SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2008
PETROCHINA COMPANY LIMITED
16 ANDELU, DONGCHENG DISTRICT
BEIJING, THE PEOPLE'S REPUBLIC OF CHINA, 100011
(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.)
Form 20-F [X] Form 40-F [ ]
(Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes [ ] No [X]
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-________)
PetroChina Company Limited (the "Registrant") is furnishing under the cover
of Form 6-K the Registrant's announcement of the interim results for the six
months ended June 30, 2008.
This announcement contains "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements
are, by their nature, subject to significant risks and uncertainties. These
forward-looking statements include, without limitation, statements relating to:
-- the Registrant's plan to increase exploration efforts, optimize the
structure of its refining operations, expand the pipeline network, and
develop larger operations internationally; and
-- the Registrant's other future plans and prospects.
These forward-looking statements reflect our current views with respect to
future events and are not a guarantee of future performance. Actual results may
differ materially from information contained in these forward-looking statements
as a result of a number of factors, including, without limitation:
- fluctuations in crude oil and natural gas prices;
- failure to achieve continued exploration success;
- failure or delay in achieving production from development projects;
- failure to complete the proposed acquisition of certain overseas
assets as planned;
- change in demand for competing fuels in the target market;
- continued availability of capital and financing;
- general economic, market and business conditions;
- changes in policies, laws or regulations of the PRC and other
jurisdictions in which the Registrant and its subsidiaries conduct
business; and
- other factors beyond the Registrant's control.
We do not intend to update or otherwise revise the forward-looking
statements in this announcement, whether as a result of new information, future
events or otherwise. Because of these risks, uncertainties and assumptions, the
forward-looking events and circumstances discussed in this announcement might
not occur in the way we expect, or at all.
You should not place undue reliance on any of these forward-looking
statements.
(LOGO) (Chinese Characters)
PETROCHINA COMPANY LIMITED
(Chinese Characters)
PETROCHINA COMPANY LIMITED
(a joint stock limited company incorporated in the People's Republic of China
with limited liability)
(HONG KONG STOCK EXCHANGE STOCK CODE: 857
SHANGHAI STOCK EXCHANGE STOCK CODE: 601857)
ANNOUNCEMENT OF THE INTERIM RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2008
(SUMMARY OF THE 2008 INTERIM REPORT)
1 IMPORTANT NOTICE
1.1 The Board of Directors ("Board") of PetroChina Company Limited (the
"Company"), the Supervisory Committee and the Directors, Supervisors and Senior
Management of the Company warrant that there are no material omissions from, or
misrepresentation or misleading statements contained in this announcement, and
jointly and severally accept full responsibility for the truthfulness, accuracy
and completeness of the information contained in this announcement.
This announcement is a summary of the 2008 Interim Report. A full version
of the 2008 Interim Report can be downloaded from the websites of the Shanghai
Stock Exchange (website: http://www.sse.com.cn), The Stock Exchange of Hong Kong
Limited (the "Hong Kong Stock Exchange") (website: http://www.hkex.com.hk) and
the Company (website: http://www.petrochina.com.cn). Investors should read the
2008 Interim Report carefully for more details.
1.2 The 2008 Interim Report has been approved unanimously at the Second
Meeting of the Fourth Session of the Board. No Director of the Company has any
doubt as to, or the inability to warrant, the truthfulness, accuracy and
completeness of the 2008 Interim Report.
1.3 Mr Liao Yongyuan, executive Director of the Company, and each of Mr
Chee-Chen Tung and Mr Franco Bernabe, both independent non-executive Directors
of the Company, were absent from the Second Meeting of the Fourth Session of the
Board. Mr Liao Yongyuan, Mr Chee-Chen Tung and Mr Franco Bernabe respectively
authorised Mr Wang Fucheng, non-executive Director of the Company, Mr Liu Hongru
and Mr Cui Junhui, both independent non-executive Directors of the Company, to
attend the meeting of the Board by proxy and to exercise their voting rights in
respect of the resolutions put forward at the meeting on their behalf.
1
1.4 The financial statements of the Company and its subsidiaries (the
"Group") for the six months ended June 30, 2008 and the consolidated interim
condensed financial statements of the Group for the six months ended June 30,
2008 have been prepared in accordance with China Accounting Standards ("CAS")
and the International Financial Reporting Standards ("IFRS"), respectively. The
financial statements of the Group for the six months ended June 30, 2008,
prepared in accordance with CAS, has been audited by PricewaterhouseCoopers
Zhong Tian CPAs Limited Company and an unqualified opinion on these financial
statements has been issued.
1.5 There is no occupancy of non-operating funds by the substantial
shareholders of the Company.
1.6 Mr Jiang Jiemin, Chairman of the Board, Mr Zhou Jiping, Vice-Chairman
of the Board and President of the Company, and Mr Zhou Mingchun, Chief Financial
Officer and Head of the Finance Department of the Company, warrant the
truthfulness and completeness of the financial statements included in the 2008
Interim Report.
2 BASIC INFORMATION OF THE COMPANY
2.1 BASIC INFORMATION OF THE COMPANY
STOCK NAME PetroChina PetroChina (Chinese Characters)
STOCK CODE 857 PTR 601857
PLACES OF LISTING Hong Kong Stock Exchange The New York Stock Shanghai Stock Exchange
Exchange, Inc
LEGAL REPRESENTATIVE OF Jiang Jiemin
THE COMPANY
REGISTERED ADDRESS AND World Tower, 16 Andelu, Dongcheng District, Beijing, People's Republic of China
OFFICE ADDRESS
POSTAL CODE 100011
WEBSITE http://www.petrochina.com.cn
EMAIL ADDRESS xwzou@petrochina.com.cn
NEWSPAPER FOR Please refer to China Securities Journal, Shanghai Securities News and
INFORMATION DISCLOSURE Securities Times for A shares.
COPIES OF THE INTERIM World Tower, 16 Andelu, Dongcheng District, Beijing, People's Republic of China
REPORT IS AVAILABLE FOR
INSPECTION AT
2
2.2 CONTACT PERSONS OF THE COMPANY AND MEANS OF COMMUNICATION
REPRESENTATIVE OF THE
SECRETARY TO THE BOARD REPRESENTATIVE ON HONG KONG
OF DIRECTORS SECURITIES MATTERS REPRESENTATIVE OFFICE
----------------------- -------------------------- ---------------------
NAME Li Huaiqi Liang Gang Mao Zefeng
ADDRESS World Tower, 16 Andelu, Dongcheng District, Beijing, Suite 3606, Tower 2,
People's Republic of China Lippo Centre, 89
Queensway, Hong Kong
POSTAL CODE 100011
TELEPHONE 86 (10)8488 6270 86 (10)8488 6959 (852) 2899 2010
FACSIMILE 86 (10)8488 6260 86 (10)8488 6260 (852) 2899 2390
EMAIL ADDRESS xwzou@petrochina.com.cn liangg@petrochina.com.cn hko@petrochina.com.hk
2.3 SUMMARY OF ACCOUNTING DATA AND FINANCIAL INDICATORS
2.3.1 Key Accounting Data and Financial Indicators Prepared under IFRS
Unit: RMB Million
AS AT THE END AS AT THE CHANGES FROM
OF THE END OF THE THE END OF THE
REPORTING PRECEDING PRECEDING
ITEMS PERIOD YEAR YEAR (%)
----- ------------- ---------- --------------
Total assets 1,123,820 1,060,131 6.0
Equity attributable to equity holders of
the Company 757,243 733,405 3.3
Net assets per share attributable to
equity holders of the Company (RMB) 4.14 4.01 3.2
CHANGES OVER
SAME PERIOD THE SAME
OF THE PERIOD OF THE
THE REPORTING PRECEDING PRECEDING
ITEMS PERIOD YEAR YEAR (%)
----- ------------- ----------- --------------
Profit attributable to equity holders of
the Company 53,615 81,830 (34.5)
Net cash flows from operating activities 81,159 109,838 (26.1)
Basic and diluted earnings per share
(RMB) 0.29 0.46 (37.0)
Net cash flows from operating activities
per share (RMB) 0.44 0.61 (27.9)
3
2.3.2 Key Accounting Data and Financial Indicators Prepared under CAS
Unit: RMB Million
AS AT THE END AS AT THE CHANGES FROM
OF THE END OF THE THE END OF THE
REPORTING PRECEDING PRECEDING
ITEMS PERIOD YEAR YEAR (%)
----- ------------- ---------- --------------
Total assets 1,059,396 994,092 6.6
Equity attributable to equity holders of
the Company 696,149 677,367 2.8
Net assets per share attributable to
equity holders of the Company (RMB) 3.80 3.70 2.7
CHANGES OVER
SAME PERIOD THE SAME
OF THE PERIOD OF THE
THE REPORTING PRECEDING PRECEDING
ITEMS PERIOD YEAR YEAR (%)
----- ------------- ----------- ----------------
Operating profit 70,725 105,934 (33.2)
Profit before taxation 73,206 106,294 (31.1)
Profit attributable to equity holders of
the Company 48,355 75,882 (36.3)
Profit after deducting non-recurring
profit/loss items attributable to
equity holders of the Company 46,489 75,843 (38.7)
Basic earnings per share (RMB) 0.26 0.42 (38.1)
Diluted earnings per share (RMB) 0.26 0.42 (38.1)
(5.92 percentage
Fully diluted return on net assets (%) 6.95 12.87 points)
Net cash flows from operating activities 84,006 112,177 (25.1)
------ ------- ----------------
Net cash flows per share from operating
activities (RMB) 0.46 0.63 (27.0)
====== ======= ================
2.3.3 Non-recurring profit/loss items
[X] Applicable [ ] Not applicable
Unit: RMB Million
FOR THE SIX MONTHS ENDED
NON-RECURRING PROFIT/LOSS ITEMS* JUNE 30, 2008(PROFIT)/LOSS
-------------------------------- --------------------------
Loss on disposal of non-current assets 315
Other net non-operating expenses 2,450
Government grants (4,651)
Tax effect of non-recurring profit/loss items 649
Total (1,237)
* Including minority interest in non-recurring profit/loss items
2.3.4 Differences Between CAS and IFRS
[X] Applicable [ ] Not applicable
Unit: RMB Million
CAS IFRS
----------------------------- -------
Net profit (including minority interest) 55,297 60,854
Equity (including minority interest) 742,745 809,051
Analysis of differences See Section 7.2.3 for details
4
3 CHANGES IN SHARE CAPITAL AND INFORMATION ON SHAREHOLDERS
3.1 CHANGES IN SHAREHOLDINGS
[X] Applicable [ ] Not applicable
Unit: Shares
PRE-MOVEMENT INCREASE/DECREASE (+, -) POST-MOVEMENT
-------------------------- ------------------------------------------------------ --------------------------
CONVERSION
NUMBER OF PERCENTAGE NEW BONUS FROM NUMBER OF PERCENTAGE
SHARES (%) ISSUE ISSUE RESERVES OTHERS* SUB-TOTAL SHARES (%)
--------------- ---------- ----- ----- ---------- ---------------- -------------- --------------- ----------
I Shares with
selling
restrictions 158,922,077,818 86.83 -- -- -- -1,000,000,000 -1,000,000,000 157,922,077,818 86.29
1. State-owned
shares 157,922,077,818 86.29 -- -- -- -- -- 157,922,077,818 86.29
2. Shares held
by state-
owned
companies -- -- -- -- -- -- -- -- --
3. Shares held
by other
domestic
investors -- -- -- -- -- -- -- -- --
of which:
Shares held by
companies
other than
state-owned
companies 1,000,000,000 0.54 -- -- -- -1,000,000,000 -1,000,000,000 0 0
Shares held by
domestic
natural
persons -- -- -- -- -- -- -- -- --
4. Shares held
by foreign
investors -- -- -- -- -- -- -- -- --
II. Shares
without
selling
restrictions 24,098,900,000 13.17 -- -- -- +1,000,000,000 +1,000,000,000 25,098,900,000 13.71
1. RMB-
denominated
ordinary
shares 3,000,000,000 1.64 -- -- -- +1,000,000,000 +1,000,000,000 4,000,000,000 2.18
2. Shares traded
in non-RMB
currencies
and listed
domestically -- -- -- -- -- -- -- -- --
3. Shares listed
overseas 21,098,900,000 11.53 -- -- -- -- -- 21,098,900,000 11.53
4. Others -- -- -- -- -- -- -- -- --
III. Total Shares 183,020,977,818 100 -- -- -- -- -- 183,020,977,818 100
* In October 2007, when the Company offered its RMB-denominated ordinary
shares (A shares) to the public for the first time, shares have been placed
with target placees off-line, which have started circulation on the
exchange since 5 February 2008.
5
3.2 SHAREHOLDINGS OF MAJOR SHAREHOLDERS
The number of shareholders of the Company as at June 30, 2008 was
1,997,949, including 1,992,211 holders of A shares and 5,738 holders of H shares
(including 312 holders of the American Depositary Shares).
