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Title of | Name of each exchange | |||
Each class | on which registered | |||
American Depositary Shares, each representing 100 H Shares, par value RMB 1.00 per share* | New York Stock Exchange, Inc. | |||
H Shares, par value RMB 1.00 per share | New York Stock Exchange, Inc.** |
State-owned shares, par value RMB 1.00 per share | 157,922,077,818 | |||
H Shares, par value RMB 1.00 per share | 21,098,900,000 | *** |
Large Accelerated Filer x | Accelerated Filer o | Non-Accelerated Filer o |
* | PetroChina’s H Shares are listed and traded on The Stock Exchange of Hong Kong Limited. |
** | Not for trading, but only in connection with the registration of American Depository Shares. |
*** | Includes 3,166,123,000 H Shares represented by American Depositary Shares. |
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• | “CNPC” or “CNPC group” are to our parent, China National Petroleum Corporation and its affiliates and subsidiaries, excluding PetroChina, its subsidiaries and its interests in long-term investments, and where the context refers to any time prior to the establishment of CNPC, those entities and businesses which were contributed to CNPC upon its establishment. | |
• | “PetroChina”, “we”, “our”, “our company” and “us” are to: |
— | PetroChina Company Limited, a joint stock company incorporated in the People’s Republic of China with limited liability and its subsidiaries and branch companies, or | |
— | the CNPC group’s domestic crude oil and natural gas exploration and production, refining and marketing, chemicals and natural gas businesses that were transferred to us in the restructuring of the CNPC group in 1999. |
• | “PRC” or “China” are to the People’s Republic of China, but do not apply to Hong Kong, Macau or Taiwan for purposes of this annual report. |
1 barrel-of-oil equivalent | = 1 barrel of crude oil | = 6,000 cubic feet of natural gas | ||
1 cubic meter | = 35.315 cubic feet | |||
1 ton of crude oil | = 1 metric ton of crude oil | = 7.389 barrels of crude oil (assuming an API gravity of 34 degrees) |
“acreage” | The total area, expressed in acres, over which an entity has interests in exploration or production. Net acreage is the entity’s interest, expressed in acres, in the relevant exploration or production area. | |
“API gravity” | An indication of the density of crude oil or other liquid hydrocarbons as measured by a system recommended by the American Petroleum Institute (API), measured in degrees. The lower the API gravity, the heavier the compound. | |
“condensate” | Light hydrocarbon substances produced with natural gas that condense into liquid at normal temperatures and pressures associated with surface production equipment. | |
“crude oil” | Crude oil, including condensate and natural gas liquids. |
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“development cost” | For a given period, costs incurred to obtain access to proved reserves and to provide facilities for extracting, treating, gathering and storing the oil and gas. | |
“finding cost” | For a given period, costs incurred in identifying areas that may warrant examination and in examining specific areas that are considered to have prospects of containing oil and gas reserves, including costs of drilling exploratory wells and exploratory-type stratigraphic test wells. Finding cost is also known as exploration cost. | |
“lifting cost” | For a given period, costs incurred to operate and maintain wells and related equipment and facilities, including applicable operating costs of support equipment and facilities and other costs of operating and maintaining those wells and related equipment and facilities. Lifting cost is also known as production cost. | |
“natural gas liquids” | Hydrocarbons that can be extracted in liquid form together with natural gas production. Ethane and pentanes are the predominant components, with other heavier hydrocarbons also present in limited quantities. | |
“offshore” | Areas under water with a depth of five meters or greater. | |
“onshore” | Areas of land and areas under water with a depth of less than five meters. | |
“primary distillation capacity” | At a given point in time, the maximum volume of crude oil a refinery is able to process in its basic distilling units. | |
“proved developed reserves” | Reserves that can be expected to be recovered through existing wells with existing equipment and operating methods. Additional oil and gas expected to be obtained through the application of fluid injection or other improved recovery techniques for supplementing the natural forces and mechanisms of primary recovery are included as “proved developed reserves” only after testing by a pilot project or after the operation of an installed program has confirmed through production response that increased recovery will be achieved. | |
“proved reserves” | Estimated quantities of crude oil and natural gas which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made. Prices include consideration of changes in existing prices provided only by contractual arrangements, but not of escalations based upon future conditions. | |
“proved undeveloped reserves” | Reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. Reserves on undrilled acreage shall be limited to those drilling units offsetting productive units that are reasonably certain of production when drilled. Proved reserves for other undrilled units can be claimed only where it can be demonstrated with certainty that there is |
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continuity of production from the existing productive formation. Under no circumstances should estimates for proved undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual tests in the area and in the same reservoir. | ||
“reserve-to-production ratio” | For any given well, field or country, the ratio of proved reserves to annual production of crude oil or, with respect to natural gas, to wellhead production excluding flared gas. | |
“sales gas” | Marketable production of gas on an “as sold” basis, excluding flared gas, injected gas and gas consumed in operations. | |
“water cut” | For a given oil region, the percentage that water constitutes of all fluids extracted from all wells in that region. |
• | BOE is to barrels-of-oil equivalent, | |
• | Mcf is to thousand cubic feet, and | |
• | Bcf is to billion cubic feet. |
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• | the amounts and nature of future exploration, development and other capital expenditures; | |
• | future prices and demand for crude oil, natural gas, refined products and chemical products; | |
• | development projects; | |
• | exploration prospects; | |
• | reserves potential; | |
• | production of oil and gas and refined and chemical products; | |
• | development and drilling potential; | |
• | expansion and other development trends of the oil and gas industry; | |
• | the planned development of our natural gas operations; | |
• | the planned expansion of our refined product marketing network; | |
• | the planned expansion of our natural gas infrastructure; | |
• | the anticipated benefit from the acquisition of certain overseas assets from CNPC, our parent company; | |
• | the plan to continue to pursue attractive business opportunities outside China; | |
• | our future overall business development and economic performance; | |
• | our anticipated financial and operating information regarding, and the future development and economic performance of, our business; | |
• | our anticipated market risk exposure arising from future changes in interest rates, foreign exchange rates and commodity prices; and | |
• | other prospects of our business and operations. |
• | fluctuations in crude oil and natural gas prices; | |
• | failure to achieve continued exploration success; | |
• | failures or delays in achieving production from development projects; | |
• | continued availability of capital and financing; | |
• | acquisitions and other business opportunities that we may pursue; |
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• | general economic, market and business conditions, including volatility in interest rates, changes in foreign exchange rates and volatility in commodity markets; | |
• | liability for remedial actions under environmental regulations; | |
• | impact of the PRC’s entry into the World Trade Organization; | |
• | the actions of competitors; | |
• | wars and acts of terrorism or sabotage; | |
• | changes in policies, laws or regulations of the PRC, including changes in applicable tax rates; | |
• | the other changes in global economic and political conditions affecting the production, supply and demand and pricing of crude oil, refined products, petrochemical products and natural gas; and | |
• | the other risk factors discussed in this annual report, and other factors beyond our control. |
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Noon buying rate | ||||||||
High | Low | |||||||
(RMB per US$) | ||||||||
November 2006 | 7.8750 | 7.8303 | ||||||
December 2006 | 7.8350 | 7.8041 | ||||||
January 2007 | 7.8127 | 7.7705 | ||||||
February 2007 | 7.7632 | 7.7410 | ||||||
March 2007 | 7.7454 | 7.7232 | ||||||
April 2007 | 7.7345 | 7.7090 | ||||||
May 2007 (through May 7) | 7.7065 | 7.7035 |
Average noon buying rate | ||||
(RMB per US$) | ||||
2002 | 8.2772 | |||
2003 | 8.2772 | |||
2004 | 8.2768 | |||
2005 | 8.1826 | |||
2006 | 7.9725 |
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Year ended December 31, | ||||||||||||||||||||||
2002(1) | 2003(1) | 2004(1) | 2005 | 2006 | ||||||||||||||||||
RMB | RMB | RMB | RMB | RMB | ||||||||||||||||||
(in millions, except for per share | ||||||||||||||||||||||
and per ADS data) | ||||||||||||||||||||||
Income Statement Data | ||||||||||||||||||||||
IFRS | ||||||||||||||||||||||
Revenues | ||||||||||||||||||||||
Sales and other operating revenues | 249,386 | 310,431 | 397,354 | 552,229 | 688,978 | |||||||||||||||||
Operating expenses | ||||||||||||||||||||||
Purchases, services and other | (71,383 | ) | (89,741 | ) | (114,249 | ) | (200,321 | ) | (271,123 | ) | ||||||||||||
Employee compensation costs | (16,665 | ) | (20,044 | ) | (22,934 | ) | (29,675 | ) | (39,161 | ) | ||||||||||||
Exploration expenses, including exploratory dry holes | (8,203 | ) | (10,624 | ) | (12,090 | ) | (15,566 | ) | (18,822 | ) | ||||||||||||
Depreciation, depletion and amortization | (37,680 | ) | (42,163 | ) | (48,362 | ) | (51,305 | ) | (61,388 | ) | ||||||||||||
Selling, general and administrative expenses | (23,930 | ) | (25,982 | ) | (28,302 | ) | (36,538 | ) | (43,235 | ) | ||||||||||||
Employee separation costs and shutting down of manufacturing assets | (2,121 | ) | (2,355 | ) | (220 | ) | — | — | ||||||||||||||
Taxes other than income taxes | (15,366 | ) | (16,821 | ) | (19,943 | ) | (23,616 | ) | (56,666 | ) | ||||||||||||
Revaluation loss of property, plant and equipment | — | (391 | ) | — | — | — | ||||||||||||||||
Other expenses, net | (59 | ) | (598 | ) | (116 | ) | (3,037 | ) | (607 | ) | ||||||||||||
Total operating expenses | (175,407 | ) | (208,719 | ) | (246,216 | ) | (360,058 | ) | (491,002 | ) | ||||||||||||
Income from operations | 73,979 | 101,712 | 151,138 | 192,171 | 197,976 | |||||||||||||||||
Income from equity affiliates and jointly controlled entities | 169 | 933 | 1,621 | 2,401 | 2,277 | |||||||||||||||||
Exchange gain (loss), net | (430 | ) | (36 | ) | 8 | 88 | 74 | |||||||||||||||
Interest income | 663 | 973 | 1,373 | 1,924 | 2,066 | |||||||||||||||||
Interest expense | (4,068 | ) | (2,889 | ) | (2,896 | ) | (2,762 | ) | (3,220 | ) | ||||||||||||
Income before taxes | 70,313 | 100,693 | 151,244 | 193,822 | 199,173 | |||||||||||||||||
Income taxes | (22,939 | ) | (28,796 | ) | (43,598 | ) | (54,180 | ) | (49,776 | ) | ||||||||||||
Income for this year | 47,374 | 71,897 | 107,646 | 139,642 | 149,397 | |||||||||||||||||
Attributable to: | ||||||||||||||||||||||
Shareholders | 46,766 | 69,835 | 103,843 | 133,362 | 142,224 | |||||||||||||||||
Minority shareholders | 608 | 2,062 | 3,803 | 6,280 | 7,173 | |||||||||||||||||
47,374 | 71,897 | 107,646 | 139,642 | 149,397 | ||||||||||||||||||
Basic and diluted net income per share | ||||||||||||||||||||||
Attributable to shareholders for this year(2) | 0.27 | 0.40 | 0.59 | 0.75 | 0.79 | |||||||||||||||||
Basic and diluted net income per ADS(3) | 26.60 | 39.72 | 59.06 | 75.44 | 79.45 | |||||||||||||||||
US GAAP | ||||||||||||||||||||||
Net income | 49,693 | 75,640 | 109,051 | 137,866 | 146,087 | |||||||||||||||||
Basic and diluted net income per share(2) | 0.28 | 0.43 | 0.62 | 0.78 | 0.82 | |||||||||||||||||
Basic and diluted net income per ADS(3) | 28.26 | 43.02 | 62.02 | 77.99 | 81.60 |
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As of December 31, | ||||||||||||||||||||||
2002(1) | 2003(1) | 2004(1) | 2005 | 2006 | ||||||||||||||||||
RMB | RMB | RMB | RMB | RMB | ||||||||||||||||||
(in millions, except for per share and | ||||||||||||||||||||||
per ADS data) | ||||||||||||||||||||||
Balance Sheet Data | ||||||||||||||||||||||
IFRS | ||||||||||||||||||||||
Assets | ||||||||||||||||||||||
Current assets | ||||||||||||||||||||||
Cash and cash equivalents | 19,532 | 11,613 | 11,688 | 80,905 | 48,559 | |||||||||||||||||
Time deposits with maturities after three months but within 12 months | 2,621 | 2,648 | 1,425 | 1,691 | 3,012 | |||||||||||||||||
Investments in collateralized loans | 420 | 24,224 | 33,217 | 235 | — | |||||||||||||||||
Accounts receivable | 6,544 | 4,115 | 3,842 | 4,630 | 8,488 | |||||||||||||||||
Inventories, at net book value | 29,352 | 30,064 | 47,377 | 62,733 | 76,038 | |||||||||||||||||
Prepaid expenses and other current assets | 19,618 | 18,845 | 24,704 | 25,701 | 26,125 | |||||||||||||||||
Total current assets | 78,087 | 91,509 | 122,253 | 175,895 | 162,222 | |||||||||||||||||
Non-current assets | ||||||||||||||||||||||
Property, plant and equipment, less accumulated depreciation, depletion and amortization | 404,135 | 442,311 | 485,612 | 563,890 | 645,337 | |||||||||||||||||
Long-term investments, at net book value | 6,055 | 9,405 | 11,504 | 13,608 | 35,010 | |||||||||||||||||
Prepaid operating lease rentals | 6,267 | 7,286 | 12,307 | 16,235 | 20,468 | |||||||||||||||||
Intangible and other assets | 2,769 | 3,027 | 3,020 | 5,011 | 6,627 | |||||||||||||||||
Time deposits mature after one year | 3,498 | 3,485 | 3,751 | 3,428 | 2,499 | |||||||||||||||||
Total non-current assets | 422,724 | 465,514 | 516,194 | 602,172 | 709,941 | |||||||||||||||||
Total assets | 500,811 | 557,023 | 638,447 | 778,067 | 872,163 | |||||||||||||||||
Liabilities and shareholders’ equity | ||||||||||||||||||||||
Current liabilities | ||||||||||||||||||||||
Short-term debt | 23,185 | 34,328 | 34,937 | 28,689 | 35,763 | |||||||||||||||||
Accounts payable and accrued liabilities | 59,950 | 66,700 | 73,072 | 99,758 | 120,182 | |||||||||||||||||
Income tax payable | 5,581 | 12,068 | 17,484 | 20,567 | 17,744 | |||||||||||||||||
Other taxes payable | 5,767 | 9,251 | 5,032 | 4,824 | 6,190 | |||||||||||||||||
Total current liabilities | 94,483 | 122,347 | 130,525 | 153,838 | 179,879 | |||||||||||||||||
Non-current liabilities | ||||||||||||||||||||||
Long-term debt | 68,894 | 51,601 | 44,648 | 44,570 | 35,634 | |||||||||||||||||
Other long-term obligations | 1,707 | 2,010 | 2,481 | 1,046 | 995 | |||||||||||||||||
Assets disposal obligations | 585 | 735 | 919 | 14,187 | 18,481 | |||||||||||||||||
Deferred taxes | 10,832 | 13,436 | 16,902 | 20,759 | 19,583 | |||||||||||||||||
Total non-current liabilities | 82,018 | 67,782 | 64,950 | 80,562 | 74,693 | |||||||||||||||||
Total liabilities | 176,501 | 190,129 | 195,475 | 234,400 | 254,572 | |||||||||||||||||
Equity | ||||||||||||||||||||||
Shareholder’s equity | ||||||||||||||||||||||
Share capital | 175,824 | 175,824 | 175,824 | 179,021 | 179,021 | |||||||||||||||||
Retained income | 57,358 | 88,152 | 143,115 | 203,812 | 264,092 | |||||||||||||||||
Reserves | 84,456 | 93,952 | 108,834 | 132,556 | 143,564 | |||||||||||||||||
317,638 | 357,928 | 427,773 | 515,389 | 586,677 | ||||||||||||||||||
Minority interest | 6,672 | 8,966 | 15,199 | 28,278 | 30,914 | |||||||||||||||||
Total equity | 324,310 | 366,894 | 442,972 | 543,667 | 617,591 | |||||||||||||||||
Total liabilities and equity | 500,811 | 557,023 | 638,447 | 778,067 | 872,163 | |||||||||||||||||
Share capital, issued and outstanding, RMB 1.00 par value | ||||||||||||||||||||||
State-owned shares | 158,242 | 158,242 | 158,242 | 157,922 | 157,922 | |||||||||||||||||
H shares and ADSs | 17,582 | 17,582 | 17,582 | 21,099 | 21,099 | |||||||||||||||||
US GAAP | ||||||||||||||||||||||
Property, plant and equipment, less accumulated depreciation, depletion and amortization | 353,932 | 413,383 | 452,017 | 537,106 | 622,668 | |||||||||||||||||
Total assets | 457,065 | 528,685 | 605,018 | 774,740 | 858,400 | |||||||||||||||||
Shareholders’ equity | 284,426 | 330,520 | 405,573 | 510,141 | 574,470 |
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As of December 31, | ||||||||||||||||||||
2002(1) | 2003(1) | 2004(1) | 2005 | 2006 | ||||||||||||||||
RMB | RMB | RMB | RMB | RMB | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Other Financial Data | ||||||||||||||||||||
Dividend per share | 0.12 | 0.18 | 0.26 | 0.34 | 0.36 | |||||||||||||||
Dividend per ADS | 12.00 | 17.82 | 26.34 | 33.80 | 35.75 | |||||||||||||||
Capital expenditures | (75,496 | ) | (86,373 | ) | (98,946 | ) | (124,801 | ) | (148,746 | ) | ||||||||||
Cash Flow Data | ||||||||||||||||||||
IFRS | ||||||||||||||||||||
Net cash provided by operating activities | 98,989 | 139,570 | 141,691 | 203,885 | 198,102 | |||||||||||||||
Net cash used for investing activities | (73,732 | ) | (102,549 | ) | (102,276 | ) | (91,576 | ) | (158,451 | ) | ||||||||||
Net cash used for financing activities | (26,488 | ) | (35,593 | ) | (39,586 | ) | (42,634 | ) | (71,739 | ) |
(1) | Certain financial data for these periods and as of these dates are derived from our audited consolidated financial statements, not included in this annual report, and were retroactively restated. In 2005, we retroactively restated our prior years’ consolidated financial statements to reflect the effect as if the refinery and petrochemical operations of Ningxia Dayuan Refinery and Petrochemical Company Limited, or Dayuan, Qingyang Refinery and Petrochemical Company Limited, or Qingyang, both of which we acquired from CNPC, and the operations of CNPC Exploration and Development Company Limited, or CNPC E&D, of which we acquired a 50% interest from China National Oil and Gas Exploration and Development Corporation, or CNODC, a wholly-owned subsidiary of CNPC, had always been combined since inception. |
