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 2004
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 annual results for the year ended
December 31, 2003.
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:
- the Registrant's plan to focus its exploration efforts for oil and
natural gas on the Erdos, Junggar, Tarim, Songliao and Bohai Bay
basins;
- the Registrant's anticipated capital expenditures for each of its
segments for the year ending December 31, 2004 and non
segment-specific capital expenditures for the same period;
- the Registrant's plan for segment operations, including continuing to:
- enhance exploration and production to ensure continuous increase
in oil and natural gas output;
- improve marketing network and increase market shares;
- increase the profitability of the refining business; and
- carefully organize the construction of key natural gas pipeline
projects to achieve various construction targets;
- the Registrant's plan to actively promote overseas oil and natural gas
exploration and development business, and selectively develop overseas
refining and chemicals processing business and marketing networks;
- the Registrant's plan to continue to raise the qualifications of its
staff and maintain strict control over the size of its workforce;
- the Registrant's plan to further streamline its production facilities
for the next several years and the anticipated impact of such plan on
the results of operations and financial position of the Registrant;
- the Registrant's plans to adopt various measures to enhance its value
and maximize shareholders' value; and
- 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:
- fluctuations in crude oil and natural gas prices;
- failure to achieve continued exploration success;
- failure or delay in achieving production from development projects;
- change in demand for competing fuels in the target market;
- continued availability of capital and financing;
- general economic, market and business conditions;
- changes in policies, laws or regulations of the PRC and other
jurisdictions in which the Registrant and its subsidiaries conduct
business; and
- 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]
PETROCHINA COMPANY LIMITED
(a joint stock limited company incorporated in the People's Republic of China
with limited liability)
ANNOUNCEMENT OF ANNUAL RESULTS FOR THE YEAR
ENDED DECEMBER 31, 2003
--------------------------------------------------------------------------------
- FINANCIAL AND BUSINESS SUMMARY -
Output of crude oil for 2003: 774.9 million barrels, representing an increase of
0.66% from 2002
Output of marketable natural gas for 2003: 691.3 billion cubic feet,
representing an increase of 14.26% from 2002
Total output of oil and gas for 2003: 890.1 million barrels of oil equivalent,
representing an increase of 2.24% from 2002
Consolidated turnover for 2003: RMB303,779 million, representing an increase of
24.28% from 2002
Consolidated net profit for 2003: RMB69,614 million, representing an increase of
48.40% from 2002
Basic and diluted earnings per share for 2003: RMB0.40, representing an increase
of RMB0.13 from 2002
THE BOARD OF DIRECTORS RECOMMENDS A DISTRIBUTION OF A FINAL DIVIDEND FOR 2003 OF
RMB0.079324 PER SHARE
--------------------------------------------------------------------------------
The board of directors (the "BOARD OF DIRECTORS") 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,
2003 prepared in accordance with International Financial Reporting Standards
("IFRS"), together with the operating results of 2002 for comparison, are as
follows:
CONSOLIDATED PROFIT AND LOSS ACCOUNT
------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
-----------------------------------
NOTES 2003 2002
------------- -------------
RMB (MILLION) RMB (million)
------------------------------------------------------------------------------------------------------------
TURNOVER 2 303,779 244,424
------------- -------------
OPERATING EXPENSES
Purchases, services and other (90,850) (71,690)
Employee compensation costs (19,542) (16,248)
Exploration expenses, including exploratory dry holes (10,577) (8,095)
Depreciation, depletion and amortisation (40,531) (36,782)
Selling, general and administrative expenses (23,930) (22,474)
Shut down of manufacturing assets (2,355) (2,121)
Taxes other than income taxes (15,879) (14,613)
Revaluation loss of property, plant and equipment (391) -
Other expense, net (538) (60)
------------- -------------
TOTAL OPERATING EXPENSES (204,593) (172,083)
------------- -------------
PROFIT FROM OPERATIONS 99,186 72,341
------------- -------------
FINANCE COSTS
Exchange gain 53 133
Exchange loss (233) (449)
Interest income 677 463
Interest expense (2,346) (3,516)
------------- -------------
TOTAL FINANCE COSTS (1,849) (3,369)
------------- -------------
SHARE OF PROFIT OF ASSOCIATED COMPANIES 985 268
------------- -------------
PROFIT BEFORE TAXATION 3 98,322 69,240
TAXATION 4 (28,072) (22,231)
------------- -------------
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
-----------------------------------
NOTES 2003 2002
------------- -------------
RMB (MILLION) RMB (million)
------------------------------------------------------------------------------------------------------------
PROFIT BEFORE MINORITY INTERESTS 70,250 47,009
MINORITY INTERESTS (636) (99)
------------- -------------
NET PROFIT 69,614 46,910
============= =============
BASIC AND DILUTED EARNINGS PER SHARE (RMB) 5 0.40 0.27
============= =============
CONSOLIDATED BALANCE SHEET
-------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
--------------------------------
2003 2002
------------- -------------
RMB (MILLION) RMB (million)
-------------------------------------------------------------------------------------------------------
NON CURRENT ASSETS
Property, plant and equipment 433,419 397,798
Investments in associates 5,571 4,145
Available-for-sale investments 1,839 1,535
Intangible and other assets 4,732 4,507
------------- -------------
445,561 407,985
------------- -------------
CURRENT ASSETS
Inventories 28,872 28,441
Accounts receivable 3,263 6,079
Prepaid expenses and other current assets 13,528 15,729
Notes receivable 2,416 2,540
Receivables under resale agreements 24,224 9,786
Time deposits with maturities over three months 2,640 2,612
Cash and cash equivalents 11,231 9,977
------------- -------------
TOTAL CURRENT ASSETS 86,174 75,164
------------- -------------
CURRENT LIABILITIES
Accounts payable and accrued liabilities 64,180 57,793
Income tax payable 12,043 5,412
Other taxes payable 8,916 5,515
Short-term borrowings 28,890 20,633
------------- -------------
114,029 89,353
------------- -------------
NET CURRENT LIABILITIES (27,855) (14,189)
------------- -------------
TOTAL ASSETS LESS CURRENT LIABILITIES 417,706 393,796
============= =============
FINANCED BY
Share capital 175,824 175,824
Retained earnings 89,577 59,004
Reserves 91,212 81,848
------------- -------------
Shareholders' equity 356,613 316,676
------------- -------------
Minority interests 5,608 4,854
------------- -------------
NON CURRENT LIABILITIES
Long-term borrowings 41,959 60,655
Deferred credits and other long-term obligations 2,000 1,684
Deferred taxation 11,526 9,927
------------- -------------
55,485 72,266
------------- -------------
417,706 393,796
============= =============
-------------------------------------------------------------------------------------------------------
NOTES
1 ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with
IFRS issued by the International Accounting Standard Board. 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 generally
accepted accounting principles 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.
In September 2002, the Company acquired from China National Petroleum
Corporation ("CNPC") the assets, liabilities and interests related to
CNPC's refined products marketing enterprises comprising primarily of
service stations and related facilities for RMB3,200 million. The Company
has accounted for the acquisition in a manner similar to a uniting of
interests, whereby the assets and liabilities of the marketing enterprises
acquired were accounted for at historical cost to CNPC, and the
consolidated financial statements were restated in the prior year to give
effect to the acquisition with all periods presented as if the operations
of the Company and these marketing enterprises had always been combined.
The difference between the RMB3,200 million acquisition price and the net
liabilities transferred from CNPC was adjusted against equity.