(1) SHAREHOLDINGS OF THE TOP TEN SHAREHOLDERS
Unit: Shares
INCREASE NUMBER OF
PERCENTAGE /DECREASE NUMBER OF SHARES
OF DURING THE SHARES WITH PLEDGED OR
NATURE OF NUMBER OF SHAREHOLDING REPORTING SELLING SUBJECT TO
NAME OF SHAREHOLDERS SHAREHOLDERS SHARES (%) PERIOD (+,-) RESTRICTIONS LOCK-UPS
---------------------------- ------------ --------------- ------------ ------------ --------------- ----------
China National Petroleum State-owned
Corporation ("CNPC") (1) shares 157,922,077,818 86.29 0 157,922,077,818 0
HKSCC Nominees Limited
(2) H Shares 20,920,665,230 11.43 -17,088,922 0 0
Industrial and Commercial
Bank of China-Shanghai 50
Index ETF Securities
Investment Fund A Shares 36,457,925 0.0199 +31,694,279 0 0
China Life Insurance
(Group) Company-
Traditional-Ordinary
Insurance Products A Shares 26,000,000 0.0142 -30,797,000 0 0
China Construction Bank-
Huabao Xingye Industry
Selected Equity
Securities Investment
Fund A Shares 23,436,313 0.0128 +23,436,313 0 0
Bank of China-Shanghai and
Shenzhen 300 Index Jiashi
Securities Investment
Fund A Shares 22,537,221 0.0123 +8,501,795 0 0
Bank of Communications-Yi
Fang Da 50 Index
Securities Investment
Fund A Shares 21,831,200 0.0119 +21,831,200 0 0
China Life Insurance
Company Limited-Dividends
-Personal Dividends-005L-
FH002 Shanghai A Shares 20,519,708 0.0112 -9,718,862 0 0
International Finance-
Standard Chartered-
CITIGROUP GLOBAL MARKETS
LIMITED A Shares 19,675,640 0.0108 +15,102,155 0 0
China Life Insurance Company
Limited-Traditional-
Ordinary Insurance
Product-005L-CT001
Shanghai A Shares 18,771,597 0.0103 -6,297,403 0 0
Notes:
(1.) CNPC is a substantial shareholder within the meaning of the Securities and
Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (the "Securities and
Futures Ordinance") whose interest is recorded in the register of interests
in shares and short positions kept by the Company pursuant to Section 336
of the Securities and Futures Ordinance.
(2.) HKSCC Nominees Limited is a subsidiary of the Hong Kong Stock Exchange and
its principal business is to act as nominee on behalf of institutional
shareholders or individual shareholders.
6
(2) SHAREHOLDINGS OF TOP TEN SHAREHOLDERS OF SHARES WITHOUT SELLING
RESTRICTIONS
Unit: Shares
NUMBER OF TYPES OF
NUMBER NAME OF SHAREHOLDERS SHARES HELD SHARES
------ ---------------------------------------------------- -------------- --------
1 HKSCC Nominees Limited 20,920,665,230 H Shares
2 Industrial and Commercial Bank of China-Shanghai 50
Index ETF Securities Investment Fund 36,457,925 A Shares
3 China Life Insurance (Group) Company- Traditional-
Ordinary Insurance Products 26,000,000 A Shares
4 China Construction Bank-Huabao Xingye Industry
Selected Equity Securities Investment Fund 23,436,313 A Shares
5 Bank of China-Shanghai and Shenzhen 300 Index Jiashi
Securities Investment Fund 22,537,221 A Shares
6 Bank of Communications-Yi Fang Da 50 Index
Securities Investment Fund 21,831,200 A Shares
7 China Life Insurance Company Limited-Dividends-
Personal Dividends-005L-FH002 Shanghai 20,519,708 A Shares
8 International Finance-Standard Chartered-CITIGROUP
GLOBAL MARKETS LIMITED 19,675,640 A Shares
9 China Life Insurance Company Limited-Traditional-
Ordinary Insurance Product-005L-CT001 Shanghai 18,771,597 A Shares
10 China Life Insurance Company Limited-Dividends-Group
Dividends-005L-FH001 Shanghai 17,000,000 A Shares
Statement on the connection or activities acting in concert among the
above-mentioned shareholders: Except for China Life Insurance (Group)
Company-Traditional-Ordinary Insurance Products, China Life Insurance Company
Limited-Dividends-Personal Dividends-005L-FH002 Shanghai, China Life Insurance
Company Limited-Traditional-Ordinary Insurance Products-005L-CT001 Shanghai and
China Life Insurance Company Limited-Dividends-Group Dividends-005L-FH001
Shanghai, all of which are under the management of China Life Insurance Asset
Management Co., Ltd, the Company is not aware of any connection among or between
the top ten shareholders and top ten shareholders of shares without selling
restrictions or that they are persons acting in concert as provided for in the
Measures for the Administration of Acquisitions by Listed Companies.
7
(3) SHAREHOLDINGS OF SUBSTANTIAL SHAREHOLDERS OF H SHARES
As at June 30, 2008, according to the register of interests in shares and
short positions kept by the Company pursuant to Section 336 of the Securities
and Futures Ordinance, the persons in the following table and notes have an
interest or short position in the H shares of the Company:
PERCENTAGE OF SUCH PERCENTAGE
SHARES IN THE SAME OF TOTAL
CLASS OF THE ISSUED SHARE
NAME OF SHAREHOLDER NUMBER OF SHARES CAPACITY SHARE CAPITAL (%) CAPITAL (%)
------------------- ---------------- ---------------------- ------------------- -----------
JPMorgan Chase & Co. Beneficial Owner/
(Note 1) 1,065,335,981(L) Investment Manager 5.05 0.58
317,095,578(S) Beneficial Owner 1.50 0.17
408,813,117(P) Approved Lending Agent 1.94 0.22
Beneficial Owner/
Investment Manager/
Persons having a
Deutsche Bank security interest in
Aktiengesellschaft (Note 2) 1,303,488,060(L) shares 6.18 0.71
Beneficial Owner/
Investment Manager/
Persons having a
security interest in
731,451,830(S) shares 3.47 0.40
(L) Long position
(S) Short position
(P) Lending pool
Note 1: JP Morgan Chase & Co., through various subsidiaries, has an interest in
1,065,335,981 H shares of the Company.
Note 2: Deutsche Bank Aktiengesellschaft, through various subsidiaries, has an
interest in 1,303,488,060 H shares of the Company.
As at June 30, 2008, save as disclosed above, no person (other than a
Director, Supervisor or Senior Management of the Company) has an interest or
short position in the H shares of the Company according to the register of
interests in shares and short positions kept by the Company pursuant to Section
336 of the Securities and Futures Ordinance.
3.3 INFORMATION ON CHANGES OF CONTROLLING SHAREHOLDER AND THE ULTIMATE
CONTROLLER
[ ] Applicable [X] Not applicable
4 DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
4.1 INFORMATION ON THE CHANGES IN THE SHAREHOLDING IN THE COMPANY HELD BY THE
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
[X] Applicable [ ] Not applicable
8
Unit: Shares
NUMBER OF NUMBER OF
SHARES IN THE DECREASE SHARES IN THE
COMPANY HELD AS INCREASE IN IN THE COMPANY HELD
AT THE THE NUMBER OF NUMBER OF AS AT THE END
BEGINNING OF SHARES HELD SHARES OF THE REASON
NATURE OF THE REPORTING IN THE HELD IN REPORTING FOR THE
NAME POSITION SHARES PERIOD COMPANY THE COMPANY PERIOD CHANGE
---- ---------- --------- --------------- ------------- ----------- ------------- -------
Yu Yibo* Supervisor A share 56,500 -- -- 56,500 --
Wang Shali* Supervisor A share 7,000 -- -- 7,000 --
H share 18,000 -- -- 18,000 --
* Mr Yu Yibo and Ms Wang Shali were appointed as supervisors of the Company
on May 15, 2008.
5 DIRECTORS' REPORT
5.1 DISCUSSION AND ANALYSIS OF THE OVERALL OPERATIONS DURING THE REPORTING
PERIOD
5.1.1 Review of Results of Operations
In the first half of 2008, despite being faced with changes in the
operating environment in the domestic and international markets, and hit by
historically rare natural disasters such as cold weather, rain and snow storms,
frost and a severe earthquake, the Company planned in a scientific manner and
responded actively, and realised a continuous development in the principal
operations of the Group, stable production and operations, a steady increase in
the output of major products and further enhancement of the sustainability of
the Group. Excluding the impacts resulting from policy factors such as the
special levy on domestic crude oil sales and the macroeconomic controls over the
prices of refined products, the efficacy of the Company's operations remains at
a robust level.
1. Market Review
(1) Crude Oil Market Review
In the first half of 2008, international crude oil prices remained high and
maintained its upward trend. Crude oil prices continued to soar to historically
high levels, increasing by more than 50% from US$90 per barrel at the beginning
of the year to US$140 per barrel. Factors such as strong demand for crude oil,
weakening of the US dollars, speculative activities, decline in crude oil
inventories, shortage of proved undeveloped reserves and market concerns over an
interruption in supply caused by geopolitical tensions were the main reasons for
crude oil prices reaching new highs in the first half of the year. In the first
half of 2008, the average prices for WTI and Brent crude oil were US$111.0 and
US$108.8 per barrel respectively, representing an increase of 80% and 72% over
the average prices for the same period of last year.
According to the relevant information, crude oil imports continued to
increase in the first half of 2008 by 11.6% to a net total of 88.97 million tons
compared with the same period of last
9
year. Domestic crude oil output and the amount of crude oil processed reached
94.35 million tons and 159 million tons, respectively.
(2) Refined Products Market Review
Domestic demand for refined products was strong in the first half of 2008.
According to the relevant information, the apparent consumption of domestic
refined products increased by 15.1% to 103 million tons in the first half of
2008. Impacted by the skyrocketing international crude oil prices, domestic
refineries incurred heavy losses in processing. Production progressively ceased
at several local refineries and supply in the refined products market became
very tight. On June 20, 2008, the PRC Government adjusted the prices of refined
products in the domestic market, raising the ex-factory prices of gasoline and
diesel by RMB1,000 per ton and the ex-factory prices of aviation fuel by
RMB1,500 per ton. However, under the macroeconomic controls of the PRC
Government, domestic refined product prices were still lower than the prices in
the international market. In the first half of 2008, the average ex-factory
prices of gasoline and diesel in the domestic market were RMB5,536 per ton and
RMB5,126 per ton respectively, being RMB2,612 per ton and RMB3,779 per ton lower
than the Cost, Insurance and Freight (CIF) per ton price as quoted on the
Singapore market, respectively.
(3) Chemical Products Market Review
In the first half of 2008, affected by the continual high crude oil prices,
the prices of most basic chemical raw materials surged to the highest level in
the past 20 years. As a result, the cost of production of chemical products
increased markedly, resulting in the prices of chemical products being
maintained at a high level. At the same time, in order to guarantee constant
supply in the domestic refined products market, petrochemical production
enterprises lowered the load of polyethylene degradation, as a result of which
output of basic chemical raw materials decreased and supply in the chemical
product market became inadequate. Demand in the chemical product market,
however, remained steady. Based on the above, in the first half of 2008, the
chemical product market was characterised by steady demand, reduction in supply
and soaring prices.
(4) Natural Gas Market Review
In the first half of 2008, the domestic natural gas market continued to
develop at a rapid pace with strong growth in demand for natural gas. The
external sales of natural gas reached 24.9 billion cubic metres, representing an
increase of 20% compared to the same period of last year. The average sales
price of the Company's natural gas was RMB821.47 per thousand cubic metres,
representing an increase of 21.4% compared to the same period of last year.
10
2. Business Review
(1) Exploration and Production
In the first half of 2008, the Group continued to place emphasis on oil and
gas exploration and stepped up efforts for key projects and in key regions. The
Company achieved major breakthroughs through further research, planning,
assessment and exploration and emphasis on the use of new technologies, all in a
comprehensive manner. In particular, significant progress was achieved in the
oil and gas exploration in Longgang in the Sichuan Basin, Baibao and Sulige in
the Erdos Basin and other basins. The Company has built up a solid foundation
for the growth of reserves for 2008. In the development of oil and gas fields,
organisation and co-ordination efforts were enhanced to overcome threats of cold
weather, rain and snow storms, frost, earthquake and other natural disasters.
New ways in the exploration of oil and gas fields were actively adopted. The
Company has initiated works on the secondary recovery of mature oilfields. The
Company has improved overall maintenance of mature oilfields through controlling
the water level and taking measures to slow down the reduction in the
productivity of mature oilfields. The Company has also built up the production
capacity in new fields through active application of technologies such as
horizontal drilling and the application of technologies to thick oil, tertiary
recovery of oil, low infiltration oilfields and oil reserves with particularly
high water content. As a result, the Company has achieved a steady growth in
crude oil output and rapid growth in natural gas output. In the first half of
2008, the lifting cost for oil and gas operations was US$8.75 per barrel,
representing an increase of 23.2% from US$7.10 per barrel in the first half of
2007. Excluding the effect of exchange rate changes, the lifting cost increased
by 12.8% compared to that of the same period of last year.
Summary of Operations of the Exploration and Production Segment
FIRST HALF FIRST HALF
UNIT OF 2008 OF 2007 CHANGE (%)
------------------ ---------- ---------- ----------
Crude oil output Million barrels 434.5 419.7 3.5
Marketable natural gas output Billion cubic feet 923.0 798.0 15.7
Oil and natural gas equivalent output Million barrels 588.4 552.7 6.5
(2) Refining and Marketing
In the first half of 2008, the Group organised refining processing
meticulously, modified refining arrangements scientifically, pushed forward with
overall optimisation and emphasis on safety and environmental protection in
respect of production. As a result, safe and steady production was achieved.
