve over the coming years, led by a gradual rebound in global oil prices, growing demand for natural gas, continued focus on cost cuts and efficiency improvements. The SOEs' combined net income improved significantly in H1 2017, from USD1.9bn in H1 2016 to USD12.6bn in H117. PetroChina and Sinopec's combined net income more than tripled, from USD3.1bn to USD10.2bn in H117. Offshore giant CNC returned to growth in H117, posting a net income of USD2.4bn after booking a loss of USD1.2bn in the same period last year, due to large impairment charges on its Canadian oil sands assets.

Debt Reduction To Continue

Net Incomes Set To Recover
Selected Companies - Net Income Available To Common Shareholders, USDbn
Source: Company Data, BMI

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