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
---------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
-------------------------
2003 2002
--------- ---------
RMB RMB
(MILLION) (million)
---------------------------------------------------------------------------------------------------------
Profit before taxation is arrived at after crediting and charging of
the following items:
Crediting:
Dividend income from available-for-sale investments 69 60
Reversal of impairment of receivables 551 344
Reversal of impairment of available-for-sale investments 21 -
Reversal of write down in inventories 23 264
Charging:
Amortisation on intangible and other assets 888 676
Auditors' remuneration 44 75
Cost of inventories (approximates cost of goods sold) recognised as
expense 134,935 112,986
Depreciation on property, plant and equipment, including impairment
provision
- owned assets 39,622 36,079
- assets under finance leases 21 27
Impairment of available-for-sale investments 179 4
Impairment of receivables 1,985 628
Interest expense (Note (a)) 2,346 3,516
Loss on disposal of property, plant and equipment 1,048 647
Operating lease rentals on land and buildings and equipment 2,991 2,942
Repair and maintenance 4,721 5,060
Research and development expenditure 2,411 1,806
Transportation expenses 8,780 8,328
Write down in inventories 159 142
--------------------------------------------------------------------------------------------------------
Note (a): INTEREST EXPENSE
Interest expense 3,666 4,412
Less: amounts capitalised (1,320) (896)
--------- ---------
2,346 3,516
========= =========
4 TAXATION
--------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
----------------------------------
2003 2002
------------- -------------
RMB (MILLION) RMB (million)
--------------------------------------------------------------------------------------------------------
Income tax 26,347 19,289
Deferred tax 1,594 2,897
Share of tax of associated companies 131 45
------------ ------------
28,072 22,231
============ ============
--------------------------------------------------------------------------------------------------------
In accordance with the relevant PRC income tax rules and regulations, the
enacted PRC income tax rate applicable to the Group is principally 33%
(2002: 33%). The Group in the last quarter of year 2002 obtained approvals
from several provincial and local tax authorities whereby a portion of the
taxable income of the Group's qualifying operations in these locales
through 2010 are assessed income tax at a reduced rate of 15% instead of
the statutory rate of 33%.
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:
---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
------------------------------
2003 2002
------------- -------------
RMB (MILLION) RMB (million)
---------------------------------------------------------------------------
Profit before taxation 98,322 69,240
------------ -------------
Tax calculated at a tax rate of 33% 32,446 22,849
Prior year tax return adjustment 419 618
Effect of preferential tax rate (5,190) (2,377)
Income not subject to tax (566) (93)
Expenses not deductible for tax purposes 963 1,234
------------ -------------
Tax charge 28,072 22,231
============ =============
--------------------------------------------------------------------------------
5 BASIC AND DILUTED EARNINGS PER SHARE
Basic and diluted earnings per share for the years ended December 31, 2003
and 2002 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
----------------------------------------------------------------------------------------------------------
SHARE RETAINED
CAPITAL EARNINGS RESERVES TOTAL
--------- --------- --------- ---------
RMB RMB RMB RMB
(MILLION) (MILLION) (MILLION) (MILLION)
----------------------------------------------------------------------------------------------------------
Balance at January 1, 2002 175,824 35,607 79,175 290,606
Net profit for the year ended
December 31, 2002 - 46,910 - 46,910
Transfer to reserves - (5,863) 5,863 -
Final dividend for 2001 (Note 7(i)) - (8,839) - (8,839)
Interim dividend for 2002 (Note 7(ii)) - (8,811) - (8,811)
Contribution from CNPC to
marketing enterprises - - 10 10
Payment to CNPC for acquisition of
marketing enterprises - - (3,200) (3,200)
--------- --------- --------- ---------
Balance at December 31, 2002 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 (iii)) - (12,299) - (12,299)
Interim dividend for 2003 (Note 7 (iv)) - (17,379) - (17,379)
--------- --------- --------- ---------
Balance at December 31, 2003 175,824 89,577 91,212 356,613
========= ========= ========= =========
----------------------------------------------------------------------------------------------------------
7 DIVIDENDS
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31
---------------------------
2003 2002
--------- ---------
RMB RMB
(MILLION) (million)
----------------------------------------------------------------------
Final dividend for 2001 (Note (i)) - 8,839
Interim dividend for 2002 (Note (ii)) - 8,811
Final dividend for 2002 (Note (iii)) 12,299 -
Interim dividend for 2003 (Note (iv)) 17,379 -
--------- ---------
29,678 17,650
========= =========
----------------------------------------------------------------------
(i) A final dividend in respect of 2001 of RMB0.050272 per share
amounting to a total of RMB8,839 million was paid on June 21,
2002, and was accounted for in shareholders' equity as an
appropriation of retained earnings in the year ended December
31, 2002.
(ii) An interim dividend in respect of 2002 of RMB0.050113 per share
amounting to a total of RMB8,811 million was paid on October 8,
2002, and was accounted for in shareholders' equity as an
appropriation of retained earnings in the year ended December
31, 2002.
(iii) 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.
(iv) As authorised by shareholders in the Annual General Meeting on
May 28, 2003, the Board of Directors, in a meeting held on
August 27, 2003, resolved to distribute an interim dividend in
respect of 2003 of RMB0.098841 per share amounting to a total of
RMB17,379 million. The interim dividend 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.
(v) At the meeting on March 24, 2004, the Board of Directors
proposed a final dividend in respect of 2003 of RMB0.079324 per
share amounting to a total of RMB13,947 million. These financial
statements do not reflect this dividend payable, which will be
accounted for in shareholders' equity as an appropriation of
retained earnings in the year ended December 31, 2004.
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 sale
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 sale 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, which is considered as one geographic location in an economic
environment with similar risks and returns. In addition to its operations
in 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 50% interests in Amerada Hess Indonesia Holdings Co. for RMB679
million. Amerada Hess Indonesia Holdings Co. holds 30% interests in one of
the oil and gas blocks in Indonesia acquired by the Group 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
2002 is presented below:
PRIMARY REPORTING FORMAT - BUSINESS SEGMENTS
------------------------------------------------------------------------------------------------------------------
YEAR ENDED EXPLORATION REFINING CHEMICALS NATURAL
DECEMBER 31, AND AND AND GAS AND
2003 PRODUCTION MARKETING MARKETING PIPELINE OTHER TOTAL
----------- --------- --------- --------- --------- ---------
RMB RMB RMB RMB RMB RMB
(MILLION) (MILLION) (MILLION) (MILLION) (MILLION) (MILLION)
------------------------------------------------------------------------------------------------------------------
Turnover
(including
intersegment) 177,271 223,584 39,211 15,067 - 455,133
Less:
Intersegment
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
=========== ========= ========= ========= ========= =========
Profit/(loss)
from operations 92,370 5,035 1,041 1,922 (1,182) 99,186
=========== ========= ========= ========= ========= =========
------------------------------------------------------------------------------------------------------------------
YEAR ENDED EXPLORATION REFINING CHEMICALS NATURAL
DECEMBER 31, AND AND AND GAS AND
2002 PRODUCTION MARKETING MARKETING PIPELINE OTHER TOTAL
----------- --------- --------- --------- --------- ---------
RMB RMB RMB RMB RMB RMB
(MILLION) (MILLION) (MILLION) (MILLION) (MILLION) (MILLION)
------------------------------------------------------------------------------------------------------------------
Turnover
(including
intersegment) 147,308 174,621 29,661 12,733 - 364,323
Less:
Intersegment
sales (106,266) (9,988) (1,093) (2,552) - (119,899)
----------- --------- --------- --------- --------- ---------
Turnover from
external
customers 41,042 164,633 28,568 10,181 - 244,424
=========== ========= ========= ========= ========= =========
Profit/(loss)
from operations 72,139 2,818 (3,162) 1,552 (1,006) 72,341
=========== ========= ========= ========= ========= =========
SECONDARY REPORTING FORMAT - GEOGRAPHICAL SEGMENTS
----------------------------------------------------------------------------------------------------------------
CAPITAL
TURNOVER TOTAL ASSETS EXPENDITURE
--------------------- --------------------- ----------------------
YEAR ENDED DECEMBER 31, 2003 2002 2003 2002 2003 2002
--------- --------- --------- --------- --------- ---------
RMB RMB RMB RMB RMB RMB
(MILLION) (MILLION) (MILLION) (MILLION) (MILLION) (MILLION)
----------------------------------------------------------------------------------------------------------------
PRC 302,854 243,792 529,209 480,873 83,645 71,774
OTHER (EXPLORATION AND PRODUCTION) 925 632 2,526 2,276 654 1,952
--------- --------- --------- --------- --------- ---------
303,779 244,424 531,735 483,149 84,299 73,726
========= ========= ========= ========= ========= =========
9 SIGNIFICANT DIFFERENCES BETWEEN IFRS AND US GAAP
The consolidated financial statements have been prepared in accordance with
IFRS, which may differ in certain material respects from the accounting
principles generally accepted in the United States of America ("US GAAP").