Faced with ever growing demand in the market, the Group has continued to enhance
the level of retail sales management and the quality of services. Efforts were
made to ensure steady market supply. Development and optimisation of refined
products sales network were promoted actively. Markets offering high return were
explored, and service stations generating a low return or no return were shut
down. These measures further improved the operating efficiency of the Group.
In the first half of this year, the Group's refineries processed 425
million barrels of crude oil, and the Exploration and Production segment
contributed approximately 78.1% of crude oil
11
processed. The Group produced approximately 36.79 million tons of gasoline,
diesel and kerosene and sold approximately 44.41 million tons of these products.
The refining processing costs of the Group's refineries was RMB145 per ton,
which represents a 6.6% increase compared to RMB136 per ton for the same period
of last year.
Summary of Operations of the Refining and Marketing Segment
FIRST HALF FIRST HALF
UNIT OF 2008 OF 2007 CHANGE (%)
---------------- ---------- ---------- ----------------------
Processed crude oil Million barrels 425.2 407.7 4.3
Gasoline, kerosene and diesel output '000 ton 36,787 35,545 3.5
of which: Gasoline '000 ton 11,861 10,670 11.2
Kerosene '000 ton 1,127 986 14.3
Diesel '000 ton 23,799 23,889 (0.4)
Refining yield % 92.7 93.2 (0.5 percentage points)
(3) Chemicals and Marketing
In the first half of 2008, the Group further kept the production in the
Chemical and Marketing segment under control and achieved large scale,
efficient, safe and steady operation. Key technological and economic indicators
improved continuously. Allocation of resources and production mix were further
optimised. The production of chemical products reached 8.16 million tons,
including 1.32 million tons of ethylene.
Summary of Operations of the Chemicals and Marketing Segment
FIRST HALF FIRST HALF
OUTPUT OF KEY CHEMICAL PRODUCTS UNIT OF 2008 OF 2007 CHANGE (%)
------------------------------- -------- ---------- ---------- ----------
Ethylene '000 ton 1,319 1,305 1.1
Synthetic resin '000 ton 2,036 1,997 2.0
Synthetic fibre raw materials and polymer '000 ton 878 701 25.2
Synthetic rubber '000 ton 157 158 (0.6)
Urea '000 ton 2,046 1,897 7.9
(4) Natural Gas and Pipeline
The Group continued with the construction of oil and gas pipelines in an
orderly manner. Construction of the Second West-East Gas Pipeline and the
Yongqing-Tangshan-Qinhuangdao Gas Transmission Pipeline commenced. The
Daqing-Qiqihar Gas Transmission Pipeline was completed and commission is
scheduled to take place in August 2008. Acquisition of the Changqing-Ningxia
Yinchuan Gas Transmission Pipeline was completed. Construction of the LNG
projects in Dalian and Jiangsu Province commenced. Construction of the
Lanzhou-Zhengzhou-Changsha Oil Pipeline progressed smoothly, and the main part
will be completed at the end of this year. Despatch priority of natural gas was
centralised to ensure safety in the gas transmission. Natural gas sales business
has leveraged on the advantage of the nationwide gas pipeline network and
achieved an overall balanced development in the production, transportation,
marketing and storage. While the Group has emphasised on the importance of
12
safe and steady supply of natural gas in key cities and the public utilities
sector and to key customers, the Group has also concurrently made its best
endeavours to ensure safe and steady supply of natural gas during the Beijing
Olympic Games and to the areas that suffered from cold weather and rain and snow
storms in the Southern part of the PRC. The Lanzhou-Chengdu-Chongqing Refined
Oil Pipeline of the Company was regarded as the lifeline during the rescue
operations of the earthquake occurred in Wenchuan, Sichuan Province on May 12,
2008. The Company has made every effort to ensure normal operation of such
pipeline to support the rescue operations in the earthquake with a view to
guarantee the supply of refined products in Sichuan Province and Chongqing
region.
5.1.2 Management Discussion and Analysis
1. THE FINANCIAL DATA SETS OUT BELOW IS EXTRACTED FROM THE CONSOLIDATED
INTERIM CONDENSED FINANCIAL STATEMENTS OF THE GROUP FOR THE SIX MONTHS ENDED
JUNE 30, 2008 PREPARED UNDER IFRS
(1) Consolidated Operating Results
Turnover Turnover increased 39.9% from RMB392,726 million for the six
months ended June 30, 2007 to RMB549,522 million for the six months ended June
30, 2008. This was primarily due to the increases in the selling prices and the
sales volume of major products including crude oil, natural gas, gasoline and
diesel oil, and the efforts made by the Group in expanding resources and
developing markets by making use of the opportunities presented by persistently
high prices in crude oil and petrochemical products in the international market.
In addition, the increase in the trading of oil and gas products during the
first half of the year also increased the turnover of the Group. The table below
sets out the external sales volume and average realised prices for major
products sold by the Group for the first half of 2007 and 2008 and the
percentages of change in the sales volume and average realised prices during
these periods:
SALES VOLUME ('000 TON) AVERAGE REALISED PRICE (RMB/TON)
------------------------------ ---------------------------------
FIRST FIRST PERCENTAGE FIRST FIRST
HALF OF HALF OF OF HALF OF HALF OF PERCENTAGE
2008 2007 CHANGE (%) 2008 2007 OF CHANGE (%)
------- ------- ---------- ------- ------- -------------
Crude oil* 8,988 9,642 (6.8) 5,086 3,207 58.6
Natural gas ('000 million cubic
metre, RMB/'000 cubic metre) 248.98 207.54 20.0 821 677 21.4
Gasoline 14,506 13,396 8.3 5,698 5,031 13.3
Diesel 28,599 26,358 8.5 5,299 4,563 16.1
Kerosene 2,614 1,805 44.8 6,134 4,622 32.7
Heavy oil 4,138 4,464 (7.3) 3,529 2,332 51.3
Polyethylene 1,079 1,023 5.5 11,811 10,264 15.1
Lubricant 1,208 1,119 8.0 7,154 6,464 10.7
* The external sales volume of crude oil listed above is crude oil produced
by the Company.
13
Operating Expenses Operating expenses increased 66.3% from RMB283,596
million for the six months ended June 30, 2007 to RMB471,758 million for the six
months ended June 30, 2008, which consisted of the following:
Purchases, Services and Other Expenses Purchases, services and other
expenses increased 76.4% from RMB166,995 million for the six months ended June
30, 2007 to RMB294,522 million for the six months ended June 30, 2008. This was
primarily due to an increase in the purchase prices and purchase volume of crude
oil, feedstock oil and refined products from external suppliers that resulted in
the increase in the purchase costs. In addition, the increase in the purchase
expenses also resulted from an increase in the level of trading of oil and gas
products in the first half of 2008.
Employee Compensation Costs The salaries and wages paid by the Group for
the first half of 2008 was RMB15,726 million, which rose by 16.7% or increased
by RMB2,254 million. Other employees' costs were increased by RMB5,731 million.
The increase in the employee compensation costs was primarily due to (1) an
increase in the level of salaries as a result of the increase in commodity
prices (according to the relevant information, the Consumer Products Index (CPI)
for the first half of 2008 rose by 7.9%); (2) an increase in the employees'
compensation costs that resulted from the expansion of the scale of operations
and the retail network of the Group; and (3) in accordance with the relevant
policies of the PRC Government, the Group has established a corporate pension
scheme, thus leading to an increase in the employee benefit expenses resulting
from pension contributions.
Exploration Expenses Exploration expenses increased 21.1% from RMB10,607
million for the six months ended June 30, 2007 to RMB12,848 million for the six
months ended June 30, 2008. To further boost crude oil and natural gas
resources, the Group continued to pool resources to conduct more exploration
activities for crude oil and natural gas.
Depreciation, Depletion and Amortisation Depreciation, depletion and
amortisation increased 36.9% from RMB31,228 million for the six months ended
June 30, 2007 to RMB42,754 million for the six months ended June 30, 2008. This
was primarily due to (1) an increase in depreciation, depletion and amortisation
that resulted from an increase in the average amount of property, plant and
equipment and the average net value of oil and gas properties (2) impairment
losses recorded during the first half of 2008.
Selling, General and Administrative Expenses Selling, general and
administrative expenses increased 17.1% from RMB23,901 million for the six
months ended June 30, 2007 to RMB27,993 million for the six months ended June
30, 2008. This was primarily due to an increase in transportation, technological
development and other related costs that resulted from the increased scale of
operations of the Group.
Taxes other than Income Taxes Taxes other than income taxes increased
128.7% from RMB28,784 million for the six months ended June 30, 2007 to
RMB65,831 million for the six months ended June 30, 2008. The increase was
primarily due to a sharp increase of special levy on the sale of domestic crude
oil by the Group due to the high international crude oil prices
14
throughout the first half of 2008. The special levy borne by the Group increased
from RMB14,942 million for the first half of 2007 to RMB47,816 million for the
first half of 2008.
Other Income, net Other income, net, increased RMB2,256 million from RMB345
million for the six months ended June 30, 2007 to RMB2,601 million for the six
months ended June 30, 2008. The increase was primarily due to the recognition of
subsidies for imported crude oil and refined products by the PRC Government in
the amount of RMB4,573 million.
Profit from Operations As a result of an increase in the amount of special
levy and macroeconomic controls over the prices of domestic refined products,
profit from operations decreased 28.7% from RMB109,130 million for the six
months ended June 30, 2007 to RMB77,764 million for the six months ended June
30, 2008.
Net Exchange Loss Net exchange loss increased from RMB342 million for the
six months ended June 30, 2007 to RMB1,028 million for the six months ended June
30, 2008. The increase in the net exchange loss was mainly due to the combined
effect of the appreciation of Renminbi against the US dollars and other
currencies.
Net Interest Expenses Net interest expenses decreased 81.2% from RMB1,231
million for the six months ended June 30, 2007 to RMB231 million for the six
months ended June 30, 2008. The decrease in the net interest expense was mainly
due to the combined effect of a decrease in the interest expenses on current
borrowings and an increase in interest income from an increase in the average
outstanding balance of deposits.
Profit Before Taxation As a result of the factors discussed above, profit
before taxation decreased 26.9% from RMB110,342 million for the six months ended
June 30, 2007 to RMB80,712 million for the six months ended June 30, 2008.
Taxation Taxation decreased 17.3% from RMB24,026 million for the six months
ended June 30, 2007 to RMB19,858 million for the six months ended June 30, 2008.
The decrease was primarily due to a reduction in the taxable income of the Group
for the first half of 2008.
Profit for the period As a result of the factors discussed above, profit of
the Group for the period decreased 29.5% from RMB86,316 million for the six
months ended June 30, 2007 to RMB60,854 million for the six months ended June
30, 2008.
Profit attributable to minority interest of the Company As the
international crude oil prices remained high during the first half of 2008,
subsidiaries of the Company including CNPC Exploration and Development Company
Limited recorded increase in the profit before taxation for the first half of
2008 to a great extent. This has resulted in an increase in the minority
interest in the results of the Company. The amount of the minority interest in
the Company increased from RMB4,486 million for the six months ended June 30,
2007 to RMB7,239 million for the six months ended June 30, 2008.
15
Profit attributable to equity holders of the Company As a result of the
factors discussed above, profit attributable to equity holders of the Company
decreased 34.5% from RMB81,830 million for the six months ended June 30, 2007 to
RMB53,615 million for the six months ended June 30, 2008.
(2) Segment Information
EXPLORATION AND PRODUCTION
Turnover Turnover increased 54.3% from RMB205,390 million for the six
months ended June 30, 2007 to RMB316,876 million for the six months ended June
30, 2008. The increase was primarily due to an increase in the prices and sales
volume of crude oil and natural gas. The average realised crude oil price of the
Group in the first half of 2008 was US$93.45 per barrel, representing an
increase of 62.0% from US$57.69 per barrel compared with the same period of last
year.
Operating Expenses Operating expenses increased 71.3% from RMB108,954
million for the six months ended June 30, 2007 to RMB186,645 million for the six
months ended June 30, 2008. The increase was primarily due to an increase in
purchase costs of imported crude oil and a sharp increase of special levy on the
sale of domestic crude oil by the Group as international crude oil prices
remained high throughout the first half of 2008.
Profit from Operations As a result of the factors discussed above, profit
from operations increased by 35.0% from RMB96,436 million for the six months
ended June 30, 2007 to RMB130,231 million for the six months ended June 30,
2008. The Exploration and Production segment remains the most important
contributor of profit for the Group.
REFINING AND MARKETING
Turnover Turnover rose 43.5% from RMB314,863 million for the six months
ended June 30, 2007 to RMB451,737 million for the six months ended June 30,
2008. The increase was due to an increase in the prices and sales volume of key
refined products and growth in the trading of oil and gas products. The Refining
and Marketing segment is the main contributor of external sales revenue for the
Group.
Operating Expenses Operating expenses increased 64.3% from RMB310,938
million for the six months ended June 30, 2007 to RMB510,752 million for the six
months ended June 30, 2008. The increase was primarily due to the persistently
high international crude oil prices and an increase in the purchase costs of
crude oil, feedstock oil and refined products from external suppliers. In
addition, the increase in operating expenses also resulted from an increase in
the level of trading of oil and gas products in the first half of 2008.