(2) | The basic and diluted income per share for the years ended December 31, 2002, 2003 and 2004 has been calculated by dividing the net profit by the number of 175,824 million shares issued and outstanding for the corresponding years. The basic and diluted income per share for the year ended December 31, 2005 was calculated by dividing the net profit by the weighted average number of 176,770 million shares issued and outstanding for the year presented. The basic and diluted income per share for the year ended December 31, 2006 was calculated by dividing the net profit by the number of 179,021 million shares issued and outstanding for the year presented. |
(3) | The basic and diluted income per ADS for the years ended December 31, 2002, 2003 and 2004 has been calculated by dividing the net profit by the number of 175,824 million shares issued and outstanding for the corresponding years, each ADS representing 100 H shares. The basic and diluted income per ADS for the year ended December 31, 2005 has been calculated by dividing the net profit by the weighted average number of 176,770 million shares issued and outstanding for the year presented, each ADS representing 100 H shares. The basic and diluted income per ADS for the year ended December 31, 2006 has been calculated by dividing the net profit by the number of 179,021 million shares issued and outstanding for the year presented, each ADS representing 100 H shares. |
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• | Our operations are affected by the volatility of prices for crude oil and refined products. We and China Petroleum and Chemical Corporation, or Sinopec, set our crude oil median prices monthly based on the Singapore trading prices for crude oil. In 2006, the PRC government, under its macro economic controls, introduced a new mechanism for determining the prices of refined products. Historically, international prices for crude oil and refined products have fluctuated widely in response to changes in many factors, such as global and regional economic and political developments and global and regional supply and demand for crude oil and refined products. We do not have, and will not have, control over the factors affecting international prices for crude oil and refined products. A decline in crude oil prices will reduce our crude oil revenues derived from external customers. If crude oil prices remain at a low level for a prolonged period, our company has to determine and estimate whether our oil and gas assets may suffer impairment losses and, if so, the amount of the impairment losses. An increase in crude oil prices may, however, increase the production costs of refined products. In addition, a decline in refined products prices will reduce our revenue derived from refining operations. An increase in the refined products prices, however, will increase the production costs of chemical products which use refined products as raw materials. | |
• | The crude oil and natural gas reserve data in this annual report are only estimates. The reliability of reserve estimates depend on a number of factors, assumptions and variables, such as the quality and quantity of our technical and economic data and the prevailing oil and gas prices applicable to our production, many of which are beyond our control and may prove to be incorrect over time. Results of drilling, testing and production after the date of the estimates may require substantial upward or downward revisions in our reserve data. Our actual production, revenues and expenditures with respect to our reserves may differ materially from these estimates because of these revisions. | |
• | Our proved crude oil reserves decreased gradually and modestly from 2001 to 2003 because the decrease in the crude oil reserves in our Daqing and Liaohe oil regions could not be offset by the increase in the crude oil reserves in our oil regions in northwestern China, such as the Xinjiang oil region, the Changqing oil and gas region and the Tarim oil region. Although our proved crude oil reserves increased slightly in 2004, 2005 and 2006 compared to prior years, we cannot assure you that we will be able to increase or maintain our crude oil reserves in the future by our exploration activities in China. We are actively pursuing business opportunities outside China to supplement our domestic resources. For instance, in 2005 and 2006, we acquired certain overseas crude oil and natural gas assets from CNPC. We cannot assure you, however, that we can successfully locate sufficient alternative sources of crude oil supply or at all due to the complexity of the international political, economic and other conditions. If we fail to obtain sufficient alternative sources of crude oil supply, our results of operations and financial condition may be materially and adversely affected. | |
• | The United States Securities and Exchange Commission, or the SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company in the United States to include a management report on such company’s internal control over financial reporting in its annual report, which contains management’s assessment of the effectiveness of the company’s internal control over financial reporting. In addition, an independent registered public accounting firm must attest to and report on management’s assessment of the effectiveness of the company’s internal control over financial reporting. Although our management concluded that our internal control over our financial reporting for the fiscal year ended December 31, 2006 was effective, we may discover other deficiencies in the course of our future evaluation of our internal control over our financial reporting and |
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may be unable to remediate such deficiencies in a timely manner. Moreover, in future years, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may still be unable to attest to our management’s assessment or may issue a report that concludes that our internal control over financial reporting is not effective. If we fail to maintain the adequacy of our internal control over financial reporting, we may not be able to conclude that we have effective internal control over financial reporting on an ongoing basis, in accordance with the Sarbanes-Oxley Act. Moreover, effective internal control is necessary for us to produce reliable financial reports and is important to prevent fraud. As a result, our failure to achieve and maintain effective internal control over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading prices of our ADSs or H shares. | ||
• | Exploring for, producing and transporting crude oil and natural gas and producing and transporting refined products and chemical products involve many hazards. These hazards may result in: |
— | fires; | |
— | explosions; | |
— | spills; | |
— | blow-outs; and | |
— | other unexpected or dangerous conditions causing personal injuries or death, property damage, environmental damage and interruption of operations. |
Some of our oil and natural gas fields are surrounded by residential areas or located in areas where natural disasters, such as earthquakes, floods and sandstorms, tend to occur more frequently than in other areas. As with many other companies around the world that conduct similar businesses, we have experienced accidents that have caused property damage and personal injuries and death. | |
Significant operating hazards and natural disasters may cause partial interruptions to our operations and property and environmental damage that could have an adverse impact on our financial condition. On November 13, 2005, an explosion occurred at one of our branch companies in Jilin Province. The incident caused serious personal injuries and deaths, loss of property and water pollution of the Songhuajing River. The Chinese government completed its investigation of this accident in December 2006. As a result, our company paid a fine of RMB 1 million in settlement of all liabilities arising from the accident. | |
Except for limited insurance coverage for vehicles and certain assets that we consider to be subject to significant operating risks, we do not carry any other insurance for our property, facilities or equipment in respect of our business operations. We do not currently carry any third party liability insurance against claims relating to personal injury or death, property or environmental damage arising from accidents on our property or relating to our operations. We also do not currently carry any business interruption insurance. The limited insurance coverage of our assets exposes us to substantial risks and will not cover most losses. |
• | CNPC owns approximately 88.21% of our share capital. This ownership percentage enables CNPC to elect our entire board of directors without the concurrence of any of our other shareholders. Accordingly, CNPC is in a position to: |
— | control our policies, management and affairs; | |
— | subject to applicable PRC laws and regulations and provisions of our articles of association, determine the timing and amount of dividend payments and adopt amendments to certain of the provisions of our articles of association; and |
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— | otherwise determine the outcome of most corporate actions and, subject to the requirements of the Listing Rules of the Hong Kong Stock Exchange, cause our company to effect corporate transactions without the approval of minority shareholders. |
CNPC’s interests may sometimes conflict with those of some or all of our minority shareholders. We cannot assure you that CNPC, as controlling shareholder, will always vote its shares in a way that benefits our minority shareholders. |
• | In addition to its relationship with us as our controlling shareholder, CNPC by itself or through its affiliates also provides us with certain services and products necessary for our business activities, such as construction and technical services, production services and supply of material services. The interests of CNPC and its affiliates as providers of these services and products to us may conflict with our interests. Although we have entered into a Comprehensive Products and Services Agreement with CNPC and our transactions with CNPC over the past three years have been conducted on open, fair and competitive commercial terms, we have only limited leverage in negotiating with CNPC and its affiliates over the specific terms of the agreements for the future provision of these services and products. | |
• | The eastern and southern regions of China have a higher demand for refined products and chemical products than the western and northern regions. Most of our refineries and chemical plants are located in the western and northern regions of China. We incur relatively higher transportation costs for delivery of our refined products and chemical products to certain areas of the eastern and southern regions from our refineries and chemical plants in western and northern China. While we continue to expand the sales of these products in the eastern and southern regions of China, we face strong competition from Sinopec and China National Offshore Oil Corp, or CNOOC. As a result, we expect that we will continue to encounter difficulty in increasing our sales of refined products and chemical products in these regions. | |
• | We are currently expanding some of our refinery and petrochemical facilities and constructing several natural gas pipelines. In addition, we may commence offshore crude oil and natural gas exploration and production activities, which could require substantial capital expenditures and investments. We cannot assure you that the cash generated by our operations will be sufficient to fund these development plans or that our actual future capital expenditures and investments will not significantly exceed our current planned amounts. If either of these conditions arises, we may have to seek external financing to satisfy our capital needs. Under such circumstance, our inability to obtain sufficient funding for our development plans could adversely affect our business, financial condition and results of operations. | |
• | We are also subject to a number of risks relating to the PRC and the PRC oil and gas industry. These risks are described as follows: |
— | Our operations, like those of other PRC oil and gas companies, are subject to extensive regulations and control by the PRC government. These regulations and control affect many material aspects of our operations, such as exploration and production licensing, industry-specific and product-specific taxes and fees and environmental and safety standards. As a result, we may face significant constraints on our ability to implement our business strategies, to develop or expand our business operations or to maximize our profitability. Our business may also be adversely affected by future changes in certain policies of the PRC government with respect to the oil and gas industry. For example, since March 26, 2006, we have been subject to a crude oil special gain levy imposed by the PRC government. As a result, we recorded an aggregate of RMB 28,914.0 million as such levy to the PRC government in relation to our domestic sales of crude oil in 2006. | |
— | Currently, the PRC government must approve the construction and major renovation of significant refining and petrochemical facilities as well as the construction of significant |
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natural gas and refined product pipelines and storage facilities. We presently have several significant projects pending approval from the relevant government authorities and will need approvals from the relevant government authorities in connection with several other significant projects. We do not have control over the timing and outcome of the final project approvals. | ||
— | We receive most of our revenues in Renminbi. A portion of our Renminbi revenues must be converted into other currencies to meet our foreign currency obligations. The existing foreign exchange limitations under the PRC laws and regulations could affect our ability to obtain foreign exchange through debt financing, or to obtain foreign exchange for capital expenditures. | |
— | Prior to 2005, our company performed capping or plugging on wellheads and surface facilities that could be salvaged for alternative use. For safety reasons, our company also performed capping or plugging on certain wells that were considered to be in areas with extensive human use at the time of the abandonment. Our company, however, did not perform capping or plugging on wells that were neither considered to be in areas with extensive human use nor could be salvaged for alternative use. Consequently, such wellheads and surface facilities were left at their original sites after the wells were retired. |
The Environmental Protection Regulation for Oil and Gas Exploration and Production Activities in Heilongjiang ProvinceandThe Environmental Protection Regulation for Oil and Gas Exploration and Production Activities in Gansu Provincewere issued in mid and late 2005. Based on our reading of the new provincial regulations and in consultation with the environmental administrative authorities in Heilongjiang and Gansu provinces, we believe that such regulations only apply to the oil and gas properties retired after these regulations were issued in 2005. Accordingly, our company established standard abandonment procedures, requesting that all of its branch and subsidiary companies recognize asset retirement provisions for their currently used oil and gas properties. | |
Our company believes it had no obligation to adopt such abandonment procedures prior to the issuance of the new regulations in 2005. For the oil and gas properties that were retired prior to the issuance of such regulations, the activities required to retire these assets, at a level that would be in compliance with the regulations and our internal policy, have not been performed. The costs associated with these activities have not been included in the asset retirement obligations accrued during 2005. However, Heilongjiang Province and Gansu Province could enact new regulations, amend the current regulations or retroactively apply the relevant requirements. If any of these regulations is determined to be applicable to assets other than those that were retired subsequent to the dates that these regulations were issued in 2005, we could be required to incur substantial costs associated with such asset retirement obligations. In addition, we cannot assure you that the provincial governments other than Heilongjiang Province and Gansu Province will not enact new regulations which will require our company to perform additional asset retirement activities related to the assets retired before the establishment of our company’s internal policy and areas in which these assets were or continue to be located. |
— | Because PRC laws, regulations and legal requirements dealing with economic matters are relatively new and continue to evolve, and because of the limited volume of published judicial interpretations and the non-binding nature of prior court decisions, the interpretation and enforcement of these laws, regulations and legal requirements involve some uncertainty. We have included the Mandatory Provisions and certain additional requirements that are imposed by the Hong Kong Stock Exchange Listing Rules in our Articles of Association for the purpose of reducing the scope of difference between the Hong Kong Company Law and the PRC Company Law. However, because the PRC Company Law is different in certain important aspects from company laws in the United States, Hong Kong |
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and other common law jurisdictions and because the PRC securities laws and regulations are still at an early stage of development, you may not enjoy shareholders’ protections that you may be entitled to in other jurisdictions. | ||
— | In addition to the adverse effect on our revenues, margins and profitability from any future fall in oil and natural gas prices, a prolonged period of low prices or other indicators would lead to a review for impairment of our oil and natural gas properties. This review would reflect management’s view of long-term oil and natural gas prices. Such a review could result in a charge for impairment which could have a significant effect on our results of operations in the period in which it occurs. |
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Overview of Our Operations |
• | the exploration, development, production and sale of crude oil and natural gas; | |