Such differences involve 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:
----------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
--------------------------------
2003 2002
------------- -------------
RMB (MILLION) RMB (MILLION)
----------------------------------------------------------------------------------------------------------
Net income under IFRS 69,614 46,910
US GAAP adjustments:
Reversal of revaluation loss of property, plant and equipment 391 -
Depreciation charges on property, plant and equipment
revaluation gain 8,053 8,157
Depreciation charges on property, plant and equipment
revaluation loss (144) (112)
Loss on disposal of property, plant and equipment 451 224
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
--------------------------------
2003 2002
------------- -------------
RMB (MILLION) RMB (MILLION)
----------------------------------------------------------------------------------------------------------
Income tax effect (2,886) (2,729)
Minority interests (60) (60)
One-time remedial payments for staff housing - (2,553)
------------- -------------
Net income under US GAAP 75,419 49,837
============= =============
Basic and diluted net income per share under US GAAP (RMB) 0.43 0.28
============= =============
Effect on shareholders' equity of significant differences between IFRS and
US GAAP is as follows:
------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
-------------------------------
2003 2002
------------- -------------
RMB (MILLION) RMB (MILLION)
------------------------------------------------------------------------------------------------------
Shareholders' equity under IFRS 356,613 316,676
US GAAP adjustments:
Reversal of property, plant and equipment revaluation gain (80,555) (80,549)
Depreciation charges on property, plant and equipment
revaluation gain 37,273 29,220
Reversal of property, plant and equipment revaluation loss 1,513 1,122
Depreciation charges on property, plant and equipment
revaluation loss (480) (336)
Loss on disposal of property, plant and equipment 791 340
Deferred tax assets on revaluation 13,686 16,567
Minority interests 364 424
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 329,205 283,464
============= =============
------------------------------------------------------------------------------------------------------
Changes in shareholders' equity under US GAAP for each of the years ended
December 31, 2003 and 2002 are as follows:
-------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
--------------------------------
2003 2002
------------- -------------
RMB (MILLION) RMB (MILLION)
-------------------------------------------------------------------------------------------------------
Balance at beginning of year 283,464 251,914
Net profit for the year 75,419 49,837
Final dividend for year 2001 - (8,839)
Interim dividend for year 2002 - (8,811)
Final dividend for year 2002 (12,299) -
Interim dividend for year 2003 (17,379) -
Contribution from CNPC to marketing enterprises - 10
Payment to CNPC for acquisition of marketing enterprises - (3,200)
Contribution from CNPC for the one-time remedial staff
housing - 2,553
------------- -------------
Balance at end of year 329,205 283,464
============= =============
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 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 could 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 a RMB872 million in excess
of the carrying value of certain property, plant and equipment
immediately prior to the revaluation 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 in 1999
experienced revaluation loss, 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 in 1999 experienced revaluation gain. 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, 2003 to December 31, 2003 was
RMB8,053 million and from January 1, 2002 to December 31, 2002 was
RMB8,157 million.
The depreciation charge on revaluation loss from January 1, 2003 to
December 31, 2003 was RMB144 million and from January 1, 2002 to
December 31, 2002 was RMB112 million.
The loss on disposal of property, plant and equipment, which includes
shut down of manufacturing assets from January 1, 2003 to December 31,
2003 was RMB451 million and from January 1, 2002 to December 31, 2002
was RMB224 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
purposes of determining taxable income.
(b) RELATED PARTY TRANSACTIONS
The Group has disclosed in its 2003 consolidated financial statements
and note 36 thereto to be published on the website of The Stock
Exchange of Hong Kong Limited ("HKSE") (website:
http://www.hkex.com.hk) the transactions with its major customers and
in notes 20, 21, 25, 26 and 37 transactions and balances with its
immediate parent, CNPC, and 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 from related parties government
departments and agencies to the extent that such dealings are in the
normal course of business. US GAAP contains no similar exemptions but
requires disclosure of material related party transactions. The Group
believes that it has provided meaningful disclosures in note 36 (Major
Customers) and note 37 (Related Party Transactions) of its
consolidated financial statements. 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 in January
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 restructuring of an employer enterprise from a wholly
state-owned status to a less than wholly state-owned status was 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 that are payable to qualified employees of the Group. This
amount, RMB2,553 million, was reflected in determining the net income
of the Group for the year ended December 31, 2002, under US GAAP.
Since this amount is borne by CNPC, a corresponding amount has been
included as an addition to the other reserves in the shareholders'
equity of the Group.
(d) RECENT US ACCOUNTING PRONOUNCEMENTS
In January 2003, Financial Accounting Standards Board of the United
States issued and in December 2003 amended the Interpretation FIN
46-R, "Consolidation of Variable Interest Entities". This provides
guidance on the identification of and financial reporting for entities
over which control is achieved through means other than voting rights.
This Interpretation requires existing unconsolidated variable interest
entities to be consolidated by their primary beneficiaries if the
entities do not effectively disperse risks among parties involved. The
Interpretation applies immediately to variable interest entities
created after January 31, 2003, and to variable interest entities in
which an enterprise obtains an interest after that date. It is
effective no later than the end of the first reporting period ending
after March 15, 2004 for variable interest entities in which an
enterprise holds a variable interest that it acquired before February
1, 2003. The adoption of the provisions of FIN 46-R is not expected to
have a material effect on the consolidated financial statements of the
Group.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
In reviewing the following discussion, please also refer to the Company's
consolidated financial statements and notes thereto contained in the information
required by paragraphs 45(1) to 45(3) of Appendix 16 to the Rules Governing the
Listing of Securities on The Stock Exchange of Hong Kong Limited (the "LISTING
RULES") and to be submitted to the HKSE and published on the website of the HKSE
on or before April 30, 2004.
OVERVIEW
For the twelve months ended December 31, 2003, profit before taxation of the
Group was RMB98,322 million, representing an increase of 42.00% compared with
the corresponding period in the previous year. Net profit was RMB69,614 million,
representing an increase of 48.40% compared with the corresponding period in the
previous year. For the first time profit was recorded in all four business
segments. The increase in profit was due primarily to the Group's ability to
take full advantage of the opportunities presented by high oil prices, to
actively adjust its crude oil
production in the east as well as to speed up production in the west, thereby
achieving a stable increase in domestic crude oil production. In terms of
natural gas business, production was sped up mainly in the top four gas
production areas and substantial efforts were made to expand the market, leading
to persistent and fast growth in both production and sales volume. With regard
to refining and chemicals business, equal emphasis was put on structural
adjustments and enhancement of management, the highest ever crude oil processing
load factor was attained while substantial efforts were made to increase the
production of products with high added value and meeting the needs of the
market. The marketing business responded proactively to market changes and made
timely adjustments to marketing strategies, resulting in significant growth both
in the total sales volume and the retail volume.
Basic and diluted earnings per share of the Company for the twelve months ended
December 31, 2003 were RMB0.40.
TWELVE MONTHS ENDED DECEMBER 31, 2003 COMPARED WITH TWELVE MONTHS ENDED DECEMBER
31, 2002
CONSOLIDATED OPERATING RESULTS
Turnover Turnover increased 24.28% from RMB244,424 million for the twelve
months ended December 31, 2002 to RMB303,779 million for the twelve months ended
December 31, 2003. This was due primarily to the increase in the price of crude
oil and the increase in the sales volume and prices of refined products and
chemical products.