Profit/Loss from Operations The loss from the Refining and Marketing
segment amounted to RMB59,015 million for the six months ended June 30, 2008.
The profit from the Refining and Marketing segment amounted to RMB3,925 million
for the six months ended June
16
30, 2007. The loss from the Refining and Marketing segment was primarily due to
the macroeconomic controls of the prices of refined products in the domestic
market by the PRC Government. Despite persistently high crude oil prices, prices
of refined products in the domestic market were not in line with the high crude
oil prices and were lower than those of the international market.
CHEMICALS AND MARKETING
Turnover Turnover rose 21.3% from RMB49,860 million for the six months
ended June 30, 2007 to RMB60,463 million for the six months ended June 30, 2008.
The growth in turnover was primarily due to an increase in the selling prices
and sales volume of certain chemical products.
Operating Expenses Operating expenses increased 20.9% from RMB44,462
million for the six months ended June 30, 2007 to RMB53,749 million for the six
months ended June 30, 2008. The increase was primarily due to an increase in the
prices of key chemical raw materials.
Profit from Operations As a result of the factors discussed above, profit
from operations of the Marketing and Chemicals segment increased by 24.4% from
RMB5,398 million for the six months ended June 30, 2007 to RMB6,714 million for
the six months ended June 30, 2008. Benefiting from the advantages created by
the better integration of production and marketing of chemical products, the
production volumes of high value-added and special products were greatly
increased, and operating efficiency and profitability continued to improve in
the Chemicals and Marketing segment.
NATURAL GAS AND PIPELINE
Turnover Turnover increased 33.1% from RMB23,216 million for the six months
ended June 30, 2007 to RMB30,902 million for the six months ended June 30, 2008.
The increase was primarily due to an increase in the selling prices of natural
gas, and an increase in the sales volume and volume of natural gas from pipeline
transmission.
Operating Expenses Operating expenses increased 31.7% from RMB17,088
million for the six months ended June 30, 2007 to RMB22,506 million for the six
months ended June 30, 2008. The increase was primarily due to an increase in the
purchase costs of natural gas.
Profit from Operations As a result of the factors discussed above, profit
from operations of the Natural Gas and Pipeline segment increased by 37.0% from
RMB6,128 million for the six months ended June 30, 2007 to RMB8,396 million for
the six months ended June 30, 2008. The natural gas and pipeline business grew
rapidly and its contribution to the profit of the Group continued to increase.
17
(3) Cash Flows
As at June 30, 2008, the primary sources of funds of the Group are cash
generated from operating activities and short-term and long-term borrowings. The
funds of the Group are mainly used for operating activities, capital
expenditures, repayment of short-term and long-term borrowings and distribution
of dividends to equity holders of the Company.
The table below sets forth the cash flows of the Group for the six months
ended June 30, 2008 and June 30, 2007 respectively and the amount of cash and
cash equivalents as at the end of each period:
SIX MONTHS ENDED JUNE 30,
-------------------------
2008 2007
RMB MILLION RMB MILLION
----------- -----------
Net cash flows generated from operating activities 81,159 109,838
Net cash flows used for investing activities (67,339) (56,836)
Net cash flows used for financing activities (20,523) (30,192)
Currency translation differences 49 402
Cash and cash equivalents as at the end of year 58,840 71,771
NET CASH FLOWS GENERATED FROM OPERATING ACTIVITIES
The net cash flows of the Group generated from operating activities for the
six months ended June 30, 2008 were RMB81,159 million, representing a decrease
of 26.1% compared with RMB109,838 million generated for the six months ended
June 30, 2007. The decrease was mainly due to a reduction in the net profit in
the first half of the year. As at June 30, 2008, the Group had cash and cash
equivalents of RMB58,840 million. The cash and cash equivalents were mainly
denominated in Renminbi (approximately 88.5% were denominated in Renminbi,
approximately 11.0% were denominated in United States Dollars and approximately
0.5% were denominated in other currencies).
NET CASH FLOWS USED FOR INVESTING ACTIVITIES
The net cash flows of the Group used for investing activities for the six
months ended June 30, 2008 were RMB67,339 million, representing an increase of
18.5% compared with RMB56,836 million used for the six months ended June 30,
2007. The increase in cash flows used for investing activities was primarily due
to an increase in capital expenditures during the first half of the year.
NET CASH FLOWS USED FOR FINANCING ACTIVITIES
The net cash flows of the Group used for financing activities for the six
months ended June 30, 2008 were RMB20,523 million, representing a decrease of
32.0% compared with RMB30,192 million used for the six months ended June 30,
2007. The decrease was primarily
18
due to an increase in the amount of net borrowings and capital contributions by
minority shareholders during the first half of the year.
The net borrowings of the Group as at June 30, 2008 and December 31, 2007,
respectively, are as follows:
AS AT JUNE 30, 2008 AS AT DECEMBER 31, 2007
RMB MILLION RMB MILLION
------------------- -----------------------
Short-term borrowings (including current portion
of long-term borrowings) 39,257 30,934
Long-term borrowings 35,287 39,688
------- -------
Total borrowings 74,544 70,622
======= =======
Less: Cash and cash equivalents (58,840) (65,494)
------- -------
Net borrowings 15,704 5,128
======= =======
Maturities of long-term borrowings (including borrowings maturing within
one year) of the Group are as follows:
AS AT JUNE 30, 2008 AS AT DECEMBER 31, 2007
RMB MILLION RMB MILLION
------------------- -----------------------
To be repaid within one year 13,440 12,200
To be repaid within one to two years 13,419 5,754
To be repaid within two to five years 7,912 19,898
To be repaid after five years 13,956 14,036
------ ------
48,727 51,888
====== ======
Of the total borrowings of the Group as at June 30, 2008, approximately
15.3% were fixed-rate loans and approximately 84.7% were floating-rate loans. Of
the borrowings as at June 30, 2008, approximately 63.4% were denominated in
Renminbi, approximately 33.7% were denominated in United States Dollars,
approximately 2.5% were denominated in Hong Kong dollars, approximately 0.3%
were denominated in Euro and approximately 0.1% were denominated in Japanese
Yen.
As at June 30, 2008, the gearing ratio of the Group (gearing ratio =
interest-bearing debts/(interest-bearing debts + total equity)) was 8.4% (As at
December 31, 2007: 8.3%).
(4) Capital Expenditures
The following table sets out the capital expenditures for the various
segments of the Group for the six months ended June 30, 2008 and for the six
months ended June 30, 2007 and the estimated capital expenditures for the
various segments of the Group for the whole year of 2008. For the first half of
2008, capital expenditures of the Group increased 40.5% from RMB51,021 million
for the six months ended June 30, 2007 to RMB71,693 million for the six months
ended June 30, 2008. The increase in capital expenditures was primarily due to
an increase in
19
expenditures relating to crude oil and natural gas exploration and development,
and construction of natural gas pipelines by the Group. In addition, increase in
commodity prices also contributed to an increase in capital investment.
FOR THE FIRST HALF FOR THE FIRST HALF
OF 2008 OF 2007 ESTIMATES FOR 2008
------------------- ------------------- -------------------
RMB MILLION (%) RMB MILLION (%) RMB MILLION (%)
----------- ----- ----------- ----- ----------- -----
Exploration and Production 47,053* 65.6 42,196* 82.7 132,300* 63.6
Refining and Marketing 6,527 9.1 4,841 9.5 23,000 11.1
Chemicals and Marketing 4,307 6.0 1,163 2.3 13,200 6.4
Natural Gas and Pipeline 12,845 17.9 2,471 4.8 37,700 18.1
Other 961 1.4 350 0.7 1,700 0.8
------ ----- ------ ----- ------- -----
Total 71,693 100.0 51,021 100.0 207,900 100.0
====== ===== ====== ===== ======= =====
* If investments related to geological and geophysical exploration costs were
included, the capital expenditures and investments for the Exploration and
Production segment for the first half of 2007 and the first half of 2008,
and the estimates for the same in 2008 would be RMB46,680 million,
RMB53,267 million and RMB143,200 million, respectively.
EXPLORATION AND PRODUCTION
The majority of the Group's capital expenditures were related to the
Exploration and Production segment. For the six months ended June 30, 2008,
capital expenditures in relation to the Exploration and Production segment
amounted to RMB47,053 million, including RMB7,684 million for oil and gas
exploration activities and RMB36,355 million for oil and gas development
activities. The capital expenditure for the six months ended June 30, 2008 was
mainly used in large oil and gas exploration projects such as in the large oil
and gas fields located in Changqing, Daqing and Southwestern oil and gas fields
and in the construction of key production facilities at those key oil and gas
exploration projects.
The Group anticipates that capital expenditures for the Exploration and
Production segment for the twelve months ending December 31, 2008 will amount to
RMB132,300 million. Approximately RMB24,200 million will be used for oil and gas
exploration, and RMB90,500 million will be used for oil and gas development.
Exploration will mainly emphasise the overall development of regions in Longgang
in the Sichuan Basin, the west of Sulige in the Erdos Basin and the Dagang Qikou
depression in the Bohai Basin and other regions. Development activities will be
emphasised on the construction of new proved oil and gas fields, while secondary
recovery of and steady production of mature oilfields will also be emphasised.
REFINING AND MARKETING
Capital expenditures for the Group's Refining and Marketing segment for the
six months ended June 30, 2008 amounted to RMB6,527 million, including RMB5,210
million for the reconstruction of refining facilities. The capital expenditure
for the six months ended June 30, 2008 was mainly used in the construction of
large scale refining facilities with capacity over ten million tons such as the
Dushanzi Petrochemical and Guangxi Petrochemical projects.
20
The Group anticipates that capital expenditures for the Refining and
Marketing segment for the twelve months ending December 31, 2008 will amount to
RMB23,000 million, of which approximately RMB16,100 million will be used for the
construction and expansion of refining facilities, and approximately RMB6,900
million will be used for investments in the establishment of the sales network
and storage infrastructure facilities for oil products.
CHEMICALS AND MARKETING
Capital expenditures for the Chemicals and Marketing segment for the six
months ended June 30, 2008 amounted to RMB4,307 million, which were used mainly
for the construction of petrochemical facilities for large scale ethylene
projects with capacity over million tons such as the Dushanzi Petrochemical and
the Fushun Petrochemical projects and the expansion of key construction projects
such as the redevelopment and expansion of ethylene in the Daqing Petrochemical
project.
The Group anticipates that capital expenditures for the Chemicals and
Marketing segment for the twelve months ending December 31, 2008 will amount to
RMB13,200 million, which are expected to be used primarily for the construction
and expansion of petrochemical facilities including large scale ethylene
projects such as the Dushanzi Petrochemical, the Daqing Petrochemical, the
Fushun Petrochemical and the Sichuan Petrochemical projects.
NATURAL GAS AND PIPELINE
Capital expenditures for the Natural Gas and Pipeline segment for the six
months ended June 30, 2008 amounted to RMB12,845 million. The Group incurred
RMB11,726 million of these expenditures on the construction of long distance
pipelines. The capital expenditure for the six months ended June 30, 2008 was
mainly used in the construction of the Second West-East Gas Pipeline project,
the Lanzhou-Zhengzhou-Changsha Oil Pipeline and other gas pipeline projects.
The Group anticipates that capital expenditures for the Natural Gas and
Pipeline segment for the twelve months ending December 31, 2008 will amount to
RMB37,700 million, which are expected to be used primarily for the construction
of key oil and gas transmission pipelines such as the Lanzhou-Zhengzhou-Changsha
Oil Pipeline and the Second West-East Gas Pipeline and associated storage
facilities and LNG projects.
OTHERS
Capital expenditures for Other segment for the six months ended June 30,
2008 were RMB961 million.
The Group anticipates that capital expenditures for Other segment for the
twelve months ending December 31, 2008 will amount to approximately RMB1,700
million, which are expected to be used primarily for scientific research and
development activities and the establishment of information systems.
21
2. THE FINANCIAL DATA SET OUT BELOW IS EXTRACTED FROM AND COMPUTED BASED ON
THE AUDITED FINANCIAL STATEMENTS OF THE GROUP PREPARED UNDER CAS
(1) Principal operations by segment under CAS
CHANGE IN
CHANGE IN COST OF
INCOME FROM PRINCIPAL
PRINCIPAL OPERATIONS
OPERATIONS COMPARED
COST OF COMPARED WITH THE
INCOME FROM PRINCIPAL WITH THE SAME
PRINCIPAL OPERATIONS SAME PERIOD PERIOD OF INCREASE OR
OPERATIONS FOR FOR THE OF THE THE DECREASE IN
THE FIRST HALF FIRST HALF GROSS PRECEDING PRECEDING MARGIN
OF 2008 OF 2008 MARGIN* YEAR YEAR (PERCENTAGE
RMB MILLION RMB MILLION (%) (%) (%) POINTS)
-------------- ----------- ------- ----------- ---------- -----------
Exploration and production 308,180 116,385 45.1 52.5 42.2 (5.4)
Refining and marketing 446,994 471,905 (7.4) 43.5 69.6 (15.7)
Chemicals and marketing 59,118 48,148 18.3 21.3 20.9 0.5
Natural gas and pipeline 30,580 21,449 28.4 33.2 31.9 0.8
Other 345 65 -- -- -- --
Inter-segment elimination (311,190) (310,600) -- -- -- --
Total 534,027 347,352 23.5 38.9 61.1 (13.8)
* Gross margin=Profit from principal operations /Income from principal
operations
During the reporting period, the total amount of connected transactions
between the Group and CNPC and its subsidiaries in respect of sales of products
and provision of services amounted to RMB20,946 million.
