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 March 2005
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 results for the year
ended December 31, 2004.
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:
o the Registrant's anticipated capital expenditures for each of its
segments for the year ended December 31, 2005 and non segment-specific
capital expenditures for the same period;
o the Registrant's plan for segment operations, including:
- continuing to enhance oil and gas exploration and production;
- speeding up the reserve and production capabilities;
- accelerating the adjustment and optimization of the refining and
chemicals businesses;
- further improving marketing network;
- accelerating the construction of key pipelines, connected
pipelines and underground gas storage tanks; and
o the Registrant's plan to continue to accelerate the implementation of
the overseas business development strategy;
o the Registrant's plans to adopt various measures to enhance its value
and maximize shareholders' value; and
o 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:
o fluctuations in crude oil and natural gas prices;
o failure to achieve continued exploration success;
o failure or delay in achieving production from development projects;
o change in demand for competing fuels in the target market;
o continued availability of capital and financing;
o general economic, market and business conditions;
o changes in policies, laws or regulations of the PRC and other
jurisdictions in which the Registrant and its subsidiaries conduct
business; and
o 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.
[PETROCHINA LOGO]
[Chinese Character]
PETROCHINA COMPANY LIMITED
(a joint stock limited company incorporated in the People's Republic of China
with limited liability)
(Stock Code: 857)
ANNOUNCEMENT OF THE RESULTS FOR THE YEAR ENDED DECEMBER 31, 2004
- FINANCIAL AND BUSINESS SUMMARY -
Output of crude oil for 2004 was 778.4 million barrels, representing an increase
of 0.5% from 2003.
Output of marketable natural gas for 2004 was 841.2 billion cubic feet,
representing an increase of 21.7% from 2003.
Total output of crude oil and natural gas for 2004 was 918.6 million barrels of
oil equivalent, representing an increase of 3.2% from 2003.
Consolidated turnover for 2004 was RMB388,633 million, representing an increase
of 27.9% from 2003.
Consolidated net profit for 2004 was RMB102,927 million, representing an
increase of 47.9% from 2003.
Basic and diluted earnings per share for 2004 were RMB0.59, representing an
increase of RMB0.19 from 2003.
THE BOARD OF DIRECTORS HAS RESOLVED TO DISTRIBUTE A FINAL DIVIDEND FOR 2004 OF
RMB 0.147511 PER SHARE.
The Board of Directors (the "BOARD") of PetroChina Company Limited (the
"COMPANY") is pleased to announce that the audited consolidated results of the
Company and its subsidiaries (the "GROUP") for the year ended December 31, 2004
prepared in accordance with International Financial Reporting Standards ("IFRS")
and its financial position as of December 31, 2004, together with the results
and financial position of 2003 for comparison, are as follows:
CONSOLIDATED PROFIT AND LOSS ACCOUNT
2004 2003
----------- -----------
NOTE RMB MILLION RMB million
----------- -----------
TURNOVER 2 388,633 303,779
----------- -----------
OPERATING EXPENSES
Purchases, services and other (116,353) (90,850)
Employee compensation costs (22,309) (19,542)
Exploration expenses, including
exploratory dry holes (11,723) (10,577)
Depreciation, depletion and amortization (46,411) (40,531)
Selling, general and administrative
expenses (26,377) (23,930)
Shut down of manufacturing assets (220) (2,355)
Taxes other than income taxes (18,685) (15,879)
Revaluation loss of property, plant and
equipment - (391)
Other income/(expense), net 31 (538)
----------- -----------
TOTAL OPERATING EXPENSES (242,047) (204,593)
----------- -----------
PROFIT FROM OPERATIONS 146,586 99,186
----------- -----------
FINANCE COSTS
Exchange gain 50 53
Exchange loss (123) (233)
Interest income 1,107 677
Interest expense (2,303) (2,346)
----------- -----------
TOTAL FINANCE COSTS (1,269) (1,849)
----------- -----------
SHARE OF PROFIT OF ASSOCIATES 1,824 985
----------- -----------
PROFIT BEFORE TAXATION 3 147,141 98,322
TAXATION 4 (42,563) (28,072)
----------- -----------
PROFIT BEFORE MINORITY INTERESTS 104,578 70,250
MINORITY INTERESTS (1,651) (636)
----------- -----------
NET PROFIT 102,927 69,614
=========== ===========
BASIC AND DILUTED EARNINGS PER SHARE (RMB) 5 0.59 0.40
=========== ===========
DIVIDENDS ATTRIBUTABLE TO:
Interim dividend declared during the year 7 20,381 17,379
Final dividend proposed after the balance sheet
date 7 25,936 13,947
----------- -----------
46,317 31,326
=========== ===========
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CONSOLIDATED BALANCE SHEET
2004 2003
----------- -----------
RMB MILLION RMB million
----------- -----------
NON CURRENT ASSETS
Property, plant and equipment 468,519 427,875
Investments in associates 7,923 5,571
Available-for-sale investments 1,510 1,839
Advance operating lease payments 12,248 7,252
Intangible and other assets 2,987 3,024
------- -------
493,187 445,561
------- -------
CURRENT ASSETS
Inventories 45,771 28,872
Accounts receivable 2,662 3,263
Prepaid expenses and other current assets 17,563 13,528
Notes receivable 4,824 2,416
Receivables under resale agreements 33,217 24,224
Time deposits with maturities over three months 1,400 2,640
Cash and cash equivalents 11,304 11,231
------- -------
TOTAL CURRENT ASSETS 116,741 86,174
------- -------
CURRENT LIABILITIES
Accounts payable and accrued liabilities 70,696 64,180
Income tax payable 17,484 12,043
Other taxes payable 4,633 8,916
Short-term borrowings 27,276 28,890
------- -------
120,089 114,029
------- -------
NET CURRENT LIABILITIES (3,348) (27,855)
------- -------
TOTAL ASSETS LESS CURRENT LIABILITIES 489,839 417,706
======= =======
FINANCED BY
Share capital 175,824 175,824
Retained earnings 143,624 89,577
Reserves 105,764 91,212
------- -------
Shareholders' equity 425,212 356,613
------- -------
Minority interests 9,391 5,608
------- -------
NON CURRENT LIABILITIES
Long-term borrowings 38,458 41,959
Other long-term obligations 2,438 2,000
Deferred taxation 14,340 11,526
------- -------
55,236 55,485
------- -------
489,839 417,706
======= =======
-3-
NOTES
1. ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards ("IFRS") issued by the
International Accounting Standards Board ("IASB"). The consolidated financial
statements have been prepared under the historical cost convention except as
disclosed in the accounting policies below.
The preparation of financial statements in conformity with IFRS requires
the use of estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Although these estimates are based on management's
best knowledge of current events and actions, actual results ultimately may
differ from those estimates.
Certain balances of the prior year have been reclassified to conform with
current year presentation, including separate presentation of advance operating
lease payments.
2. 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. Analysis of turnover by segment is shown in Note 8.
3. PROFIT BEFORE TAXATION
2004 2003
----------- -----------
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 investments 90 69
Reversal of impairment of receivables 1,346 551
Reversal of impairment of available-for-sale investments 155 21
Reversal of write down in inventories 229 23
-4-
CHARGING:
Amortization on intangible and other assets 754 635
Auditors' remuneration 43 44
Cost of inventories (approximates cost of goods
sold) recognized as expense 165,025 134,935
Depreciation on property, plant and equipment,
including impairment provision
- owned assets 45,040 39,293
- assets under finance leases 23 21
Impairment of available-for-sale investments 181 179
Impairment of receivables 1,826 1,985
Interest expense (Note (a)) 2,303 2,346
Loss on disposal of property, plant and equipment 2,806 1,048
Operating lease expenses 3,873 3,573
Repair and maintenance 6,205 4,721
Research and development expenditure 2,936 2,411
Transportation expenses 10,029 8,780
Write down in inventories 375 159
NOTE (a) INTEREST EXPENSE
Interest expense 3,308 3,666
Less: amounts capitalized (1,005) (1,320)
--------- -----------
2,303 2,346
========= ===========
4. TAXATION
2004 2003
----------- -----------
RMB MILLION RMB million
----------- -----------
Income tax 39,404 26,347
Deferred tax 2,814 1,594
Share of tax of associates 345 131
--------- ---------
42,563 28,072
========= =========
In accordance with the relevant PRC income tax rules and regulations, the
PRC income tax rate applicable to the Group is principally 33% (2003: 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% instead of the
statutory rate of 33% through to the year 2010 or accelerated depreciation of
certain plant and equipment.
-5-
The tax on the Group's profit before taxation differs from the theoretical
amount that would arise using the basic tax rate in the PRC applicable to the
Group as follows:
2004 2003
----------- -----------
RMB MILLION RMB million
----------- -----------
Profit before taxation 147,141 98,322
-------- -------
Tax calculated at a tax rate of 33% 48,556 32,446
Prior year tax return adjustment 27 419
Effect of preferential tax rate (6,886) (5,190)
Utilization of previously unrecognized tax loss of
subsidiaries (832) -
Income not subject to tax (605) (566)
Expenses not deductible for tax purposes 2,303 963
Tax charge 42,563 28,072
======== =======
5. BASIC AND DILUTED EARNINGS PER SHARE
Basic and diluted earnings per share for the years ended December 31, 2004
and 2003 have been computed by dividing net profit by the number of 175.82
billion shares issued and outstanding for each of the years.
There are no dilutive potential ordinary shares.