• | the refining, transportation, storage and marketing of crude oil and petroleum products; | |
• | the production and marketing of basic petrochemical products, derivative chemical products and other chemical products; and | |
• | the transmission and storage of crude oil, refined products and natural gas as well as the sale of natural gas. |
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Acquisitions |
Disposal |
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Our Corporate Organization and Shareholding Structure |
(1) | Indicates approximate shareholding. |
(2) | Includes subsidiary companies and those branches without legal person status. |
(3) | Represents enterprises directly administered and operated by such segment. |
(4) | Includes PetroChina Planning & Engineering Institute, PetroChina Exploration & Development Research Institute, CNPC E&D, PetroChina Foreign Cooperation Administration Department, PetroChina International Co., Ltd. and Petrochemical Research Institute. |
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(1) | Includes subsidiary companies and those branches without legal person status. |
(2) | Represents enterprises directly administered and operated by such segment. |
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Crude oil | Natural gas(1) | Combined(1) | |||||||||||
(millions of barrels) | (Bcf) | (BOE, in millions) | |||||||||||
Proved developed and undeveloped reserves | |||||||||||||
Reserves as of December 31, 2004 | 11,501.2 | 45,248.9 | 19,042.7 | ||||||||||
Revisions of previous estimates | 156.8 | 212.9 | 192.3 | ||||||||||
Extensions and discoveries | 605.5 | 4,004.8 | 1,273.0 | ||||||||||
Improved recovery | 101.4 | — | 101.4 | ||||||||||
Production for the year | (828.7 | ) | (1,343.5 | ) | (1,052.7 | ) | |||||||
Reserves as of December 31, 2005 | 11,536.2 | 48,123.1 | 19,556.7 | ||||||||||
Revisions of previous estimates | 196.1 | �� | 685.9 | 310.4 | |||||||||
Extensions and discoveries | 635.3 | 6,247.7 | 1,676.5 | ||||||||||
Improved recovery | 81.1 | — | 81.1 | ||||||||||
Production for the year | (830.7 | ) | (1,587.5 | ) | (1,095.3 | ) | |||||||
Reserves as of December 31, 2006 | 11,618.0 | 53,469.2 | 20,529.4 | ||||||||||
Proved developed reserves | |||||||||||||
As of December 31, 2004 | 9,067.9 | 17,254.5 | 11,943.6 | ||||||||||
As of December 31, 2005 | 9,194.8 | 19,857.8 | 12,504.4 | ||||||||||
As of December 31, 2006 | 9,185.2 | 22,563.9 | 12,945.8 |
(1) | Represents natural gas remaining after field separation for condensate removal and reduction for flared gas. |
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As of December 31, | |||||||||||||||||||||||||
2004 | 2005 | 2006 | |||||||||||||||||||||||
Proved | Proved | Proved | |||||||||||||||||||||||
developed | developed | developed | |||||||||||||||||||||||
and | Proved | and | Proved | and | Proved | ||||||||||||||||||||
undeveloped | developed | undeveloped | developed | undeveloped | developed | ||||||||||||||||||||
(millions of barrels) | |||||||||||||||||||||||||
Crude oil reserves | |||||||||||||||||||||||||
Daqing | 4,615.0 | 4,122.3 | 4,396.9 | 3,863.9 | 4,200.3 | 3,516.0 | |||||||||||||||||||
Liaohe | 1,123.1 | 915.1 | 1,114.6 | 937.5 | 1,067.5 | 845.8 | |||||||||||||||||||
Xinjiang | 1,232.1 | 921.9 | 1,261.8 | 1,010.8 | 1,306.6 | 1,077.0 | |||||||||||||||||||
Changqing | 1,191.6 | 769.6 | 1,267.0 | 840.6 | 1,450.6 | 1,182.9 | |||||||||||||||||||
Jilin | 643.8 | 404.4 | 675.0 | 472.2 | 775.5 | 501.8 | |||||||||||||||||||
Dagang | 482.3 | 402.0 | 516.1 | 426.7 | 482.1 | 400.0 | |||||||||||||||||||
Tarim | 507.6 | 374.8 | 543.8 | 418.1 | 523.9 | 370.4 | |||||||||||||||||||
Huabei | 510.3 | 353.9 | 536.2 | 381.5 | 500.9 | 388.4 | |||||||||||||||||||
Qinghai | 226.1 | 181.2 | 243.0 | 185.5 | 227.9 | 187.2 | |||||||||||||||||||
Tuha | 218.3 | 168.4 | 165.0 | 110.8 | 156.5 | 104.9 | |||||||||||||||||||
Sichuan | 8.6 | 5.3 | 8.0 | 5.5 | 11.7 | 5.4 | |||||||||||||||||||
Other regions(1) | 742.4 | 449.0 | 808.8 | 541.7 | 914.5 | 605.4 | |||||||||||||||||||
Total | 11,501.2 | 9,067.9 | 11,536.2 | 9,194.8 | 11,618.0 | 9,185.2 | |||||||||||||||||||
As of December 31, | |||||||||||||||||||||||||
2004 | 2005 | 2006 | |||||||||||||||||||||||
Proved | Proved | Proved | |||||||||||||||||||||||
developed | developed | developed | |||||||||||||||||||||||
and | Proved | and | Proved | and | Proved | ||||||||||||||||||||
undeveloped | developed | undeveloped | developed | undeveloped | developed | ||||||||||||||||||||
(Bcf) | |||||||||||||||||||||||||
Natural gas reserves(2) | |||||||||||||||||||||||||
Sichuan | 8,729.8 | 4,767.9 | 9,211.2 | 5,063.5 | 10,362.8 | 4,867.3 | |||||||||||||||||||
Changqing | 14,932.7 | 4,091.3 | 15,765.6 | 4,089.8 | 17,846.1 | 4,559.7 | |||||||||||||||||||
Xinjiang | 1,712.3 | 1,036.8 | 1,686.8 | 1,120.4 | 1,723.0 | 1,047.0 | |||||||||||||||||||
Daqing | 1,060.6 | 879.4 | 1,936.8 | 813.3 | 1,894.6 | 740.2 | |||||||||||||||||||
Qinghai | 4,603.6 | 1,583.4 | 4,534.1 | 1,528.0 | 4,467.0 | 1,584.0 | |||||||||||||||||||
Tarim | 10,897.8 | 2,934.8 | 11,838.8 | 5,347.9 | 14,443.6 | 7,818.4 | |||||||||||||||||||
Liaohe | 522.7 | 455.4 | 489.8 | 417.6 | 429.3 | 338.8 | |||||||||||||||||||
Tuha | 705.3 | 427.8 | 677.4 | 367.8 | 640.5 | 401.8 | |||||||||||||||||||
Huabei | 375.9 | 217.5 | 369.3 | 211.8 | 340.3 | 264.6 | |||||||||||||||||||
Dagang | 599.5 | 186.8 | 586.9 | 207.8 | 275.0 | 189.7 | |||||||||||||||||||
Jilin | 203.9 | 150.4 | 187.8 | 132.7 | 198.6 | 113.7 | |||||||||||||||||||
Other regions(1) | 904.8 | 523 | 838.6 | 557.2 | 848.4 | 638.7 | |||||||||||||||||||
Total | 45,248.9 | 17,254.5 | 48,123.1 | 19,857.8 | 53,469.2 | 22,563.9 | |||||||||||||||||||
(1) | Represents the Jidong and Yumen oil regions and our overseas oil and gas fields as a result of our acquisition of overseas assets. |
(2) | Represents natural gas remaining after field separation for condensate removal and reduction for flared gas. |
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Year | Daqing | Xinjiang | Liaohe | Changqing | Huabei | Dagang | Sichuan | Others(1) | Total | |||||||||||||||||||||||||||||
2004 | Net exploratory wells drilled(2) | 221 | 153 | 68 | 427 | 96 | 53 | 32 | 355 | 1,405 | ||||||||||||||||||||||||||||
Crude oil | 85 | 85 | 40 | 201 | 49 | 32 | 4 | 172 | 668 | |||||||||||||||||||||||||||||
Natural gas | 3 | 0 | 0 | 22 | 0 | 0 | 17 | 9 | 51 | |||||||||||||||||||||||||||||
Dry(3) | 133 | 68 | 28 | 204 | 47 | 21 | 11 | 174 | 686 | |||||||||||||||||||||||||||||
Net development wells drilled(2) | 2,857 | 1,440 | 622 | 1,675 | 224 | 188 | 76 | 1,463 | 8,545 | |||||||||||||||||||||||||||||
Crude oil | 2,853 | 1,440 | 605 | 1,597 | 223 | 184 | 6 | 1,387 | 8,295 | |||||||||||||||||||||||||||||
Natural gas | 4 | 0 | 13 | 46 | 1 | 3 | 56 | 73 | 196 | |||||||||||||||||||||||||||||
Dry(3) | 0 | 0 | 4 | 32 | 0 | 1 | 14 | 3 | 54 | |||||||||||||||||||||||||||||
2005 | Net exploratory wells drilled(2) | 250 | 191 | 71 | 456 | 83 | 39 | 58 | 360 | 1,508 | ||||||||||||||||||||||||||||
Crude oil | 78 | 92 | 47 | 200 | 53 | 22 | 0 | 152 | 644 | |||||||||||||||||||||||||||||
Natural gas | 6 | 1 | 0 | 24 | 0 | 0 | 30 | 15 | 76 | |||||||||||||||||||||||||||||
Dry(3) | 166 | 98 | 24 | 232 | 30 | 17 | 28 | 193 | 788 | |||||||||||||||||||||||||||||
Net development wells drilled(2) | 3,722 | 1,608 | 563 | 2,608 | 250 | 192 | 101 | 2,587 | 11,631 | |||||||||||||||||||||||||||||
Crude oil | 3,712 | 1,604 | 549 | 2,364 | 248 | 188 | 6 | 2,495 | 11,166 | |||||||||||||||||||||||||||||
Natural gas | 10 | 4 | 12 | 195 | 2 | 4 | 83 | 88 | 398 | |||||||||||||||||||||||||||||
Dry(3) | 0 | 0 | 2 | 49 | 0 | 0 | 12 | 4 | 67 | |||||||||||||||||||||||||||||
2006 | Net exploratory wells drilled(2) | 250 | 180 | 64 | 466 | 83 | 50 | 62 | 390 | 1,545 | ||||||||||||||||||||||||||||
Crude oil | 73 | 88 | 35 | 203 | 49 | 21 | 114 | 583 | ||||||||||||||||||||||||||||||
Natural gas | 7 | 21 | 1 | 37 | 7 | 31 | 6 | 110 | ||||||||||||||||||||||||||||||
Dry(3) | 170 | 71 | 28 | 226 | 34 | 22 | 31 | 270 | 852 | |||||||||||||||||||||||||||||
Net development wells drilled(2) | 4,183 | 1,605 | 713 | 2,023 | 330 | 179 | 57 | 2,361 | 11,451 | |||||||||||||||||||||||||||||
Crude oil | 4,160 | 1,586 | 688 | 1,772 | 225 | 173 | 9 | 2,235 | 10,848 | |||||||||||||||||||||||||||||
Natural gas | 23 | 8 | 14 | 216 | 105 | 6 | 40 | 123 | 535 | |||||||||||||||||||||||||||||
Dry(3) | 0 | 11 | 11 | 35 | 0 | 0 | 8 | 3 | 68 |
(1) | Represents the Jilin, Tarim, Tuha, Qinghai, Jidong and Yumen oil regions. |
(2) | “Net” wells refer to the wells after deducting interests of others. No third parties own any interests in any of our wells. |
(3) | “Dry” wells are wells with insufficient reserves to sustain commercial production. |
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Oil-and-Gas Properties |
Acreage(1)(thousands of acres) | |||||||||||||||||||||||||
Productive wells(1) | Developed | Undeveloped | |||||||||||||||||||||||
Oil region | Crude oil | Natural gas | Crude oil | Natural gas | Crude oil | Natural gas | |||||||||||||||||||
Daqing | 66,271 | 192 | 745.4 | 76.2 | 656.1 | 110.4 | |||||||||||||||||||
Liaohe | 19,924 | 640 | 191.0 | 35.8 | 94.6 | 4.7 | |||||||||||||||||||
Xinjiang | 21,422 | 81 | 328.1 | 44.5 | 98.2 | 25.6 | |||||||||||||||||||
Jilin | 21,453 | 53 | 307.9 | 20.9 | 315.9 | 19.5 | |||||||||||||||||||
Changqing | 18,563 | 1,007 | 452.6 | 1,536.6 | 304.3 | 1,801.5 | |||||||||||||||||||
Huabei | 7,032 | 91 | 140.0 | 12.6 | 60.8 | 3.5 | |||||||||||||||||||
Dagang | 4,735 | 62 | 106.2 | 24.9 | 61.1 | 19.8 | |||||||||||||||||||
Tuha | 2,068 | 87 | 41.8 | 21.4 | 28.3 | 10.7 | |||||||||||||||||||
Tarim | 817 | 160 | 141.5 | 131.7 | 50.6 | 195.3 | |||||||||||||||||||
Sichuan | 414 | 1,423 | 358.5 | 414.6 | 17.6 | 264.5 | |||||||||||||||||||
Other regions(2) | 4,871 | 291 | 79.4 | 43.0 | 36.6 | 28.5 | |||||||||||||||||||
Total | 167,570 | 4,087 | 2,892.5 | 2,362.3 | 1,724.1 | 2,484.2 | |||||||||||||||||||
(1) | Includes all wells and acreage in which we have an interest. No third parties own any interests in any of our wells or acreage. |
(2) | Represents the Qinghai, Jidong and Yumen oil regions. |
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For the year ended | |||||||||||||||||
December 31, | |||||||||||||||||
% of | |||||||||||||||||
2004 | 2005 | 2006 | 2006 Total | ||||||||||||||
Crude oil production(1) | |||||||||||||||||
(thousands of barrels per day, except percentages or otherwise indicated) | |||||||||||||||||
Daqing | 942.0 | 915.1 | 883.1 | 38.80 | |||||||||||||
Liaohe | 245.4 | 238.2 | 230.4 | 10.13 | |||||||||||||
Xinjiang | 227.1 | 238.8 | 244.2 | 10.73 | |||||||||||||
Changqing | 164.6 | 191.4 | 215.6 | 9.47 | |||||||||||||
Tarim | 109.9 | 122.8 | 123.9 | 5.44 | |||||||||||||
Huabei | 87.6 | 88.4 | 89.4 | 3.93 | |||||||||||||
Jilin | 102.6 | 112.1 | 115.6 | 5.08 | |||||||||||||
Dagang | 97.9 | 102.6 | 93.6 | 4.11 | |||||||||||||
Tuha | 48.4 | 45.2 | 44.4 | 1.95 | |||||||||||||
Other(2) | 199.1 | 200.0 | 235.7 | 10.36 | |||||||||||||
Total | 2,224.6 | 2,254.5 | 2,275.9 | 100.0 | |||||||||||||
Annual production (million barrels) | 814.2 | 822.9 | 830.7 | ||||||||||||||
Average sales price | |||||||||||||||||
(RMB per barrel) | 279.1 | 396.2 | 476.8 | ||||||||||||||
(US$ per barrel) | 33.72 | 48.37 | 59.81 | ||||||||||||||
Natural gas production(1)(3) | |||||||||||||||||
(millions of cubic feet per day, except percentages or otherwise indicated) | |||||||||||||||||
Sichuan | 905.7 | 1,107.9 | 1,233.9 | 32.8 | |||||||||||||
Changqing | 651.4 | 640.7 | 650.4 | 17.3 | |||||||||||||
Daqing | 135.4 | 133.8 | 138.0 | 3.7 | |||||||||||||
Qinghai | 145.5 | 172.8 | 200.7 | 5.3 | |||||||||||||
Tuha | 92.2 | 121.1 | 133.4 | 3.5 | |||||||||||||
Xinjiang | 95.7 | 109.8 | 114.2 | 3.0 | |||||||||||||
Liaohe | 58.7 | 56.0 | 52.8 | 1.4 | |||||||||||||
Huabei | 44.2 | 43.5 | 41.3 | 1.1 | |||||||||||||
Tarim | 89.2 | 479.5 | 1,015.7 | 27.0 | |||||||||||||
Dagang | 26.5 | 26.2 | 28.7 | 0.8 | |||||||||||||
Other(4) | 149.8 | 175.9 | 149.6 | 4.1 | |||||||||||||
Total | 2,394.3 | 3,067.2 | 3,758.7 | 100.0 | % | ||||||||||||
Annual production (Bcf) | 876.3 | 1,119.5 | 1,371.9 | ||||||||||||||
Average sales price | |||||||||||||||||
(RMB per Mcf) | 21.11 | 23.35 | 27.6 | ||||||||||||||
(US$ per Mcf) | 2.55 | 2.85 | 3.46 |
(1) | Production volumes for each region include our share of the production from all of our cooperative projects with foreign companies in that region. |
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(2) | Represents production from the Qinghai, Jidong and Yumen oil regions, the Sichuan gas region and our share of overseas production as a result of our acquisition of overseas assets. |
(3) | Represents production of natural gas for sale. |
(4) | Represents production from the Jilin, Jidong and Yumen oil regions and our share of overseas production as a result of our acquisition of overseas assets. |
Daqing Oil Region |
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• | terminating unprofitable or marginally profitable exploration and production activities; | |
• | reducing expenditures on ancillary ground facilities in the outer areas of the Daqing oil region; | |
• | increasing preventive maintenance to prolong the useful life of our production facilities; and | |
• | applying new technologies to reduce energy consumption. |
Liaohe Oil Region |
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Xinjiang Oil Region |
Sichuan Gas Region |
Changqing Oil and Gas Region |
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Tarim Oil and Gas Region |
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• | as of December 31, 2006, our refineries’ annual primary distillation capacity totaled 935.8 million barrels of crude oil per year, or 2,563.9 thousand barrels per day; | |
• | we processed 785 million barrels of crude oil, or 2.20 million barrels per day; | |
• | we produced approximately 68.30 million tons of gasoline, diesel and kerosene and sold approximately 74.9 million tons of these products; | |
• | as of December 31, 2006, our retail distribution network consisted of: |
— | 16,624 service stations owned and operated by us, | |
— | 282 service stations either wholly owned by CNPC or jointly owned by CNPC and third parties and to which we provide supervisory support, representing a significant decrease from last year, as a result of our taking ownership of or operating certain service stations previously owned by CNPC or jointly owned by CNPC and third parties, and | |
— | 1,301 franchise service stations owned and operated by third parties with which we have long-term refined product supply agreements, representing a significant decrease from last year, as a result of our termination of cooperation arrangements with certain franchise service stations that had demonstrated deficiencies in image, service or oil quality; and |
• | in 2006, our service stations, which are located throughout China, sold approximately 47.0 million tons of gasoline and diesel, representing 64.5% of the total of these products sold through our marketing operations. |
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Refined Products |
Year ended December 31, | |||||||||||||
Product | 2004 | 2005 | 2006 | ||||||||||
(in thousands of tons) | |||||||||||||
Diesel | 38,941.8 | 43,000.7 | 44,226.5 | ||||||||||
Gasoline | 20,606.1 | 21,414.6 | 22,027.2 | ||||||||||
Fuel oil | 4,290.2 | 3,816.3 | 3,491.4 | ||||||||||
Naphtha | 4,942.8 | 4,872.8 | 6,317.9 | ||||||||||
Asphalt | 1,946.8 | 1,484.7 | 1,605.7 | ||||||||||
Kerosene | 1,961.8 | 1,970.3 | 2,063.7 | ||||||||||
Lubricants | 1,467.8 | 1,528.6 | 1,488.4 | ||||||||||
Paraffin | 1,140.0 | 1,139.3 | 1,051.8 | ||||||||||
Total | 75,297.3 | 79,227.3 | 82,272.6 | ||||||||||
Our Refineries |
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As of December 31, | ||||||||||||||
2004 | 2005 | 2006 | ||||||||||||
Primary distillation capacity(1)(thousand barrels per day) | ||||||||||||||
Lanzhou Petrochemical(2) | 212.6 | 212.6 | 212.6 | |||||||||||
Dalian Petrochemical | 212.6 | 212.6 | 415.0 | |||||||||||
Fushun Petrochemical | 186.2 | 186.2 | 186.2 | |||||||||||
Daqing Petrochemical | 121.5 | 121.5 | 121.5 | |||||||||||
Jinzhou Petrochemical(3) | 127.5 | 131.6 | 131.6 | |||||||||||
Jinxi Petrochemical | 131.6 | 131.6 | 131.6 | |||||||||||
Jilin Petrochemical(4) | 107.3 | 141.7 | 141.7 | |||||||||||
Urumqi Petrochemical | 101.2 | 101.2 | 101.2 | |||||||||||
Other refineries | 982.8 | 1,098.2 | 1,122.5 | |||||||||||
Total | 2,183.3 | 2,337.2 | 2,563.9 | |||||||||||
�� | ||||||||||||||
Refining throughput(thousand barrels per day) | ||||||||||||||
Lanzhou Petrochemical(2) | 166.4 | 178.7 | 191.4 | |||||||||||
Dalian Petrochemical | 242.3 | 223.7 | 244.7 | |||||||||||
Fushun Petrochemical | 181.7 | 194.4 | 196.4 | |||||||||||
Daqing Petrochemical | 119.2 | 125.5 | 128.5 | |||||||||||
Jinzhou Petrochemical(3) | 120.8 | 127.9 | 137.8 | |||||||||||
Jinxi Petrochemical | 123.9 | 129.2 | 132.1 | |||||||||||
Jilin Petrochemical(4) | 129.6 | 138.0 | 146.5 | |||||||||||
Urumqi Petrochemical | 81.8 | 85.3 | 98.0 | |||||||||||
Other refineries | 773.6 | 858.4 | 875.3 | |||||||||||
Total | 1,939.3 | 2,061.1 | 2,150.8 | |||||||||||
Conversion equivalent(5)(percent) | ||||||||||||||
Lanzhou Petrochemical(2) | 41.9 | 53.3 | 53.3 | |||||||||||
Dalian Petrochemical | 54.3 | 54.3 | 27.8 | |||||||||||
Fushun Petrochemical | 70.7 | 68.5 | 70.7 | |||||||||||
Daqing Petrochemical | 76.7 | 76.7 | 76.7 | |||||||||||
Jinzhou Petrochemical(3) | 63.5 | 84.6 | 84.6 | |||||||||||
Jinxi Petrochemical | 60.0 | 66.2 | 66.2 | |||||||||||
Jilin Petrochemical(4) | 75.5 | 61.4 | 61.4 | |||||||||||
Urumqi Petrochemical | 62.0 | 62.0 | 62.0 | |||||||||||
Average of other refineries | 53.7 | 50.5 | 51.8 |
(1) | Represents the primary distillation capacity of crude oil and condensate. |
(2) | Includes Lanzhou Refinery, which was merged into Lanzhou Petrochemical in October 2000 as part of our ongoing restructuring. |
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(3) | Includes a 1.08% minority interest held by unrelated third parties in Jinzhou Petrochemical Company Limited in the relevant periods. |
(4) | Includes Jilin Chemical Industrial Company Limited, in which we held a 99.61% equity interest in the relevant periods. Data regarding the primary distillation capacity, refining throughput and conversion equivalent of Jilin Petrochemical includes a 0.39% minority interest held by unrelated third parties in Jilin Chemical Industrial Company Limited in the relevant periods. |
(5) | Stated in fluid catalytic cracking, delayed coking and hydrocracking equivalent/ topping (percentage by weight), based on 100% of balanced distillation capacity. |