(2) Principal operations by region under CAS
CHANGE COMPARED WITH
THE SAME PERIOD OF THE
FIRST HALF OF 2008 FIRST HALF OF 2007 PRECEDING YEAR
OPERATING INCOME RMB MILLION RMB MILLION (%)
---------------- ------------------ ------------------ ----------------------
PRC 519,845 380,444 36.6
Other 29,677 12,282 141.6
Total 549,522 392,726 39.9
5.2 EXPLANATION ABOUT THE REASONS FOR CHANGES IN PRINCIPAL OPERATIONS AND
THEIR STRUCTURE
[ ] Applicable [X] Not applicable
5.3 EXPLANATION ABOUT MATERIAL CHANGES IN PROFITABILITY (GROSS MARGIN) OF
PRINCIPAL OPERATIONS COMPARED TO THE SAME PERIOD OF THE PRECEDING YEAR
[ ] Applicable [X] Not applicable
22
5.4 ANALYSIS OF THE REASONS FOR MATERIAL CHANGES IN THE PROFIT COMPOSITION
COMPARED TO THE SAME PERIOD OF THE PRECEDING YEAR
[ ] Applicable [X] Not applicable
5.5 USE OF PROCEEDS FROM FUND RAISING
5.5.1 Utilisation of proceeds from fund raising
[X] Applicable [ ] Not applicable
TOTAL AMOUNT OF In October 2007, the Company TOTAL AMOUNT RMB4,742 million
PROCEEDS issued 4 billion A shares. OF PROCEEDS
The total proceeds and net USED DURING
proceeds from such issuance THE REPORTING
were RMB66,800 million and PERIOD
RMB66,243 million
respectively. ACCUMULATED RMB47,159 million
AMOUNT OF
PROCEEDS USED
PROPOSED MODIFICATION ACTUAL REALISED ESTIMATED
INVESTMENT OF INVESTMENT RETURN PROGRESS AS RETURN
COMMITTED PROJECT (RMB MILLION) THE PROJECT (RMB MILLION) ON INVESTMENT PLANNED ON INVESTMENT
----------------- ------------- ------------ ------------- ------------- ----------- ---------------
Project to increase 6,840 No 4,342 To be Yes To be confirmed
the crude oil confirmed only upon
production capacity only upon commissioning
of Changqing Oilfield commissioning
Project to increase 5,930 No 2,235 To be Yes To be confirmed
the crude oil confirmed only upon
production capacity only upon commissioning
of Daqing Oilfield commissioning
Project to increase 1,500 No 495 To be Yes To be confirmed
the crude oil confirmed only upon
production capacity only upon commissioning
of Jidong Oilfield commissioning
Dushanzi 17,500 No 11,416 To be Yes To be confirmed
Petrochemical's confirmed only upon
projects - only upon commissioning
processing and commissioning
refining
sulphur-bearing
crude oil imported
from Kazakhstan and
ethylene technology
development projects
Daqing Petrochemical 6,000 No 197 To be Yes To be confirmed
1.2 million confirmed only upon
tons/year ethylene only upon commissioning
redevelopment and commissioning
expansion project
Total 37,770 18,685 -- --
Projects not --
progressing as
planned and not
achieving estimated
return
Projects modified --
and modification
procedures
Application and The unutilised portion of the net proceeds from the A share issuance has been deposited
status of unused into the designated bank accounts maintained by the Company.
proceeds
23
5.5.2 Modification of projects
[ ] Applicable [X] Not applicable
5.6 BUSINESS PROSPECT IN THE SECOND HALF OF 2008
During the second half of 2008, the Group will continue to adhere to the
policy of "stability, balance, efficiency, control and co-ordination" in the
conduct of its operations. The Group will organise production and operation in a
scientific manner, enhance technological improvements actively, continually
strengthen corporate management and promote sustained, effective and rapid
development of the Company.
In respect of exploration and production, the Group will continue to place
top priority on resources exploration and maintain a leading position in its
upstream business in China. The Group will stress the parallel development of
oil and gas exploration and implement projects to meet the demands during the
period of peak growth of reserves. The Group will endeavour to discover sizeable
and high quality reserves. The Group will ensure steady output in mature
oilfields on the one hand, and push forward with recovery of mature oilfields at
a steady pace and overall development of new oilfields effectively on the other
hand. The Group will aim to maintain steady growth in domestic crude oil output
at 100 million tons. The Group will view natural gas construction as strategic
and growth-oriented operation. The Group will place great emphasis on key gas
regions, increase production capacity at a quicker pace in order to meet the
rapid growth of natural gas output.
In respect of refining and petrochemicals, the Group will speed up the
modification of the strategic structure of its refinery and petrochemical
business to expedite and facilitate the construction of world-class scale
refinery and petrochemical bases and develop the refining and petrochemicals
business efficiently. The Group will strive to improve the product quality and
modify the structure of refined products with a view to continually increase its
competitiveness.
In respect of the sale of refined products, the Group will place greater
emphasis in building up a modernised sales and distribution system to further
improve the refined products sales and distribution network. Efforts will be
made to explore profitable markets. The Group will speed up the construction of
the storage facilities for retail use and commercial use, thereby creating a
regional hub for storage for retail use and a sales and distribution network at
provincial, regional and municipal levels. Increasing efforts will be made to
achieve overall balance in resources allocation, optimisation and utilisation of
resources in order to ensure supply of refined products in the domestic market
and realise maximum returns on the refined products.
In respect of natural gas and pipeline, sales of natural gas are expected
to maintain its rapid growth. The Group will continue to speed up the domestic
trunk pipeline network and improve storage and transportation facilities. A
nationwide pipeline network and supply system characterised by flexible despatch
priority and stable supply will be established. Upon completion of the
construction of a number of key pipelines, the capability of the Company to
24
ensure oil and gas supply will be enhanced, and the foundation for the business
development of the Company will become more solid.
In respect of international operations, the Group will continue to speed up
development and endeavour to enlarge business scale. The Group will continue to
leverage on the existing resources with a view to ensure steady production in
the developed oilfields, and at the same time, expedite the development of new
projects in an attempt to increase reserves and production from new oil fields.
The Group aims to boost its international operations, increase its international
trading and improve the standard of its operations so as to meet the
international standards.
5.7 MODIFICATION TO THE OPERATING PLAN APPROVED BY THE BOARD DURING THE
SECOND HALF OF THIS YEAR
[ ] Applicable [X] Not applicable
5.8 WARNING AND EXPLANATION CONCERNING THE EXPECTATION THAT THE ACCRUED NET
PROFIT FROM THE BEGINNING OF THIS YEAR TO THE END OF THE NEXT REPORTING PERIOD
WILL BE NEGATIVE, OR WILL CHANGE DRAMATICALLY FROM THAT OF THE SAME PERIOD OF
THE PRECEDING YEAR
[ ] Applicable [X] Not applicable
5.9 EXPLANATION OF THE BOARD ABOUT THE ACCOUNTING FIRM'S "OTHER THAN
STANDARD UNQUALIFIED OPINION" IN RESPECT OF THE INTERIM REPORT
[ ] Applicable [X] Not applicable
5.10 EXPLANATION OF THE BOARD ABOUT THE CHANGES IN ISSUES RELATING TO THE
ACCOUNTING FIRM'S "OTHER THAN STANDARD UNQUALIFIED OPINION" FOR THE PRECEDING
YEAR AND HOW THESE ISSUES ARE RESOLVED
[ ] Applicable [X] Not applicable
5.11 FINAL DIVIDENDS FOR THE YEAR ENDED DECEMBER 31, 2007
Final dividends attributable to equity holders of the Company in respect of
2007 of RMB0.156859 per share (inclusive of tax) amounting to a total of
RMB28,708 million were approved by the shareholders at the annual general
meeting on May 15, 2008 and accounted for in equity as an appropriation of
retained earnings in the six months ended June 30, 2008, and were paid on June
13, 2008.
5.12 INTERIM DIVIDENDS AND CLOSURE OF REGISTER OF MEMBERS
The Board was authorised by the shareholders to approve the distribution of
an interim dividend for 2008 at the shareholders meeting held on May 15, 2008.
The Board has resolved to pay an interim dividend of RMB0.131827 per share
(inclusive of tax) for the six months ended
25
June 30, 2008 on the basis of 45% of the profit attributable to the equity
holders of the Company for the period. The interim dividend will be paid to
equity holders whose names appear on the register of members of the Company at
the close of business on September 18, 2008. The register of members of H shares
will be closed from September 11, 2008 to September 18, 2008 (both days
inclusive) during which period no transfer of H shares will be registered. In
order to qualify for the interim dividends, holders of H shares must lodge all
transfer documents together with the relevant share certificates at Hong Kong
Registrars Limited no later than 4:30 p.m. on September 10, 2008. Equity holders
of A shares whose names appear on the register of members of the Company
maintained at China Securities Depository and Clearing Corporation Limited
Shanghai Branch Company at the close of trading on the Shanghai Stock Exchange
in the afternoon of September 18, 2008 will be eligible for the interim
dividends.
In accordance with the relevant provisions of the Company's Articles of
Association, dividends payable to the Company's equity holders shall be declared
in Renminbi. Dividends payable to the holders of A shares shall be paid in
Renminbi while dividends payable to the holders of H shares shall be paid in
Hong Kong Dollars. The amount of Hong Kong Dollars payable shall be calculated
at the rate of HK$1.00 equals to RMB0.87685 which was the average of the closing
exchange rate for Renminbi to Hong Kong Dollar as announced by the People's Bank
of China for the week prior to the declaration of the dividends by the Board of
Directors on August 27, 2008. Accordingly, the dividends payable for each H
share of the Company will be HK$0.150342 (inclusive of tax).
6 SIGNIFICANT EVENTS
6.1 ACQUISITION, SALE OF ASSETS AND RESTRUCTURING OF ASSETS
6.1.1 Acquisition of Assets
[X] Applicable [ ] Not applicable
NET PROFIT NET PROFIT
CONTRIBUTED CONTRIBUTED
TO THE TO THE
GROUP SINCE GROUP FROM
THE DATE OF THE WHETHER
THE BEGINNING WHETHER CONTRACTUAL
ACQUISITION OF THE YEAR OWNERSHIP OF RIGHTS AND
TO THE END TO THE END WHETHER THE RELEVANT OBLIGATIONS
OF THE OF THE CONSTITUTE ASSETS HAS HAVE BEEN
COUNTERPARTY AND DATE OF ACQUISITION REPORTING REPORTING CONNECTED BEEN FULLY FULLY
ASSETS ACQUIRED ACQUISITION PRICE PERIOD PERIOD TRANSACTION TRANSFERRED TRANSFERRED
---------------- ------------- ----------- ----------- ----------- ------------ ------------ -----------
Acquisition from June 10, 2008 RMB1,004 Not Not Yes, based No No
CNPC of the million applicable applicable on valuation
assets and
operations of
the refined
products
marketing
operations and
assets
The above transaction did not have any impact on the continuity of the
Group's operation and management and is advantageous to the future financial
position and operating results of the Group.
26
6.1.2 Sale of Assets
[ ] Applicable [X] Not applicable
6.1.3 The progress of the transaction and the impact on the operating
results and financial conditions of the Group during the reporting period since
the publication of the report on the restructuring of assets or sale and
purchase of assets
[ ] Applicable [X] Not applicable
6.2 MATERIAL GUARANTEE
[X] Applicable [ ] Not applicable
At June 30, 2008, the Group had contingent liabilities in respect of
guarantees made to China Petroleum Finance Company Limited ("CP Finance", a
subsidiary of CNPC):
Unit: RMB Million
EXTERNAL GUARANTEES PROVIDED BY THE COMPANY (EXCLUDING GUARANTEES PROVIDED TO
SUBSIDIARIES)
WHETHER
CONSTITUTED
DATE OF GUARANTEE
OCCURRENCE TO
(DATE OF WHETHER CONNECTED
EXECUTION OF GUARANTEE TYPE OF PERIOD OF GUARANTEE PARTY
GUARANTEE PROVIDED TO AGREEMENT) AMOUNT GUARANTEE GUARANTEE EXPIRED (YES OR NO)
--------------------- ------------- --------- ----------- --------- --------- -----------
Huahai Petroleum July 12, 2000 14 Joint and 10 years No No
Transportation and several
Marketing Company liabilities
Limited*
Huahai Petroleum September 24, 37 Joint and 11 years No No
Transportation and 2001 several
Marketing Company liabilities
Limited*
Jinzhou Jinglian October 21, 18 Joint and 5 years No No
Lubricant 2003 several
Addicatives Company liabilities
Limited*
Total amount of guarantees incurred during the reporting period 0
Total amount of guarantees as at the end of the reporting period 69
TOTAL AMOUNT OF GUARANTEES BY THE COMPANY
(INCLUDING GUARANTEE PROVIDED FOR SUBSIDIARIES)
Total amount of guarantees 69
Ratio of total amount of guarantees to the net assets of
the Company 0.009%
of which:
Amount of guarantee provided for shareholders, ultimate --
controller and their respective related parties
Amount of guarantee provided directly or indirectly for
entities with liabilities to assets ratio exceeding 70% --
Amount of guarantee exceeding 50% of the total net assets --
Aggregate amount of the above three types of guarantees --
* for identification only
6.3 NON-OPERATING CONNECTED OBLIGATORY RIGHTS AND DEBTS
[ ] Applicable [X] Not applicable
27
6.4 MATERIAL LITIGATION AND ARBITRATION
[ ] Applicable [X] Not applicable
6.5 OTHER SIGNIFICANT EVENTS
[X] Applicable [ ] Not applicable
6.5.1 In April 2008, the Company was notified by the Ministry of Finance of
the PRC that in order to ensure supply of crude oil and refined products in the
market, financial support measures would be provided to the Company. During the
reporting period, the Company recognised governmental grants in the amount of
RMB4,573 million.