6. CHANGES IN SHAREHOLDERS' EQUITY
Retained
Share Capital Earnings Reserves Total
------------- ----------- ----------- -----------
RMB million RMB million RMB million RMB million
------------- ----------- ----------- -----------
Balance at January 1, 2003 175,824 59,004 81,848 316,676
Net profit for the year ended
December 31, 2003 - 69,614 - 69,614
Revaluation surplus of property,
plant and equipment, net of tax - - 527 527
Revaluation loss offset against
previous revaluation surplus of
property, plant and equipment, net
of tax - - (526) (526)
Transfer to reserves - (9,363) 9,363 -
Final dividend for 2002 (note 7) - (12,299) - (12,299)
Interim dividend for 2003 (note 7) - (17,379) - (17,379)
------------- ---------- ---------- -------
Balance at December 31, 2003 175,824 89,577 91,212 356,613
Net profit for the year ended
December 31, 2004 - 102,927 - 102,927
Transfer to reserves - (14,552) 14,552 -
Final dividend for 2003 (note 7) - (13,947) - (13,947)
Interim dividend for 2004 (note 7) - (20,381) - (20,381)
------------- ---------- ---------- -------
Balance at December 31, 2004 175,824 143,624 105,764 425,212
============= ========== ========== =======
-6-
7. DIVIDENDS
2004 2003
----------- -----------
RMB MILLION RMB million
----------- -----------
Final dividend for 2002 (Note (i)) - 12,299
Interim dividend for 2003 (Note (ii)) - 17,379
Final dividend for 2003 (Note (iii)) 13,947 -
Interim dividend for 2004 (Note (iv)) 20,381 -
------ ------
34,328 29,678
====== ======
(i) A final dividend in respect of 2002 of RMB0.069951 per share amounting to a
total of RMB12,299 million was paid on June 12, 2003, and was accounted for in
shareholders' equity as an appropriation of retained earnings in the year ended
December 31, 2003.
(ii) An interim dividend in respect of 2003 of RMB0.098841 per share amounting
to a total of RMB17,379 million was paid on October 8, 2003, and was accounted
for in shareholders' equity as an appropriation of retained earnings in the year
ended December 31, 2003.
(iii) A final dividend in respect of 2003 of RMB0.079324 per share amounting to
a total of RMB 13,947 million was paid on June 2, 2004, and was accounted for in
shareholders' equity as an appropriation of retained earnings in the year ended
December 31, 2004.
(iv) As authorized by shareholders in the Annual General Meeting on May 18,
2004, the Board of Directors, in a meeting held on August 26, 2004, resolved to
distribute an interim dividend in respect of 2004 of RMB0.115919 per share
amounting to a total of RMB20,381 million. The interim dividend was paid on
October 8, 2004, and was
-7-
accounted for in shareholders' equity as an appropriation of retained earnings
in the year ended December 31, 2004.
(v) At the meeting on March 16, 2005, the Board of Directors proposed a final
dividend in respect of 2004 of RMB0.147511 per share amounting to a total of
RMB25,936 million. These financial statements for the year ended December 31,
2004 do not reflect this dividend payable, which will be accounted for in
shareholders' equity as an appropriation of retained earnings in the year ending
December 31, 2005.
8. SEGMENT INFORMATION
The Group is engaged in a broad range of petroleum related activities
through its four major business segments: Exploration and Production, Refining
and Marketing, Chemicals and Marketing, and Natural Gas and Pipeline.
The Exploration and Production segment is engaged in the exploration,
development, production and sales of crude oil and natural gas.
The Refining and Marketing segment is engaged in the refining,
transportation, storage and marketing of crude oil and petroleum products.
The Chemicals and Marketing segment is engaged in the production and sales
of basic petrochemical products, derivative petrochemical products and other
chemical products.
The Natural Gas and Pipeline segment is engaged in the transmission of
natural gas, crude oil and refined products, and the sales of natural gas.
In addition to these four major business segments, the Other segment
includes the assets, income and expenses relating to cash management, financing
activities, the corporate center, research and development, and other business
services to the operating business segments of the Group.
Substantially all assets and operations of the Group are located in the
PRC, of which each of the different regions is considered as one geographic
location in an economic environment with similar risks and returns. In addition
to its operations in
-8-
the PRC, in April 2002 the Group acquired all the share capital of Devon Energy
Indonesia Ltd., a company engaging in the exploration and production of crude
oil and natural gas in Indonesia. In April 2003, the Group acquired for RMB679
million a 50% interest in Amerada Hess Indonesia Holdings Co., which has a 30%
interest in one of the oil and gas concessions that the Group acquired in 2002.
The accounting policies of the operating segments are the same as those
described in Note 1 "Accounting Policies".
Operating segment information for the years ended December 31, 2003 and
2004 is presented below:
PRIMARY REPORTING FORMAT--BUSINESS SEGMENTS
EXPLORATION REFINING CHEMICALS NATURAL
AND AND AND GAS AND
PRODUCTION MARKETING MARKETING PIPELINE OTHER TOTAL
----------- ----------- ----------- ----------- ----------- -----------
YEAR ENDED DECEMBER 31, 2004 RMB MILLION RMB MILLION RMB MILLION RMB MILLION RMB MILLION RMB MILLION
---------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Turnover
(including inter-segment sales) 222,305 295,598 57,179 18,255 - 593,337
Less: Inter-segment sales (176,458) (21,862) (2,679) (3,705) - (204,704)
----------- ----------- ----------- ----------- ----------- -----------
Turnover from external customers 45,847 273,736 54,500 14,550 - 388,633
=========== =========== =========== =========== =========== ===========
Depreciation, depletion and amortization (29,092) (8,829) (5,741) (2,645) (104) (46,411)
Segment result 131,448 28,502 11,025 2,475 (518) 172,932
Other costs (5,877) (16,521) (3,370) 60 (638) (26,346)
----------- ----------- ----------- ----------- ----------- -----------
Profit/(loss) from operations 125,571 11,981 7,655 2,535 (1,156) 146,586
=========== =========== =========== =========== =========== ===========
EXPLORATION REFINING CHEMICALS NATURAL
AND AND AND GAS AND
PRODUCTION MARKETING MARKETING PIPELINE OTHER TOTAL
----------- ----------- ----------- ----------- ----------- -----------
YEAR ENDED DECEMBER 31, 2003 RMB MILLION RMB MILLION RMB MILLION RMB MILLION RMB MILLION RMB MILLION
---------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Turnover
(including inter-segment sales) 177,271 223,584 39,211 15,067 - 455,133
Less:
Inter-segment sales (128,963) (16,867) (2,263) (3,261) - (151,354)
----------- ----------- ----------- ----------- ----------- -----------
Turnover from external customers 48,308 206,717 36,948 11,806 - 303,779
=========== =========== =========== =========== =========== ===========
- 9 -
Depreciation, depletion and amortization (25,486) (7,601) (5,795) (1,543) (106) (40,531)
Segment result 98,819 20,679 2,621 2,248 (713) 123,654
Other costs (6,449) (15,644) (1,580) (326) (469) (24,468)
----------- ----------- ----------- ----------- ----------- -----------
Profit/(loss) from operations 92,370 5,035 1,041 1,922 (1,182) 99,186
=========== =========== =========== =========== =========== ===========
SECONDARY REPORTING FORMAT - GEOGRAPHICAL SEGMENTS
TURNOVER TOTAL ASSETS CAPITAL EXPENDITURE
---------------- ---------------- -------------------
2004 2003 2004 2003 2004 2003
------- ------- ------- ------- ------- -------
RMB RMB RMB RMB RMB RMB
YEAR ENDED DECEMBER 31, MILLION MILLION MILLION MILLION MILLION MILLION
----------------------------------- ------- ------- ------- ------- ------- -------
PRC 387,639 302,854 606,147 529,209 94,235 82,275
Other (Exploration and Production) 994 925 3,781 2,526 1,114 654
------- ------- ------- ------- ------- -------
388,633 303,779 609,928 531,735 95,349 82,929
======= ======= ======= ======= ======= ======
9. SIGNIFICANT DIFFERENCES BETWEEN IFRS AND US GAAP
(UNAUDITED)
The consolidated financial statements in this results announcement have
been prepared in accordance with IFRS, which differ in certain material respects
from the accounting principles generally accepted in the United States of
America ("US GAAP"). Such differences include methods for measuring the amounts
shown in the financial statements, as well as additional disclosures required by
US GAAP.
