US$22 bln finncing required by PetroChina to boost cash flow and maintain its capital expenditure and dividend payout

07-May-09

PetroChina Co., the world’s second- largest company by market value, could require 150 billion yuan (US$22 bln) financing this year to boost cash flow and maintain its capital expenditure and dividend payout. In Q1-09, it has raised 50 bln yuan through bank borrowings and a bond issue and plans to seek approval for the balance 100 billion yuan at a shareholder meeting this month. In 2008, free cash flow fell 76.9 billion yuan because of taxes and investments. As China’s government encourages its companies to take advantage of low commodity prices to expand reserves, PetroChina plans to spend 233 bln yuan to acquire and upgrade assets including oil fields. The company is building a 142 bln yuan pipeline from northwestern Xinjiang province to Guangdong in the south and may pay as much as US$1.4 bln for a stake in a Kazakhstan oil company. PetroChina had negative free cash flow of 44.9 billion yuan in 2008. Free cash flow is the cash available for investing or financing after meeting certain expenses from operations. PetroChina’s debt amounted to about 11% of the company’s assets in 2008.