Why did third-quarter results slightly exceed Goldman Sachs’ expectations?

  • PetroChina’s third-quarter EBITDA was 126.1 billion yuan, 2% above Goldman Sachs’ forecast but below the second quarter’s 134.5 billion yuan; net profit attributable to shareholders was 51.8 billion yuan, 9% above the bank’s forecast.
  • The main positive surprise came from refining: third-quarter refining throughput was broadly flat year over year, whereas Goldman Sachs had forecast a decline of 9%; refining earnings before interest and tax were 2.7 dollars per barrel, above the bank’s forecast loss of 1.8 dollars per barrel.
  • Segment performance was mixed: third-quarter EBITDA in exploration and production was 97.2 billion yuan, 6.6 billion yuan below Goldman Sachs’ forecast; refining and chemicals EBITDA was 16.3 billion yuan, 10.2 billion yuan above its forecast.

How does strong cash flow relate to the pace of capital spending?

  • Free cash flow in the first three quarters reached 118% of Goldman Sachs’ full-year forecast, above the historical average of 112% for the same period; capital spending over the same period was 55% of the bank’s full-year assumption, below the historical figure of 62% for the same period.
  • The slow pace of capital spending is important context for understanding cash performance in the first three quarters. Goldman Sachs expects the company to maintain strong cash flow, assuming Brent crude at 80 dollars per barrel in 2027 and 75 dollars per barrel over the long term.
  • Under Goldman Sachs’ base case, the company’s cash flow can still cover the bank’s assumed capital spending and dividends even if Brent crude falls below 60 dollars per barrel. Oil prices below expectations and increased competition in the global natural gas market are downside risks cited by the bank.

Why is Goldman Sachs maintaining its Buy rating?

  • Goldman Sachs maintained its Buy ratings on PetroChina’s H-shares and A-shares, citing cash-flow coverage and valuation as support. The bank forecasts a free cash flow yield of 11% in 2027.
  • Goldman Sachs estimates the company’s 2027 enterprise value to debt-adjusted cash flow multiple at 3.8 times, below the global peer average of 5.8 times; it believes the current H-share price implies a long-term oil price of about 60 dollars per barrel.
  • Goldman Sachs set 12-month price targets of 12.10 Hong Kong dollars for the H-shares and 15.50 yuan for the A-shares.