Operating Expenses Operating expenses increased 18.89% from RMB172,083 million
for the twelve months ended December 31, 2002 to RMB204,593 million for the
twelve months ended December 31, 2003. This was due primarily to the increased
expenses in purchases of crude oil and refined products from external suppliers.
Purchases, Services and Other Expenses Purchases, services and other expenses
increased 26.73% from RMB71,690 million for the twelve months ended December 31,
2002 to RMB90,850 million for the twelve months ended December 31, 2003. This
mainly reflects: (i) the increase in the procurement cost for crude oil
corresponding to the increase in the refining volume of the refineries; and (ii)
the increase in the price of refined products resulting in the increased
expenses in purchasing refined products from external suppliers.
Employee Compensation Costs Employee compensation costs increased 20.27% from
RMB16,248 million for the twelve months ended December 31, 2002 to RMB19,542
million for the twelve months ended December 31, 2003. This was due primarily to
an increase in employees' salaries and welfare expenses corresponding to better
operating results of the Company this year and an increase in labour expenses as
a result of the development of the retail distribution network.
Depreciation, Depletion and Amortisation Depreciation, depletion and
amortisation increased 10.19% from RMB36,782 million for the twelve months ended
December 31, 2002 to RMB40,531 million for the twelve months ended December 31,
2003. This was due primarily to an increase in depreciation expenses resulting
from the addition of new assets.
Selling, General and Administrative Expenses Selling, general and
administrative expenses increased 6.48% from RMB22,474 million for the twelve
months ended December 31, 2002 to RMB23,930 million for the twelve months ended
December 31, 2003. This increase was due primarily to the higher impairment of
receivables. The Company was able to keep such expenses under effective control
while continuing to increase its scale and achieving a fairly significant
increase in its sales volume.
Shut Down of Manufacturing Assets The costs for shutting down manufacturing
assets increased by 11.03% from RMB2,121 million for the twelve months ended
December 31, 2002 to RMB2,355 million for the twelve months ended December 31,
2003, including RMB1,596 million for shutting down refining assets with low
efficiency in the refining and marketing segment, and RMB759 million in the
chemicals and marketing segment.
Taxes Other than Income Taxes Taxes other than income taxes increased 8.66%
from RMB14,613 million for the twelve months ended December 31, 2002 to
RMB15,879 million for the twelve months ended December 31, 2003. This was due
primarily to: (i) increases in the production of gasoline and diesel products
resulting in higher consumption tax and surcharges; and (ii) an increase in
revenue resulting in an increase in resources compensation fees.
Profit From Operations Profit from operations increased 37.11% from RMB72,341
million for the twelve months ended December 31, 2002 to RMB99,186 million for
the twelve months ended December 31, 2003.
Net Exchange Gain (Loss) Net exchange loss decreased 43.04% from RMB316 million
for the twelve months ended December 31, 2002 to RMB180 million for the twelve
months ended December 31, 2003. This was due primarily to a decrease in the
average proportion of foreign exchange borrowings and an adjustment in the
currency mix of foreign exchange borrowings by repaying some of the foreign
debts denominated in foreign currencies with relatively high exchange rate risk,
such as Euro and British Sterling.
Net Interest Expense Net interest expense decreased 45.33% from RMB3,053
million for the twelve months ended December 31, 2002 to RMB1,669 million for
the twelve months ended December 31, 2003. This decrease was due primarily to
sufficient cash flow generated by operating activities, a decrease in the
average proportion of interest-bearing debts, and decreases in the average
interest rates.
Profit Before Taxation Profit before taxation increased 42.00% from RMB69,240
million for the twelve months ended December 31, 2002 to RMB98,322 million for
the twelve months ended December 31, 2003.
Taxation Taxation increased 26.27% from RMB22,231 million for the twelve months
ended December 31, 2002 to RMB28,072 million for the twelve months ended
December 31, 2003 due primarily to an increase in profit before taxation.
Net Profit Net profit increased 48.40% from RMB46,910 million for the twelve
months ended December 31, 2002 to RMB69,614 million for the twelve months ended
December 31, 2003.
SEGMENT INFORMATION
EXPLORATION AND PRODUCTION
Turnover Turnover increased 20.34% from RMB147,308 million for the twelve
months ended December 31, 2002 to RMB177,271 million for the twelve months ended
December 31, 2003. This was due primarily to an increase in the price of crude
oil and the increased sales volume of natural gas. The average realised price of
crude oil of the Company in 2003 was US$27.20 per barrel, increased by 21.00% as
compared with 2002.
Intersegment sales increased 21.36% from RMB106,266 million for the twelve
months ended December 31, 2002 to RMB128,963 million for the twelve months ended
December 31, 2003. This was due primarily to an increase in the price of crude
oil and the increased sales volume of natural gas.
Operating Expenses Operating expenses increased 12.95% from RMB75,169 million
for the twelve months ended December 31, 2002 to RMB84,901 million for the
twelve months ended December 31, 2003 due primarily to an increase in
exploration expenses, depletion of oil and gas property, human resources
expenses and higher impairment of receivables.
Profit From Operations Profit from operations increased 28.04% from RMB72,139
million for the twelve months ended December 31, 2002 to RMB92,370 million for
the twelve months ended December 31, 2003.
REFINING AND MARKETING
Turnover Turnover increased 28.04% from RMB174,621 million for the twelve
months ended December 31, 2002 to RMB223,584 million for the twelve months ended
December 31, 2003 due to increases in the sales volume and prices of major
refined products.
Sales revenue from gasoline increased 23.02% from RMB48,834 million for the
twelve months ended December 31, 2002 to RMB60,073 million for the twelve months
ended December 31, 2003 due primarily to an increase in the selling price and
sales volume. The average realised selling price of gasoline increased 17.62%
from RMB2,570 per ton for the twelve months ended December 31, 2002 to RMB3,023
per ton for the twelve months ended December 31, 2003. The sales volume of
gasoline increased 4.59% from 19 million tons for the twelve months ended
December 31, 2002 to 19.87 million tons for the twelve months ended December 31,
2003.
Sales revenue from diesel increased 26.88% from RMB79,081 million for the twelve
months ended December 31, 2002 to RMB100,336 million for the twelve months ended
December 31, 2003 due primarily to an increase in the selling price and sales
volume. The average realised selling price of diesel increased 14.72% from
RMB2,384 per ton for the twelve months ended December 31, 2002 to RMB2,735 per
ton for the twelve months ended December 31, 2003. The sales volume of diesel
increased 10.59% from 33.17 million tons for the twelve months ended December
31, 2002 to 36.68 million tons for the twelve months ended December 31, 2003.
Sales revenue from kerosene increased 6.76% from RMB3,864 million for the twelve
months ended December 31, 2002 to RMB4,125 million for the twelve months ended
December 31, 2003 due primarily to an increase in the selling price.
Intersegment sales revenue increased 68.87% from RMB9,988 million for the twelve
months ended December 31, 2002 to RMB16,867 million for the twelve months ended
December 31, 2003 due primarily to increases in the price and sales volume of
refined products.
Operating Expenses Operating expenses increased 27.21% from RMB171,803 million
for the twelve months ended December 31, 2002 to RMB218,549 million for the
twelve months ended December 31, 2003 due primarily to the increased expenses in
purchases of crude oil and refined products from external suppliers.
Profit From Operations Profit from operations increased 78.67% from RMB2,818
million for the twelve months ended December 31, 2002 to RMB5,035 million for
the twelve months ended December 31, 2003.
CHEMICALS AND MARKETING
Turnover Turnover increased 32.20% from RMB29,661 million for the twelve months
ended December 31, 2002 to RMB39,211 million for the twelve months ended
December 31, 2003. This significant improvement in the results of this segment
was due primarily to increases in the sales volume and prices of chemical
products.
Operating Expenses Operating expenses increased 16.29% from RMB32,823 million
for the twelve months ended December 31, 2002 to RMB38,170 million for the
twelve months ended December 31, 2003 due primarily to an increase in the
purchase expenses for direct materials.