• | approximately 1,073 regional wholesale distribution outlets nationwide. Substantially all of these outlets are located in high demand areas such as economic centers across China, particularly in the coastal areas, along major railways and along the Yangtze River; and | |
• | 16,624 service stations owned and operated by us, 282 service stations wholly owned by CNPC or jointly owned by CNPC and third parties that exclusively sell refined products produced or supplied by us and to which we provide supervisory support under contractual arrangement, and 1,301 franchise service stations owned and operated by third parties. |
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Year ended December 31, | |||||||||||||
Product | 2004 | 2005 | 2006 | ||||||||||
(in thousands of tons) | |||||||||||||
Diesel | 43,178.3 | 47,811.0 | 48,863.9 | ||||||||||
Gasoline | 21,714.2 | 26,161.6 | 23,993.2 | ||||||||||
Fuel oil | 5,747.4 | 6,409.6 | 8,711.2 | ||||||||||
Naphtha | 5,325.9 | 5,574.1 | 6,887.6 | ||||||||||
Kerosene | 2,116.2 | 2,008.0 | 2,047.4 | ||||||||||
Lubricants | 1,974.0 | 2,181.6 | 2,044.4 | ||||||||||
Asphalt | 2,348.7 | 2,475.6 | 3,321.2 | ||||||||||
Paraffin | 1,138.1 | 1,160.3 | 1,104.3 | ||||||||||
Total | 83,542.8 | 93,781.8 | 96,973.2 | ||||||||||
Wholesale Marketing |
Retail Marketing |
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Owned and operated by us(1) | 16,624 | ||||
Wholly owned by CNPC or jointly owned by CNPC and third parties(2) | 282 | ||||
Franchised | 1,301 | ||||
Total | 18,207 |
(1) | Includes 445 service stations owned and operated by BP PetroChina Petroleum Company Limited. |
(2) | These service stations exclusively sell refined products produced or supplied by us. We also provide supervisory support to these service stations. |
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Year ended December 31, | ||||||||||||||
2004 | 2005 | 2006 | ||||||||||||
(in thousand tons) | ||||||||||||||
Basic petrochemicals | ||||||||||||||
Propylene | 1,969.1 | 2,493.5 | 2,671.2 | |||||||||||
Ethylene | 1,845.6 | 1,887.9 | 2,067.9 | |||||||||||
Benzene | 712.7 | 707.9 | 749.6 | |||||||||||
Derivative petrochemicals | ||||||||||||||
Synthetic resin | ||||||||||||||
Polyethylene | 1,309.5 | 1,355.9 | 1,531.3 | |||||||||||
Polypropylene | 986.9 | 1,142.8 | 1,291.0 | |||||||||||
ABS | 228.1 | 223.0 | 223.0 | |||||||||||
Other synthetic resin products | 27.6 | 35.2 | 15.8 | |||||||||||
Synthetic fiber | ||||||||||||||
Polyacrylic fiber | 108.1 | 97.1 | 81.0 | |||||||||||
Terylene fiber | 94.3 | 86.2 | 53.3 | |||||||||||
Other synthetic fiber products | 7.4 | 6.3 | 6.4 | |||||||||||
Synthetic rubber | ||||||||||||||
Styrene butadiene rubber | 190.2 | 194.4 | 212.9 | |||||||||||
Other synthetic rubber products | 95.6 | 87.0 | 99.1 | |||||||||||
Intermediates | ||||||||||||||
Alkylbenzene | 194.9 | 205.7 | 207.9 | |||||||||||
Other chemicals | ||||||||||||||
Urea | 3,652.3 | 3,577.6 | 3,576.3 | |||||||||||
Ammonium nitrate | 32.0 | 5.4 | — |
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Year ended December 31, | ||||||||||||||
Product | 2004 | 2005 | 2006 | |||||||||||
(in thousands of tons) | ||||||||||||||
Derivative petrochemicals | ||||||||||||||
Synthetic resin | ||||||||||||||
Polyethylene | 1,423.6 | 1,477.0 | 1,594.8 | |||||||||||
Polypropylene | 793.3 | 972.3 | 1,069.6 | |||||||||||
ABS | 231.8 | 232.0 | 233.4 | |||||||||||
Synthetic fiber | ||||||||||||||
Terylene fiber | 103.6 | 103.3 | 59.4 | |||||||||||
Polyacrylic fiber | 115.8 | 95.5 | 91.2 | |||||||||||
Synthetic rubber | ||||||||||||||
Butadiene styrene rubber | 187.8 | 202.2 | 203.4 | |||||||||||
Intermediates | ||||||||||||||
Alkylbenzene | 110.9 | 112.3 | 127.9 | |||||||||||
Other chemicals | ||||||||||||||
Urea | 3,662.8 | 3,413.8 | 3,570.6 | |||||||||||
Ammonium nitrate | 32.8 | 4.1 | 1.4 |
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As of December 31 or year | ||||||||||||
ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Length of natural gas pipelines used by our natural gas segment (km) | 17,868 | 19,212 | 19,662 | |||||||||
Total length of natural gas pipelines (km) | 18,995 | 20,340 | 20,590 | |||||||||
Volume of natural gas sold by our natural gas segment (Bcf) | 657.3 | 888.8 | 1,200.5 | |||||||||
Total volume of natural gas sold(1)(Bcf) | 781.4 | 1,052.2 | 1,357.0 |
(1) | Including both the natural gas sold to third parties and the natural gas sold within our company for the production of other products. |
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• | 9,620 kilometers of crude oil pipelines with an average daily throughput of approximately 2.50 million barrels; and | |
• | crude oil storage facilities with an aggregate storage capacity of approximately 17.2 million cubic meters. |
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�� | • | 2,413 kilometers of refined product pipelines with an average daily throughput of approximately 37,000 tons; and |
• | refined product storage facilities with a total storage capacity of approximately 18.7 million cubic meters. |
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• | require an environmental evaluation report to be submitted and approved prior to the commencement of exploration, production, refining and chemical projects; | |
• | restrict the type, quantities, and concentration of various substances that can be released into the environment in connection with drilling and production activities; | |
• | limit or prohibit drilling activities within protected areas and certain other areas; and | |
• | impose penalties for pollution resulting from oil, natural gas and petrochemical operations, including criminal and civil liabilities for serious pollution. |
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• | reducing sulphur levels in heavy fuel oil and diesel fuel; | |
• | reducing olefin and benzene content in gasoline and the quantity of emissions and effluents from our refineries and petrochemical plants; and | |
• | developing and installing monitoring systems at our pollutant discharge openings and developing environmental impact assessments for major projects. |
• | providing each household in areas surrounding our production facilities with printed materials to explain and illustrate safety and protection knowledge and skills; and | |
• | enhancing the implementation of various safety production measures we have adopted previously. |
• | conducting environmental risk monitoring; and | |
• | establishing preventive systems for emergency use at refinery and petrochemical enterprises. |
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• | CNPC would use its best endeavors to obtain formal land use right licenses to replace the entitlement certificates in relation to the 28,649 parcels of land, which were leased or transferred to us from CNPC, within one year from August, September and October 1999 when the relevant entitlement certificates were issued; | |
• | CNPC would 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 us are located; and | |
• | CNPC would obtain individual building ownership certificates in our name for all of the 57,482 buildings transferred to us by CNPC, before November 5, 2000. |
• | The Ministry of Land and Resources has the authority for granting, examining and approving oil and gas exploration and production licenses, the administration of registration and transfer of exploration and production licenses. | |
• | The Ministry of Commerce: |
— | sets the import and export volume quotas for crude oil and refined products according to the overall supply and demand for crude oil and refined products in China as well as the WTO requirements for China; | |
— | issues import and export licenses for crude oil and refined products to oil and gas companies that have obtained import and export quotas; and | |
— | examines and approves production sharing contracts and Sino-foreign equity and cooperative joint venture contracts. |
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• | The National Development and Reform Commission: |
— | has the industry administration and policy coordination authority over China’s oil and gas industry; | |
— | determines mandatory minimum volumes and applicable prices of natural gas to be supplied to certain fertilizer producers; | |
— | publishes guidance prices for natural gas and retail median guidance prices for certain refined products, including gasoline and diesel; | |
— | approves significant petroleum, natural gas, oil refinery and chemical projects set forth under the Catalogues of Investment Projects Approved by the Central Government; and | |
— | approves Sino-foreign equity and cooperative projects exceeding certain capital amounts. |
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Crude Oil |
Refined Products |
Chemical Products |
Natural Gas |
55
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Crude Oil |
Refined Products |
Natural Gas |
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Cooperation in Exploration and Production with Foreign Companies |
Transportation and Refining |
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Tax item | Tax base | Tax Rate | ||
Enterprise income tax | Taxable income | Currently at a rate of 33%. However, our qualified branch companies in the west regions of the PRC are entitled to a rate of 15%. Tax concession or exemption enjoyed by any subsidiary or branch company continues to apply. Effective from January 1, 2008, PRC enterprises will be subject to new income tax rates. Its impact on our operating results and financial positions of future periods remains uncertain until more detailed regulations and measures are announced. | ||
Value-added tax | Revenue | 13% for liquified natural gas, natural gas, liquified petroleum gas, agricultural film and fertilizers and 17% for other items. PetroChina charges value-added tax from its customers at the time of settlement on top of the selling prices of its products on behalf of the taxation authority. The value-added tax paid by PetroChina for purchasing materials to be consumed during the production process and for charges paid for drilling and other engineering services and labor is deducted from output value-added tax payable by PetroChina. Since March 14, 2006, the rebate of the value-added tax paid in connection with export of gasoline has been suspended. | ||
Sales volume | 5% for the Sino-foreign oil and gas exploration and development cooperative projects. However input value-added tax cannot be deducted. |
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Tax item | Tax base | Tax Rate | ||
Business tax | Revenue from transportation services | 3% | ||
Consumption tax | Aggregate volume sold or self-consumed | RMB 277.6 per ton for gasoline; since January 1, 1999, RMB 388.64 per ton for leaded gasoline. RMB 117.6 per ton for diesel. Since April 1, 2006, RMB 277 per ton for naphtha and levied at the rate of 30% of the taxable amount for the time being. Since April 1, 2006, RMB 256.4 per ton for solvent naphtha and levied at the rate of 30% of the taxable amount for the time being. Since April 1, 2006, RMB 225.2 per ton for lubricants and levied at the rate of 30% of the taxable amount for the time being. Since April 1, 2006, RMB 101.5 per ton for fuel oil and levied at the rate of 30% of the taxable amount for the time being. Since April 1, 2006, RMB 124.6 per ton for aviation kerosene and not levied for the time being. | ||
Resource tax | Aggregate volume sold or self-consumed | Since July 1, 2005, resource tax applicable to crude oil of our company was adjusted upward from the original RMB 8 to 30 per ton to RMB 14 to 30 per ton, and the resource tax for natural gas was adjusted from the original RMB 2 to 15 per thousand cubic meter to RMB 7 to 15 per thousand cubic meter. The actual applicable rate for each oil field may differ depending on the resource differences, volume of the exploration and production activities and costs required for the production at the particular oil field. | ||
Compensatory fee for mineral resources | Revenue | 1% for crude oil and natural gas | ||
Crude oil special gain levy | Sales amount above certain threshold | Effective March 26, 2006, levied on the domestic crude oil sold at or above US$40/barrel, with a five-level progressive tax rates, varying from 20% to 40% |
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Tax item | Tax base | Tax Rate | ||
Exploration license fee | Area | RMB 100 to 500 per square kilometer per year | ||
Production license fee | Area | RMB 1,000 per square kilometer per year | ||
Royalty fee(1) | Production volume | Progressive rate of 0–12.5% for crude oil and 0–3% for natural gas |
(1) | Payable only by Sino-foreign oil and gas exploration and development cooperative projects. The project entity of those cooperative projects is not subject to any other resource tax or fee. |
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• | the exploration, development, production and sale of crude oil and natural gas; | |
• | the refining, transportation, storage and marketing of crude oil and petroleum products; | |
• | the production and marketing of basic petrochemical products, derivative chemical products and other chemical products; and | |
• | the transmission and storage of crude oil, refined oil products and natural gas as well as the sale of natural gas. |
Crude Oil Prices |
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Median prices for principal grades of | Premium/(discount) | |||||||||||||||||||||||||||
crude oil (RMB/barrel) | (RMB/barrel) | |||||||||||||||||||||||||||
Year 2004 | Year 2005 | Year 2006 | ||||||||||||||||||||||||||
Grade of crude oil | Benchmark | average | average | average | 2004 | 2005 | 2006 | |||||||||||||||||||||
Daqing | Minas | 300.7 | 430 | 513 | 0 | (4.4 | ) | (3.8 | ) | |||||||||||||||||||
Jidong | Minas | 300.7 | 430 | 513 | 0 | (4.4 | ) | (3.8 | ) | |||||||||||||||||||
Huabei | Minas | 300.7 | 430 | 513 | 1.3 | (3.0 | ) | (2.4 | ) | |||||||||||||||||||
Dagang | Cinta | 290.5 | 412 | 494 | 1.4 | (1.8 | ) | (2.5 | ) | |||||||||||||||||||
Tarim | Minas | 300.7 | 430 | 513 | (34.6 | ) | (34.9 | ) | (34.6 | ) | ||||||||||||||||||
Tuha | Tapis | 329.2 | 457 | 554 | (25.5 | ) | (29.0 | ) | ||||||||||||||||||||
Refined Product Prices |
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90(#) | 0(#) | |||||||
Date | Gasoline | Diesel | ||||||
(RMB/ton) | (RMB/ton) | |||||||
March 26, 2006 | 5,172 | 4,510 | ||||||
May 24, 2006 | 5,672 | 5,010 | ||||||
January 14, 2007 | 5,452 | — |
Chemical Product Prices |
Natural Gas Prices |
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Foreign Currency Exposure |
Interest Rate Exposure |
Accounting of Oil and Gas Exploration and Production Activities |
Oil and Gas Reserves |
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Property, Plant and Equipment |
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Buildings | 20-40 years | |
Plant and machinery | 10-25 years | |
Motor vehicles | 7-15 years |
Provision for Asset Decommissioning |
Impairment of Accounts Receivable |
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Deferred Tax Assets |
Revenue Recognition |
67
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Year ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
in million RMB | in million RMB | in million RMB | ||||||||||
Total revenues | 397,354 | 552,229 | 688,978 | |||||||||
Operating expenses | (246,216 | ) | (360,058 | ) | (491,002 | ) | ||||||
Income from operations | 151,138 | 192,171 | 192,976 | |||||||||
Exchange gain (loss), net | 8 | 88 | 74 | |||||||||
Interest expense, net | (1,523 | ) | (838 | ) | (1,154 | ) | ||||||
Income from equity affiliates and jointly controlled entities | 1,621 | 2,401 | 2,277 | |||||||||
Income before income taxes | 151,244 | 193,822 | 199,173 | |||||||||
Income taxes | (43,598 | ) | (54,180 | ) | (49,776 | ) | ||||||
(Income) loss attributable to minority interest | (3,803 | ) | (6,280 | ) | (7,173 | ) | ||||||
Net income | 103,843 | 133,362 | 142,224 | |||||||||
2005 | 2006 | |||||||||||||||||||
vs. | vs. | |||||||||||||||||||
2004 | 2005 | 2004 | 2006 | 2005 | ||||||||||||||||
(RMB in millions, except percentages) | ||||||||||||||||||||
Sales and other operating revenues | ||||||||||||||||||||
Exploration and production | 233,948 | 337,208 | 44.1 | % | 421,340 | 24.9 | % | |||||||||||||
Refining and marketing | 296,427 | 428,494 | 44.6 | % | 543,299 | 26.8 | % | |||||||||||||
Chemicals and marketing | 57,179 | 73,978 | 29.4 | % | 82,791 | 11.9 | % | |||||||||||||
Natural gas and pipeline | 18,255 | 26,214 | 43.6 | % | 38,917 | 48.5 | % | |||||||||||||
Other | 0 | 0 | — | 1,080 | — | |||||||||||||||
Total | 605,809 | 865,894 | 42.9 | % | 1,087,427 | 25.6 | % | |||||||||||||
Less intersegment sales | (208,455 | ) | (313,665 | ) | 50.5 | % | (398,449 | ) | 27.0 | % | ||||||||||
Consolidated net sales from operations | 397,354 | 552,229 | 39.0 | % | 688,978 | 24.8 | % | |||||||||||||
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2005 | 2006 | |||||||||||||||||||
vs. | vs. | |||||||||||||||||||
2004 | 2005 | 2004 | 2006 | 2005 | ||||||||||||||||
(RMB in millions, except percentages) | ||||||||||||||||||||
Income (loss) from operations | ||||||||||||||||||||
Exploration and production | 130,213 | 208,080 | 59.8 | % | 219,860 | 5.7 | % | |||||||||||||
Refining and marketing | 11,891 | (19,810 | ) | — | (29,164 | ) | — | |||||||||||||
Chemicals and marketing | 7,655 | 3,276 | (57.2 | )% | 5,058 | 54.4 | % | |||||||||||||
Natural gas and pipeline | 2,535 | 3,183 | 25.6 | % | 8,986 | 182.3 | % | |||||||||||||
Other | (1,156 | ) | (2,558 | ) | 121.3 | % | (6,764 | ) | — | |||||||||||
Total | 151,138 | 192,171 | 27.1 | % | 197,976 | 3.0 | % | |||||||||||||
Consolidated Results of Operation |
Overview |
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Exploration and Production |
Refining and Marketing |
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Chemicals and Marketing |
Natural Gas and Pipeline |
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Consolidated Results of Operation |
Overview |
75
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Exploration and Production |
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Year Ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
(RMB in millions) | ||||||||||||
Net cash generated by operating activities | 141,691 | 203,885 | 198,102 | |||||||||
Net cash used for investing activities | (102,276 | ) | (91,576 | ) | (158,451 | ) | ||||||
Net cash used for financing activities | (39,586 | ) | (42,634 | ) | (71,739 | ) | ||||||
Currency translation difference | 246 | (458 | ) | (258 | ) | |||||||
Cash and cash equivalents at the end of period | 11,688 | 80,905 | 48,559 |