6.5.2 On May 12, 2008, an earthquake with a magnitude of 8.0 on the Richter
scale struck Wenchuan area of Sichuan Province of the PRC. As a result of the
Company's well-established production facilities and effective contingency
plans, the earthquake did not have material adverse effect on the production and
operations of the Company.
6.5.3 On June 20, 2008, the PRC Government adjusted the prices of refined
products in the domestic market, raising the ex-factory prices of gasoline and
diesel by RMB1,000 per ton and the ex-factory prices of aviation fuel by
RMB1,500 per ton, representing an increase of the ex-factory prices of gasoline,
diesel and aviation fuel by 18.2%, 19.7% and 25.2% respectively.
6.5.4 The Company has adopted a share-based compensation scheme which is a
share appreciation right arrangement payable in cash to the recipients upon
exercise of the rights which became effective upon the listing of the H shares
of the Company on April 7, 2000. Directors, Supervisors and senior executives of
the Company are eligible for the scheme and the rights granted thereunder can be
exercised from April 8, 2003 to April 7, 2008. The exercise price is the price
of the H share as at the initial public offering, being HK$1.28 per share. As at
April 7, 2008 (being the expiry date of the exercise of the share appreciation
rights), none of the holders of the share appreciation rights exercised their
rights. The Company therefore derecognised the liability previously accrued of
RMB1,400 million in the financial statements of the Group for the six months
ended June 30, 2008.
6.5.5 In order to satisfy the operations needs of the Company, on June 10,
2008, the Board resolved to issue domestic corporate bonds with an aggregate
principal amount of not more than RMB60 billion in one or more tranches. The
proposal was approved at the extraordinary general meeting of the Company held
on July 31, 2008.
7 FINANCIAL STATEMENTS
7.1 AUDITORS' OPINION
Financial Statements [ ] Unaudited [X] Audited
Auditors' opinion [X] Standard unqualified opinion [ ] Other than standard unqualified opinion
28
7.2 THE GROUP'S BALANCE SHEETS, PROFIT AND LOSS ACCOUNTS/ INCOME
STATEMENTS, CASH FLOW STATEMENTS AND CHANGES IN EQUITY, THE COMPANY'S BALANCE
SHEET, WITH COMPARATIVES
7.2.1 Financial statements prepared in accordance with IFRS
(1) Consolidated Profit and Loss Account
SIX MONTHS ENDED JUNE 30
-------------------------
2008 2007
NOTES RMB MILLION RMB MILLION
----- ----------- -----------
TURNOVER (i) 549,522 392,726
-------- --------
OPERATING EXPENSES
Purchases, services and other (294,522) (166,995)
Employee compensation costs (30,411) (22,426)
Exploration expenses, including
exploratory dry holes (12,848) (10,607)
Depreciation, depletion and
amortisation (42,754) (31,228)
Selling, general and administrative
expenses (27,993) (23,901)
Taxes other than income taxes (65,831) (28,784)
Other income, net 2,601 345
-------- --------
TOTAL OPERATING EXPENSES (471,758) (283,596)
-------- --------
PROFIT FROM OPERATIONS 77,764 109,130
-------- --------
FINANCE COSTS
Exchange gain 1,304 581
Exchange loss (2,332) (923)
Interest income 1,404 819
Interest expense (1,635) (2,050)
-------- --------
TOTAL NET FINANCE COSTS (1,259) (1,573)
-------- --------
SHARE OF PROFIT OF ASSOCIATES AND JOINTLY
CONTROLLED ENTITIES 4,207 2,785
-------- --------
PROFIT BEFORE TAXATION (ii) 80,712 110,342
TAXATION (iii) (19,858) (24,026)
-------- --------
PROFIT FOR THE PERIOD 60,854 86,316
======== ========
ATTRIBUTABLE TO:
Equity holders of the Company 53,615 81,830
Minority interest 7,239 4,486
-------- --------
60,854 86,316
======== ========
BASIC AND DILUTED EARNINGS PER SHARE FOR
PROFIT ATTRIBUTABLE TO EQUITY HOLDERS
OF THE COMPANY (RMB YUAN) (iv) 0.29 0.46
======== ========
DIVIDENDS ATTRIBUTABLE TO EQUITY HOLDERS
OF THE COMPANY DURING THE PERIOD
Interim dividends declared after the
balance sheet date (v) 24,127 36,823
======== ========
29
(2) Consolidated Balance Sheet
JUNE 30, 2008 DECEMBER 31, 2007
RMB MILLION RMB MILLION
------------- -----------------
NON CURRENT ASSETS
Property, plant and equipment 783,087 762,882
Investments in associates and jointly controlled entities 30,382 26,535
Available-for-sale financial assets 2,193 2,581
Advance operating lease payments 24,637 23,417
Intangible and other assets 8,707 8,488
Time deposits with maturities over one year 4,605 5,053
------- -------
TOTAL NON CURRENT ASSETS 853,611 828,956
------- -------
CURRENT ASSETS
Inventories 98,560 88,467
Accounts receivable 27,726 18,419
Prepaid expenses and other current assets 68,319 36,018
Notes receivable 5,832 4,735
Time deposits with maturities over three months but within
one year 10,932 18,042
Cash and cash equivalents 58,840 65,494
------- -------
TOTAL CURRENT ASSETS 270,209 231,175
------- -------
CURRENT LIABILITIES
Accounts payable and accrued liabilities 172,832 144,353
Income tax payable 2,096 11,709
Other taxes payable 20,166 11,099
Short-term borrowings 39,257 30,934
------- -------
TOTAL CURRENT LIABILITIES 234,351 198,095
------- -------
NET CURRENT ASSETS 35,858 33,080
------- -------
TOTAL ASSETS LESS CURRENT LIABILITIES 889,469 862,036
======= =======
EQUITY
Equity attributable to equity holders of the Company
Share capital 183,021 183,021
Retained earnings 357,339 332,432
Reserves 216,883 217,952
------- -------
757,243 733,405
Minority interest 51,808 42,942
------- -------
TOTAL EQUITY 809,051 776,347
------- -------
NON CURRENT LIABILITIES
Long-term borrowings 35,287 39,688
Asset retirement obligations 25,966 24,761
Deferred taxation 18,159 20,205
Other long-term obligations 1,006 1,035
------- -------
TOTAL NON CURRENT LIABILITIES 80,418 85,689
------- -------
TOTAL EQUITY AND NON CURRENT LIABILITIES 889,469 862,036
======= =======
30
(3) Consolidated Cash Flow Statement
SIX MONTHS ENDED JUNE 30
-------------------------
2008 2007
RMB MILLION RMB MILLION
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the period 60,854 86,316
Adjustments for:
Taxation 19,858 24,026
Depreciation, depletion and amortisation 42,754 31,228
Capitalised exploratory costs charged to expense 6,634 6,123
Share of profit of associates and jointly controlled entities (4,207) (2,785)
Reversal of provision for impairment of receivables, net (48) (2,254)
Write down /(Reversal of write down) in inventories, net 1,422 (68)
Impairment of available-for-sale financial assets, net 10 --
Impairment of investments in associates and jointly controlled
entities, net 19 5
Loss on disposal of property, plant and equipment 498 407
Loss/(Gain) on disposal of investments in associates and jointly
controlled entities 3 (371)
Gain on disposal of available-for-sale financial assets (4) (105)
Dividend income (100) (75)
Interest income (1,404) (819)
Interest expense 1,635 2,050
Advance payments on long-term operating leases (2,143) (1,350)
Changes in working capital:
Accounts receivable and prepaid expenses and other current assets (32,808) (20,616)
Inventories (11,515) (8,221)
Accounts payable and accrued liabilities 31,533 30,365
------- -------
CASH GENERATED FROM OPERATIONS 112,991 143,856
Interest received 1,271 835
Interest paid (1,975) (2,039)
Income taxes paid (31,128) (32,814)
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 81,159 109,838
======= =======
31
(3) Consolidated Cash Flow Statement (Continued)
SIX MONTHS ENDED JUNE 30
-------------------------
2008 2007
RMB MILLION RMB MILLION
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (75,660) (58,304)
Acquisition of investments in associates and jointly controlled
entities (203) (1,018)
Acquisition of available-for-sale financial assets (10) (300)
Acquisition of intangible assets (587) (265)
Acquisition of other non-current assets (327) (501)
Purchase of minority interest in listed subsidiaries -- (86)
Purchase of minority interest in subsidiaries (132) --
Repayment of capital by associates and jointly controlled entities -- 1,552
Proceeds from disposal of property, plant and equipment 98 512
Proceeds from disposal of investments in associates and jointly
controlled entities 2 1,015
Proceeds from disposal of available-for-sale financial assets 25 164
Dividends received 2,227 365
Decrease in time deposits with maturities over three months 7,228 30
------- -------
NET CASH USED FOR INVESTING ACTIVITIES (67,339) (56,836)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of short-term borrowings (29,969) (15,405)
Repayments of long-term borrowings (4,111) (13,741)
Dividends paid to minority interest (3,045) (1,905)
Dividends paid to equity holders of the Company (28,708) (27,694)
Increase in short-term borrowings 37,450 16,139
Increase in long-term borrowings 822 12,269
Capital contribution from minority interest 8,232 266
Capital reduction (1,165) --
Decrease in other long-term obligations (29) (121)
------- -------
NET CASH USED FOR FINANCING ACTIVITIES (20,523) (30,192)
------- -------
TRANSLATION OF FOREIGN CURRENCY 49 402
------- -------
(Decrease)/Increase in cash and cash equivalents (6,654) 23,212
Cash and cash equivalents at beginning of the period 65,494 48,559
------- -------
Cash and cash equivalents at end of the period 58,840 71,771
======= =======
32
(4) Selected notes from the financial statements prepared in accordance
with IFRS
(i) Turnover
Turnover represents revenues from the sale of crude oil, natural gas,
refined products and petrochemical products and from the transportation of crude
oil and natural gas.
(ii) Profit before Taxation
SIX MONTHS ENDED JUNE 30
-------------------------
2008 2007
RMB MILLION RMB MILLION
----------- -----------
Profit before taxation is arrived at after crediting and charging of
the following items:
Crediting
Dividend income from available-for-sale financial assets 100 75
Reversal of provision for impairment of receivables 70 2,321
Reversal of write down in inventories -- 68
Charging
Amortisation of intangible and other assets 732 688
Cost of inventories (approximates cost of goods sold) recognised as
expense 343,727 208,074
Depreciation of property, plant and equipment, including impairment
provision
- owned assets 41,161 29,916
- assets under finance leases 3 3
Impairment of available-for-sale financial assets 10 --
Impairment of investments in associates and jointly controlled entities 19 5
Provision for impairment of receivables 22 67
Interest expense (Note (i)) 1,635 2,050
Loss on disposal of property, plant and equipment 498 407
Operating lease expenses 3,071 3,166
Repair and maintenance 4,145 3,687
Research and development expenses 5,153 2,796
Write down in inventories 1,422 --
Note (i): Interest expense
Interest expense 2,754 2,624
Less: Amounts capitalised (1,119) (574)
------- -------
1,635 2,050
======= =======
33
(iii) Taxation
SIX MONTHS ENDED JUNE 30
-------------------------
2008 2007
RMB MILLION RMB MILLION
----------- -----------
Income tax 21,515 25,415
Deferred tax (1,657) (1,389)
------ ------
19,858 24,026
====== ======
In accordance with the relevant PRC income tax rules and regulations, the
PRC corporate income tax rate applicable to the Group is principally 25% (2007:
33%). Operations of the Group in certain regions in China have qualified for
certain tax incentives in the form of a reduced income tax rate of 15% through
the year 2010 and accelerated depreciation of certain property, plant and
equipment.
The tax on the Group's profit before taxation differs from the theoretical
amount that would arise using the corporate income tax rate in the PRC
applicable to the Group as follows:
SIX MONTHS ENDED JUNE 30
-------------------------
2008 2007
RMB MILLION RMB MILLION
----------- -----------
Profit before taxation 80,712 110,342
------ -------
Tax calculated at a tax rate of 25% (2007: 33%) 20,178 36,413
Prior year tax return adjustment 25 451
Effect of income taxes from international operations in excess of taxes
at the PRC statutory tax rate 4,716 389
Effect of preferential tax rate (5,735) (8,256)
Effect of change in PRC corporate income tax rate on deferred taxes -- (4,482)
Tax effect of income not subject to tax (1,215) (1,226)
Tax effect of expenses not deductible for tax purposes 1,889 737
------ -------
Taxation 19,858 24,026
====== =======
(iv) Basic and Diluted Earnings Per Share
Basic and diluted earnings per share for the six months ended June 30, 2008
have been computed by dividing the profit attributable to equity holders of the
Company by 183,021 million shares issued and outstanding during the period.