Profit From Operations The chemicals and marketing segment made a profit from
operations of RMB1,041 million for the twelve months ended December 31, 2003,
compared with a loss of RMB3,162 million for the twelve months ended December
31, 2002.
NATURAL GAS AND PIPELINE
Turnover Turnover increased 18.33% from RMB12,733 million for the twelve months
ended December 31, 2002 to RMB15,067 million for the twelve months ended
December 31, 2003 due primarily to increases in the sales volume of natural gas,
the average pipeline transmission price for crude oil and natural gas and the
income from pipeline transmission for refined products.
Operating Expenses Operating expenses increased 17.57% from RMB11,181 million
for the twelve months ended December 31, 2002 to RMB13,145 million for the
twelve months ended December 31, 2003. This was due primarily to an increase in
the purchase expenses for natural gas and depreciation expenses.
Profit From Operations Profit from operations increased 23.84% from RMB1,552
million for the twelve months ended December 31, 2002 to RMB1,922 million for
the twelve months ended December 31, 2003.
LIQUIDITY AND CAPITAL RESOURCES
For the twelve months ended December 31, 2003, the Group's primary sources of
funding were cash generated from operating activities, short-term and long-term
borrowings, cash and cash equivalents. The Group's funds were primarily used in
operating activities, for capital expenditures, repayment of short-term and
long-term borrowings, and distributions of dividends to shareholders.
As at December 31, 2003, short-term borrowings made up approximately 6.67% of
the capital employed compared with approximately 5.12% as at December 31, 2002.
The ability to obtain financing may be affected by the financial position and
the results of operations of the Company, and by the conditions of international
and domestic capital markets. In addition, prior to accessing international
capital markets, the Company must obtain approvals from relevant PRC government
authorities. In general, the Company must obtain PRC government approvals for
any project involving significant capital investment in the refining and
marketing segment, chemicals and marketing segment and the natural gas and
pipeline segment.
The Company plans to fund the capital and related investments principally
through the cash flow generated from operating activities, short-term and
long-term borrowings, cash and cash equivalents. A net cash flow of RMB138,820
million was generated from operating activities for the twelve months ended
December 31, 2003. As at December 31, 2003, the Group had RMB11,231 million in
cash and cash equivalents. Cash and cash equivalents were primarily Renminbi
(with Renminbi accounting for approximately 91.68% and United States Dollar
accounting for approximately 8.32%).
The table below sets forth the cash flow of the Group for each of the twelve
months ended December 31, 2002 and 2003 and the cash equivalents at the end of
each period:
--------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------
2003 2002
------------- -------------
RMB (MILLION) RMB (million)
--------------------------------------------------------------------------------------------
Net cash flow generated from operating activities 138,820 98,341
Net cash flow used for investing activities (97,797) (71,662)
Net cash flow used for financing activities (39,769) (27,829)
Cash and cash equivalents at the end of each period 11,231 9,977
--------------------------------------------------------------------------------------------
CASH FLOW GENERATED FROM OPERATING ACTIVITIES
The net cash flow of the Group generated from operating activities increased
from RMB98,341 million for the twelve months ended December 31, 2002 to
RMB138,820 million for the twelve months ended December 31, 2003. This was due
primarily to an increase in sales revenue, the timely collection of payment for
goods, and increased efforts in clearing old receivables.
As at December 31, 2003, the Group had a working capital deficit of RMB27,855
million, compared with a working capital deficit of RMB14,189 million as at
December 31, 2002. This increase in working capital deficit was due to an
increased amount of long-term borrowings due within a year.
CASH USED FOR FINANCING ACTIVITIES
The net borrowings of the Group as at December 31, 2002 and December 31, 2003
were as follows:
-----------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
-------------------------------
2003 2002
------------- -------------
RMB (MILLION) RMB (million)
-----------------------------------------------------------------------------------------------------
Short-term borrowings (including liquid portion of long-term
borrowings) 28,890 20,633
Long-term borrowings 41,959 60,655
------------- -------------
Total borrowings 70,849 81,288
============= =============
Less:
Cash and cash equivalents 11,231 9,977
Time deposits with maturities over three months 2,640 2,612
Receivables under resale agreements 24,224 9,786
------------- -------------
Net borrowings 32,754 58,913
-----------------------------------------------------------------------------------------------------
THE MATURITY PROFILE OF LONG-TERM BORROWINGS OF THE GROUP IS AS FOLLOWS:
--------------------------------------------------------------
PRINCIPAL AS AT
DECEMBER 31,
2003
----------------
RMB (MILLION)
--------------------------------------------------------------
To be repaid within one year 19,711
To be repaid within one to two years 18,183
To be repaid within two to five years 17,108
To be repaid after five years 6,668
----------------
61,670
--------------------------------------------------------------
Of the total borrowings of the Group as at December 31, 2003, approximately
24.03% were fixed-rate loans and 75.97% were floating-rate loans. Of the total
borrowings as at December 31, 2003, approximately 81.95% were denominated in
Renminbi, approximately 16.05% in United States Dollar, approximately 0.64% in
British Sterling, approximately 0.82% in Japanese Yen and approximately 0.54% in
Euro.
As at December 31, 2002 and December 31, 2003, the amount of short-term
borrowings owed to related parties was RMB570 million and RMB610 million,
respectively. As at December 31, 2002 and December 31, 2003, the amount of
long-term borrowings owed to related parties was RMB24,132 million and RMB24,578
million, respectively.
As at December 31, 2003, the amount of short-term and long-term borrowings owed
to China Petroleum Finance Company Limited was RMB610 million and RMB24,578
million, respectively.
The net cash flow used for financing activities for the twelve months ended
December 31, 2003 increased 42.90% compared with the twelve months ended
December 31, 2002. This increase was primarily due to increased dividend
payment.
As at December 31, 2003, RMB170 million worth of loans made to the Group (RMB398
million in 2002) were secured loans (finance lease and bank loans), of which
RMB114 million worth of bank loans (RMB276 million in 2002) were secured by
plant and equipment of the Group that worth RMB152 million (RMB426 million in
2002). 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, 2003, the debts incurred by the Group by way
of finance lease amounted to RMB56 million (RMB122 million in 2002). The net
book value of the properties, plant and equipment under finance lease was RMB240
million (RMB399 million in 2002).
The debt to capitalisation ratio as at December 31, 2003 was 16.57% (20.43% as
at December 31, 2002).
CAPITAL EXPENDITURES
The table below sets forth capital expenditures of the Group by business segment
for each of the twelve months ended December 31, 2003 and the twelve months
ended December 31, 2002. Capital expenditures increased 14.34% from RMB73,726
million as at December 31, 2002 to RMB84,299 million as at December 31, 2003.
This was due primarily to increased investments in exploration, the speeding up
of production in the west and greater efforts in the construction of the sales
network.
-------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
2003 2002 2004 (ESTIMATED VALUE)
----------------- ----------------- -----------------------
RMB % RMB % RMB %
(MILLION) (MILLION) (MILLION)
---------------------------------------------------- ----------------- -----------------------
Exploration and production 52,813* 62.65 46,078* 62.50 52,070* 60.78
Refining and marketing 13,915 16.51 11,327 15.36 10,100 11.79
Chemicals and marketing 3,903 4.63 3,175 4.31 5,500 6.42
Natural gas and pipeline 13,530 16.05 13,013 17.65 17,400 20.31
Other 138 0.16 133 0.18 600 0.70
----------------- ----------------- -----------------------
Total 84,299 100.00 73,726 100.00 85,670 100.00
-------------------------------------------------------------------------------------------------------
Note*: If the investments relating to geological and geophysical exploration
costs are included, the capital expenditures and investments for the exploration
and production segment for 2002, 2003 and the estimated value for the year of
2004 will be RMB50,646 million, RMB58,699 million and RMB56,900 million,
respectively.
