Analytical Instrumentation

What Went Wrong with PetroChina?

Nov 27 2017 Comments 0

China may be one of the biggest economic powerhouses on the planet, but this didn't stop its biggest oil and gas producer from going sideways. After debuting on the Shanghai Stock Exchange in November 2007, PetroChina emerged as the world's first US$1 trillion company. A decade later and the PetroChina’s Shanghai-listed shares have dropped by a huge 82%. This represents a staggering shareholder loss of $800 billion, according to Bloomberg.

The huge loss equates to more than the current market capitalisation value of Microsoft. It also tops the total value of the entire Italian stock market, as well as the combined net worth of the 12 richest people on the planet. Basically, it's a devastating blow. Even more alarming is the fact that experts predict that shares could continue to plummet.

A perfect storm for PetroChina

So what caused PetroChina to crumble? Analysts blame a combination of factors, both domestic and international. One of the biggest triggers is the fact that PetroChina share prices soared the day the company hit the Shanghai Stock Exchange in November 2007. But despite the optimism, the global financial system was already showing cracks. Just a few months later the subprime mortgages market collapsed, followed closely by a bankruptcy claim from Lehman Brothers. By September 2008 the global financial crisis was well underway.

The wrath of the global oil price crash

Before PetroChina had a chance to recover the world was hit by the 2014 oil price crash. This severed the profits and market capitalisation prospects of oil and gas giants across the globe. In addition to the global oil price crash, PetroChina was hit hard by the Chinese market collapse in 2015. It saw excessive stock speculation burst an unsustainable bubble, which dragged down PetroChina stocks even further.

Electric vehicles threaten Chinese oil and gas market

Over the past few years China has been investing heavily in the electric vehicle (EV) revolution. It's also started to clamp down on speculative trades to prevent another volatile stock market bubble. Both moves have also taken their toll on PetroChina’s shares.

Can PetroChina recover? While some analysts are optimistic, others assert that with the advent of the EV era, a full recovery is impossible.  

Want to know more about how oil and gas companies crunch the numbers? 'Total Cost of Analysis in Petroleum Labs' offers an overview of the concepts of Total Cost of Ownership and Total Cost of Analysis.

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