Effect on net income of significant differences between IFRS and US GAAP
is as follows:
2004 2003
----------- -----------
RMB MILLION RMB million
----------- -----------
Net income under IFRS 102,927 69,614
US GAAP adjustments:
Reversal of revaluation loss of property, plant and equipment - 391
Depreciation charges on property, plant and equipment revaluation gain 8,170 8,053
Depreciation charges on property, plant and equipment revaluation loss (830) (144)
Loss on disposal of revalued property, plant and equipment 523 451
Income tax effect (2,595) (2,886)
Minority interests (60) (60)
--------- --------
Net income under US GAAP 108,135 75,419
========= ========
Basic and diluted net income per share under US GAAP (RMB) 0.62 0.43
- 10 -
Effect on shareholders' equity of significant differences between IFRS and
US GAAP is as follows:
2004 2003
----------- -----------
RMB MILLION RMB million
----------- -----------
Shareholders' equity under IFRS 425,212 356,613
US GAAP adjustments:
Reversal of property, plant and equipment revaluation gain (80,555) (80,555)
Depreciation charges on property, plant and equipment revaluation gain 45,443 37,273
Reversal of property, plant and equipment revaluation loss 1,513 1,513
Depreciation charges on property, plant and equipment revaluation loss (1,310) (480)
Loss on disposal of revalued property, plant and equipment 1,314 791
Deferred tax assets on revaluation 11,091 13,686
Minority interests 304 364
Effect on the retained earnings from the one-time remedial payments for
staff housing borne by the state shareholder of the Company (2,553) (2,553)
Effect on the other reserves of the shareholders' equity from the one- time
remedial payments for staff housing borne by the state shareholder of the
Company 2,553 2,553
---------- ---------
Shareholders' equity under US GAAP 403,012 329,205
========== =========
Changes in shareholders' equity under US GAAP for each of the years ended
December 31, 2004 and 2003 are as follows:
2004 2003
----------- -----------
RMB MILLION RMB million
----------- -----------
Balance at beginning of year 329,205 283,464
Net profit for the year 108,135 75,419
Final dividend for year 2002 - (12,299)
Interim dividend for year 2003 - (17,379)
Final dividend for year 2003 (13,947) -
Interim dividend for year 2004 (20,381) -
--------- -----------
Balance at end of year 403,012 329,205
========= ===========
In preparing the summary of differences between IFRS and US GAAP, the
management of the Company is required to make estimates and assumptions that
affect
- 11 -
the reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities, and the estimates of revenues and expenses. Accounting
estimates have been employed in these financial statements to determine reported
amounts, including realisability, useful lives of tangible and intangible
assets, income taxes and other areas. Actual results may differ from those
estimates.
A summary of the principal differences and additional disclosures
applicable to the Group is set out below:
(a) REVALUATION OF PROPERTY, PLANT AND EQUIPMENT
The property, plant and equipment, excluding oil and gas reserves,
transferred to the Company by CNPC were appraised as of June 30, 1999, as
required by the relevant PRC regulations, by a firm of independent valuers
registered in the PRC, China Enterprise Appraisal. As at September 30, 2003, a
revaluation of the Group's refining and chemical production equipment was
undertaken by a firm of independent valuers registered in the PRC, China United
Assets Appraiser Co., Ltd, on a depreciated replacement cost basis.
The June 1999 revaluation resulted in RMB80,549 million in excess of the
prior carrying value and a revaluation loss of RMB1,122 million on certain
property, plant and equipment.
The September 2003 revaluation resulted in RMB872 million in excess of the
carrying value of certain property, plant and equipment and a revaluation loss
of RMB1,257 million.
With respect to the RMB872 million revaluation gain resulting from the
2003 revaluation, RMB98 million were related to property, plant and equipment
that experienced revaluation loss in 1999, and were credited to the profit and
loss account. The remaining RMB774 million was credited to the revaluation
reserve in the shareholders' equity.
With respect to the RMB1,257 million revaluation loss resulting from the
2003 revaluation, RMB768 million were related to property, plant and equipment
that
- 12 -
experienced revaluation gain in 1999. The remaining RMB489 million were charged
to the profit and loss account.
The depreciation charge, which includes impairment charge, on the
revaluation surplus from January 1, 2004 to December 31, 2004 was RMB8,170
million, and from January 1, 2003 to December 31, 2003 was RMB8,053 million.
The depreciation charge, which includes impairment charge, on the
revaluation loss from January 1, 2004 to December 31, 2004 was RMB830 million,
and from January 1, 2003 to December 31, 2003 was RMB144 million.
The loss on disposal of revalued property, plant and equipment, which
includes shut down of manufacturing assets, from January 1, 2004 to December 31,
2004 was RMB523 million, and from January 1, 2003 to December 31, 2003 was
RMB451 million.
For purposes of reconciling to the US GAAP financial data, the effect of
the revaluation, the related depreciation charges and loss on disposal is
reversed. A deferred tax asset relating to the reversal of the effect of
revaluation in 1999 is established, together with a corresponding increase in
the shareholders' equity. Under a special approval granted by the Ministry of
Finance, the effect of the revaluation in 1999 is available as additional
depreciation base for purpose of determining taxable income.
(b) RELATED PARTY TRANSACTIONS
The Group has disclosed in its 2004 consolidated financial statements and
Note 36 thereto to be published on the website of The Stock Exchange of Hong
Kong Limited ("HKSE") (http://www.hkex.com.hk) the transactions with its
significant customers, and in Notes 21, 22, 26, 27 and 37 transactions and
balances with its immediate parent, CNPC, and its related companies. CNPC is
owned by the PRC government, which also owns a significant portion of the
productive assets in the PRC. IFRS exempts state controlled enterprises from
disclosing transactions with other state controlled enterprises. IFRS also
excludes government departments and agencies from related
- 13 -
parties to the extent that such dealings are in the normal course of business.
US GAAP contains no similar exemptions and requires disclosure of material
related party transactions. The Group believes that it has provided meaningful
disclosures of related party transactions through the major customer disclosures
in Note 36 and the transactions with the CNPC Group disclosed in Note 37.
Although the majority of the Group's activities are conducted with the PRC
government and its affiliates and other state controlled enterprises, none
individually constitutes a major customer or supplier other than those
disclosed.
(c) ONE-TIME REMEDIAL PAYMENTS FOR STAFF HOUSING
The Ministry of Finance of the PRC issued several public notices and
regulations during the year ended December 31, 2000 and 2001 with respect to the
one-time remedial payments for staff housing payable to certain employees who
joined the workforce prior to December 31, 1998 and have housing conditions
below local standards as determined in accordance with government regulations
and guidelines. These notices and regulations issued by the Ministry of Finance
also provided that the portion of remedial payments attributable to the periods
prior to a restructuring of the employer enterprise from a wholly state-owned
status to a less than wholly state-owned status is to be borne by the state
shareholder of the enterprise.
The restructuring that resulted in the formation of the Group took place
in November 1999. As such, the one-time remedial housing payments payable to the
eligible employees of the Group are to be borne by the state shareholder of the
Group.
Under IFRS, such direct payments to employees or reimbursements will not
be recorded through the consolidated profit and loss account of the Group. US
GAAP contains no such exemption but requires this principal shareholder's action
on behalf of the Company to be recorded in the consolidated profit and loss
account. In the last quarter of year 2002, the Group and CNPC completed the
process of estimating the amount payable to qualified employees of the Group.
This amount, RMB2,553 million, was reflected in determining net income of the
Group for the year ended December 31, 2002, under US GAAP. Since this amount is
borne by CNPC, a
- 14 -
corresponding amount has been included as an addition to the other reserves in
the shareholders' equity of the Group. There were no significant changes in this
estimate during 2003 and 2004.
(d) RECENT US ACCOUNTING PRONOUNCEMENTS
In December 2004, the FASB revised FAS No. 123 (FAS 123 (R)). FAS 123 (R),
"Share-Based Payment", requires all share-based payments to employees, including
grants of employee stock options, to be recognized in the financial statements
based on their fair values. Pro forma disclosure is no longer an alternative to
financial statement recognition. FAS 123 (R) is effective for interim periods
beginning after June 15, 2005. The Group is evaluating the transition provisions
allowed by FAS 123(R). The Group does not expect the adoption of FAS 123(R) to
have a material impact on the Group's financial position or operational results.
On November 24, 2004, the FASB issued Statement No. 151, "Inventory
Costs", an amendment of ARB No. 43, Chapter 4 (FAS 151). FAS 151 requires that
abnormal amounts of idle capacity and spoilage costs be excluded from the cost
of inventory and expensed when incurred. The provisions of FAS 151 are
applicable to inventory costs incurred during fiscal years beginning after June
15, 2005. The Group does not expect the adoption of FAS 151 to have a material
impact on the Group's financial position or results of operation.
On December 15, 2004, the FASB issued Statement No. 153, "Exchanges of Non
monetary Assets", an amendment of APB Opinion No. 29 (FAS 153). FAS 153 requires
exchanges of productive assets to be accounted for at fair value, rather than at
carryover basis, unless (1) neither the asset received nor the asset surrendered
has a fair value that is determinable within reasonable limits or (2) the
transactions lack commercial substance. FAS 153 is effective for non monetary
asset exchanges occurring in fiscal periods beginning after June 15, 2005. The
Group does not expect the adoption of FAS 153 to have a material impact on the
Group's financial position or results of operation.
- 15 -
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements of the Group and the notes thereto, proposed
to be submitted by the Company to the HKSE and published on the website of the
HKSE on or before April 30, 2005 which contains information required under the
Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong
Limited (the "LISTING RULES") applicable to this reporting period.
OVERVIEW
For the twelve months ended December 31, 2004, profit before taxation of
the Group was RMB147,141 million, representing an increase of 49.7% compared
with the corresponding period in the previous year. Net profit was RMB102,927
million, representing an increase of 47.9% compared with the corresponding
period in the previous year. For the first time net profit of the Group exceeded
RMB100,000 million. Profit in all four business segments recorded historical
highs. The increase in profit was due primarily to the Group's ability to take
full advantage of the opportunities presented by persistently high oil prices
and strong market demand to enhance exploration and development and to increase
oil and gas production, thereby achieving a steady increase in domestic crude
oil production. Production and sales of refined oil and chemicals increased and
the quantity of processed crude oil reached a record high. Production of natural
gas continued to increase; and there is also a new breakthrough in the
infrastructure of oil and gas pipelines. Management of the Company was also
strengthened and technological and management innovations are introduced on an
ongoing basis.
For the year ended December 31, 2004, the Company's basic and diluted
earnings per share were RMB0.59.