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December 31, | ||||||||||||||
2004 | 2005 | 2006 | ||||||||||||
(RMB in millions) | ||||||||||||||
Short-term debt (including current portion of long-term debt) | 34,937 | 28,689 | 35,763 | |||||||||||
Long-term debt | 44,648 | 44,570 | 35,634 | |||||||||||
Total debt | 79,585 | 73,259 | 71,397 | |||||||||||
Less: | ||||||||||||||
Cash and cash equivalents | 11,688 | 80,905 | 48,559 | |||||||||||
Time deposits with term exceeding three months within one year | 1,425 | 1,691 | 3,012 | |||||||||||
Investments in Collateralized Loans | 33,217 | 235 | — | |||||||||||
Time deposits exceeding one year | 3,751 | 3,428 | 2,499 | |||||||||||
Net debt | 29,504 | (13,000 | ) | 17,327 | ||||||||||
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• | an increase in the distribution of dividends leading to an increase of RMB 14,922 million in cash outflow; and | |
• | our follow-on offering of H shares in 2005 leading to an increase of RMB 19,692 million in cash inflow while no such financing activity occurred in 2006. |
• | a decrease in new long-term debts leading to a decrease of RMB 2,939 million in cash inflow; | |
• | an increase in the repayment of short-term debts leading to an increase of RMB 10,667 million in cash outflow; and | |
• | an increase in the distribution of dividends leading to an increase of RMB 19,339 million in cash outflow; |
• | our follow-on offering of H shares leading to an increase of RMB 19,692 million in cash inflow. | |
• | an increase in new short-term debts leading to an increase of RMB 3,906 million in cash inflow; and | |
• | a decrease in the repayment of long-term debts leading to a decrease of RMB 9,156 million in cash outflow. |
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2007 | |||||||||||||||||||||||||||||||||
2004 | 2005 | 2006 | anticipated | ||||||||||||||||||||||||||||||
(RMB in | (RMB in | (RMB in | (RMB in | ||||||||||||||||||||||||||||||
millions) | % | millions) | % | millions) | % | millions) | % | ||||||||||||||||||||||||||
Exploration and production | 70,217 | 66.06 | 92,233 | 68.92 | 114,520 | 72.44 | 127,200 | 64.34 | |||||||||||||||||||||||||
Refining and marketing | 17,684 | 16.64 | 16,454 | 12.30 | 19,206 | 12.15 | 28,000 | 14.16 | |||||||||||||||||||||||||
Chemicals and marketing | 4,319 | 4.06 | 13,569 | 10.14 | 10,681 | 6.76 | 16,000 | 8.09 | |||||||||||||||||||||||||
Natural gas and pipeline | 13,901 | 13.08 | 11,137 | 8.32 | 11,309 | 7.15 | 18,000 | 9.10 | |||||||||||||||||||||||||
Corporate and other | 174 | 0.16 | 427 | 0.32 | 2,358 | 1.50 | 8,500 | 4.31 | |||||||||||||||||||||||||
Total | 106,295 | 100.0 | 133,820 | 100.0 | 158,074 | 100.0 | 197,700 | 100.0 | |||||||||||||||||||||||||
Exploration and Production |
Refining and Marketing |
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• | approximately RMB 20,000 million for the construction and expansion of our refining facilities; and | |
• | approximately RMB 8,000 million for the construction of our service stations and retail facilities for finished oil products. |
Chemicals and Marketing |
Natural Gas and Pipeline |
Other |
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Payment due by period | ||||||||||||||||||||
Less than | After | |||||||||||||||||||
Contractual obligations | Total | 1 year | 1-3 years | 3-5 years | 5 years | |||||||||||||||
(RMB in millions) | ||||||||||||||||||||
Long-term debt | 56,241 | 20,607 | 18,211 | 4,035 | 13,388 | |||||||||||||||
Capital lease obligations | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Operating leases | 94,780 | 3,099 | 5,463 | 6,142 | 80,076 | |||||||||||||||
Capital commitments | 9,193 | 4,871 | 4,315 | 3 | 4 | |||||||||||||||
Unconditional purchase obligations | 1,412.1 | 1,063.2 | 274.1 | 28.4 | 46.4 | |||||||||||||||
Other long-term obligations | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Total contractual cash obligations | 161,626.1 | 29,640.2 | 28,263.1 | 10,208.4 | 93,514.4 |
Amount of commitment expiration per period | ||||||||||||||||||||
Total | ||||||||||||||||||||
amounts | Less than | Over | ||||||||||||||||||
Other commercial commitments | committed | 1 year | 1-3 years | 3-5 years | 5 years | |||||||||||||||
(RMB in million) | ||||||||||||||||||||
Lines of credit | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Standby letters of credit | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Guarantees | 203 | 87 | 49 | 22 | 45 | |||||||||||||||
Total commercial commitments | 203 | 87 | 49 | 22 | 45 |
Year | Annual payment | |||
(RMB in millions) | ||||
2007 | 750 | |||
2008 | 780 | |||
2009 | 800 | |||
2010 | 850 | |||
2011 | 900 |
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Quantities | ||||
(billion of | ||||
cubic feet) | ||||
2007 | 720 | |||
2008 | 885 | |||
2009 | 943 | |||
2010 | 1,002 | |||
2011 | 1,050 | |||
2012 and thereafter | 10,460 |
Oil-and-Gas Assets Retirement Obligation |
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• | geological structures of crude oil and natural gas reserves; | |
• | oil and gas exploration and development; | |
• | oil and gas production and pipeline transportation; and | |
• | energy conservation and environment protection. |
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Revaluation of Property, Plant and Equipment |
One-time Compensatory Payments for Staff Housing |
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Minority Interest |
Purchase from Minority Interest of Listed Subsidiaries |
Recent US Accounting Pronouncements |
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Quantitative Disclosure Relating to US GAAP and IFRS |
Year Ended December 31, 2006 Compared to Year Ended December 31, 2005 |
Year Ended December 31, 2005 Compared to Year Ended December 31, 2004 |
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• | convening shareholders’ meetings and reporting its work to the shareholders’ meetings; | |
• | implementing the resolutions of the shareholders’ meetings; | |
• | determining our business plans and investment plans; | |
• | formulating our annual budget and final accounts; | |
• | formulating our proposals for dividend and bonus distributions and for the increase or reduction of capital; and | |
• | exercising other powers, functions and duties as conferred by our articles of association. |
• | attending board meetings; | |
• | examining our financial affairs; | |
• | examining balance sheets, profit and loss accounts, business reports, dividend distribution proposals and other financial information proposed at shareholders’ general meetings by the directors from time to time; and | |
• | overseeing the actions of our board of directors and our senior management personnel in carrying out their duties. |
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Name | Age | Position | Date of election(1) | |||||||
Chen Geng | 60 | Chairman of the board of directors | May 18, 2004 | |||||||
Jiang Jiemin | 51 | Vice Chairman of the board of directors and President | May 18, 2004 | |||||||
Duan Wende | 55 | Director and Senior Vice President | May 18, 2004 | |||||||
Zheng Hu | 60 | Director | May 26, 2006 | |||||||
Zhou Jiping | 54 | Director | May 18, 2004 | |||||||
Wang Yilin | 50 | Director | November 8, 2005 | |||||||
Zeng Yukang | 56 | Director | November 8, 2005 | |||||||
Gong Huazhang | 60 | Director | November 8, 2005 | |||||||
Jiang Fan | 43 | Director | November 8, 2005 | |||||||
Chee-Chen Tung | 64 | Independent non-executive director | November 8, 2005 | |||||||
Liu Hongru | 76 | Independent non-executive director | November 8, 2005 | |||||||
Franco Bernabè | 58 | Independent non-executive director | May 26, 2006 | |||||||
Li Huaiqi | 57 | Secretary to the board of directors | ||||||||
Wang Guoliang | 54 | Chief Financial Officer | ||||||||
Liao Yongyuan | 44 | Vice President | ||||||||
Jia Chengzao | 58 | Vice President | ||||||||
Hu Wenrui | 57 | Vice President | ||||||||
Wang Fucheng | 56 | Chairman of the supervisory committee | ||||||||
Wen Qingshan | 48 | Supervisor | ||||||||
Sun Xianfeng | 54 | Supervisor | ||||||||
Xu Fengli | 59 | Supervisor | ||||||||
Qin Gang | 53 | Supervisor | ||||||||
Li Yongwu | 62 | Independent supervisor | ||||||||
Wu Zhipan | 50 | Independent supervisor |
(1) | For directors only. |
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% Stock | ||||||||||||
% Fixed | appreciation | % Performance | ||||||||||
salary | rights | bonus | ||||||||||
Chairman | 30 | 70 | 0 | |||||||||
President | 25 | 60 | 15 | |||||||||
Vice President | 25 | 60 | 15 | |||||||||
Department GM | 25 | 50 | 25 |
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• | supervising the integrity of financial reporting process to ensure fair, transparent and true financial disclosure; | |
• | evaluating the effectiveness of the internal control and risk management framework; | |
• | inspecting and supervising the effectiveness of the internal audit functions; | |
• | reviewing and supervising the engagement and work of external auditors, including evaluating the performance of external auditors annually and raising proposals together with the supervisory committee to the shareholders’ meetings with respect to the engagement, re-engagement and dismissal of external auditors and the compensation of such external auditors; | |
• | receiving, keeping and dealing with complaints regarding accounting, internal control or auditing matters. | |
• | receiving and dealing with anonymous submissions and complaints by employees regarding accounting or auditing matters, and keeping such submission and complaints confidential, and other duties provided in the Listing Rules from time to time. |
• | studying strategic action plans as proposed by our President and making recommendations to the board of directors; | |
• | studying the annual investment budget and the adjustment proposal regarding the investment plan as proposed by our President and making recommendations to the board of directors; and | |
• | reviewing preliminary feasibility studies and feasibility studies for material investment projects requiring approval of the board of directors and making recommendations to the board of directors. |
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• | managing the performance evaluations for our President and submitting report to our board and monitoring performance evaluations led by our President for Senior Vice President, Vice Presidents, Chief Financial Officer and other senior management personnel; | |
• | studying our incentive plan, compensation plan and stock appreciation rights plan, supervising and evaluating the implementation of these plans and making recommendations for improvements to and perfection of such plans. |
• | supervising the effective implementation of our Health, Safety and Environmental Protection Plan; | |
• | making recommendations to the board of directors and our President for major decisions with respect of health, safety and environmental protection; | |
• | inquiring the occurrence of and responsibilities for material accidents and supervising the remedial measures of material accidents. |
Employees | % of total | ||||||||
Exploration and production | 247,442 | 55.44 | |||||||
Refining and marketing | 118,504 | 26.55 | |||||||
Chemicals and marketing | 61,152 | 13.70 | |||||||
Natural gas and pipeline | 15,496 | 3.47 | |||||||
Other(1) | 3,696 | 0.84 | |||||||
Total | 446,290 | 100.0 | % | ||||||
(1) | Including the numbers of employees of the management of our headquarters, specialized companies, PetroChina Exploration & Development Research Institute, PetroChina Planning & Engineering Institute, Petrochemical Research Institute and other units. |
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Acquisition of a 67% interest in PKZ |
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• | Construction and technical services, | |
• | Production services, | |
• | Supply of materials services, | |
• | Social services, | |
• | Ancillary services, and | |
• | Financial services. |
Product and Service Implementation Agreements |
Land Use Rights Leasing Contract |
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Buildings Leasing Contract and Buildings Supplementary Leasing Agreement |
Intellectual Property Licensing Contracts |
Contract for the Transfer of Rights under Production Sharing Contracts |
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Guarantee of Debts Contract |
New Continuing Related Party Transactions with CNPC E&D |
• | the provision of production services by CNPC Group to our company; | |
• | the provision of construction and technical services such as exploration technology services by CNPC Group to our company; | |
• | the provision of materials supply services by CNPC Group to our company. |
Continuing Related Party Transactions with CNPC (HK) |
(1) Production and development cost sharing between our company and CNPC (HK):For both Leng Jiapu Oilfield and blocks 9-1 to 9-5 of the Karamay Oilfield, our company and CNPC (HK) share the development costs for these oilfields as to 46% by our company and 54% by CNPC (HK), and share the oil and natural gas produced from these oilfields, as to 30% by our company and 70% by CNPC (HK). |
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(2) Provision of assistance by our company to CNPC (HK):Our company shall provide assistance to CNPC (HK), including: (i) leasing warehouses, terminal facilities, barges, pipeline and land, etc.; (ii) obtaining approvals necessary for the conduct of the petroleum operations; and (iii) obtaining office space, office supplies, transportation and communication facilities. For such assistance, CNPC (HK) will pay an annual assistance fee of US$50,000 to each of blocks9-1 to9-5 of the Karamay Oilfield and the Leng Jiapu Oilfield. The amount of such fee was determined after negotiations, and has taken into account the actual circumstances and conditions, including the scope of the projects and the level of demand for such assistance. This fee shall be accounted for as operating costs and shared by our company and CNPC (HK) in accordance with the procedures described in the Xinjiang Contract and the Liaohe Contract. | |
(3) Payment of training fees:In the course of development and operations of each oilfield, CNPC (HK) shall pay our company an amount of US$50,000 annually for the training of personnel carried out by our company for each of the blocks 9-1 to 9-5 of the Karamay Oilfield and the Leng Jiapu Oilfield. The amount of such fee was determined after negotiations, and has taken into account the actual circumstances and conditions, including the scope of the projects and the level of demand for training. | |
(4) Sale of crude oil by CNPC (HK) to our company:CNPC (HK) has the right to deliver its share of oil production from each of blocks 9-1 to 9-5 of the Karamay Oilfield and the Leng Jiapu Oilfield to a destination of its choice, except for destinations which infringe on the political interests of the PRC. However, given the transportation costs and the prevailing oil prices, the only likely purchaser of the oil production attributable to CNPC (HK) from each of blocks9-1 to9-5 of the Karamay Oilfield and the Leng Jiapu Oilfield is CNPC or its affiliates, including our company, which will accept delivery of oil produced in blocks9-1 to9-5 of the Karamay Oilfield and the Leng Jiapu Oilfield at the market price. Since the signing of the PRC Oil Production Sharing Contracts, CNPC (HK) has sold all of its share of the oil production to CNPC or its affiliates, including our company. As far as the Board of Directors is aware, CNPC (HK) intends to continue with this arrangement. There is no contractual obligation upon our company to purchase oil produced from blocks9-1 to9-5 of the Karamay Oilfield and the Leng Jiapu Oilfield, although, from a commercial perspective, our company intends to continue to accept part of the deliveries. The price of various grades of crude oil sold shall be set either with reference to the price approved by the relevant PRC authorities, or as determined with reference to the prevailing fair market price for transactions of crude oil of a similar quality in the major oil markets. This will be adjusted to take into account the terms of transportation, payment and other terms. | |
The waiver in respect of the above continuing related party transactions between our company and CNPC (HK) granted by the HKSE expired on December 31, 2006. Our company made an announcement on August 23, 2006 in respect of the reporting and announcement obligations for these continuing related party transaction for the period from January 1, 2007 to December 31, 2008. |
Continuing Related Party Transactions with CRMSC and Beijing Gas |
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• | general business conditions; | |
• | our financial results; | |
• | capital requirements; | |
• | contractual restrictions on the payment of dividends by us to our shareholders or by our subsidiaries to us; | |
• | our shareholders’ interests; | |
• | the effect on our debt ratings; and | |
• | other factors our board of directors may deem relevant. |
• | recovery of losses, if any; | |
• | allocations to the statutory common reserve fund; and | |
• | allocations to a discretionary common reserve fund if approved by our shareholders. |
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• | providing our shareholders with a competitive return on investment; and | |
• | assuring sufficient reinvestment of profits to enable us to achieve our strategic objectives. |
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Price per | |||||||||||||||||
H share | Price per ADS | ||||||||||||||||
High | Low | High | Low | ||||||||||||||
(HK$) | (US$) | ||||||||||||||||
2002 | |||||||||||||||||
First quarter | 1.62 | 1.39 | 21.07 | 18.03 | |||||||||||||
Second quarter | 1.75 | 1.52 | 22.40 | 19.23 | |||||||||||||
Third quarter | 1.72 | 1.53 | 21.72 | 19.25 | |||||||||||||
Fourth quarter | 1.57 | 1.44 | 20.75 | 18.40 | |||||||||||||
2003 | |||||||||||||||||
First quarter | 1.70 | 1.55 | 21.61 | 19.10 | |||||||||||||
Second quarter | 2.38 | 1.62 | 30.82 | 20.94 | |||||||||||||
Third quarter | 2.80 | 2.15 | 35.89 | 27.67 | |||||||||||||
Fourth quarter | 4.45 | 2.60 | 57.05 | 33.75 | |||||||||||||
2004 | |||||||||||||||||
First quarter | 4.85 | 3.75 | 63.70 | 47.53 | |||||||||||||
Second quarter | 4.00 | 3.20 | 50.96 | 41.63 | |||||||||||||
Third quarter | 4.175 | 3.60 | 53.76 | 45.98 | |||||||||||||
Fourth quarter | 4.375 | 4.075 | 56.60 | 52.22 | |||||||||||||
2005 | |||||||||||||||||
First quarter | 5.10 | 4.025 | 65.36 | 51.65 | |||||||||||||
Second quarter | 5.85 | 4.675 | 74.65 | 59.71 | |||||||||||||