EXPLORATION AND PRODUCTION
The majority of the Group's capital expenditures relate to the exploration and
production segment. Capital expenditures of the exploration and production
segment for the twelve months ended December 31, 2003 were RMB52,813 million, of
which RMB9,250 million was used for exploration activities and RMB39,587 million
for development activities. The capital expenditures of this segment for the
twelve months ended December 31, 2002 totalled RMB46,078 million, including
RMB6,136 million for exploration activities and RMB35,558 million for
development activities. The increase in the capital expenditures was due
primarily to increased investments in exploration, the strategic adjustments in
the east and the speeding up of production in the west.
The Group anticipates that capital expenditures for the exploration and
production segment for the twelve months ending December 31, 2004 will amount to
RMB52,070 million. Approximately RMB9,870 million will be used for oil and gas
exploration activities and approximately RMB42,200 million for oil and gas
development activities. The exploration efforts will be focused on the Erdos,
Junggar, Tarim, Songliao and Bohai Bay basins.
REFINING AND MARKETING
Capital expenditures for the Group's refining and marketing segment for the
twelve months ended December 31, 2003 were RMB13,915 million, of which RMB8,573
million was spent on the expansion of the retail marketing network for refined
products and basic storage facilities, and RMB5,342 million was spent on the
renovation of the refining facilities. The total capital expenditures of this
segment for the twelve months ended December 31, 2002 were RMB11,327 million.
The increase in capital expenditures was due primarily to greater efforts in the
construction of the sales network.
The Group anticipates that capital expenditures for the refining and marketing
segment for the twelve months ended December 31, 2004 will amount to RMB10,100
million, which include:
o approximately RMB4,600 million for the construction and expansion of
refining facilities;
o approximately RMB5,500 million for investments in the refined product sales
network in order to increase the number of service stations and storage
facilities.
CHEMICALS AND MARKETING
Capital expenditures for the chemicals and marketing segment increased 22.93%
from RMB3,175 million for the twelve months ended December 31, 2002 to RMB3,903
million for the twelve months ended December 31, 2003. The increase in capital
expenditures was due primarily to increased investments in the ethylene project
of Daqing Petrochemical Company, and the launching of a number of new
construction projects, such as the upgrading of facilities for organosilicon
polymer and butanol/octanol in Jilin Petrochemical Company.
The Group anticipates that capital expenditures for the chemicals and marketing
segment for the twelve months ending December 31, 2004 will amount to RMB5,500
million, which is expected to be used primarily for the upgrading of the three
big ethylene projects at Daqing, Jilin and Lanzhou, and for the launching of
three chemical fertilizer production capacity expansion projects at Daqing,
Ningxia and Urumqi petrochemical companies 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, 2003 were RMB13,530 million. The Group spent RMB13,276
million of these capital expenditures on the construction of long distance
pipelines, of which RMB10,667 million was spent on the West-East gas pipeline
project. Capital expenditures in this segment for the twelve months ended
December 31, 2002 totalled RMB13,013 million. The increase in the capital
expenditures was due primarily to increased investments in the West-East gas
pipeline project, the Zhongxian-Wuhan and the second Shaanxi-Beijing pipelines.
The Group anticipates that capital expenditures for the natural gas and pipeline
segment for the twelve months ending December 31, 2004 will amount to RMB17,400
million. Approximately RMB13,400 million is expected to be invested in the
West-East gas pipeline project, the Zhongxian-Wuhan pipeline and the second
Shaanxi-Beijing pipeline projects, approximately RMB4,000 million is expected to
be invested in the construction of natural gas storage facilities and natural
gas, crude oil and refined products pipelines.
OTHER
Non-segment-specific capital expenditures for the twelve months ended December
31, 2002 and the twelve months ended December 31, 2003 were RMB133 million and
RMB138 million, respectively. The capital expenditures related primarily to
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, 2004 will amount to RMB600 million, which is
expected to be primarily used for the construction of water and electricity
supply systems, roads and telecommunications systems for the benefits of various
segments.
MATERIAL INVESTMENT
The Group did not hold any material investment for the year ended December 31,
2003.
MATERIAL ACQUISITION OR DISPOSAL
The Group had no material acquisition or disposal of subsidiaries and associated
companies in the year ended December 31, 2003.
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 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 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 revenue, 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 revenue, but the cost for acquiring imported materials and
equipment may be reduced. The results of operations and the financial position
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 broad range of petroleum related activities. The
hydrocarbon commodity markets are influenced by global as well as regional
supply and demand conditions. The PRC government currently publishes prices for
onshore crude oil, gasoline and diesel according to international benchmark
prices. A decline in prices of crude oil and refined products could adversely
affect its financial performance. The Group historically has not used commodity
derivative instruments to hedge the potential price fluctuations of crude oil
and other refined products. Therefore, during 2003 and 2002, the Group was
exposed to the general price fluctuations of broadly traded oil and gas
commodities.
INDUSTRY RISK
Like other crude 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 licenses, the imposition of industry-specific taxes and levies and
the implementation of environmental and safety standards, is expected to have an
effect 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, 2002 and December 31, 2003, the Group had 419,598 and 417,229
employees, respectively. The table below sets forth the number of the employees
by business segment as at December 31, 2003:
----------------------------------------------------------------------------------------------------
NUMBER OF
EMPLOYEES % OF TOTAL
--------- ----------
Exploration and production ............................................. 234,733 56.00
Refining and marketing.................................................. 111,655 27.00
Chemicals and marketing................................................. 57,722 14.00
Natural gas and pipeline................................................ 10,342 2.00
Other* ................................................................. 2,777 1.00
--------- ----------
Total .................................................................. 417,229 100.00
----------------------------------------------------------------------------------------------------
Note*: Including PetroChina Exploration & Development Research Institute,
PetroChina Planning & Engineering Institute, headquarters and business segments.
EMPLOYEE COMPENSATION
The total employee compensation payable by the Group for the twelve months ended
December 31, 2003 was RMB12,893 million, being the total salaries of the
employees during the reporting period. Compensation of the employees is
determined according to industry practice and the actual conditions of the
Group, and is based on the principles of attracting and retaining the
high-calibre personnel, and motivating all staff for the realisation of the best
results.
The Company's senior management remuneration system links senior management
members' financial interests (including those of executive directors and
supervisors) with the Company's operating results and the market performance of
its shares. The senior management members 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 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 Manager 25 50 25
Details of the directors' and supervisors' emoluments as at December 31, 2003
and December 31, 2002 are as follows:
--------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
----------------------------
2003 2002
--------- ---------
(RMB'000) (RMB'000)
--------------------------------------------------------------------------
Fee for directors and supervisors 83 128
Salaries, allowances and other benefits 1,377 1,042
Contribution to retirement benefit scheme 34 25
--------- ---------
1,494 1,195
--------------------------------------------------------------------------
--------------------------------------------------------------------------------
The numbers of directors and supervisors whose emoluments fall within the
following band (including directors and supervisors whose term expired during
the year):
--------------------------------------------
2003 2002
------ ------
NUMBER Number
--------------------------------------------
Nil - RMB1,000,000 19 23
====== ======
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 committed originally 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, with the aim of keeping the workforce at its present
size. The target is to maintain zero growth in head count while striving to
reduce head count.
TRAINING PROGRAMMES
In order to develop the Company into a first-class international oil company,
the Company will endeavour to carry out its training programmes this year with a
special emphasis on learning. It will focus on the training of core employees,
actively train all its employees and strive to build up an operating and
management team, a technology renovation team and an skillful operators' team,
so as to achieve an overall improvement in the quality of its staff and ensure
the supply of talents required for the continuous, steady and rapid development
of the Company.
MEDICAL INSURANCE
Since October 1, 2002, the Company's headquarters and its regional branches
based in Beijing have participated in the basic medical insurance scheme
organised 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 the respective local
basic medical insurance scheme.
As basic medical insurance is organised by the local government, the
implementation dates vary and there are certain differences between the rate of
contribution and reimbursement methods adopted by various cities. The rate of
contribution is usually set at 6% to 10% of the total basic salaries of the
employees of the respective companies.