- 16 -
TWELVE MONTHS ENDED DECEMBER 31, 2004 COMPARED WITH TWELVE MONTHS ENDED DECEMBER
31, 2003
CONSOLIDATED OPERATING RESULTS
Turnover Turnover increased 27.9% from RMB303,779 million for the twelve
months ended December 31, 2003 to RMB388,633 million for the twelve months ended
December 31, 2004. This was due primarily to the increase in the price of crude
oil and the increase in the prices and sales volume of natural gas, refined
products and chemicals.
Operating Expenses Operating expenses increased 18.3% from RMB204,593
million for the twelve months ended December 31, 2003 to RMB242,047 million for
the twelve months ended December 31, 2004. This was mainly attributable to an
increase in the purchase cost of crude oil and refined products from external
suppliers and increased depreciation and depletion caused by an increase in the
amount of property, plant and equipment.
Purchases, Services and Other Expenses Purchases, services and other
expenses increased 28.1% from RMB90,850 million for the twelve months ended
December 31, 2003 to RMB116,353 million for the twelve months ended December 31,
2004. This was due primarily to (1) the increase in the purchase cost of crude
oil from external suppliers resulted from the increase of crude oil price and
the increase in the purchase volume of crude oil by the Company's refineries;
and (2) the increase in the prices of refined oil and chemical products, which
increased the purchase cost of refined oil and chemical products from external
suppliers.
- 17 -
Employee Compensation Costs Employee compensation costs rose 14.2% from
RMB19,542 million for the twelve months ended December 31, 2003 to RMB22,309
million for the twelve months ended December 31, 2004. This was due primarily to
the increase in employees' salaries and welfare expenses as a result of strong
operating results achieved by the Company, and the increase in labour costs as a
result of further development of the Company's retail network.
Depreciation, Depletion and Amortization Depreciation, depletion and
amortization increased 14.5% from RMB40,531 million for the twelve months ended
December 31, 2003 to RMB46,411 million for the twelve months ended December 31,
2004. This was mainly attributable to an increase in impairment of assets and an
increase in depreciation, depletion and amortization caused by an increase in
the amount of property, plant and equipment.
Selling, General and Administrative Expenses Selling, general and
administrative expenses increased 10.2% from RMB23,930 million for the twelve
months ended December 31, 2003 to RMB26,377 million for the twelve months ended
December 31, 2004. This was due primarily to an increase in transportation,
repair and other related costs caused by an increase in the sales volume of
refined oil and petrochemical products.
Shut down of Manufacturing Assets The costs for shutting down
manufacturing assets decreased by 90.7% from RMB2,355 million for the twelve
months ended December 31, 2003 to RMB220 million for the twelve months ended
December 31, 2004, including RMB192 million for shutting down inefficient
facilities in the Refining and Marketing segment, and RMB28 million for shutting
down inefficient facilities in the Chemicals and Marketing segment.
Taxes other than Income Tax Taxes other than income tax increased 17.7%
from RMB15,879 million for the twelve months ended December 31, 2003 to
- 18 -
RMB18,685 million for the twelve months ended December 31, 2004. The increase
was due primarily to: (i) an increase in consumption tax and surcharges as a
result of an increase in the sales volume of gasoline and diesel oil by the
Company's refineries; and (ii) an increase in compensation fees for mineral
resources due to an increase in crude oil revenue.
Profit from Operations As a result of the factors discussed above, profit
from operations increased 47.8% from RMB99,186 million for the twelve months
ended December 31, 2003 to RMB146,586 million for the twelve months ended
December 31, 2004.
Net Exchange Gain (Loss) Net exchange loss decreased 59.4% from RMB180
million for the twelve months ended December 31, 2003 to RMB73 million for the
twelve months ended December 31, 2004. The decrease in net exchange loss was
mainly due to a decrease in the average proportion of foreign exchange
borrowings and a dramatic slowdown in the appreciation of foreign currencies
against Renminbi.
Net Interest Expenses Net interest expenses decreased 28.3% from RMB1,669
million for the twelve months ended December 31, 2003 to RMB1,196 million for
the twelve months ended December 31, 2004. The decrease in net interest expenses
was due primarily to sufficient cash flow generated from operating activities
and a decrease in the average proportion of interest-bearing debts.
Profit Before Taxation Profit before taxation rose 49.7% from RMB98,322
million for the twelve months ended December 31, 2003 to RMB147,141 million for
the twelve months ended December 31, 2004.
Taxation Taxation increased 51.6% from RMB28,072 million for the twelve
months ended December 31, 2003 to RMB42,563 million for the twelve months ended
December 31, 2004. The increase was mainly due to an increase in taxable
profits.
- 19 -
Net Profit As a result of the factors discussed above, net profit
increased 47.9% from RMB69,614 million for the twelve months ended December 31,
2003 to RMB102,927 million for the twelve months ended December 31, 2004.
SEGMENT INFORMATION
EXPLORATION AND PRODUCTION
Turnover Turnover increased 25.4% from RMB177,271 million for the twelve
months ended December 31, 2003 to RMB222,305 million for the twelve months ended
December 31, 2004. The increase was mainly attributable to an increase in the
price of crude oil and an increase in the sales volume of natural gas. The
average realized crude oil price of the Company in 2004 was US$33.88 per barrel,
representing an increase of US$6.68 per barrel and 24.6% from US$27.20 per
barrel compared with the corresponding period in the previous year.
Intersegment sales increased 36.8% from RMB128,963 million for the twelve
months ended December 31, 2003 to RMB176,458 million for the twelve months ended
December 31, 2004. The increase was mainly due to an increase in the price of
crude oil and an increase in the sales volume of natural gas.
Operating Expenses Operating expenses increased 13.9% from RMB84,901
million for the twelve months ended December 31, 2003 to RMB96,734 million for
the twelve months ended December 31, 2004. The increase was mainly due to the
increase in crude oil import from Russia, the increase in exploration expenses,
depreciation and depletion of fixed assets and increases in staff costs.
Profit from Operations Profit from operations increased 35.9% from
RMB92,370 million for the twelve months ended December 31, 2003 to RMB125,571
million for the twelve months ended December 31, 2004.
- 20 -
REFINING AND MARKETING
Turnover Turnover rose 32.2% from RMB223,584 million for the twelve months
ended December 31, 2003 to RMB295,598 million for the twelve months ended
December 31, 2004. The increase was caused by an increase in the prices and
sales volume of key refined products, of which:
Sales revenue from gasoline increased 28.0% from RMB60,073 million for the
twelve months ended December 31, 2003 to RMB76,919 million for the twelve months
ended December 31, 2004. The average realized selling price of gasoline surged
17.2% from RMB3,023 per ton for the twelve months ended December 31, 2003 to
RMB3,542 per ton for the twelve months ended December 31, 2004, resulting in an
increase in revenue by RMB11,267 million. The sales volume of gasoline increased
9.3% from 19.87 million tons for the twelve months ended December 31, 2003 to
21.71 million tons for the twelve months ended December 31, 2004, resulting in
an increase in revenue by RMB5,579 million.
Sales revenue from diesel increased 36.2% from RMB100,336 million for the
twelve months ended December 31, 2003 to RMB136,649 million for the twelve
months ended December 31, 2004. The average realized selling price of diesel
increased 15.7% from RMB2,735 per ton for the twelve months ended December 31,
2003 to RMB3,165 per ton for the twelve months ended December 31, 2004,
resulting in an increase in revenue by RMB18,567 million. The sales volume of
diesel increased 17.7% from 36.68 million tons for the twelve months ended
December 31, 2003 to 43.18 million tons for the twelve months ended December 31,
2004, resulting in an increase in revenue by RMB17,746 million.
- 21 -
Sales revenue from kerosene increased 42.6% from RMB4,125 million for the
twelve months ended December 31, 2003 to RMB5,881 million for the twelve months
ended December 31, 2004.
Intersegment sales revenue increased 29.6% from RMB16,867 million for the
twelve months ended December 31, 2003 to RMB21,862 million for the twelve months
ended December 31, 2004. The increase was mainly due to an increase in selling
prices and intersegment sales volume.
Operating Expenses Operating expenses increased 29.8% from RMB218,549
million for the twelve months ended December 31, 2003 to RMB283,617 million for
the twelve months ended December 31, 2004. The increase was mainly attributable
to the increase in the purchase cost of crude oil and refined oil from external
suppliers, and an increase in staff cost, selling and administrative expenses.
Profit from Operations Profit from operations increased 137.9% from
RMB5,035 million for the twelve months ended December 31, 2003 to RMB11,981
million for the twelve months ended December 31, 2004.
CHEMICALS AND MARKETING
Turnover Turnover rose 45.8% from RMB39,211 million for the twelve months
ended December 31, 2003 to RMB57,179 million for the twelve months ended
December 31, 2004. The growth in turnover of this segment was mainly due to an
increase in the sales volume and selling prices of chemical products.
Operating Expenses Operating expenses increased 29.7% from RMB38,170
million for the twelve months ended December 31, 2003 to RMB49,524 million for
the twelve months ended December 31, 2004. The increase was mainly due to an
increase
- 22 -
in the expenses for the purchase of raw materials and an increase in selling and
administrative expenses.
Profit from Operations Profit from operations increased 635.4% from
RMB1,041 million for the twelve months ended December 31, 2003 to RMB7,655
million for the twelve months ended December 31, 2004.
NATURAL GAS AND PIPELINE
TurnoverTurnover increased 21.2% from RMB15,067 million for the twelve
months ended December 31, 2003 to RMB18,255 million for the twelve months ended
December 31, 2004. The increase was mainly due to an increase in the sales
volume, and volume of natural gas from pipeline transmission.