Third quarter | 7.35 | 5.90 | 94.50 | 74.95 | |||||||||||||
Fourth quarter | 6.50 | 5.65 | 83.70 | 72.70 | |||||||||||||
2006 | |||||||||||||||||
First quarter | 8.10 | 6.35 | 104.95 | 83.50 | |||||||||||||
Second quarter | 9.55 | 7.10 | 122.75 | 90.63 | |||||||||||||
Third quarter | 9.09 | 8.17 | 117.20 | 104.60 | |||||||||||||
Fourth quarter | 11.12 | 8.12 | 142.12 | 104.95 | |||||||||||||
2006 | |||||||||||||||||
November | 9.90 | 8.66 | 128.10 | 110.74 | |||||||||||||
December | 11.12 | 9.91 | 142.12 | 128.10 | |||||||||||||
2007 | |||||||||||||||||
January | 11.08 | 9.39 | 137.90 | 120.75 | |||||||||||||
February | 9.73 | 9.11 | 124.70 | 114.25 | |||||||||||||
March | 9.27 | 8.57 | 118.40 | 109.55 | |||||||||||||
April | 9.26 | 8.90 | 118.80 | 112.14 |
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Enforceability of Shareholders’ Rights |
• | between a holder of H shares and us; | |
• | between a holder of H shares and any of our directors, supervisors, general managers, deputy general managers or other senior officers; or | |
• | between a holder of H shares and a holder of State-owned shares, arising from any provision of the articles of association, any right or obligation conferred or imposed by the PRC Company Law or any other relevant law or administrative regulation which concerns our affairs must, with certain exceptions, be referred to arbitration at either the China International Economic and Trade Arbitration Commission in the PRC or the Hong Kong International Arbitration Center. Our articles of association provide that such arbitration will be final and conclusive. |
Restrictions on Transferability and the Share Register |
• | any relevant transfer fee is paid; | |
• | the instrument of transfer is accompanied by the share certificates to which it relates, or such other evidence is given as may be reasonably necessary to show the right of the transferor to make the transfer; | |
• | the instrument of transfer is in respect of one class of shares only; and | |
• | the transfer is conducted in accordance with the laws and administrative regulations of or required by the securities exchanges on which the shares are listed. |
Dividends |
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• | recovery of losses, if any; | |
• | allocations to the statutory common reserve fund; | |
• | allocations to the statutory common welfare fund; and | |
• | allocations to a discretionary common reserve fund if approved by the shareholders. |
Voting Rights and Shareholders’ Meetings |
• | where the number of directors is less than the number stipulated in the PRC Company law or two-thirds of the number specified in our articles of association; | |
• | where our unrecovered losses reach one-third of the total amount of our share capital; | |
• | where shareholders holding 10% or more of our issued and outstanding voting shares request in writing the convening of an extraordinary general meeting; or | |
• | where our board deems necessary or our board of supervisors so request. |
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• | an increase or reduction of our share capital or the issue of shares of any class, warrants and other similar securities; | |
• | the issue of our debentures; | |
• | our division, merger, dissolution and liquidation; | |
• | amendments to our articles of association; and | |
• | any other matters considered by the shareholders in a general meeting and which they have resolved by way of an ordinary resolution to be of a nature which may have a material impact on us and should be adopted by special resolution. |
Board of Directors |
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(a) be responsible for the convening of shareholders’ meetings and reporting on its work to the shareholders at such meetings; | |
(b) implement the resolutions passed by the shareholders in general meetings; | |
(c) determine our business plans and investment proposals; | |
(d) formulate our annual preliminary and final budgets; | |
(e) formulate our profit distribution proposal and loss recovery proposals; | |
(f) formulate proposals for the increase or reduction of our registered capital and the issuance of our debentures; | |
(g) draw up plans for our merger, division or dissolution; | |
(h) decide on our internal management structure; | |
(i) appoint or remove our president and to appoint or remove the vice presidents and other senior officers, including the financial controller, based on the recommendation of the general manager, and to decide on their remuneration; | |
(j) formulate our basic management system; | |
(k) formulate proposals for any amendment of our articles of association; and | |
(l) exercise any other powers conferred by the shareholders in general meetings. |
• | not to cause us to exceed the scope of business stipulated in our business license; | |
• | to act honestly in our best interests; | |
• | not to expropriate our property in any way, including, without limitation, usurpation of opportunities which benefit us; and |
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• | not to expropriate the individual rights of shareholders, including, without limitation, rights to distributions and voting rights, save and except according to a restructuring which has been submitted to the shareholders for their approval in accordance with the articles of association. |
• | a duty, in the exercise of such person’s powers and discharge of such person’s duties, to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances; | |
• | a fiduciary obligation, in the exercise of our powers entrusted to him or her, not to place himself or herself in a position where his or her duty to us and his or her interests may conflict; and | |
• | a duty not to direct a person or entity related or connected to a director, supervisor, president, vice president or senior officer in certain relationships enumerated in the articles of association to act in a manner which such director, supervisor, president, vice president or senior officer is prohibited from doing. |
• | to verify financial reports and other financial information which have been prepared by the board and which are proposed to be presented at shareholders’ meetings, and | |
• | to oversee our directors, president, vice presidents and other senior officers in order to prevent such persons from abusing their authority or infringing upon our interest. |
Restrictions on Large or Controlling Shareholders |
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• | to relieve a director or supervisor from his or her duty to act honestly in our best interests; | |
• | to approve the expropriation by a director or supervisor of our assets in any way, including, without limitation, opportunities which may benefit us; or | |
• | to approve the expropriation by a director or supervisor of the individual rights of other shareholders, including, without limitation, rights to distributions and voting rights, except according to a restructuring of our company which has been submitted for approval by the shareholders in a general meeting in accordance with our articles of association. |
• | is in a position to elect more than one-half of the board of directors; | |
• | has the power to exercise, or to control the exercise of, 30% or more of our voting rights; | |
• | holds 30% or more of our issued and outstanding shares; or | |
• | has de facto control of us in any other way. |
Share Capital Structure |
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• | Share Purchase Agreement in respect of the shares of PetroKazakhstan, dated August 23, 2006, between Pervinage Holding B.V. (a wholly-owned subsidiary of CNPC E&D) and 819 Luxembourg S. a r. l. (an indirect wholly-owned subsidiary of CNPC); | |
• | Capital Contribution Agreement, dated June 9, 2005, among China National Oil and Gas Exploration and Development Corporation, Central Asia Petroleum Company Limited, Zhong You Kan Tan Kai Fa Company Limited and our company (English Translation); and | |
• | Transfer Agreement, dated June 9, 2005, between Zhong You Kan Tan Kai Fa Company Limited and our company (English Translation). |
• | debt service on foreign currency-denominated debt; | |
• | purchases of imported equipment and materials; and | |
• | payment of any dividends declared in respect of the H shares. |
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Dividends and Individual Investors |
Dividends and Foreign Enterprises |
Tax Treaties |
• | the United States; | |
• | Australia; | |
• | Canada; | |
• | France; | |
• | Germany; | |
• | Japan; | |
• | Malaysia; | |
• | Singapore; |
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• | the United Kingdom; and | |
• | the Netherlands. |
Capital Gains |
Additional PRC Tax Considerations |
• | tax-exempt entities; | |
• | certain insurance companies; | |
• | broker-dealers; | |
• | traders in securities that elect to mark to market; | |
• | U.S. holders liable for alternative minimum tax; | |
• | U.S. holders that own 10% or more of our voting stock; |
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• | U.S. holders that hold the H shares or ADSs as part of a straddle or a hedging or conversion transaction; or | |
• | U.S. holders whose functional currency is not the U.S. dollar. |
• | a citizen or resident of the United States for United States federal income tax purposes; | |
• | a corporation, or other entity treated as a corporation for United States federal income tax purposes, created or organized under the laws of the United States or any political subdivision thereof; | |
• | an estate the income of which is subject to United States federal income tax without regard to its source; or | |
• | a trust: |
— | subject to the primary supervision of a United States court and the control of one or more United States persons; or | |
— | that has elected to be treated as a United States person under applicable United States Treasury regulations. |
Distributions on the H Shares or ADSs |
• | a foreign corporation that is eligible for the benefits of a comprehensive income tax treaty with the United States that includes an exchange of information program; or |
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• | a foreign corporation if its stock with respect to which a dividend is paid (or ADSs backed by such stock) is readily tradable on an established securities market within the United States, |
Sale, Exchange or Other Disposition |
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PFIC Rules |
• | 75% or more of its gross income consists of passive income, such as dividends, interest, rents and royalties; or | |
• | 50% or more of the average quarterly value of its assets consists of assets that produce, or are held for the production of, passive income. |
Backup Withholding and Information Reporting |
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• | are a corporation or fall within various other exempt categories, and, when required, demonstrate this fact; or | |
• | provide a correct taxpayer identification number on a properly completed IRS Form W-9 or a substitute form, certify that you are exempt from backup withholding and otherwise comply with applicable requirements of the backup withholding rules. |
1. | From our main web page, first click on “Investor Relations”. | |
2. | Next, click on “Corporate Governance Structure”. | |
3. | Finally, click on “Significant Differences In Corporate Governance Practices For Purposes Of Section 303A.11 of The New York Stock Exchange Listed Company Manual”. |
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Percentage | |||||||||||||||||||||||||||||||||||||
Expected maturity date | to total | ||||||||||||||||||||||||||||||||||||
long-term | Fair | ||||||||||||||||||||||||||||||||||||
2007 | 2008 | 2009 | 2010 | 2011 | Thereafter | Total | debt (%) | value | |||||||||||||||||||||||||||||
(RMB equivalent in millions, except percentages) | |||||||||||||||||||||||||||||||||||||
Long term debt | |||||||||||||||||||||||||||||||||||||
Loan in RMB | |||||||||||||||||||||||||||||||||||||
Fixed rate | 62 | 272 | 1 | 335 | 0.60% | 320 | |||||||||||||||||||||||||||||||
Average interest rate | 4.45% | 3.83% | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Variable rate(1) | 13,740 | 7,280 | 5,220 | 1,142 | 7,590 | 34,972 | 62.17% | 34,972 | |||||||||||||||||||||||||||||
Average interest rate | 5.21% | 5.35% | 4.64% | 5.01% | — | 5.07% | — | — | — | ||||||||||||||||||||||||||||
Loan in Euro | |||||||||||||||||||||||||||||||||||||
Fixed rate | 17 | 16 | 16 | 16 | 16 | 176 | 257 | 0.46% | 214 | ||||||||||||||||||||||||||||
Average interest rate | 2.12% | 2.12% | 2.12% | 2.12% | 2.12% | 2.11% | — | — | — | ||||||||||||||||||||||||||||
Variable rate | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Average interest rate | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Loan in United States Dollar | |||||||||||||||||||||||||||||||||||||
Fixed rate | 568 | 146 | 73 | 41 | 41 | 562 | 1,431 | 2.55% | 1,200 | ||||||||||||||||||||||||||||
Average interest rate | 7.69% | 5.12% | 3.96% | 1.43% | 1.43% | 1.39% | — | — | — | ||||||||||||||||||||||||||||
Variable rate | 4,541 | 4,042 | 706 | 297 | 82 | 3,217 | 12,885 | 22.91% | 12,885 | ||||||||||||||||||||||||||||
Average interest rate | 5.68% | 6.81% | 5.95% | 5.79% | 4.72% | 5.77% | — | — | — | ||||||||||||||||||||||||||||
Loan in British Pound | |||||||||||||||||||||||||||||||||||||
Fixed rate | 49 | — | — | — | — | — | 49 | 0.09% | 47 | ||||||||||||||||||||||||||||
Average interest rate | 2.85% | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Loan in Japanese Yen | |||||||||||||||||||||||||||||||||||||
Fixed rate | 37 | 21 | 9 | 8 | 75 | 0.13% | 78 | ||||||||||||||||||||||||||||||
Average interest rate | 4.25% | 3.40% | 2.42% | 2.42% | — | — | — | — | — | ||||||||||||||||||||||||||||
Variable rate | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Average interest rate | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Debenture in United States Dollar | |||||||||||||||||||||||||||||||||||||
Fixed Rate | 205 | 20 | — | — | 781 | 343 | 1,349 | 2.40% | 1,403 | ||||||||||||||||||||||||||||
Average interest rate | 13.48% | 15.00% | — | — | 9.50% | 3.00% | — | — | — | ||||||||||||||||||||||||||||
Debenture in RMB | |||||||||||||||||||||||||||||||||||||
Fixed rate | 1,388 | — | — | — | 2,000 | 1,500 | 4,888 | 8.69% | 4,449 | ||||||||||||||||||||||||||||
Average interest rate | 4.49% | — | — | — | 3.76% | 4.11% | — | — | — | ||||||||||||||||||||||||||||
Total | 20,607 | 11,797 | 6,024 | 1,504 | 2,921 | 13,388 | 56,241 | 100.00% | 55,568 | ||||||||||||||||||||||||||||
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Percentage | |||||||||||||||||||||||||||||||||||||
Expected maturity date | to total | ||||||||||||||||||||||||||||||||||||
long-term | Fair | ||||||||||||||||||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | Thereafter | Total | debt (%) | value | |||||||||||||||||||||||||||||
(RMB equivalent in millions, except percentages) | |||||||||||||||||||||||||||||||||||||
Long term debt | |||||||||||||||||||||||||||||||||||||
Loan in RMB | |||||||||||||||||||||||||||||||||||||
Fixed rate | — | 66 | 274 | — | — | 1 | 341 | 0.57% | 323 | ||||||||||||||||||||||||||||
Average interest rate | 1.53% | 4.18% | 3.80% | — | — | — | |||||||||||||||||||||||||||||||
Variable rate(1) | 9,128 | 13,740 | 6,390 | 100 | 911 | 6,000 | 36,269 | 60.54% | 36,269 | ||||||||||||||||||||||||||||
Average interest rate | 5.18% | 5.08% | 5.12% | 5.51% | 4.77% | 4.90% | |||||||||||||||||||||||||||||||
Loan in Euro | |||||||||||||||||||||||||||||||||||||
Fixed rate | 16 | 16 | 16 | 16 | 15 | 177 | 256 | 0.43% | 221 | ||||||||||||||||||||||||||||
Average interest rate | 2.11% | 2.11% | 2.11% | 2.11% | 2.11% | 2.11% | |||||||||||||||||||||||||||||||
Variable rate | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Average interest rate | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Loan in United States Dollar | |||||||||||||||||||||||||||||||||||||
Fixed rate | 409 | 621 | 142 | 74 | 43 | 624 | 1,913 | 3.19% | 1,633 | ||||||||||||||||||||||||||||
Average interest rate | 6.26% | 7.56% | 5.02% | 3.92% | 1.43% | 1.39% | |||||||||||||||||||||||||||||||
Variable rate | 5,508 | 2,497 | 4,371 | 2,293 | 79 | 1,649 | 16,397 | 27.38% | 16,397 | ||||||||||||||||||||||||||||
Average interest rate | 5.60% | 5.42% | 5.99% | 5.37% | 2.69% | 4.69% | |||||||||||||||||||||||||||||||
Loan in British Pound | |||||||||||||||||||||||||||||||||||||
Fixed rate | 116 | 44 | — | — | — | — | 160 | 0.27% | 156 | ||||||||||||||||||||||||||||
Average interest rate | 2.85% | 2.85% | — | — | — | — | |||||||||||||||||||||||||||||||
Loan in Japanese Yen | |||||||||||||||||||||||||||||||||||||
Fixed rate | 148 | 39 | 21 | 9 | 9 | — | 226 | 0.38% | 242 | ||||||||||||||||||||||||||||
Average interest rate | 4.74% | 4.84% | 4.48% | 5.02% | 5.02% | — | |||||||||||||||||||||||||||||||
Variable rate | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Average interest rate | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Debenture in United States Dollar | |||||||||||||||||||||||||||||||||||||
Fixed rate | — | — | 179 | — | — | 1,304 | 1,483 | 2.48% | 1,509 | ||||||||||||||||||||||||||||
Average interest rate | — | — | 15% | — | — | 8.25% | |||||||||||||||||||||||||||||||
Debenture in RMB | |||||||||||||||||||||||||||||||||||||
Fixed rate | — | 1,350 | — | — | — | 1,500 | 2,850 | 4.76% | 2,664 | ||||||||||||||||||||||||||||
Average interest rate | — | — | — | — | — | 4.11% | |||||||||||||||||||||||||||||||
Total | 15,325 | 18,373 | 11,393 | 2,492 | 1,057 | 11,255 | 59,895 | 100% | 59,414 | ||||||||||||||||||||||||||||
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Percentage | |||||||||||||||||||||||||||||||||||||
Expected maturity date | to total | ||||||||||||||||||||||||||||||||||||
long-term | Fair | ||||||||||||||||||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | Thereafter | Total | debt (%) | value | |||||||||||||||||||||||||||||
(RMB equivalent in millions, except percentages) | |||||||||||||||||||||||||||||||||||||
Long term debt | |||||||||||||||||||||||||||||||||||||
Loan in RMB | |||||||||||||||||||||||||||||||||||||
Fixed rate | 1,021 | 221 | 100 | 200 | — | 1 | 1,543 | 2.43% | 1,529 | ||||||||||||||||||||||||||||
Average interest rate | 4.57% | 4.32% | 4.25% | 3.60% | — | 6.10% | |||||||||||||||||||||||||||||||
Variable rate(1) | 12,234 | 6,366 | 13,718 | 4,440 | 100 | 4,500 | 41,358 | 65.01% | 41,358 | ||||||||||||||||||||||||||||
Average interest rate | 5.08% | 5.12% | 4.85% | 5.03% | 5.18% | 4.62% | |||||||||||||||||||||||||||||||
Loan in Euro | |||||||||||||||||||||||||||||||||||||
