A research report from Citigroup indicates that PETROCHINA (00857) achieved a net profit of RMB 48.3 billion in the first quarter of this year, representing a 2% year-on-year increase. However, the exploration and production (E&P) segment underperformed expectations due to an 8.5% year-on-year decline in realized oil prices, which fell short of forecasts. The refining business did not experience the same quarterly surge as seen at SINOPEC CORP (00386), partly because SINOPEC CORP had procured crude oil earlier, benefiting from substantial inventory gains. The bank believes PETROCHINA's performance should be relatively stronger, influenced by stable crude oil supplies from Russia, and expresses a preference for PETROCHINA over SINOPEC CORP. It assigns PETROCHINA a target price of HK$10 and a "Buy" rating.

Additionally, a highlight for PETROCHINA was the 40% year-on-year growth in EBIT from natural gas sales in the first quarter. This was primarily driven by a 3.5% increase in sales volume and a 3% decrease in the cost of competitive pipeline gas imports, which offset a 4% decline in the average selling price. The bank anticipates that PETROCHINA will again outperform SINOPEC CORP in the second quarter, citing improved competitiveness in natural gas due to recent rises in LNG prices, alongside a strengthening E&P segment and oil business. Although China might ease restrictions on refined oil product exports, this is expected to have only a limited effect in alleviating domestic refining margin pressures for both oil companies.