In accordance with relevant regulations of the State, the Company has given
permission to regional branches which have already participated in the local
basic medical insurance scheme to establish supplemental medical insurance
scheme beginning from 2002. Contributions to such supplemental scheme must not
exceed 4% of the total salaries and will be booked as cost.
CONTINGENT LIABILITIES
Information on the Group's contingent liabilities as of December 31, 2003 is as
follows:
BANK AND OTHER GUARANTEES
At December 31, 2003, 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.
-------------------------------------------------------------------------------------------
DECEMBER 31, December 31,
2003 2002
------------- -------------
RMB (MILLION) RMB (million)
-------------------------------------------------------------------------------------------
Guarantees in respect of borrowings of associated
companies 448 962
------------- -------------
-------------------------------------------------------------------------------------------
ENVIRONMENTAL LIABILITIES
China has adopted extensive environmental laws and regulations that affect the
operation of the oil and gas industry. The outcome of environmental liabilities
under proposed or future environmental legislation cannot reasonably be
estimated at present, and could be material. Under the existing legislation,
however, the management of the Group believes that there are no probable
environmental liabilities, except for the amounts which have already been
reflected in the financial statements, that 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 outcomes of such contingencies, lawsuits or other proceedings cannot
be determined at present, the management believes that any resulting 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 incorporation of the Company, CNPC has undertaken to the
Company the following:
o 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;
o CNPC will complete, within one year from November 5, 1999, the necessary
governmental procedures for the requisition of the collectively-owned land
on which 116 service stations owned by the Company are located; and
o 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, 2003, CNPC had obtained formal land use right certificates in
relation to 24,046 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 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 by CNPC or the fact that the relevant governmental procedures have not
been completed. In the management's opinion, the outcome of the above events
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 damage 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 of the Group 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.
RE-ALLOCATION OF PRODUCTION FACILITIES
The Group may further streamline its production facilities within the next
several years to further improve the competitiveness and operating efficiency of
the Group. The management has not approved all significant actions to be taken
to complete such plans. The management believes such plans will not 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.
MARKET REVIEW
CRUDE OIL MARKET REVIEW
International crude oil prices remained high for the most of 2003 due to
international military, political, economic and other factors. The annual
average price remained at a fairly high level for the most of 2003. The annual
average price for WTI, Brent and Minas crude oil was US$31.05 per barrel,
US$28.84 per barrel and US$29.50 per barrel respectively, representing a
respective increase of US$4.86 per barrel, US$3.76 per barrel and US$3.78 per
barrel over the annual average price in 2002. Corresponding to the rise in
international oil prices, domestic crude oil prices had increased. The average
realised price for domestic crude oil in 2003 was higher than the 2002 level.
Net crude oil imports continued to increase in 2003, rising by 33.43% over the
previous year to a total of 82.99 million tons. The domestic output of crude oil
and refined products reached 169 million tons and 243 million tons respectively.
REFINED PRODUCTS MARKET REVIEW
In general, the domestic market for refined products fared well in 2003, with
nominal consumption increasing by 8.1% to 131.91 million tons. Save in the
second quarter, when the consumption of refined products decreased due to the
outbreak of severe acute respiratory syndrome (SARS), the demand for refined
products was strong in the other three quarters as a result of the persistent
growth in the domestic economy. Net import of refined products for the whole
country climbed to 14.41 million tons, increasing 49.30% over the previous year.
As compared with the beginning of 2003, the national inventory of refined
products declined by approximately 1.4 million tons at the end of 2003.
Owing to the adjustment and control of the domestic prices for refined products
by the central government in 2003 and affected by the prices in the
international markets, the annual average reference medium guidance prices for
both gasoline and diesel were higher than the 2002 level.
CHEMICAL PRODUCTS MARKET REVIEW
In 2003, despite the impacts of the war in Iraq and the outbreak of SARS, the
shortage of basic energy became more acute as the global economy began to
recover and grew at an increasing speed. Accordingly, the prices for all
chemical products had a fairly substantial increase compared with 2002.
At the beginning of 2003, the overall inventory in China was at a relatively low
level. The fast development of the global economy led to a rapid development of
China's real estate, automobile and other industries. The increase in demand for
chemical products outpaced the increase in gross domestic product (GDP), and
there was a relatively large increase in the exports of plastic and textile
products. As a result, despite the increase in imports compared with the
previous year, the limited growth in domestic production capacity failed to
satisfy the increased demand, thus leading to a shortage of resources for the
chemical products market.
With the incoming of labour-intensive enterprises to the PRC and increased
investments in industries in 2003, there was a corresponding increase in the
demand for chemical products. Until the large-scale ethylene production projects
in the Middle East commence production, there will be a shortage of chemical
products in China, leading to a fluctuated but rising trend for the prices of
such products.
COMPANY BUSINESS REVIEW
For the twelve months ended December 31, 2003, the Company's total annual output
of oil and gas amounted to 890.1 million barrels of oil equivalent, including
774.9 million barrels of crude oil and 691.3 billion cubic feet of marketable
natural gas, representing an average production of 2.12 million barrels of crude
oil and 1.894 billion cubic feet of marketable natural gas per day. A total of
726 million barrels of crude oil and 651 billion cubic feet of natural gas were
sold. Approximately 73% of the crude oil sold by the Company was purchased by
its refineries. In 2003, the Company's lifting cost (inclusive of overseas
business) was US$4.39 per barrel (US$4.36 per barrel if exclusive of overseas
business; for the same period in 2002, the lifting cost was US$4.34 per barrel
if inclusive of overseas business, and US$4.32 per barrel if exclusive of
overseas business), representing an increase of 1.15% compared with the year
2002.
For the twelve months ended December 31, 2003, the Company's refineries
processed 621 million barrels of crude oil, or an average of 1.70 million
barrels per day. Approximately 86% of the crude
oil processed in the Company's refineries was supplied by the exploration and
production segment. The Company produced approximately 52.79 million tons of
gasoline, diesel and kerosene and sold approximately 58.34 million tons of these
products. The Company actively expanded its sales and distribution networks, in
particular the retail distribution network, by capitalising fully on the
complementary value-added effect of the integration of refining and marketing.
As at December 31, 2003, there were 15,231 service stations either owned,
controlled or franchised by the Company or owned by CNPC but to which the
Company provides supervisory support. The Company's cash processing costs
declined steadily from RMB136 per ton to RMB132 per ton.
For the twelve months ended December 31, 2003, the Company produced 1.818
million tons of ethylene, 2.369 million tons of synthetic resin, 0.212 million
tons of synthetic fibres, 0.246 million tons of rubber, and 3.58 million tons of
urea.
The natural gas and pipeline segment is the Company's core business segment for
development. For the twelve months ended December 31, 2003, the Company sold
543.4 billion cubic feet of marketable natural gas through the natural gas and
pipeline segment. The Company currently owns and operates 15,144 kilometres of
regional natural gas pipeline networks, of which 14,017 kilometres are operated
by the natural gas and pipeline segment. As at December 31, 2003, the Company
owned and operated a crude oil pipeline network of 9,141 kilometres and a
refined products pipeline of 2,276 kilometres.
In 2003, the Company exceeded all production and operating targets, with an
overall development trend remarkably better than anticipated. The Company
received a number of awards in the "Asia's Best Companies - China" survey by
FinanceAsia. The Company's rank in BusinessWeek's list of "Top 200
Emerging-Market Companies" (measured by market capitalisation) jumped from 83rd
in 2002 to the 3rd in 2003. Standard & Poor's rated the Company as one of
"China's Top 50 Companies" and the most profitable among those 50 companies. By
accelerating the construction of key projects such as the West-East Pipeline
project, the Company increased its efforts to achieve continued developments.