Operating Expenses Operating expenses increased 19.6% from RMB13,145
million for the twelve months ended December 31, 2003 to RMB15,720 million for
the twelve months ended December 31, 2004. The increase was mainly due to an
increase in expenses for the purchase of gas and an increase in depreciation
charges caused by the commencement of operation of the West-East Gas Pipeline.
Profit from Operations Profit from operations increased 31.9% from
RMB1,922 million for the twelve months ended December 31, 2003 to RMB2,535
million for the twelve months ended December 31, 2004.
LIQUIDITY AND CAPITAL RESOURCES
For the twelve months ended December 31, 2004, the Group's primary sources
of funds were cash generated from operating activities, short-term and long-term
borrowings, cash and cash equivalents. The Group's funds were used for operating
- 23 -
activities, capital expenditures, repayment of short-term and long-term
borrowings and distribution of dividends to shareholders.
As at December 31, 2004, short-term borrowings made up approximately 5.5%
of the Group's capital employed as compared with approximately 6.7% as at
December 31, 2003. The Group's ability to obtain adequate financing may be
affected by the financial condition and operating results and the conditions of
the domestic and foreign capital markets. The Group must seek approvals from the
relevant PRC government authorities before raising funds in the domestic and
foreign capital markets. In general, the Group must obtain PRC government
approvals for any project involving significant capital investments in the
Refining and Marketing segment, the Chemicals and Marketing segment and the
Natural Gas and Pipeline segment.
The Group plans to fund its capital and related investments principally
from the cash generated from operating activities, short-term and long-term
borrowings, cash and cash equivalents. For the twelve months ended December 31,
2004, net cash generated from operating activities was RMB137,299 million. As at
December 31, 2004, the Group had RMB11,304 million in cash and cash equivalents.
Cash and cash equivalents were primarily Renminbi (with Renminbi accounting for
approximately 71.1% and United States Dollar accounting for approximately
28.9%).
The table below sets forth the cash flow of the Group for each of the
twelve months ended December 31, 2004 and 2003 and the cash and cash equivalents
at the end of each period.
YEAR ENDED DECEMBER 31,
2004 2003
----------- -----------
RMB MILLION RMB million
----------- -----------
Net cash flow generated from operating activities 137,299 137,236
Net cash flow used for investment activities (98,533) (96,213)
Net cash flow used for financing activities (38,693) (39,769)
Cash and cash equivalents at the end of each period 11,304 11,231
- 24 -
CASH FLOW GENERATED FROM OPERATING ACTIVITIES
The net cash flow of the Group generated from operating activities for the
twelve months ended December 31, 2004 was RMB137,299 million which is basically
the same as the RMB137,236 million generated for the twelve months ended
December 2003. This was due to an increase in sales revenue as well as an
increase in the amount of expenditure and the amount of income tax payable. In
addition, the level of inventories also increased resulting from an increase in
the scale of its sales.
As at December 31, 2004, the Group had a working capital deficit of
RMB3,348 million compared with a working capital deficit of RMB27,855 million as
at December 31, 2003. The decrease in working capital deficit was mainly due to
an increase in inventories resulting from an increase in the scale of its sales
and an increase in receivables under resale agreements.
- 25 -
CASH USED FOR FINANCING ACTIVITIES
The net borrowings of the Group as at December 31, 2004 and December 31,
2003 are as follows:
YEAR ENDED DECEMBER 31,
----------------------------
2004 2003
RMB MILLION RMB million
----------- -----------
Short-term borrowings (including current portion of long-term borrowings) 27,276 28,890
Long-term borrowings 38,458 41,959
-------- --------
Total borrowings 65,734 70,849
======== ========
Less
Cash and cash equivalents 11,304 11,231
Time deposits with maturities over three months 1,400 2,640
Receivables under resale agreements 33,217 24,224
-------- --------
Net borrowings 19,813 32,754
======== ========
The maturity profile of the long-term borrowings of the Group is as
follows:
PRINCIPAL AS AT DECEMBER 31, 2004 Principal as at December 31, 2003
--------------------------------- ---------------------------------
RMB MILLION RMB million
--------------------------------- ---------------------------------
To be repaid within one year 16,008 19,711
To be repaid within one to two years 8,130 18,183
To be repaid within two to five years 22,961 17,108
To be repaid after five years 7,367 6,668
------ ------
54,466 61,670
====== ======
Of the total borrowings of the Group as at December 31, 2004,
approximately 27.1% were fixed-rate loans and approximately 72.9% were
floating-rate loans. Of the borrowings as at December 31, 2004, approximately
85.1% were denominated in Renminbi, approximately 13.2% were denominated in US
Dollars, approximately 0.5% were denominated in British Pound Sterling,
approximately 0.7% were denominated in Japanese Yen, and approximately 0.5% were
denominated in Euro.
- 26 -
As at December 31, 2004 and December 31, 2003, the amount of short-term
borrowings owed to related parties was RMB600 million and RMB610 million,
respectively. As at December 31, 2004 and December 31, 2003, the amount of
long-term borrowings owed to related parties was RMB22,568 million and RMB24,578
million, respectively.
As at December 31, 2004, the amount of short-term and long-term borrowings
owed to China Petroleum Finance Company Limited was RMB600 million and RMB22,568
million, respectively.
The net cash used for financing activities for the twelve months ended
December 31, 2004 decreased 2.7% compared with the twelve months ended December
31, 2003. The decrease was mainly due to lower net repayment compared with the
corresponding period of last year.
As at December 31, 2004, loans of the Group consisted of RMB50 million
(RMB170 million as at December 31, 2003) secured loans (finance lease and bank
loans), of which RMB29 million worth of bank loans (RMB114 million as at
December 31, 2003) were secured by plant and equipment of the Group valued at
RMB218 million (RMB152 million as at December 31, 2003). Given that title to the
leased property will be transferred to the lessor in the event of default, debts
incurred by way of finance lease are in fact secured debts. As at December 31,
2004, the debts incurred by the Group by way of finance lease amounted to RMB21
million (RMB56 million as at December 31, 2003). The net book value of property,
plant and equipment under finance lease was RMB175 million (RMB240 million as at
December 31, 2003).
As at December 31, 2004, the debt to capitalization ratio(debt to
capitalization ratio = interest-bearing debts/(interest-bearing debts +
shareholder's equity) was 13.4% (16.6% as at December 31, 2003).
- 27 -
CAPITAL EXPENDITURES
The table below sets out our capital expenditures by the business segments
for each of the twelve months ended December 31, 2004 and the twelve months
ended December 31, 2003. As at December 31, 2004, capital expenditures increased
15.0% to RMB95,349 million from RMB82,929 million as at December 31, 2003. The
increase was mainly due to an increase in expenditures relating to oil and gas
exploration and development and continuation in putting in greater efforts in
the construction of the sales network.
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------
2004 2003 2005(estimated value)
--------------------------- ----------------------- ----------------------
RMB MILLION % RMB million % RMB million %
----------- ---- ----------- ---- ----------- ----
Exploration and
Production 59,488* 62.4 52,713* 63.6 61,160* 62.7
Refining and
Marketing 17,467 18.3 12,650 15.2 14,590 15.0
Chemicals and
Marketing 4,319 4.5 3,898 4.7 8,350 8.6
Natural gas and
Pipeline 13,901 14.6 13,530 16.3 12,400 12.7
Other 174 0.2 138 0.2 1,000 1.0
----------- ---- ----------- ---- ----------- ----
Total 95,349 100 82,929 100 97,500 100
=========== ==== =========== ==== =========== ====
Note: *If geological and geophysical exploration costs were included, the
capital expenditures and investments for the Exploration and Production segment
for 2003 and 2004, and the estimate of the same for the entire 2005 would be
RMB58,599 million, RMB66,493 million and RMB66,660 million, respectively.
EXPLORATION AND PRODUCTION
The majority of the Group's capital expenditures is related to the
Exploration and Production segment. For the twelve months ended December 31,
2004, capital expenditures in relation to exploration and production amounted to
RMB59,488 million, including RMB11,308 million for exploration activities and
RMB43,217 million for development activities. For the twelve months ended
December 31, 2003, capital expenditures in relation to this segment totaled
RMB52,713 million, including RMB9,250 million for exploration activities and
RMB39,587 million for development
- 28 -
activities. The increase in capital expenditures was mainly due to an increase
in expenditures relating to oil and gas exploration and development as well as
strategic adjustments in the east and the speeding up of production in the west,
and an increase in expenditures relating to exploration and development of gas
fields in the Tarim, Sichuan and Erdos basins.
The Group anticipates that capital expenditures for the Exploration and
Production segment for the twelve months ending December 31, 2005 will amount to
RMB61,160 million. Approximately RMB10,960 million will be used for oil and gas
exploration, and approximately RMB50,200 million will be used for oil and gas
development. Exploration and development will be mainly carried out in the
Erdos, Junggar, Tarim, Songliao, Sichuan and Bohai Bay basins.
REFINING AND MARKETING
Capital expenditures for the Group's Refining and Marketing segment for
the twelve months ended December 31, 2004 amounted to RMB17,467 million, of
which RMB11,729 million was spent on the expansion of the retail sales network
of refined products and storage infrastructure facilities, and RMB5,738 million
was spent on renovation of refining facilities. The total capital expenditures
of this segment for the twelve months ended December 31, 2003 were RMB12,650
million. The increase in capital expenditures was mainly due to the continual
increase in the efforts in the construction of the sales network.