Fixed rate | 36 | 35 | 17 | 17 | 17 | 238 | 360 | 0.57% | 302 | ||||||||||||||||||||||||||||
Average interest rate | 5.47% | 5.42% | 2.13% | 2.13% | 2.13% | 2.01% | |||||||||||||||||||||||||||||||
Variable rate | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Average interest rate | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Loan in United States Dollar | |||||||||||||||||||||||||||||||||||||
Fixed rate | 480 | 406 | 586 | 169 | 103 | 693 | 2,437 | 3.83% | 2,172 | ||||||||||||||||||||||||||||
Average interest rate | 6.46% | 6.29% | 7.57% | 5.48% | 4.50% | 1.57% | |||||||||||||||||||||||||||||||
Variable rate | 4,868 | 2,817 | 2,442 | 960 | 2,725 | 482 | 14,294 | 22.47% | 14,294 | ||||||||||||||||||||||||||||
Average interest rate | 3.78% | 4.43% | 3.41% | 3.19% | 3.41% | 2.10% | |||||||||||||||||||||||||||||||
Loan in British Pound | |||||||||||||||||||||||||||||||||||||
Fixed rate | 154 | 133 | 51 | — | — | — | 338 | 0.53% | 326 | ||||||||||||||||||||||||||||
Average interest rate | 2.85% | 2.85% | 2.85% | — | — | — | |||||||||||||||||||||||||||||||
Loan in Japanese Yen | |||||||||||||||||||||||||||||||||||||
Fixed rate | 170 | 167 | 43 | 24 | 9 | 17 | 430 | 0.68% | 463 | ||||||||||||||||||||||||||||
Average interest rate | 4.63% | 4.62% | 4.84% | 4.45% | 5.02% | 5.02% | |||||||||||||||||||||||||||||||
Variable rate | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Average interest rate | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Debenture in RMB | |||||||||||||||||||||||||||||||||||||
Fixed rate | — | — | 1,350 | — | — | 1,500 | 2,850 | 4.48% | 2,632 | ||||||||||||||||||||||||||||
Average interest rate | — | — | 4.50% | — | — | 4.11% | |||||||||||||||||||||||||||||||
Total | 18,963 | 10,145 | 18,307 | 5,810 | 2,954 | 7,431 | 63,610 | 100% | 63,076 | ||||||||||||||||||||||||||||
(1) | Due to the declining interest rates in recent years in China, the PRC government has implemented a program to adjust interest rates on certain fixed RMB loans periodically to reflect the market rates in effect published by the People’s Bank of China, or the PBOC, from time to time. As a result, these previously fixed RMB loans are categorized as variable rate loans as of December 31, 2004, 2005 and 2006. The newly adjusted rates usually become effective one year after the announcement by the PBOC. The average interest rates on these loans are calculated based on the then effective rates as of December 31, 2004, 2005 and 2006, respectively. |
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Evaluation of the Management on Disclosure Controls and Procedures |
Management’s Report on Internal Control over Financial Reporting |
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1. | From our main web page, first click on “Investor Relations”. | |
2. | Next, click on “Corporate Governance Structure”. | |
3. | Finally, click on “Code of Ethics for Senior Management” or “Code of Ethics for Employees of PetroChina Company Limited”. |
December 31, | ||||||||
2005 | 2006 | |||||||
RMB | RMB | |||||||
(in millions) | ||||||||
Audit fees | 50 | 140 | ||||||
Audit-related fees | — | — | ||||||
Tax fees | — | * | — | * | ||||
All other fees | — | 25 | ||||||
Total | 50 | 165 | ||||||
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Audit Committee Pre-approved Policies and Procedures |
Exhibit | ||
Number | Description of Exhibits | |
1.1 | Articles of Association (as amended) (English translation) | |
1.2 | Articles of Association (as amended and pending for approval of SASAC) (English translation) | |
4.1 | Form of 2007 Management Performance Contract (English Translation) | |
4.2 | Crude Oil Mutual Supply Framework Agreement, dated January 29, 2007, between China Petroleum and Chemical Corporation and PetroChina (English translation) | |
4.3 | Second Supplemental Agreement to Comprehensive products and Services Agreement, dated September 1, 2005, between CNPC and PetroChina (English translation)(1) | |
4.4 | Capital Contribution Agreement, dated June 9, 2005, among China National Oil and Gas Exploration and Development Corporation, Central Asia Petroleum Company Limited, Zhong You Kan Tan Kai Fa Company Limited and PetroChina (English Translation)(2) | |
4.5 | Transfer Agreement, dated June 9, 2005, between Zhong You Kan Tan Kai Fa Company Limited and PetroChina (English Translation)(2) |
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Exhibit | ||
Number | Description of Exhibits | |
4.6 | Supplementary Agreement to Comprehensive Products and Services Agreement, dated June 9, 2005, between CNPC and PetroChina (English Translation)(2) | |
4.7 | Form of Non-competition Agreement between CNPC and PetroChina (together with English translation)(3) | |
4.8 | Form of Comprehensive Products and Services Agreement between CNPC and PetroChina (together with English translation)(3) | |
4.9 | Form of Land Use Rights Leasing Contract between CNPC and PetroChina (together with English translation)(3) | |
4.10 | Form of Buildings Leasing Contract between CNPC and PetroChina (together with English translation)(3) | |
4.11 | Form of Trademark Licensing Contract between CNPC and PetroChina (together with English translation)(3) | |
4.12 | Form of Patent and Know-how Licensing Contract between CNPC and PetroChina (together with English translation)(3) | |
4.13 | Form of Computer Software Licensing Contract between CNPC and PetroChina (together with English translation)(3) | |
4.14 | Form of Contract for Transfer of Rights under Production Sharing Contracts between CNPC and PetroChina (together with English translation)(3) | |
4.15 | Form of Guarantee of Debts Contract between CNPC and PetroChina (together with English translation)(3) | |
4.16 | Form of Contract for the Supervision of Certain Sales Enterprises between CNPC and PetroChina (together with English translation)(3) | |
4.17 | Form of Agreement for Transfer of Rights and Interests under the Crude Oil Premium and Discount Calculation Agreement between China Petrochemical Corporation, CNPC and PetroChina (together with English translation)(3) | |
4.18 | Form of Agreement for the Transfer of Rights and Interests under the Retainer Contracts relating to Oil Exploration and Exploitation in Lengjiapu Area, Liaohe Oil Region and No. 9.1-9.5 Areas, Karamay Oil Field (together with English translation)(3) | |
4.19 | Share Purchase Agreement in respect of the shares of PetroKazakhstan, dated August 23, 2006, between Pervinage Holding B.V. (a wholly-owned subsidiary of CNPC E&D) and 819 Luxembourg S. a r. l. (an indirect wholly-owned subsidiary of CNPC) | |
8.1 | List of major subsidiaries | |
10.1 | Significant Differences in Corporate Governance Practices for Purposes of Section 303A.11 of the New York Exchange Listed Company Manual(2) | |
12.1 | Certification of Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 | |
12.2 | Certification of Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 | |
13.1 | Certification of Chief Executive Officer required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
13.2 | Certification of Chief Financial Officer required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
16.1 | Code of Ethics for Senior Management(2) | |
16.2 | Code of Ethics for Employees(2) |
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(1) | Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2005 (File No. 1-15006) filed with the Commission. |
(2) | Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2004 (File No. 1-15006) filed with the Commission. |
(3) | Incorporated by reference to our Registration Statement on Form F-1 (File No. 333-11566) filed with the Commission, as declared effective on March 29, 2000. |
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PETROCHINA COMPANY LIMITED | |
/s/LI HUAIQI | |
Name: Li Huaiqi |
Title: | Secretary to Board of Directors |
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Page | |||||
PetroChina Company Limited and its Subsidiaries | |||||
Consolidated Financial Statements | |||||
F-2 | |||||
F-3 | |||||
F-5 | |||||
F-6 | |||||
F-7 | |||||
F-9 | |||||
F-11 | |||||
F-73 |
F-1
Table of Contents
F-2
Table of Contents
F-3
Table of Contents
PricewaterhouseCoopers | |
Certified Public Accountants | |
Hong Kong, May 10, 2007 |
F-4
Table of Contents
Year Ended December 31, | ||||||||||||||||||
Notes | 2004 | 2005 | 2006 | |||||||||||||||
RMB | RMB | RMB | ||||||||||||||||
REVENUES | ||||||||||||||||||
Sales and other operating revenues | 397,354 | 552,229 | 688,978 | |||||||||||||||
OPERATING EXPENSES | ||||||||||||||||||
Purchases, services and other | (114,249 | ) | (200,321 | ) | (271,123 | ) | ||||||||||||
Employee compensation costs | 5 | (22,934 | ) | (29,675 | ) | (39,161 | ) | |||||||||||
Exploration expenses, including exploratory dry holes | (12,090 | ) | (15,566 | ) | (18,822 | ) | ||||||||||||
Depreciation, depletion and amortization | (48,362 | ) | (51,305 | ) | (61,388 | ) | ||||||||||||
Selling, general and administrative expenses | (28,302 | ) | (36,538 | ) | (43,235 | ) | ||||||||||||
Shut down of manufacturing assets | 6 | (220 | ) | — | — | |||||||||||||
Taxes other than income taxes | 7 | (19,943 | ) | (23,616 | ) | (56,666 | ) | |||||||||||
Other expense, net | (116 | ) | (3,037 | ) | (607 | ) | ||||||||||||
TOTAL OPERATING EXPENSES | (246,216 | ) | (360,058 | ) | (491,002 | ) | ||||||||||||
INCOME FROM OPERATIONS | 151,138 | 192,171 | 197,976 | |||||||||||||||
FINANCE COSTS | ||||||||||||||||||
Exchange gain | 225 | 942 | 1,830 | |||||||||||||||
Exchange loss | (217 | ) | (854 | ) | (1,756 | ) | ||||||||||||
Interest income | 1,373 | 1,924 | 2,066 | |||||||||||||||
Interest expense | 8 | (2,896 | ) | (2,762 | ) | (3,220 | ) | |||||||||||
TOTAL NET FINANCE COSTS | (1,515 | ) | (750 | ) | (1,080 | ) | ||||||||||||
INCOME FROM EQUITY AFFILIATES AND JOINTLY CONTROLLED ENTITIES | 19 | 1,621 | 2,401 | 2,277 | ||||||||||||||
INCOME BEFORE INCOME TAXES | 151,244 | 193,822 | 199,173 | |||||||||||||||
INCOME TAXES | 9 | (43,598 | ) | (54,180 | ) | (49,776 | ) | |||||||||||
INCOME FOR THE YEAR | 107,646 | 139,642 | 149,397 | |||||||||||||||
ATTRIBUTABLE TO: | ||||||||||||||||||
EQUITY HOLDERS OF THE COMPANY | 103,843 | 133,362 | 142,224 | |||||||||||||||
MINORITY INTEREST | 3,803 | 6,280 | 7,173 | |||||||||||||||
107,646 | 139,642 | 149,397 | ||||||||||||||||
BASIC AND DILUTED NET INCOME PER SHARE FOR INCOME ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY DURING THE YEAR | 10 | 0.59 | 0.75 | 0.79 | ||||||||||||||
NUMBER OF SHARES | 10 | 175,824 | 179,021 | 179,021 | ||||||||||||||
DIVIDENDS ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY: | ||||||||||||||||||
Interim dividends declared during the year | 11 | 20,381 | 27,731 | 36,307 | ||||||||||||||
Final dividends proposed after the balance sheet date | 11 | 25,936 | 32,282 | 27,694 | ||||||||||||||
46,317 | 60,013 | 64,001 | ||||||||||||||||
F-5
Table of Contents
At December 31, | ||||||||||||
Notes | 2005 | 2006 | ||||||||||
RMB | RMB | |||||||||||
ASSETS | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | 12 | 80,905 | 48,559 | |||||||||
Time deposits with maturities over three months but within one year | 1,691 | 3,012 | ||||||||||
Investments in collateralized loans | 13 | 235 | — | |||||||||
Notes receivable | 14 | 3,028 | 2,844 | |||||||||
Accounts receivable, less provision for impairment of accounts receivables | 15 | 4,630 | 8,488 | |||||||||
Inventories | 16 | 62,733 | 76,038 | |||||||||
Prepaid expenses and other current assets | 17 | 22,673 | 23,281 | |||||||||
TOTAL CURRENT ASSETS | 175,895 | 162,222 | ||||||||||
Property, plant and equipment, less accumulated depreciation, depletion and amortization | 18 | 563,890 | 645,337 | |||||||||
Investments in equity affiliates and jointly controlled entities | 19 | 12,378 | 32,956 | |||||||||
Available-for-sale investments | 20 | 1,230 | 2,054 | |||||||||
Advance operating lease payments | 21 | 16,235 | 20,468 | |||||||||
Intangible and other assets | 22 | 5,011 | 6,627 | |||||||||
Time deposits with maturities over one year | 3,428 | 2,499 | ||||||||||
TOTAL ASSETS | 778,067 | 872,163 | ||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
Current liabilities | ||||||||||||
Short-term debts | 24 | 28,689 | 35,763 | |||||||||
Accounts payable and accrued liabilities | 23 | 99,758 | 120,182 | |||||||||
Income tax payable | 20,567 | 17,744 | ||||||||||
Other taxes payable | 4,824 | 6,190 | ||||||||||
TOTAL CURRENT LIABILITIES | 153,838 | 179,879 | ||||||||||
Long-term debts | 24 | 44,570 | 35,634 | |||||||||
Other long-term obligations | 1,046 | 995 | ||||||||||
Asset retirement obligations | 25 | 14,187 | 18,481 | |||||||||
Deferred taxes | 26 | 20,759 | 19,583 | |||||||||
TOTAL LIABILITIES | 234,400 | 254,572 | ||||||||||
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY: | ||||||||||||
State-owned shares | 27 | 157,922 | 157,922 | |||||||||
H shares | 27 | 21,099 | 21,099 | |||||||||
Share capital, issued and outstanding, RMB 1.00 Par value | 27 | 179,021 | 179,021 | |||||||||
Retained earnings | 203,812 | 264,092 | ||||||||||
Capital reserve | 28 | (8,881 | ) | (8,881 | ) | |||||||
Revaluation reserve | 28 | 79,946 | 79,946 | |||||||||
Statutory common reserve fund | 28 | 48,736 | 89,928 | |||||||||
Statutory common welfare fund | 28 | 27,837 | — | |||||||||
Currency translation differences | 28 | (379 | ) | (570 | ) | |||||||
Other reserves | 28 | (14,703 | ) | (16,859 | ) | |||||||
MINORITY INTEREST | 28,278 | 30,914 | ||||||||||
TOTAL EQUITY | 543,667 | 617,591 | ||||||||||
TOTAL LIABILITIES AND EQUITY | 778,067 | 872,163 | ||||||||||
F-6
Table of Contents
Year Ended December 31, | ||||||||||||||||||
Notes | 2004 | 2005 | 2006 | |||||||||||||||
RMB | RMB | RMB | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||||||||
Net income | 107,646 | 139,642 | 149,397 | |||||||||||||||
Adjustments for: | ||||||||||||||||||
Income taxes | 9 | 43,598 | 54,180 | 49,776 | ||||||||||||||
Depreciation, depletion and amortization | 48,362 | 51,305 | 61,388 | |||||||||||||||
Provision for shut down of manufacturing assets | 6 | 220 | — | — | ||||||||||||||
Dry hole costs | 4,741 | 6,547 | 9,494 | |||||||||||||||
Income from equity affiliates and jointly controlled entities | 19 | (1,621 | ) | (2,401 | ) | (2,277 | ) | |||||||||||
Provision for impairment of receivables, net | 15, 17 | 676 | (455 | ) | (316 | ) | ||||||||||||
Write down in inventories, net | 16 | 147 | (139 | ) | 140 | |||||||||||||
Impairment of available-for-sale investments, net | 20 | 26 | (23 | ) | 32 | |||||||||||||
Loss on disposal of property, plant and equipment | 2,818 | 2,026 | 1,753 | |||||||||||||||
Loss/(Profit) on disposal of equity affiliates and jointly controlled entities | 33 | 2 | (10 | ) | ||||||||||||||
Loss/(Profit) on disposal of available-for-sale investments | 6 | 27 | (3 | ) | ||||||||||||||
Loss on disposal of intangible and other assets | 50 | 106 | 192 | |||||||||||||||
Dividend income | 20 | (113 | ) | (109 | ) | (208 | ) | |||||||||||
Interest income | (1,373 | ) | (1,924 | ) | (2,066 | ) | ||||||||||||
Interest expense | 8 | 2,896 | 2,762 | 3,220 | ||||||||||||||
Advance payments on long-term operating leases | (5,624 | ) | (5,170 | ) | (5,694 | ) | ||||||||||||
Changes in working capital: | ||||||||||||||||||
— accounts receivable and prepaid expenses and other current assets | (6,195 | ) | 165 | (3,115 | ) | |||||||||||||
— inventories | (17,460 | ) | (15,896 | ) | (13,445 | ) | ||||||||||||
— accounts payable and accrued liabilities | 398 | 22,089 | 5,346 | |||||||||||||||
CASH GENERATED FROM OPERATIONS | 179,231 | 252,734 | 253,604 | |||||||||||||||
Interest received | 1,373 | 1,917 | 1,993 | |||||||||||||||
Interest paid | (3,998 | ) | (3,628 | ) | (3,700 | ) | ||||||||||||
Income taxes paid | (34,915 | ) | (47,138 | ) | (53,795 | ) | ||||||||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 141,691 | 203,885 | 198,102 | |||||||||||||||
F-7
Table of Contents
Year Ended December 31, | |||||||||||||||||
Notes | 2004 | 2005 | 2006 | ||||||||||||||
RMB | RMB | RMB | |||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||||||||
Capital expenditures | (94,045 | ) | (119,227 | ) | (130,409 | ) | |||||||||||
Acquisition of equity affiliates and jointly controlled entities | (1,000 | ) | (2,334 | ) | (22,549 | ) | |||||||||||
Acquisition of available-for-sale investments | (476 | ) | (782 | ) | (62 | ) | |||||||||||
Net (acquisition)/proceeds of investments in collateralized loans with maturities not greater than three months | (8,049 | ) | 26,896 | 235 | |||||||||||||
Acquisition of investments in collateralized loans with maturities over three months | (8,301 | ) | (443 | ) | — | ||||||||||||
Acquisition of intangible assets | (531 | ) | (1,600 | ) | (1,358 | ) | |||||||||||
Acquisition of other non-current assets | (280 | ) | (1,133 | ) | (1,706 | ) | |||||||||||
Return of capital to minority interest due to liquidation of subsidiaries | — | (935 | ) | — | |||||||||||||
Purchase from minority interest of listed subsidiaries | 38 | — | (2,019 | ) | (4,095 | ) | |||||||||||
Other purchase from minority interest | — | (376 | ) | (640 | ) | ||||||||||||
Proceeds from sale of investments in collateralized loans with maturities over three months | 7,357 | 6,529 | — | ||||||||||||||
Repayment of capital by equity affiliates and jointly controlled entities | 272 | 115 | 99 | ||||||||||||||
Proceeds from disposal of property, plant and equipment | 873 | 898 | 346 | ||||||||||||||
Proceeds from disposal of equity affiliates and jointly controlled entities | 27 | 1,102 | 69 | ||||||||||||||
Proceeds from disposal of available-for-sale investments | 83 | 976 | 4 | ||||||||||||||
Proceeds from disposal of intangible and other non-current assets | 37 | 22 | 2 | ||||||||||||||
Dividends received | 800 | 678 | 2,099 | ||||||||||||||
Decrease/(Increase) in time deposits with maturities over three months | 957 | 57 | (486 | ) | |||||||||||||
NET CASH USED FOR INVESTING ACTIVITIES | (102,276 | ) | (91,576 | ) | (158,451 | ) | |||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||||||||
Repayments of short-term debts | (23,862 | ) | (34,529 | ) | (28,349 | ) | |||||||||||
Repayments of long-term debts | (28,331 | ) | (19,175 | ) | (17,587 | ) | |||||||||||
Principal payment on capital lease obligations | (35 | ) | (21 | ) | — | ||||||||||||
Dividends paid to minority interest | (736 | ) | (1,486 | ) | (3,033 | ) | |||||||||||
Cash payment for acquisition of CNPC marketing enterprises | (1,476 | ) | — | — | |||||||||||||
Dividends paid to equity holders of the Company | 11 | (34,328 | ) | (53,667 | ) | (68,589 | ) | ||||||||||
Increase in short-term debts | 28,113 | 32,019 | 30,183 | ||||||||||||||
Increase in long-term debts | 18,453 | 15,514 | 14,195 | ||||||||||||||