34
Basic and diluted earnings per share for the six months ended June 30, 2007
have been computed by dividing the profit attributable to equity holders of the
Company by 179,021 million shares issued and outstanding during the period.
There are no potential dilutive ordinary shares.
(v) Dividends Attributable to Equity Holders of the Company
SIX MONTHS ENDED JUNE 30
-------------------------
2008 2007
RMB MILLION RMB MILLION
----------- -----------
Final dividends attributable to equity holders of the Company for 2006
(note a) -- 27,694
Final dividends attributable to equity holders of the Company for 2007
(note b) 28,708 --
------ ------
28,708 27,694
====== ======
(a) Final dividends attributable to equity holders of the Company in respect of
2006 of RMB0.154699 yuan per share amounting to a total of RMB27,694
million were approved by the shareholders in the Annual General Meeting on
May 16, 2007 and accounted for in equity as an appropriation of retained
earnings in the six months ended June 30, 2007, and were paid on June 1,
2007.
(b) Final dividends attributable to equity holders of the Company in respect of
2007 of RMB0.156859 yuan per share amounting to a total of RMB28,708
million were approved by the shareholders in the Annual General Meeting on
May 15, 2008 and accounted for in equity as an appropriation of retained
earnings in the six months ended June 30, 2008, and were paid on June 13,
2008.
(c) As authorised by shareholders in the Annual General Meeting on May 15,
2008, the Board of Directors, in a meeting held on August 27, 2008,
resolved to distribute interim dividends attributable to equity holders of
the Company in respect of 2008 of RMB0.131827 yuan per share amounting to a
total of RMB24,127 million. These unaudited consolidated interim condensed
financial statements do not reflect this dividend payable, as it was not
declared until after the balance sheet date.
35
7.2.2 Financial statements prepared in accordance with CAS
(1) Consolidated and Company Balance Sheets
JUNE 30, 2008 DECEMBER 31, 2007 JUNE 30, 2008 DECEMBER 31, 2007
THE GROUP THE GROUP THE COMPANY THE COMPANY
ASSETS RMB MILLION RMB MILLION RMB MILLION RMB MILLION
------ ------------- ----------------- ------------- -----------------
CURRENT ASSETS
Cash at bank and on hand 74,377 88,589 58,730 78,332
Notes receivable 5,832 4,735 5,628 3,988
Accounts receivable 27,726 18,419 3,365 2,131
Advances to suppliers 51,042 20,386 40,262 16,086
Interest receivable 242 109 242 109
Dividends receivable 25 18 85 85
Other receivables 16,964 15,444 23,757 24,173
Inventories 98,560 88,467 80,689 70,284
Current portion of non-current
assets 37 59 35 59
Other current assets 9 2 9 2
--------- ------- ------- -------
TOTAL CURRENT ASSETS 274,814 236,228 212,802 195,249
--------- ------- ------- -------
NON-CURRENT ASSETS
Available-for-sale financial
assets 2,147 2,530 1,098 1,456
Long-term equity investments 26,855 22,686 120,707 104,691
Fixed assets 239,884 247,803 193,382 199,411
Oil and gas properties 319,957 326,328 228,086 231,921
Construction in progress 134,260 105,634 108,816 85,597
Construction materials 8,681 6,927 6,159 5,455
Fixed assets pending disposal 481 287 481 282
Intangible assets 20,943 20,022 16,944 16,356
Goodwill 148 -- -- --
Long-term prepaid expenses 12,402 12,028 10,365 9,924
Deferred tax assets 18,288 12,871 12,989 9,048
Other non-current assets 536 748 -- --
--------- ------- ------- -------
TOTAL NON-CURRENT ASSETS 784,582 757,864 699,027 664,141
--------- ------- ------- -------
TOTAL ASSETS 1,059,396 994,092 911,829 859,390
========= ======= ======= =======
36
(2) Consolidated and Company Balance Sheets (Continued)
JUNE 30, 2008 DECEMBER 31, 2007 JUNE 30, 2008 DECEMBER 31, 2007
LIABILITIES AND THE GROUP THE GROUP THE COMPANY THE COMPANY
SHAREHOLDERS' EQUITY RMB MILLION RMB MILLION RMB MILLION RMB MILLION
-------------------- ------------- ----------------- ------------- ------------------
CURRENT LIABILITIES
Short-term borrowings 25,817 18,734 31,224 17,898
Notes payable 1,059 1,143 -- --
Accounts payable 117,590 104,460 73,848 66,877
Advances from customers 15,177 12,433 12,309 10,443
Employee compensation payable 7,961 11,585 6,768 10,751
Taxes payable 22,262 22,808 5,668 13,793
Interest payable 178 173 86 61
Dividends payable 874 89 -- --
Other payables 35,912 17,849 69,696 46,582
Provisions 560 715 61 75
Current portion of
non-current liabilities 13,440 11,652 11,777 9,029
Other current liabilities 12 13 -- --
--------- ------- ------- -------
TOTAL CURRENT LIABILITIES 240,842 201,654 211,437 175,509
--------- ------- ------- -------
NON-CURRENT LIABILITIES
Deferred income 79 76 61 62
Long-term borrowings 31,044 35,305 23,543 29,044
Debentures payable 4,243 4,383 3,500 3,500
Long-term payables 57 57 56 56
Grants payable 743 774 681 710
Provisions 25,966 24,761 16,081 15,307
Deferred tax liabilities 13,550 11,883 7,466 6,598
Other non-current liabilities 127 128 123 123
--------- ------- ------- -------
TOTAL NON-CURRENT LIABILITIES 75,809 77,367 51,511 55,400
--------- ------- ------- -------
TOTAL LIABILITIES 316,651 279,021 262,948 230,909
--------- ------- ------- -------
SHAREHOLDERS' EQUITY
Share capital 183,021 183,021 183,021 183,021
Capital surplus 122,019 122,192 125,683 125,848
Surplus reserves 102,696 102,696 91,596 91,596
Undistributed profits 290,191 270,544 248,581 228,016
Currency translation
differences (1,778) (1,086) -- --
--------- ------- ------- -------
EQUITY ATTRIBUTABLE TO
EQUITY HOLDERS OF THE COMPANY 696,149 677,367 648,881 628,481
--------- ------- ------- -------
MINORITY INTEREST 46,596 37,704 -- --
--------- ------- ------- -------
TOTAL SHAREHOLDERS' EQUITY 742,745 715,071 648,881 628,481
--------- ------- ------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 1,059,396 994,092 911,829 859,390
========= ======= ======= =======
37
(2) Consolidated and Company Income Statements
FOR THE SIX FOR THE SIX FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
JUNE 30, 2008 JUNE 30, 2007 JUNE 30, 2008 JUNE 30, 2007
THE GROUP THE GROUP THE COMPANY THE COMPANY
ITEMS RMB MILLION RMB MILLION RMB MILLION RMB MILLION
----- ------------- ------------- ------------- -------------
1. OPERATING INCOME 549,522 392,726 393,015 290,391
Less: Cost of sales (361,287) (223,140) (310,500) (195,320)
Tax and levies on
operations (61,891) (26,853) (37,130) (16,258)
Selling expenses (21,576) (19,075) (17,078) (15,049)
General and
administrative
expenses (29,562) (21,475) (23,565) (15,738)
Finance expenses (1,448) (1,656) (205) (944)
Asset impairment losses (7,330) 2,317 (7,315) 1,842
Add: Investment income 4,297 3,090 44,104 30,404
-------- -------- -------- --------
2. OPERATING PROFIT 70,725 105,934 41,326 79,328
-------- -------- -------- --------
Add: Non-operating income 5,614 1,441 4,606 856
Less: Non-operating expenses (3,133) (1,081) (1,766) (948)
-------- -------- -------- --------
3. PROFIT BEFORE TAXATION 73,206 106,294 44,166 79,236
-------- -------- -------- --------
Less: Taxation (17,909) (25,997) 5,107 (5,788)
-------- -------- -------- --------
4. NET PROFIT 55,297 80,297 49,273 73,448
-------- -------- -------- --------
Net profit attributable to
equity holders of the
Company 48,355 75,882 49,273 73,448
Minority interest 6,942 4,415 -- --
5. EARNINGS PER SHARE (BASED ON
NET PROFIT ATTRIBUTABLE TO
EQUITY HOLDERS OF THE
COMPANY)
Basic earnings per
share (RMB, Yuan) 0.26 0.42 0.27 0.41
Diluted earnings per
share (RMB, Yuan) 0.26 0.42 0.27 0.41
======== ======== ======== ========
38
(3) Consolidated and Company Cash Flow Statements
FOR THE SIX MONTHS FOR THE SIX MONTHS FOR THE SIX MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30, ENDED JUNE 30, ENDED JUNE 30,
2008 2007 2008 2007
THE GROUP THE GROUP THE COMPANY THE COMPANY
ITEMS RMB MILLION RMB MILLION RMB MILLION RMB MILLION
----- ------------------ ------------------ ------------------ ------------------
1. CASH FLOWS FROM
OPERATING ACTIVITIES
Cash received from sales
of goods and rendering
of services 634,074 444,524 457,759 333,860
Refund of taxes and levies 4,186 536 3,329 501
Cash received relating
to other operating
activities 1,674 363 5,274 1,317
-------- -------- -------- --------
SUB-TOTAL OF CASH INFLOWS 639,934 445,423 466,362 335,678
-------- -------- -------- --------
Cash paid for goods and
services (374,110) (210,590) (325,820) (193,789)
Cash paid to and on
behalf of employees (34,035) (21,200) (27,280) (14,729)
Payments of taxes and levies (122,470) (80,234) (63,098) (46,070)
Cash paid relating to
other operating activities (25,313) (21,222) (11,597) (13,359)
-------- -------- -------- --------
SUB-TOTAL OF CASH OUTFLOWS (555,928) (333,246) (427,795) (267,947)
-------- -------- -------- --------
NET CASH FLOWS FROM
OPERATING ACTIVITIES 84,006 112,177 38,567 67,731
-------- -------- -------- --------
2. CASH FLOWS FROM
INVESTING ACTIVITIES
Cash received from
disposal of investments 7,255 2,731 8,026 1,177
Cash received from
returns on investments 3,498 1,200 44,492 30,196
Net cash received from
disposal of fixed
assets, oil and gas
properties, intangible
assets and other
long-term assets 98 512 77 17
-------- -------- -------- --------
SUB-TOTAL OF CASH INFLOWS 10,851 4,443 52,595 31,390
-------- -------- -------- --------
Cash paid to acquire
fixed assets, oil and
gas properties,
intangible assets and
other long-term assets (78,717) (60,420) (68,431) (46,397)
Cash paid to acquire
investments (345) (1,374) (15,761) (918)
Including: Cash paid to
purchase shares of
listed subsidiaries -- (86) -- (86)
-------- -------- -------- --------
SUB-TOTAL OF CASH OUTFLOWS (79,062) (61,794) (84,192) (47,315)
-------- -------- -------- --------
NET CASH FLOWS FROM
INVESTING ACTIVITIES (68,211) (57,351) (31,597) (15,925)
-------- -------- -------- --------
39
FOR THE FOR THE FOR THE FOR THE
SIX MONTHS ENDED SIX MONTHS ENDED SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2008 JUNE 30, 2007 JUNE 30, 2008 JUNE 30, 2007
THE GROUP THE GROUP THE COMPANY THE COMPANY
ITEMS RMB MILLION RMB MILLION RMB MILLION RMB MILLION
----- ---------------- ---------------- ---------------- ----------------
3. CASH FLOWS FROM FINANCING
ACTIVITIES
Cash received from
capital contributions 8,232 266 -- --
Including: Cash received
from minority
shareholders' capital
contributions to
subsidiaries 8,232 266 -- --
Cash received from
borrowings 38,272 28,408 27,872 22,237
Cash received relating
to other financing
activities 24 64 21 31
------- ------- ------- -------
SUB-TOTAL OF CASH INFLOWS 46,528 28,738 27,893 22,268
------- ------- ------- -------
Cash repayments of
borrowings (34,080) (28,931) (16,594) (22,160)
Cash payments for
interest expenses and
distribution of
dividends or profits (33,728) (31,638) (29,821) (29,256)
Including: Subsidiaries'
cash payments for
distribution of
dividends or profits to
minority shareholders (3,045) (1,895) -- --
Capital reduction (1,165) -- -- --
Cash payments relating
to other financing
activities (53) (185) (50) (96)
------- ------- ------- -------
SUB-TOTAL OF CASH OUTFLOWS (69,026) (60,754) (46,465) (51,512)
------- ------- ------- -------
NET CASH FLOWS FROM FINANCING
ACTIVITIES (22,498) (32,016) (18,572) (29,244)
------- ------- ------- -------
4. EFFECT OF FOREIGN EXCHANGE
RATE CHANGES ON CASH AND CASH
EQUIVALENTS 49 402 -- --
------- ------- ------- -------
5. NET (DECREASE) / INCREASE
IN CASH AND CASH EQUIVALENTS (6,654) 23,212 (11,602) 22,562
------- ------- ------- -------
Add: Cash and cash
equivalents at
beginning of the period 65,494 48,559 60,332 45,029
------- ------- ------- -------
6. CASH AND CASH EQUIVALENTS AT
END OF THE PERIOD 58,840 71,771 48,730 67,591
======= ======= ======= =======
40
(4) Consolidated Statement of Changes in Equity
SHAREHOLDERS' EQUITY ATTRIBUTABLE TO THE COMPANY
----------------------------------------------------------
CURRENCY TOTAL
SHARE CAPITAL SURPLUS UNDISTRIBUTED TRANSLATION MINORITY SHAREHOLDERS'
CAPITAL SURPLUS RESERVES PROFITS DIFFERENCES INTEREST EQUITY
RMB RMB RMB RMB RMB RMB RMB
ITEMS MILLION MILLION MILLION MILLION MILLION MILLION MILLION
----- ------- ------- -------- ------------- ----------- -------- -------------
BALANCE AT JANUARY 1, 2007 179,021 59,797 89,928 213,255 (534) 26,128 567,595
------- ------- ------- ------- ------ ------ -------
CHANGES IN THE SIX MONTHS ENDED
JUNE 30, 2007 -- (64) -- 48,188 (132) 2,549 50,541