The Group anticipates that capital expenditures for the Refining and
Marketing segment for the twelve months ending December 31, 2005 will amount to
RMB14,590 million, which include:
- approximately RMB7,250 million for construction and expansion of
refining facilities;
- approximately RMB7,340 million for investments in the development of
the refined product sales network.
- 29 -
CHEMICALS AND MARKETING
Capital expenditures for the Chemicals and Marketing segment for the
twelve months ended December 31, 2004 and 2003 amounted to RMB4,319 million and
RMB3,898 million respectively. The increase was mainly due to an increase in
investments in the ethylene projects in Daqing, Jilin and Lanzhou.
The Group anticipates that capital expenditures for the chemicals and
marketing segment for the twelve months ending December 31, 2005 will amount to
RMB8,350 million, which is expected to be used primarily for upgrading ethylene
facilities in Daqing, Jilin, Lanzhou and Dushanzi and the PTA project at
Liaoyang Petrochemical Company.
NATURAL GAS AND PIPELINE
Capital expenditures in the Natural Gas and Pipeline segment for the
twelve months ended December 31, 2004 amounted to RMB13,901 million. The Group
spent RMB13,462 million of these expenditures on the construction of long
distance pipelines, of which RMB3,425 million was spent on the West-East Gas
Pipeline project. For the twelve months ended December 31, 2003, capital
expenditures in the segment totaled RMB13,530 million. The increase in capital
expenditures was mainly due to an increase in investments in the Zhongxian-Wuhan
and the second Shaanxi-Beijing pipelines projects.
The Group anticipates that capital expenditures for the Natural Gas and
Pipeline segment for the twelve months ending December 31, 2005 will amount to
RMB12,400 million. Approximately RMB7,000 million is expected to be invested in
the West-East Gas Pipeline project, the Zhongxian-Wuhan pipeline and the second
Shaanxi-Beijing pipeline projects and approximately RMB5,400 million is expected
to be invested in the construction of natural gas storage facilities and other
natural gas, crude oil and refined products pipelines.
- 30 -
OTHER
Non-segment-specific capital expenditures for the twelve months ended
December 31, 2004 and for the twelve months ended December 31, 2003 were RMB174
million and RMB138 million respectively. These capital expenditures were mainly
used for non segment-specific equipment purchases and research and development
activities.
The Group anticipates that its non-segment-specific capital expenditures
for the twelve months ending December 31, 2005 will amount to RMB1billion, which
is expected to be used primarily for technology research, information system,
construction of water and electricity supply systems, roads and
telecommunications system for the mutual benefit of various segments.
MATERIAL INVESTMENT
The Group did not hold any material investment for the year ended December
31, 2004.
MATERIAL ACQUISITION OR DISPOSAL
The Group had not made any material acquisition or disposal of
subsidiaries and associated companies for the year ended December 31, 2004.
FOREIGN EXCHANGE RATE RISK
Renminbi is not a freely convertible currency. Future exchange rates of
Renminbi could vary significantly from the current or historical exchange rates
as a result of controls that could be imposed by the PRC government. The
exchange rates of Renminbi are affected by changes in PRC government policies.
The exchange rates of Renminbi are also affected by economic developments and
political changes domestically and internationally, and the supply and demand
for Renminbi. The official exchange rate for the conversion of Renminbi to
United States Dollar has generally been stable recently. As Renminbi is the
measurement currency of the Company and most of its consolidated entities, the
fluctuation of exchange rates of
- 31 -
Renminbi may have positive or negative impacts on the results of operations of
the Group. Because prices for the Group's crude oil and refined products are set
generally with reference to United States Dollar-denominated international
prices, a devaluation of Renminbi against United States Dollar may not have a
negative impact on the Group's turnover but may increase the cost incurred by
the Group to acquire imported materials and equipment as well as the foreign
currency-denominated obligations of the Group. On the other hand, an
appreciation of Renminbi against United States Dollar may decrease the Group's
turnover, but the cost for acquiring imported materials and equipment may be
reduced. The results of operations and the financial condition of the Group may
also be affected by fluctuations in exchange rates against Renminbi of a number
of other foreign currencies other than United States Dollar.
COMMODITY PRICE RISK
The Group is engaged in a wide range of petroleum related activities. The
global oil and gas market is affected by international political, economic and
military developments and global demand for and supply of oil and gas. As the
prices of Chinese crude oil and refined products are determined by reference to
international benchmark prices, fluctuations of prices of crude oil and refined
products in the international market will directly or indirectly, affect prices
of Chinese crude oil and refined products. A decrease in the prices of crude oil
and refined products could adversely affect the Group's financial position. The
Group has not used derivative instruments to hedge against potential price
fluctuations of crude oil and refined products. Therefore, during 2004 and 2003,
the Group was exposed to general price fluctuations of widely traded oil and gas
commodities.
INDUSTRY RISK
Like other oil and natural gas companies in China, the Company's business
activities are subject to regulation and control by the PRC government in many
aspects. This regulation and control, such as by way of grant of exploration and
production licences, the imposition of industry-specific taxes and levies and
the implementation of
- 32 -
environmental and safety standards, is expected to have an impact on the
Company's business operations. As a result, the Company may be subject to fairly
significant restrictions when implementing its business strategy, developing and
expanding its business or maximising its profitability. Any future changes in
PRC governmental policies on the crude oil and natural gas industry may also
affect the Company's business operations.
EMPLOYEES
NUMBER OF EMPLOYEES
As at December 31, 2003 and December 31, 2004, the Group had 417,229 and
424,175 employees respectively. The table below sets out the number of employees
by business segment as at December 31, 2004:
NUMBER OF EMPLOYEES PERCENTAGE OF TOTAL (%)
------------------- -----------------------
Exploration and Production 236,591 55.8
Refining and Marketing 116,813 27.5
Chemicals and Marketing 57,765 13.6
Natural Gas and Pipeline 10,191 2.4
Other(*) 2,815 0.7
------------------- -----------------------
Total 424,175 100.00
=================== =======================
Note*: Including management staff of PetroChina Exploration & Development
Research Institute, PetroChina Planning & Engineering Institute, Oil Refining
and Petrochemical Technological Research Centres, Company headquarters and
business segment head offices.
EMPLOYEE COMPENSATION
The total employee compensation payable by the Group for the twelve months
ended December 31, 2004 was RMB14,926 million, being the total salaries of
employees during the reporting period. Compensation of employees is determined
according to industry practice and the actual conditions of the Group, and is
based on
- 33 -
the principles of attracting and retaining high-caliber personnel, and
motivating all staff for the realization of best results.
The Company's senior management remuneration system links senior
management financial interests (including those of executive directors and
supervisors) with the Company's operating results and the market performance of
its shares. Members of the senior management have entered into performance
contracts with the Company. Under this system, the senior management members'
compensation has three components, namely, fixed salaries, performance bonuses
and stock appreciation rights. The variable components in their compensation
account for approximately 70% to 75% of the senior management officers' total
potential compensation, including approximately 0% to 25% forming the
performance bonus component and approximately 50% to 70% forming the stock
appreciation rights component. Variable compensation rewards are linked to the
attainment of specific performance targets, such as net profit, return on
capital and cost reduction targets. The chart below sets forth the components of
the total potential compensation for key officers.
Stock appreciation Performance
Basic salary(%) rights(%) bonus(%)
--------------- ------------------ -----------
Chairman 30 70 0
President 25 60 15
Vice President 25 60 15
Department General 25 50 25
Manager
Details of the directors' and supervisors' emoluments as at December 31,
2004 and December 31, 2003 were as follows:
2004 2003
------- -------
RMB'000 RMB'000
------- -------
Fee for directors and supervisors 120 83
Salaries, allowances and other benefits 2,012 1,377
Contribution to retirement benefit scheme 43 34
------- -------
2,175 1,494
======= =======
- 34 -
The number of directors and supervisors whose emoluments fall within the
following band (including directors and supervisors whose term expired during
the year):
2004 2003
------ ------
NUMBER Number
------ ------
Nil-RMB1,000,000 24 19
====== ======
Upon exercise of their share options, members of the senior management
will not receive any shares in the Company, but will, by way of stock
appreciation rights, receive a monetary sum which is calculated on the basis of
the share price of the H shares listed on the HKSE.
WORKFORCE REDUCTION PLAN
During the period from 1999 to 2002, a total of 58,300 people were laid
off, which has met the target of laying off 50,000 employees originally
committed by the Company.
The Company has no plan for any substantial reduction of its workforce in
the next few years, but will continue to keep a strict control on the total
number of employees. Workforce required for new projects or expanded production
capacity will first be obtained by way of tapping existing resources and making
use of any spare capacity.
TRAINING PROGRAMS
In order to develop the Company into an internationally competitive oil
company, the Company has targeted high-calibre and skillful staff in its
training program for 2004 with a focus on the training of core personnel and
implementation of a "strong corporate and high talent" strategy, actively
promoted the training of all of its employees and strived to build a proficient
operating and management team, a technology innovation
- 35 -
team and a skilful operators' team so as to achieve an overall improvement in
the quality of its staff and to ensure the supply of talents required for the
continuous, steady and relatively speedy development of the Company.
MEDICAL INSURANCE
Since October 1, 2002, the Company's headquarters and its regional
branches based in Beijing are members of the basic medical insurance scheme
organized by the Beijing Municipality, making contributions at 9% of the total
basic salaries of the employees. Other regional branches of the Company have
also participated in their respective local basic medical insurance schemes.
As basic medical insurance is organized by local authorities, the dates of
implementation, rates of contribution and reimbursement methods vary with
localities. The rate of contribution is generally set at 6% to 10% of the total
basic salaries of the employees of various companies.
