J.P. Morgan: Raising PetroChina gas price forecast: domestic gas profits improve as imported gas losses widen

Why does natural gas pricing reform affect earnings?

Management said regulators continue to promote the gradual alignment of residential and nonresidential gas prices, increase the share of gas volumes priced against city-gate prices, and reduce the volume subject to regulation during the winter heating season. JPMorgan believes this will structurally improve the company's domestic gas selling prices and margins.
The bank expects the average realized domestic natural gas price to be 2.35 yuan per cubic meter in 2026, up 6% year over year. It also raised its 2028 forecast to approximately 2.6 yuan because pricing reform is accelerating.

Net profit attributable to shareholders was 51.84 billion yuan in the third quarter of 2026, above 42.648 billion yuan a year earlier but below 55.603 billion yuan in the second quarter. Operating profit from the oil, gas and new energy business was 51.575 billion yuan, up from a year earlier but below 59.403 billion yuan in the second quarter.
Operating profit from the natural gas sales business fell to 9.206 billion yuan from 12.653 billion yuan a year earlier. Within that, losses on imported gas and liquefied natural gas widened to 4.79 billion yuan from 290 million yuan, while operating profit per cubic meter of domestic gas sold rose to 0.26 yuan from 0.24 yuan over the same period.
JPMorgan identified a sharp rise in international natural gas or LNG prices due to geopolitical events or unexpected production outages as a risk: it could widen losses on imported gas and weaken the effect of improved domestic gas sales profits.

Management said there have been new oil and gas discoveries in major producing areas. JPMorgan expects new reserves to bring the reserves replacement ratio back to 100% in 2026, above 95.6% in 2025. About half of the new discoveries are unconventional oil and gas, which can benefit from government subsidies.
The company aims to raise annual shale oil production to 8 million tonnes over the next few years while keeping domestic crude oil production stable and reaching natural gas production of 170 billion cubic meters in 2027. JPMorgan believes this implies natural gas production growth above its usual rate.
Besides gas prices, the commissioning of the Tarim ethane-to-ethylene cracking project was one reason the bank raised its earnings forecasts.

JPMorgan raised its earnings per share forecasts for 2026 and 2027 by 3.7% and 6.6%, respectively, to RMB 1.05 and RMB 1.14.
The bank maintained its overweight ratings on the A and H shares and raised its June 2027 price targets from RMB 15.50 to RMB 15.70 and from HK$13.50 to HK$13.70, respectively. It said the H shares had underperformed the A shares by more than 20% over the past three months and expects the valuation discount between them to narrow gradually.