The eastern section of the West-East Pipeline project was fully completed and
successfully put into trial operation on October 1, 2003. Gas supply to Henan,
Anhui, Jiangsu and Zhejiang commenced ahead of schedule, while gas supply to
commercial customers in Shanghai commenced on January 1, 2004 as scheduled. All
welding work of major pipelines in the western section was completed.
Construction of the Zhongxian-Wuhan pipeline commenced on August 28, 2003. Key
engineering projects such as Changjiang crossing was completed by more than 50%
of the total volume of work. The preliminary design of the second
Shaanxi-Beijing gas pipeline was completed and the key engineering projects were
started. At the end of 2003, a gas blowout occurred at the Company's Luojia
No.16H gas well in Kaixian, Chongqing. The gas well was contracted for drilling
by the No. 12 Drilling Team of Chuandong Drilling Company under the Sichuan Oil
Administration Bureau, a subsidiary of CNPC. This is a serious accident which
has resulted in the poisoning, injury and death of many people living in the
surrounding areas. This accident has not resulted in a material adverse effect
on the Company's results of operations and financial position, but it has
already prompted the Company to pay serious attention to production safety.
STANDARDISED OPERATIONS AND BUSINESS PROSPECTS
The Company strictly follows the regulatory laws and regulations of its places
of listing and operates according to relevant laws and standards. In 2003, a
number of positive and effective measures were taken according to regulatory
requirements. The Company's H share price rose steadily in 2003 to a closing
price of HK$4.45 per share at the end of the year, representing an
increase of almost 200% over the price at the end of 2002, or an increase of
almost 250% over the issue price of the H shares.
In 2003, the Company continued to enhance exploration and exploitation of oil
and gas reserves, advance geological survey and integrate exploration and
exploitation, making a series of important achievements. The target of a steady
increase in crude oil production was attained through strategic adjustments of
crude oil production in the east on the one hand and speeding up of production
in the west on the other hand. Natural gas business continued its rapid growth,
recording substantial increases in both output and the sales volume. Overseas
project in Indonesia was running well in terms of production and operations.
The Company continued to emphasise on the improvement of resources allocation
and restructuring of the refining and chemicals business. While speeding up the
construction of 10-million-ton-class refining and chemicals production bases,
the Company improved the allocation of resources, carefully organised production
and operations, accelerated the construction of key refining and chemicals
projects and technology upgrading, stepped up the construction of sales networks
for end products in the oil refining business, and unified the sales of chemical
products, thus leading to a remarkable increase in scale-related strengths and
profitability, an increase in the profits from oil refining business and the
turning of the overall loss of the chemicals business into profits.
By accelerating the construction of key projects such as the West-East Pipeline
project, the Company increased its efforts to achieve continued developments.
The eastern section of the West-East Pipeline project was completed and began to
supply gas to downstream users from October 16, 2003. Major work of the western
section was completed. The controlling work for the Zhongxian-Wuhan pipeline was
half-completed. The preliminary design of the second Shaanxi-Beijing gas
pipeline was completed and the controlling work has already started.
The Company continued to promote e-commerce by making use of the website
"Energyahead" (www.energyahead.com), which was maintained as an e-commerce
platform. Procurement cost was lowered through the unification of procurement
activities and the promotion of centralised procurement of goods in large
quantities.
In the course of its production and operation, the Company persistently adhered
to the principle of "safety first and focus on prevention", carried out
management work in a way that is orientated towards the people, and provided
in-depth skills training for each post and work safety education centred around
the post responsibility system, tightened the administration of safety
production on contract basis and fully promoted the establishment of the Health,
Safety and Environment (HSE) management system. The Company achieved clean
production by treating pollution at its sources and controlling the discharge of
pollutants.
Looking forward, the Company intends to continue to improve oil and gas
exploration and exploitation, adjust and optimise its refining and chemicals
business, speed up the construction of key projects, stress on marketing efforts
and develop its overseas business, so as to achieve better operating results.
For the exploration and production business, the Company will continue to give
top priority to exploration, greatly improve pre-exploration work and strive to
increase reserves of good quality and high efficiency. Emphasis will be put on
the tapping of resource potentials of existing oilfields and the continuous
increase of recovery rate. The expansion of the production capacity of new
blocks will be sped up, so as to ensure a steady increase in the output of crude
oil, a significant growth in the output of natural gas and an overall
improvement in exploration and exploitation
standards and economic benefits, and maintain the Company's leading position in
China's oil and gas industry.
For the refining and chemicals business, the Company will continue to optimise
resources and restructure its business, use its best endeavours to organise
operations and the construction of key projects, and strive to achieve a
continuous and steady increase in profits.
For the marketing business, the Company will continue to improve its marketing
structure, push ahead the construction of marketing networks and use its best
endeavours to open up new markets, so as to achieve a continued increase in its
market shares and marketing benefits.
For the natural gas and pipeline business, the Company intends to monitor
pipeline construction work with the West-East Pipeline project as the focus, and
achieve targets in terms of the control of construction timetable, quality and
investments. The Company intends to continue to plan the development of the
national pipeline network and facilities, so as to establish a solid foundation
for the gradual formation of a trunk pipeline network connecting the source of
natural gas and covering major markets in China.
For the overseas business, the Company will accelerate the implementation of its
overseas business development strategy and expand its international operation.
It will actively promote its overseas oil and gas exploration and development
business, selectively develop overseas refining and chemicals processing
business and marketing networks, speed up the development of its international
trade and continue to open up new areas for international business operations.
The Company's management will persist in enhancing the Company's value and
strive to maximise benefits and value for its shareholders. The Company will
make substantial efforts in technological innovation and management innovation,
establish a sound internal control system and mechanism which comply with
regulatory requirements and, by way of prudent operations, promote the
continuous, effective and speedy development of the Company.
FINAL DIVIDEND AND TEMPORARY CLOSURE OF REGISTER OF MEMBERS
The Board of Directors recommends to pay a final dividend of RMB0.079324 per
share (inclusive of applicable tax) from the balance of 45% of the net profit
for the twelve months ended December 31, 2003 less the interim dividend for 2003
paid on October 8, 2003. The proposed final dividend is subject to shareholders'
approval at the annual general meeting held on May 18, 2004. The final dividend
shall be paid to shareholders whose names appear on the register of members of
the Company at the close of business on May 18, 2004. The register of members
will be closed from April 18, 2004 to May 18, 2004, 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 16, 2004.
According to Article 149 of the Articles of Association of the Company,
dividends payable to the Company's shareholders shall be declared in Renminbi.
Dividends payable to holders of State-owned shares shall be paid in Renminbi
while dividends payable to holders of H shares shall be paid in Hong Kong
Dollars. The exchange rate of Hong Kong Dollars shall be based on the average of
the closing exchange rates for Renminbi to Hong Kong Dollars, as announced by
the People's Bank of China for the week prior to the announcement of the
dividend at the shareholders' meeting to be held on May 18, 2004.
Final dividend will be paid on or about June 2, 2004.
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 repurchase or redeem any of the securities
of the Company during the twelve months ended December 31, 2003.
DISCLOSURE OF OTHER INFORMATION
Save as otherwise disclosed above, as regards the other matters required to be
disclosed pursuant to Paragraph 45(4)(b)(ii) of Appendix 16 to the Listing
Rules, there is no significant change compared with the information disclosed in
the annual report for the year ended December 31, 2002 nor any significant
impact on the business of the Group, and 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
Code of Best Practice contained in Appendix 14 to the Listing Rules.
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, 2003.
PUBLICATION OF RESULTS ON THE WEBSITE OF THE HKSE AND OF THE COMPANY
In accordance with paragraphs 45(1) to 45(3) of Appendix 16 to the Listing
Rules, all the information of the Company contained in this Announcement of
Results for the Year Ended December 31, 2003 will be published on the website of
the HKSE (website: http://www.hkex.com.hk) on or before April 30, 2004. 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
MA FUCAI
Chairman
Beijing, China
March 24, 2004
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 25, 2004 By: /s/ Li Huaiqi
--------------------------------
Name: Li Huaiqi
Title: Company Secretary