In accordance with relevant regulations of the PRC government, the Company
has given permission to regional companies that have participated in local basic
insurance schemes to establish a supplemental medical insurance scheme from
2002. Contributions to the schemes are set at not more than 4% of the total
salaries and will be booked as cost.
CONTINGENT LIABILITIES
Information on the Group's contingent liabilities as of December 31, 2004
is as follows:
BANK AND OTHER GUARANTEES
As at December 31, 2004, the Group had contingent liabilities in respect
of bank and other guarantees and other matters arising in the ordinary course of
business from which it is anticipated that no material liabilities will arise.
2004 2003
----------- -----------
RMB MILLION RMB million
----------- -----------
Guarantees of borrowings of associates 203 448
=========== ===========
- 36 -
ENVIRONMENTAL LIABILITIES
CNPC and the Group have operated in China for many years. China has
adopted extensive environmental laws and regulations that affect the operation
of the oil and gas industry. The impact of environmental liabilities under
proposed or future environmental legislation cannot reasonably be estimated at
present, and could be material. Under existing legislation, however, the
management believes that there are no probable liabilities, except for the
amounts which have already been reflected in the financial statements, which
will have a material adverse effect on the financial position of the Group.
LEGAL CONTINGENCIES
The Group is the named defendant in certain insignificant lawsuits as well
as the named party in other proceedings arising in the ordinary course of
business. While the outcome of such contingencies, lawsuits or other proceedings
cannot be determined at present, the management believes that any resulting
legal liabilities will not have a material adverse effect on the financial
position of the Group.
LEASING OF LAND, ROADS AND BUILDINGS
According to the Restructuring Agreement entered into between the Company
and CNPC in 1999 upon the formation of the Company, CNPC has undertaken to the
Company as follows:
- CNPC will use its best endeavours to obtain formal land use right
certificates to replace the entitlement certificates in relation to the 28,649
parcels of land which were leased or transferred to the Company from CNPC,
within one year from August, September and October 1999 when the relevant
entitlement certificates were issued;
- 37 -
- CNPC will complete, within one year from November 5, 1999, the necessary
governmental procedures for the requisition of collectively-owned land on which
116 service stations owned by the Company are located; and
- CNPC will obtain individual building ownership certificates in the name
of the Company for all of the 57,482 buildings transferred to the Company by
CNPC, before November 5, 2000.
As at December 31, 2004, CNPC had obtained formal land use right
certificates in relation to 26,549 out of the above-mentioned 28,649 parcels of
land, and some building ownership certificates for the above-mentioned
buildings, but had not yet completed the necessary governmental procedures for
the above-mentioned service stations located on collectively-owned land. The
Directors of the Company are of the opinion that the use of and the conduct of
the relevant activities at the above-mentioned parcels of land, service stations
and buildings are not affected by the fact that the relevant land use right
certificates or individual building ownership certificates have not been
obtained or the fact that the relevant governmental procedures have not been
completed and therefore will not have a material adverse effect on the results
of operations or the financial position of the Group.
GROUP INSURANCE
Except for limited insurance coverage for vehicles and certain assets
subject to significant operating risks, the Group does not carry any other
insurance for property, facilities or equipment with respect to its business
operations. In addition, the Group does not carry any third-party liability
insurance against claims relating to personal injury, property and environmental
damages or business interruption insurance since such insurance coverage is not
customary in China. While the effect of under-insurance on future incidents
cannot be reasonably assessed at present, the management believes that it may
have a material impact on the operating results but will not have a material
adverse effect on the financial position of the Group.
- 38 -
RE-ALLOCATION OF PRODUCTION AND OPERATION FACILITIES
The Group may further streamline its production and operation facilities
within the next several years to further improve the operating efficiency and
competitiveness of the Group. The management has not approved all significant
actions to be taken to complete such plans. The management does not believe such
plans will have a material adverse impact on the Group's financial position, but
they may have a material adverse effect on the Group's results of operations.
OTHER
In December 2003, a gas blow-out incident occurred at one of the gas wells
of the Group. The blow-out caused the leakage of a large quantity of sulfurated
hydrogen, causing injuries and deaths to many residents living in the
surrounding area. As a result of an investigation conducted by the PRC
government, CNPC, which provided drilling services for the well, was held liable
for this blow-out. The incident has not had, and the Company does not believe it
will have, a material adverse effect on the results of operations and financial
position of the Group.
MARKET REVIEW
CRUDE OIL MARKET REVIEW
International crude oil prices remained high for most of 2004 and the
annual average oil price soared due to global economic recovery, surging oil
demand, and the international political climate. The annual average price for
WTI, Brent and Minas crude oil was US$41.52, US$38.25 and US$36.97 per barrel
respectively, representing an increase of US$10.47, US$9.41 and US$7.47 per
barrel respectively over the annual average price in 2003. Corresponding to the
rise in international oil prices, domestic crude oil prices also increased. The
average realized price for domestic crude oil in 2004 was higher than that of
2003.
- 39 -
Net crude oil imports of China continued to increase in 2004, increased by
41.3% to a net total of 117 million tons compared with the corresponding period
in the previous year. The domestic output of crude oil and refined products
reached 176 million tons and 259 million tons respectively.
REFINED PRODUCTS MARKET REVIEW
In general, the domestic market for refined products performed well in
2004, with nominal consumption increasing by 19.1% to 157.05 million tons. Net
import of refined products for the whole country climbed to 26.41 million tons,
representing an increase of 83.3% over the previous year. As compared with the
beginning of 2004, the national inventory level of refined products also
increased by approximately 100,000 tons by the end of 2004.
Owing to the adjustment and control of the domestic prices for refined
products by the central government in 2004 and the impact of international oil
prices, the annual average benchmark prices for both gasoline and diesel were
higher than the 2003 level.
CHEMICAL PRODUCTS MARKET REVIEW
The rapid global economic development in 2004 brought about a sharp rise
in the demand for basic energy resources and chemical materials, which in turn
led to a tightened supply of energy, transportation and chemical materials, and
thus a shortage of petrochemical products. On the other hand, international
crude oil prices continuously reached new heights, forcing up prices of
downstream chemical products. Compared with 2003, the prices of petrochemical
products increased by a huge margin and the prices of a majority of chemical
products were at a 10-year high.
The Chinese economy grew steadily and rapidly in 2004 under the state's
macroeconomic regulation and control. A favourable economic environment helped
boost the development of the petrochemical market, especially the demand for
plastic and textile products. On the other hand, there was an insufficient
domestic petrochemical output as well as a shortage of chemical resources. As a
result of the
- 40 -
changes in cost and demand, both the price and production of petrochemical
products in the domestic petrochemical market increased in 2004.
COMPANY BUSINESS REVIEW
For the twelve months ended December 31, 2004, total oil and gas output of
the Company was 918.6 million barrels of oil equivalent, including 778.4 million
barrels of crude oil and 841.2 billion cubic feet of marketable natural gas,
representing an average production of 2.13 million barrels of crude oil and
2,305 million cubic feet of natural gas per day. A total of 730.2 million
barrels of crude oil and 781.4 billion cubic feet of natural gas were sold.
Approximately 82% of the crude oil sold by the Company was purchased by its
refineries. In 2004, the lifting cost for the oil and gas operations of the
Company was US$4.61 per barrel, representing an increase of 5.0% from US$4.39
per barrel in 2003.
For the twelve months ended December 31, 2004, the Company's refineries
processed 698 million barrels of crude oil, or an average of 1.91 million
barrels per day. Approximately 84% of the crude oil processed in the Company's
refineries was supplied by the Exploration and Production segment. The Company
produced approximately 64.30 million tons of gasoline, diesel and kerosene and
sold approximately 67.01 million tons of these products. The Company actively
expanded its sales and distribution networks, in particular the retail sales
network, by capitalizing fully on the complementary value-added effect of the
integration of refining and marketing. As at December 31, 2004, there were
17,403 service stations which were either owned, controlled or franchised by the
Company or owned by CNPC but to which the Company provided supervisory support.
The cash processing cost of the Company's refineries also decreased from RMB132
per ton to RMB131 per ton.
For the twelve months ended December 31, 2004, the Company produced 1.846
million tons of ethylene, 2.527 million tons of synthetic resin, 1.263 million
tons of synthetic fibre raw materials and polymer, 0.286 million tons of
synthetic rubber, and 3.652 million tons of urea.
- 41 -
The Natural Gas and Pipeline segment is the Company's core business
segment for development. For the twelve months ended December 31, 2004, the
Company sold 657.3 billion cubic feet of marketable natural gas through the
Natural Gas and Pipeline segment. The Company currently owns and operates 18,995
kilometres of regional natural gas pipeline networks, of which 17,868 kilometres
are operated by the Natural Gas and Pipeline segment. As at December 31, 2004,
the Company owned and operated 9,167 kilometres of crude oil pipeline and 2,460
kilometres of refined product pipeline.
