Bernstein: PetroChina’s third-quarter profit beats expectations as refining and chemicals drive growth and natural gas lags

Why did third-quarter results exceed expectations?

In the third quarter of 2026, PetroChina’s revenue was 794 billion yuan, up 10% year on year; net profit was 51.8 billion yuan, up 22% year on year and 6% above Bernstein’s forecast.
Upstream exploration and production earnings before interest and tax reached 51.6 billion yuan, up 36% year on year, and remained the largest source of profit. Higher oil prices offset a slight decline in oil production, while upstream profit per barrel rose to 16.8 dollars, above the bank’s forecast of 14.3 dollars.
The company’s realized crude oil selling price was 77.7 dollars per barrel, up 18.5% year on year; the average Brent crude price was close to 91 dollars over the same period. Bernstein noted that the increase in the realized selling price was smaller than that indicated by benchmark oil prices, limiting the response of upstream profits to higher oil prices.

Refining earnings before interest and tax rose 138% year on year to 11.4 billion yuan, chemicals earnings grew nearly 5-fold to 2.3 billion yuan, and marketing earnings rose 59% to 6.5 billion yuan, benefiting from improved margins and an optimized product mix.
Third-quarter refinery throughput rose 11% quarter on quarter to 347 million barrels of oil equivalent; output of five major chemical products rose 29% year on year to 8.6 million tonnes. Bernstein believes the recovery in refining, chemicals and marketing profitability means the company’s earnings growth is no longer reliant solely on upstream operations.
The improvement in downstream profits came against a backdrop of relatively weak end-market fuel demand: marketing sales volume fell 4% year on year in the third quarter. Bernstein believes electric vehicle penetration and energy substitution trends continue to put structural pressure on domestic fuel demand.

Total oil and gas production rose only 0.6% year on year in the third quarter: natural gas output increased 2.3%, offsetting a 0.9% decline in oil output. Geopolitical disruption also put pressure on overseas production; management had previously mentioned a decline in Middle East production during the year.
Natural gas business earnings before interest and tax fell 27% year on year to 9.2 billion yuan, 41% below Bernstein’s forecast. The bank believes weak domestic natural gas demand and pricing pressure offset the benefit of higher sales volumes.

Third-quarter free cash flow was 37.8 billion yuan, below Bernstein’s forecast, mainly due to changes in working capital; operating cash flow for the first three quarters rose 9% year on year to 374 billion yuan. Third-quarter capital expenditure was 84.4 billion yuan, down 26% year on year.
Bernstein rates the H shares Outperform with a target price of 13 Hong Kong dollars; it rates the A shares Market-Perform with a target price of 12.30 yuan. The bank’s valuation model assumes an average Brent crude price of 90 dollars per barrel in 2026, 78 dollars in 2027, and 75 dollars over the long term.
The bank sees a decline in oil prices following an easing of the Middle East conflict as the main near-term risk, and is monitoring whether downstream margin expansion can continue and how natural gas profitability develops in 2027.