------- ------- ------- ------- ------ ------ -------
Net profit -- -- -- 75,882 -- 4,415 80,297
------- ------- ------- ------- ------ ------ -------
Losses recognised directly in
equity -- (64) -- -- (132) (237) (433)
------- ------- ------- ------- ------ ------ -------
Currency translation
differences -- -- -- -- (132) (226) (358)
Purchase of minority
interest in
subsidiaries -- (64) -- -- -- (22) (86)
Other -- -- -- -- -- 11 11
------- ------- ------- ------- ------ ------ -------
SUB-TOTAL -- (64) -- 75,882 (132) 4,178 79,864
------- ------- ------- ------- ------ ------ -------
Shareholders' contribution
and withdrawal -- -- -- -- -- 266 266
------- ------- ------- ------- ------ ------ -------
Capital contribution
by shareholders -- -- -- -- -- 266 266
------- ------- ------- ------- ------ ------ -------
Profit distribution -- -- -- (27,694) -- (1,895) (29,589)
------- ------- ------- ------- ------ ------ -------
Distribution to shareholders -- -- -- (27,694) -- (1,895) (29,589)
------- ------- ------- ------- ------ ------ -------
BALANCE AT JUNE 30, 2007 179,021 59,733 89,928 261,443 (666) 28,677 618,136
======= ======= ======= ======= ====== ====== =======
BALANCE AT JANUARY 1, 2008 183,021 122,192 102,696 270,544 (1,086) 37,704 715,071
------- ------- ------- ------- ------ ------ -------
41
(4) Consolidated Statement of Changes in Equity (continued)
SHAREHOLDERS' EQUITY ATTRIBUTABLE TO THE COMPANY
----------------------------------------------------------
CURRENCY TOTAL
SHARE CAPITAL SURPLUS UNDISTRIBUTED TRANSLATION MINORITY SHAREHOLDERS'
CAPITAL SURPLUS RESERVES PROFITS DIFFERENCES INTEREST EQUITY
RMB RMB RMB RMB RMB RMB RMB
ITEMS MILLION MILLION MILLION MILLION MILLION MILLION MILLION
----- ------- ------- -------- ------------- ----------- -------- -------------
CHANGES IN THE SIX MONTHS ENDED
JUNE 30, 2008 -- (173) -- 19,647 (692) 8,892 27,674
------- ------- ------- ------- ------ ------ -------
Net profit -- -- -- 48,355 -- 6,942 55,297
------- ------- ------- ------- ------ ------ -------
Losses recognised directly in
equity -- (173) -- -- (692) (1,287) (2,152)
------- ------- ------- ------- ------ ------ -------
Currency translation
differences -- -- -- -- (692) (1,185) (1,877)
Purchase of minority
interest in
subsidiaries -- (15) -- -- -- (117) (132)
Fair value changes of
available-for-sale
financial assets -- (158) -- -- -- -- (158)
Other -- -- -- -- -- 15 15
------- ------- ------- ------- ------ ------ -------
SUB-TOTAL -- (173) -- 48,355 (692) 5,655 53,145
------- ------- ------- ------- ------ ------ -------
Shareholders'contribution and
withdrawal -- -- -- -- -- 7,067 7,067
------- ------- ------- ------- ------ ------ -------
Capital contribution by
shareholders -- -- -- -- -- 8,232 8,232
Capital reduction -- -- -- -- -- (1,165) (1,165)
------- ------- ------- ------- ------ ------ -------
Profit distribution -- -- -- (28,708) -- (3,830) (32,538)
------- ------- ------- ------- ------ ------ -------
Distribution to shareholders -- -- -- (28,708) -- (3,830) (32,538)
------- ------- ------- ------- ------ ------ -------
BALANCE AT JUNE 30, 2008 183,021 122,019 102,696 290,191 (1,778) 46,596 742,745
======= ======= ======= ======= ====== ====== =======
42
7.2.3 Significant differences between IFRS and CAS
The financial statements of the Group prepared in accordance with CAS
differ in certain material aspects from those in accordance with IFRS. A
statement of reconciliation of such differences is set out below:
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, 2008 JUNE 30, 2007
CONSOLIDATED NET PROFIT NOTES RMB MILLION RMB MILLION
----------------------- ----- ------------- -------------
Consolidated profit for the period under IFRS 60,854 86,316
Adjustments:
Depletion of oil and gas properties (1) (4,453) (3,899)
Amortisation of revaluation for assets other than
fixed assets and oil and gas properties in 1999 (2) (140) (39)
Depreciation and depletion of revaluation for
fixed assets and oil and gas properties in 2003 (3) (129) (80)
Reversal of reversed impairment for non-current assets (4) (18) --
Adjustment of safety fund (5) (2,932) --
Other 166 (30)
Deferred taxation (6) 1,949 (1,971)
------ ------
Consolidated profit for the period under CAS 55,297 80,297
====== ======
JUNE 30, 2008 DECEMBER 31, 2007
CONSOLIDATED SHAREHOLDERS' EQUITY NOTES RMB MILLION RMB MILLION
--------------------------------- ----- ------------- -----------------
Consolidated shareholders' equity under IFRS 809,051 776,347
Adjustments:
Depletion of oil and gas properties (1) (84,115) (79,662)
Revaluation, amortisation of disposal of assets other
than fixed assets and oil and gas properties
in 1999 (2) 269 409
Revaluation, and depreciation and depletion of fixed
assets and oil and gas properties revalued in 2003 (3) 208 337
Reversal of reversed impairment for non-current assets
and related difference on disposal of such
non-current assets (4) (110) (92)
Adjustment of safety fund (5) (6,491) (3,559)
Currency translation differences 137 (390)
Other 691 525
Deferred taxation (6) 23,105 21,156
------- -------
Consolidated shareholders' equity under CAS 742,745 715,071
======= =======
(1) Depletion of oil and gas properties is provided using the unit of
production method under IFRS, while the straight-line method is used under
CAS.
(2) During the restructuring of CNPC and establishment of the Company in 1999 a
valuation was carried out on June 30, 1999 for the assets and liabilities
CNPC invested in the Company. The valuation results from China Enterprise
Appraisals are all recognised in the financial statements under CAS.
However, in the financial statements under IFRS, revaluation
43
model is used in subsequent measurement by the Group only for fixed assets
and oil and gas properties. Consequently, valuation results other than for
fixed assets and oil and gas properties are not recognised in the financial
statements under IFRS.
(3) As the revaluation model is used in subsequent measurement for fixed assets
and oil and gas properties by the Group under IFRS, revaluations were
carried out by independent appraisers with sufficient regularity. In order
to meet the requirements of IFRS, on September 30, 2003, a revaluation of
the Group's refining and chemical production equipment was undertaken by a
firm of independent valuers, China United Assets Appraiser Co., Ltd., in
the PRC on a depreciated replacement cost basis. The results of the
revaluation were recognised in the financial statements under IFRS.
However, fixed assets and oil and gas properties are recognised using the
historical cost model under CAS. Consequently, these revaluation results
were not recognised in the financial statements under CAS.
(4) Under CAS, once recognised, any impairment losses for long-term assets,
such as fixed assets, oil and gas properties, intangible assets and
long-term equity investments, cannot be reversed in subsequent accounting
periods. However, under IFRS, if there are changes to the factors which
resulted in the original impairment of the long-term asset which result in
the recoverable amount being higher than the carrying amount the impairment
loss previously recognised shall be reversed.
(5) In accordance with the "Temporary regulation for safety expense financial
management of high risk industry" from Ministry of Finance and State
Administration of Work Safety of PRC, a safety fund has been accrued for
the Group's oil and gas exploration, refinery and chemical production
activities within the PRC from January 1, 2007. This safety fund has been
recognised into the Group's income statement. As the Group did not have
specific utilisation plan for this accrued safety fund as at June 30, 2008,
it was reversed under IFRS.
(6) The consequences of (1)-(5) and other differences between IFRS and CAS on
deferred taxation.
7.3 NOTES TO FINANCIAL STATEMENTS
7.3.1 Explanation for any Changes in Accounting Policies, Accounting
Estimates or Correction of Accounting Error, Reason and the Impact
[ ] Applicable [X] Not applicable
7.3.2 Explanation for any Material Changes in the Scope of Consolidation,
Reason and the Impact
[ ] Applicable [X] Not applicable
44
7.3.3 Explanation if qualified audited report is issued and the relevant
notes thereon
[ ] Applicable [X] Not applicable
8 REPURCHASE, SALE OR REDEMPTION OF SECURITIES
The Company and its subsidiaries did not sell any securities of the
Company, nor did it repurchase or redeem any of the securities of the Company
during the six months ended June 30, 2008.
9 DISCLOSURE OF OTHER INFORMATION
Save as disclosed above, there have been no material changes from the
information disclosed in the annual report of the Group for the year ended
December 31, 2007 in respect of matters required to be disclosed under paragraph
46(3) of Appendix 16 to the Rules Governing the Listing of Securities on the
Hong Kong Stock Exchange (the "Listing Rules").
10 COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS OF
LISTED ISSUERS
The Company has adopted the Model Code for Securities Transactions for
Directors of Listed Issuers contained in Appendix 10 to the Listing Rules (the
"Model Code") in respect of dealing of the Company's shares by its directors.
Each Director and Supervisor has confirmed to the Company that each of them has
complied with the requirements set out in the Model Code.
11 COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE PRACTICES
The Company has complied with the code provisions under the Code on
Corporate Governance Practices set out in Appendix 14 to the Listing Rules
applicable during the six months ended June 30, 2008, except that from May 20,
2007 to May 16, 2008, the roles of the Chairman and the President of the Company
were concurrently held by Mr Jiang Jiemin. On May 16, 2008, the First Meeting of
the Fourth Session of the Board was convened at which Mr Jiang Jiemin resigned
as the President of the Company and Mr Zhou Jiping was appointed as the
President of the Company with immediate effect. Thereafter, the roles of the
Chairman and the President of the Company are held by separate individuals and
thereby the Company complies with the relevant requirement under the Code on
Corporate Governance Practices.
45
12 AUDIT COMMITTEE
The audit committee of the Company formed pursuant to Appendix 14 of the
Listing Rules comprises Mr Franco Bernabe, Mr Chee-Chen Tung, Mr Cui Junhui and
Mr Wang Guoliang. The main responsibilities of the audit committee are the
review and monitoring of the financial reporting and the internal control
mechanism of the Group and giving advice to the Board of Directors.
The audit committee of the Company has reviewed and confirmed the interim
results announcement and the interim report for the six months ended June 30,
2008.
By Order of the Board of Directors
PETROCHINA COMPANY LIMITED
JIANG JIEMIN
Chairman
Beijing, the PRC
August 27, 2008
As at the date of this announcement, the Board of Directors comprises Mr
Jiang Jiemin as the Chairman; Mr Zhou Jiping (Vice Chairman) and Mr Liao
Yongyuan as executive Directors; Mr Wang Yilin, Mr Zeng Yukang, Mr Wang Fucheng,
Mr Li Xinhua, Mr Wang Guoliang and Mr Jiang Fan as non-executive Directors; and
Mr Chee-Chen Tung, Mr Liu Hongru, Mr Franco Bernabe, Mr Li Yongwu and Mr Cui
Junhui as independent non-executive Directors.
This announcement contains certain forward-looking statements with respect
to the financial position, financial results and business of the Group. These
forward-looking statements are, by their nature, subject to significant risk and
uncertainties because they relate to events and depend on circumstances that may
occur in the future and are beyond our control. The forward-looking statements
reflect the Group's current views with respect of future events and are not a
guarantee of future performance. Actual results may differ from information
contained in the forward-looking statements.
This announcement is published in English and Chinese. In the event of any
inconsistency between the two versions, the Chinese version shall prevail.
46
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this announcement to be signed on its behalf by the
undersigned, thereunto duly authorized.
PetroChina Company Limited
Dated: August 29, 2008 By: /s/ Li Huaiqi
------------------------------------
Name: Li Huaiqi
Title: Company Secretary