In 2004, the Company's production and operations continue to perform well,
with remarkable increase in overall economic efficiency and indicates a growing
trend. In Forbe's 2004 ranking of the top 2000 global firms, the Company was
selected as the best company in China and ranked 55 worldwide. In AsiaMoney's
2004 "Annual Best-Managed Large Companies Poll", the Company was awarded the
"Overall Best-Managed Large Cap Company" and "Overall Most Improved Company for
Best- Management Practices". The Company also won a series of awards in the
competition organized by Finance Asia, an influential magazine in Asia Pacific
capital markets. The smooth implementation of key projects such as the West-East
Pipeline project paved the way for the Company's further developments. Gas
supply through the West-East Pipeline to commercial customers in Shanghai
commenced on January 1, 2004. The entire West-East Pipeline was put into trial
operation on October 1, 2004, enabling natural gas from the Tarim Basin in
Xinjiang to be transmitted to Shanghai. On December 30, 2004, the entire
West-East Pipeline was put into full commercial operation. Construction of the
Zhongxian-Wuhan pipeline is progressing smoothly. As at December 31, 2004, the
Zhongxian-Wuhan pipeline, including its two branch lines (Jingzhou-Xiangfan
branch line and Wuhan-Huangshi branch line) were ready for gas transmission and
the commercial operation of the entire pipeline will commence in 2005. As at
December 31, 2004, the second Shaanxi-Beijing pipeline construction and the
large-scale river and tunnel pass were completed, and construction of other
station yards is under way.
- 42 -
STANDARDIZED OPERATIONS AND BUSINESS PROSPECTS
The Company strictly follows the laws and regulations of its places of
listing and operates steadily within the regulatory framework. In 2004, a number
of effective corporate governance measures were undertaken by the Company in
accordance with regulatory requirements to build up its internal control
mechanism. The level of corporate governance of the Company was improved. The
average closing price of the Company's H shares was HK$3.90 per share in 2004,
representing an increase of 70% over the last year, and an increase of over 200%
from the issue price.
In 2004, the Company continued to enhance its efforts in exploration and
exploitation of oil and gas reserves and achieved significant results in oil and
gas exploration, indicating a bright prospect for the development of this field.
Production of crude oil recorded steady growth while the natural gas business
developed rapidly. The pace of overseas oil and gas exploration and development
quickened and the geographical allocation and product structure of the refining
and chemicals business of the Company improved. The production and sales of both
refined and chemical products blossomed, profitability improved markedly and the
construction of key pipeline projects and refining facilities were smooth. With
the early commencement of commercial operation of the West-East Pipeline
Project, the Company has achieved the objective of the project.
Using the "Energyahead" website (www.energyahead.com) as an e-commerce
platform, the Company focused on the centralized procurement of goods in large
quantities and enhanced the integration of its resources procurement business.
The Company will continue to promote e-commerce which will effectively lower
procurement costs and improve the management of resources.
In the course of production and operation, the Company persistently
adhered to the principle of "human-oriented" management and devoted great
efforts to fundamental work on quality, safety and environmental protection.
Through the advancement of technology, the Company has improved the quality of
its products, minimized consumption of materials and energy and established its
brand image. The launching
- 43 -
of the "Safety Management Year" campaign has helped the Company enforce its
organizational leadership in safety promotion, increase the awareness and level
of safety in production among all staff and devise a comprehensive emergency
plan in dealing with accidents, thereby minimizing and preventing the occurrence
of accidents to the greatest extent possible. The Company also adopted clean
production technologies and focused on reducing the source of pollution by
strengthening the monitoring and regulation of pollution as well as controlling
the discharge of pollutants. The Company will continue to improve its Quality,
Health, Safety and Environment management system and establish a long-term
effective mechanism to promote quality, health, safety and environmental
protection.
On December 26, 2004, the Company adopted a new logo, which is jointly
owned by the Company and CNPC.
The new logo inherits the existing registered trademarks of PetroChina and
CNPC and reflects the characteristic of the enterprise. It is an integration of
the logos of PetroChina and CNPC, which is designed to increase the awareness
among consumers and the general public of the integration of services and
products of the two entities.
Looking forward, the Company intends to continue to improve oil and gas
exploration and exploitation and speed up its reserve and production
capabilities, accelerate the adjustment and optimization of its refining and
chemicals business, further improve its competitiveness and profitability,
intensify its marketing efforts, improve operating efficiency, accelerate the
development of its overseas business and secure as much overseas resources as
possible.
For the exploration and production business, the Company will continue to
give top priority to exploration and more effort will be put into the
development of oil and gas fields. A continuous improvement in the rate of
conversion of resources, the rate of utilization of reserves and the ultimate
recovery ratio will ensure a steady increase in the output of crude oil and a
significant growth in the output of natural gas.
- 44 -
For the refining and chemicals business, the Company will continue to
integrate the refining and chemicals business, optimize allocation of resources,
improve the concentration of crude oil processing and increase the standard of
the light chemical materials. On the basis of safe operation of equipment, the
Company will strive to increase the production of processed crude oil, finished
oil as well as other value-added products in order to satisfy market demand and
improve economic efficiency.
For the marketing business, the Company will continue to further improve
and optimize its marketing network as a means to stabilize market supply and
maximize operating efficiency. It will also raise the level of marketing
services and management in order to build up a good reputation for PetroChina.
For the natural gas and pipeline business, the Company will accelerate the
construction of key pipelines, connected pipelines and underground gas storage
tanks according to the requirements of balanced development of upstream and
downstream operations, and will ensure the timely completion and commencement of
production. In addition, the Company will further improve the linkage between
production, transportation and marketing in order to achieve balance of
resources and ensure a safe and steady supply of gas through operating
pipelines.
For the overseas business, the Company will continue to accelerate the
implementation of its overseas business development strategy. It will expand
overseas operations and will actively seek opportunities to develop its overseas
oil and gas exploration and development business. It will also expand
international trade and grow its overseas business by way of mergers and
acquisitions or joint ventures.
The Company will have been listed in Hong Kong and New York for five years
in April 2005. During these five years, with the support and endorsement of
shareholders and the public, the businesses of the Company have developed
smoothly and the value of the Company has steadily increased. In the future, the
Company's management will persist in enhancing the Company's value and strive to
maximize the benefit and value for its shareholders. The Company will make
substantial efforts in technological and management innovation, further
strengthen its internal control mechanism and
- 45 -
monitoring system which comply with regulatory requirements in the market, and
by way of careful planning and prudent operations, which promotes the
continuous, effective and relatively speedy development of the Company.
FINAL DIVIDEND AND TEMPORARY CLOSURES OF REGISTER OF MEMBERS
The Board of Directors' recommends to pay a final dividend of RMB0.147511
per share (inclusive of applicable tax) from the balance of 45% of the net
profit for the twelve months ended December 31, 2004 less the interim dividend
for 2004 paid on October 8, 2004. The proposed final dividend is subject to
shareholders' approval at the annual general meeting to be held on May 26, 2005.
The final dividend will be paid to shareholders whose names appear on the
register of members of the Company at the close of business on May 26, 2005. The
register of members will be closed from April 26, 2005 to May 26, 2005 (both
days inclusive) during which period no transfer of shares will be registered. In
order to qualify for the final dividend, all transfer documents must be lodged,
together with the relevant share certificates, at the Hong Kong Registrars
Limited no later than 4 p.m. on April 25, 2005.
In accordance with Article 149 of its Articles of Association, dividends
payable to the Company's shareholders shall be declared in Renminbi. Dividends
payable to the holders of State-owned 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 on the basis of the
average of the closing exchange rates for Renminbi to Hong Kong Dollar as
announced by the People's Bank of China for the week prior to the declaration of
the dividend at the shareholders' meeting to be held on May 26, 2005.
Final dividend will be paid on or around June 10, 2005.
- 46 -
REPURCHASE, SALE OR REDEMPTION OF SECURITIES
The Company or any of its subsidiaries did not sell any other types of
securities of the Company, nor did it repurchased or redeemed any of the
securities of the Company during the twelve months ended December 31, 2004.
DISCLOSURE OF OTHER INFORMATION
Save as otherwise disclosed above, as regards the other matters required
to be disclosed pursuant to the Listing Rules, there has been no significant
changes compared with the information disclosed in the annual report for the
year ended December 31, 2003 nor other matters having a significant impact on
the businesses of the Group. Therefore, no supplementary information is
disclosed in this announcement.
COMPLIANCE WITH THE CODE OF BEST PRACTICE
Following its listing of H shares on the HKSE, the Company has complied
with the requirements under the Code of Best Practice contained in the Listing
Rules which is applicable to the reporting period.
AUDIT COMMITTEE
The audit committee of the Company has reviewed and confirmed the final
results announcement and the final results report for the twelve months ended
December 31, 2004.
PUBLICATION OF RESULTS ON THE WEBSITE OF THE HKSE AND OF THE COMPANY
In accordance with the requirements under the Listing Rules which are
applicable to the reporting period, all information about the Company contained
in this Announcement of Annual Results for the Year Ended December 31, 2004 will
be published on the website of the HKSE (website:http://www.hkex.com.hk) on or
before April 30, 2005. This information will also be published on the website of
the Company (website:http://www.petrochina.com.cn).
By Order of the Board of Directors
PETROCHINA COMPANY LIMITED
CHEN GENG
Chairman
Beijing, China
March 16, 2005
As at the date of this announcement, the Board comprises Mr. Chen Geng as the
Chairman; Mr. Jiang Jiemin and Mr. Ren Chuanjun as Vice Chairmen; Mr. Su Shulin,
Mr. Duan Wende and Mr. Wang Fucheng as executive directors; Mr. Zheng Hu, Mr.
Zhou Jiping, Mr. Gong Huazhang and Mr. Zou Haifeng as non-executive directors;
and Mr. Chee-Chen Tung, Mr. Liu Hongru and Mr. Franco Bernabe as independent
non-executive directors.
47
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PetroChina Company Limited
Dated: March 17, 2005 By: /s/ Li Huaiqi
----------------------------------
Name: Li Huaiqi
Title: Company Secretary