Capital contribution from minority interest | 2,145 | 454 | 1,492 | ||||||||||||||
Change in other long-term obligations | 471 | (1,435 | ) | (51 | ) | ||||||||||||
Issuance of H shares | 27 | — | 19,692 | — | |||||||||||||
NET CASH USED FOR FINANCING ACTIVITIES | (39,586 | ) | (42,634 | ) | (71,739 | ) | |||||||||||
TRANSLATION OF FOREIGN CURRENCY | 246 | (458 | ) | (258 | ) | ||||||||||||
Increase/(Decrease) in cash and cash equivalents | 75 | 69,217 | (32,346 | ) | |||||||||||||
Cash and cash equivalents at beginning of the year | 12 | 11,613 | 11,688 | 80,905 | |||||||||||||
Cash and cash equivalents at end of the year | 12 | 11,688 | 80,905 | 48,559 | |||||||||||||
F-8
Table of Contents
Attributable to equity holders | ||||||||||||||||||||||||
of the Company | ||||||||||||||||||||||||
Share | Retained | Minority | Total | |||||||||||||||||||||
Capital | Earnings | Reserves | Subtotal | interest | equity | |||||||||||||||||||
RMB | RMB | RMB | RMB | RMB | RMB | |||||||||||||||||||
Balance at January 1, 2004 | 175,824 | 88,152 | 93,952 | 357,928 | 8,966 | 366,894 | ||||||||||||||||||
Currency translation differences | — | — | 330 | 330 | 677 | 1,007 | ||||||||||||||||||
Net income recognized directly in equity | — | — | 330 | 330 | 677 | 1,007 | ||||||||||||||||||
Net income for the year ended December 31, 2004 | — | 103,843 | — | 103,843 | 3,803 | 107,646 | ||||||||||||||||||
Total recognized income for 2004 | — | 103,843 | 330 | 104,173 | 4,480 | 108,653 | ||||||||||||||||||
Transfer to reserves (Note 28) | — | (14,552 | ) | 14,552 | — | — | — | |||||||||||||||||
Final dividends for 2003 (Note 11) | — | (13,947 | ) | — | (13,947 | ) | — | (13,947 | ) | |||||||||||||||
Interim dividends for 2004 (Note 11) | — | (20,381 | ) | — | (20,381 | ) | — | (20,381 | ) | |||||||||||||||
Dividends to minority interest | — | — | — | — | (656 | ) | (656 | ) | ||||||||||||||||
Other movements of minority interest | — | — | — | — | 2,409 | 2,409 | ||||||||||||||||||
Balance at December 31, 2004 | 175,824 | 143,115 | 108,834 | 427,773 | 15,199 | 442,972 | ||||||||||||||||||
F-9
Table of Contents
Attributable to equity holders | ||||||||||||||||||||||||
of the Company | ||||||||||||||||||||||||
Share | Retained | Minority | Total | |||||||||||||||||||||
Capital | Earnings | Reserves | Subtotal | interest | Equity | |||||||||||||||||||
RMB | RMB | RMB | RMB | RMB | RMB | |||||||||||||||||||
Currency translation differences | — | — | (268 | ) | (268 | ) | (465 | ) | (733 | ) | ||||||||||||||
Net loss recognized directly in equity | — | — | (268 | ) | (268 | ) | (465 | ) | (733 | ) | ||||||||||||||
Net income for the year ended December 31, 2005 | — | 133,362 | — | 133,362 | 6,280 | 139,642 | ||||||||||||||||||
Total recognized income/(loss) for 2005 | — | 133,362 | (268 | ) | 133,094 | 5,815 | 138,909 | |||||||||||||||||
Issue of H shares (Note 27 and 28) | 3,197 | — | 16,495 | 19,692 | — | 19,692 | ||||||||||||||||||
Transfer to reserves (Note 28) | — | (18,998 | ) | 18,998 | — | — | — | |||||||||||||||||
Final dividends for 2004 (Note 11) | — | (25,936 | ) | — | (25,936 | ) | — | (25,936 | ) | |||||||||||||||
Interim dividends for 2005 (Note 11) | — | (27,731 | ) | — | (27,731 | ) | — | (27,731 | ) | |||||||||||||||
Payment to CNPC for the acquisition of the refinery and petrochemical businesses (Note 2) | — | — | (9 | ) | (9 | ) | — | �� | (9 | ) | ||||||||||||||
Dividends to minority interest | — | — | — | — | (1,568 | ) | (1,568 | ) | ||||||||||||||||
Return of capital to minority interest due to liquidations of subsidiaries | — | — | — | — | (935 | ) | (935 | ) | ||||||||||||||||
Purchase from minority interest of listed subsidiaries (Note 38) | — | — | (1,438 | ) | (1,438 | ) | (581 | ) | (2,019 | ) | ||||||||||||||
Other movement in minority interest | — | — | — | — | 242 | 242 | ||||||||||||||||||
Capital contribution to CNPC Exploration and Development Company Limited (Note 2) | — | — | (10,056 | ) | (10,056 | ) | 10,106 | 50 | ||||||||||||||||
Balance at December 31, 2005 | 179,021 | 203,812 | 132,556 | 515,389 | 28,278 | 543,667 | ||||||||||||||||||
Currency translation differences | — | — | (191 | ) | (191 | ) | (204 | ) | (395 | ) | ||||||||||||||
Net loss recognized directly in equity | — | — | (191 | ) | (191 | ) | (204 | ) | (395 | ) | ||||||||||||||
Net income for the year ended December 31, 2006 | — | 142,224 | — | 142,224 | 7,173 | 149,397 | ||||||||||||||||||
Total recognized income/(loss) for 2006 | — | 142,224 | (191 | ) | 142,033 | 6,969 | 149,002 | |||||||||||||||||
Transfer to reserves (Note 28) | — | (13,355 | ) | 13,355 | — | — | — | |||||||||||||||||
Final dividends for 2005 (Note 11) | — | (32,282 | ) | — | (32,282 | ) | — | (32,282 | ) | |||||||||||||||
Interim dividends for 2006 (Note 11) | — | (36,307 | ) | — | (36,307 | ) | — | (36,307 | ) | |||||||||||||||
Dividends to minority interest | — | — | — | — | (3,000 | ) | (3,000 | ) | ||||||||||||||||
Purchase from minority interest of subsidiaries (Note 38) | — | — | (2,156 | ) | (2,156 | ) | (2,579 | ) | (4,735 | ) | ||||||||||||||
Other movement of minority interest | — | — | — | — | (246 | ) | (246 | ) | ||||||||||||||||
Minority interest paid-in capital | — | — | — | — | 1,492 | 1,492 | ||||||||||||||||||
Balance at December 31, 2006 | 179,021 | 264,092 | 143,564 | 586,677 | 30,914 | 617,591 | ||||||||||||||||||
Balance at December 31, 2006 in US$ | 22,939 | 33,840 | 18,396 | 75,175 | 3,961 | 79,137 | ||||||||||||||||||
F-10
Table of Contents
(a) Amendments and interpretations to existing standards effective in 2006 |
• | International Accounting Standard (“IAS”) No 39 (IAS 39) and IFRS 4 (Amendment), Financial Guarantee Contracts; and | |
• | International Financial Reporting Interpretations Committee (“IFRIC”) Interpretation 4, Determining whether an Arrangement contains a Lease; |
(b) Interpretations to existing standards early adopted by the Group |
• | IFRIC Interpretation 8, Scope of IFRS 2 (effective for annual periods beginning on or after May 1, 2006) |
• | IAS 19 (Amendment), Employee Benefits: Actuarial Gains and Losses, Group Plans and Disclosures; |
F-11
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• | IAS 21 (Amendment), Net Investment in a Foreign Operation; | |
• | IAS 39 (Amendment), Cash Flow Hedge Accounting of Forecast Intragroup Transactions; | |
• | IAS 39 (Amendment), The Fair Value Option; | |
• | IFRIC Interpretation 5, Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds; and | |
• | IFRIC Interpretation 6, Liabilities arising from Participating in a Specific Market — Waste Electrical and Electronic Equipment. |
F-12
Table of Contents
(a) Basis of consolidation |
(b) Investments in equity affiliates |
F-13
Table of Contents
(c) Investments in jointly controlled entities |
(d) Transactions with minority interest |
(e) Foreign currencies |
(f) Financial instruments |
F-14
Table of Contents
(g) Investments |
(h) | Property, plant and equipment |
F-15
Table of Contents
Buildings | 20-40 years | |
Plant and equipment | 10-25 years | |
Motor vehicles | 7-15 years |
(i) | Oil and gas properties |
F-16
Table of Contents
(j) | Intangible assets |
(k) Leases |
F-17
Table of Contents
(l) Related parties |
(m) Inventories |
(n) Accounts receivable |
(o) Cash and cash equivalents |
(p) Debts |
F-18
Table of Contents
(q) Taxation |
(r) Revenue recognition |
(s) Provisions |
F-19
Table of Contents
(t) Research and development |
(u) Retirement benefit plans |
(v) Share-based compensation — Share appreciation rights |
(w) New accounting developments |
• | IFRS 7, Financial Instruments: Disclosures, and the complementary Amendment to IAS 1, Presentation of Financial Statements — Capital Disclosures |
• | IFRIC Interpretation 10, Interim Financial Reporting and Impairment (effective for annual periods beginning on or after November 1, 2006) |
F-20
Table of Contents
• | IFRIC Interpretation 7, Applying the Restatement Approach under IAS 29, Financial Reporting in Hyperinflationary Economies (effective from March 1, 2006) | |
• | IFRIC Interpretation 9, Reassessment of Embedded Derivatives (effective for annual periods beginning on or after June 1, 2006) |
(x) Convenience translation |
4 | CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS |
(a) Estimation of oil and natural gas reserves |
F-21
Table of Contents
(b) Estimated impairment of property, plant and equipment |
(c) Estimation of asset retirement obligations |
5 | EMPLOYEE COMPENSATION COSTS |
Year Ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
RMB | RMB | RMB | ||||||||||
Wages and salaries | 15,449 | 19,351 | 26,629 | |||||||||
Social security costs(i) | 7,485 | 10,324 | 12,532 | |||||||||
22,934 | 29,675 | 39,161 | ||||||||||
(i) | Social security costs mainly represent contributions to funds for staff welfare organized by the PRC municipal and provincial governments including contribution to the retirement benefit plans (See Note 29). |
F-22
Table of Contents
6 | SHUT DOWN OF MANUFACTURING ASSETS |
7 | TAXES OTHER THAN INCOME TAXES |
8 | INTEREST EXPENSE |
Year Ended December 31, | |||||||||||||
2004 | 2005 | 2006 | |||||||||||
RMB | RMB | RMB | |||||||||||
Interest on | |||||||||||||
— loans | 3,846 | 3,766 | 3,739 | ||||||||||
— capital leases | 2 | 1 | — | ||||||||||
Accretion expense (Note 25) | 54 | 60 | 796 | ||||||||||
Less: amounts capitalized | (1,006 | ) | (1,065 | ) | (1,315 | ) | |||||||
2,896 | 2,762 | 3,220 | |||||||||||
9 | INCOME TAXES |
Year Ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
RMB | RMB | RMB | ||||||||||
Current taxes | 40,331 | 50,221 | 50,972 | |||||||||
Deferred taxes (Note 26) | 3,267 | 3,959 | (1,196 | ) | ||||||||
43,598 | 54,180 | 49,776 | ||||||||||
F-23
Table of Contents
Year Ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
RMB | RMB | RMB | ||||||||||
Income before income taxes | 151,244 | 193,822 | 199,173 | |||||||||
Tax calculated at a tax rate of 33% | 49,911 | 63,961 | 65,727 | |||||||||
Prior year tax return adjustment | 27 | 364 | 243 | |||||||||
Effect of preferential tax rate | (6,886 | ) | (10,744 | ) | (14,169 | ) | ||||||
Tax effect of income not subject to tax | (913 | ) | (427 | ) | (1,602 | ) | ||||||
Tax effect of expenses not deductible for tax purposes | 2,428 | 1,026 | 2,466 | |||||||||
Effect of income taxes from international operations in excess of taxes at the PRC statutory rate | — | — | 1,512 | |||||||||
Reversal of a tax liability in an amount of RMB 4,401 million in relation to certain crude oil sales that were exempted from tax prior to the establishment of the company in November 1999 | — | — | (4,401 | ) | ||||||||
Utilization of previously unrecognized tax loss of subsidiaries | (969 | ) | — | — | ||||||||
Tax charge | 43,598 | 54,180 | 49,776 | |||||||||
10 | BASIC AND DILUTED NET INCOME PER SHARE |
F-24
Table of Contents
11 | DIVIDENDS ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY |
Year Ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
RMB | RMB | RMB | ||||||||||
Final dividends attributable to equity holders of the Company for 2003 (Note (i)) | 13,947 | — | — | |||||||||
Interim dividends attributable to equity holders of the Company for 2004 (Note (ii)) | 20,381 | — | — | |||||||||
Final dividends attributable to equity holders of the Company for 2004 (Note (iii)) | — | 25,936 | — | |||||||||
Interim dividends attributable to equity holders of the Company for 2005 (Note (iv)) | — | 27,731 | — | |||||||||
Final dividends attributable to equity holders of the Company for 2005 (Note (v)) | — | — | 32,282 | |||||||||
Interim dividends attributable to equity holders of the Company for 2006 (Note (vi)) | — | — | 36,307 | |||||||||
34,328 | 53,667 | 68,589 | ||||||||||
(i) | Final dividends attributable to equity holders of the Company in respect of 2003 of RMB 0.079324 per share amounting to a total of RMB 13,947 were paid on June 2, 2004, and were accounted for in equity as an appropriation of retained earnings in the year ended December 31, 2004. |
(ii) | Interim dividends attributable to equity holders of the Company in respect of 2004 of RMB 0.115919 per share amounting to a total of RMB 20,381 were paid on October 8, 2004, and were accounted for in equity as an appropriation of retained earnings in the year ended December 31, 2004. |
(iii) | Final dividends attributable to equity holders of the Company in respect of 2004 of RMB 0.147511 per share amounting to a total of RMB 25,936 were paid on June 10, 2005, and were accounted for in equity as an appropriation of retained earnings in the year ended December 31, 2005. |
(iv) | Interim dividends attributable to equity holders of the Company in respect of 2005 of RMB 0.157719 per share amounting to a total of RMB 27,731 were paid on September 30, 2005, and were accounted for in equity as an appropriation of retained earnings in the year ended December 31, 2005. |
(v) | Final dividends attributable to equity holders of the Company in respect of 2005 of RMB 0.180325 per share amounting to a total of RMB 32,282 were paid on June 9, 2006, and were accounted for in equity as an appropriation of retained earnings in the year ended December 31, 2006. |
(vi) | Interim dividends attributable to equity holders of the Company in respect of 2006 of RMB 0.202806 per share amounting to a total of RMB 36,307 were paid on September 26, 2006 and were accounted for in equity as an appropriation of retained earnings in the year ended December 31, 2006. |
(vii) | At the meeting on March 19, 2007, the Board of Directors proposed final dividends attributable to equity holders of the Company in respect of 2006 of RMB 0.154699 per share amounting to a total of RMB 27,694. These consolidated financial statements do not reflect this dividend |
F-25
Table of Contents
payable as the final dividends were proposed after the balance sheet date and will be accounted for in equity as an appropriation of retained earnings in the year ending December 31, 2007 when approved at the forthcoming annual general meeting. |
12 | CASH AND CASH EQUIVALENTS |
13 | INVESTMENTS IN COLLATERALIZED LOANS |
14 | NOTES RECEIVABLE |
15 | ACCOUNTS RECEIVABLE |
At | ||||||||
December 31, | ||||||||
2005 | 2006 | |||||||
RMB | RMB | |||||||
Accounts receivable due from third parties | 6,483 | 9,498 | ||||||
Accounts receivable due from related parties | 2,145 | 2,247 | ||||||
Less: Provision for impairment of receivables | (3,998 | ) | (3,257 | ) | ||||
4,630 | 8,488 | |||||||
Year Ended | ||||||||||||
December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
RMB | RMB | RMB | ||||||||||
Balance at beginning of the year | 5,952 | 4,848 | 3,998 | |||||||||
Provision/(Write back) | (408 | ) | (333 | ) | (126 | ) | ||||||
Amount written off against provision | (696 | ) | (517 | ) | (615 | ) | ||||||
Balance at end of the year | 4,848 | 3,998 | 3,257 | |||||||||
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Table of Contents
16 | INVENTORIES |
At | ||||||||
December 31, | ||||||||
2005 | 2006 | |||||||
RMB | RMB | |||||||
Crude oil and other raw materials | 22,396 | 24,143 | ||||||
Work in progress | 5,933 | 5,493 | ||||||
Finished goods | 35,131 | 47,263 | ||||||
Spare parts and consumables | 43 | 41 | ||||||
63,503 | 76,940 | |||||||
Less: Write down in inventories | (770 | ) | (902 | ) | ||||
62,733 | 76,038 | |||||||
Year Ended | ||||||||||||
December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
RMB | RMB | RMB | ||||||||||
Balance at beginning of the year | 803 | 926 | 770 | |||||||||
Provision /(Write back) | 147 | (139 | ) | 140 | ||||||||
Amount written off against provision | (24 | ) | (17 | ) | (8 | ) | ||||||
Balance at end of the year | 926 | 770 | 902 | |||||||||
17 | PREPAID EXPENSES AND OTHER CURRENT ASSETS |
At | ||||||||
December 31, | ||||||||
2005 | 2006 | |||||||
RMB | RMB | |||||||
Other receivables | 9,404 | 7,083 | ||||||
Amounts due from related parties | 13,524 | 15,925 | ||||||
Less: Provision for impairment of these receivables | (6,814 | ) | (6,506 | ) | ||||
16,114 | 16,502 | |||||||
Advances to suppliers | 5,819 | 6,087 | ||||||
Prepaid expenses | 279 | 326 | ||||||
Other current assets | 461 | 366 | ||||||
22,673 | 23,281 | |||||||
F-27
Table of Contents
Year Ended | ||||||||||||
December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
RMB | RMB | RMB | ||||||||||
Balance at beginning of the year | 6,365 | 7,255 | 6,814 | |||||||||
Provision/(Write back) | 1,084 | (122 | ) | (190 | ) | |||||||
Amount written off against provision | (194 | ) | (319 | ) | (118 | ) | ||||||
Balance at end of the year | 7,255 | 6,814 | 6,506 | |||||||||
18 | PROPERTY, PLANT AND EQUIPMENT |
Year Ended | Oil and Gas | Plant and | Motor | Construction | ||||||||||||||||||||||||
December 31, 2005 | Buildings | Properties | Equipment | Vehicles | Other | in Progress | Total | |||||||||||||||||||||
RMB | RMB | RMB | RMB | RMB | RMB | RMB | ||||||||||||||||||||||
Cost or valuation | ||||||||||||||||||||||||||||
At beginning of the year | 64,824 | 428,577 | 250,840 | 9,397 | 6,705 | 39,137 | 799,480 | |||||||||||||||||||||
Additions | 1,394 | 14,308 | 1,292 | 1,744 | 122 | 119,199 | 138,059 | |||||||||||||||||||||
Transfers | 7,661 | 67,223 | 27,451 | — | 362 | (102,697 | ) | — | ||||||||||||||||||||
Disposals or write off | (714 | ) | (11,817 | ) | (2,152 | ) | (286 | ) | (95 | ) | — | (15,064 | ) | |||||||||||||||
Currency translation differences | (32 | ) | (659 | ) | (67 | ) | (26 | ) | (43 | ) | (42 | ) | (869 | ) | ||||||||||||||
At end of the year | 73,133 | 497,632 | 277,364 | 10,829 | 7,051 | 55,597 | 921,606 | |||||||||||||||||||||
Accumulated depreciation and impairment | ||||||||||||||||||||||||||||
At beginning of the year | (12,905 | ) | (180,926 | ) | (112,000 | ) | (4,810 | ) | (3,025 | ) | (202 | ) | (313,868 | ) | ||||||||||||||
Charge for the year | (3,454 | ) | (25,819 | ) | (18,234 | ) | (955 | ) | (749 | ) | — | (49,211 | ) | |||||||||||||||
Disposals or write off | 329 | 3,054 | 1,279 | 200 | 76 | 104 | 5,042 | |||||||||||||||||||||
Currency translation differences | 1 | 275 | 23 | 10 | 12 | — | 321 | |||||||||||||||||||||
At end of the year | (16,029 | ) | (203,416 | ) | (128,932 | ) | (5,555 | ) | (3,686 | ) | (98 | ) | (357,716 | ) | ||||||||||||||
Net book value | ||||||||||||||||||||||||||||
At end of the year | 57,104 | 294,216 | 148,432 | 5,274 | 3,365 | 55,499 | 563,890 | |||||||||||||||||||||
Carrying value of the property, plant and equipment had they been stated at cost less accumulated depreciation | 52,779 | 289,820 | 131,411 | 4,787 | 2,810 | 55,499 | 537,106 | |||||||||||||||||||||
F-28
Table of Contents
Year Ended | Oil and Gas | Plant and | Motor | Construction | ||||||||||||||||||||||||
December 31, 2006 | Buildings | Properties | Equipment | Vehicles | Other | in Progress | Total | |||||||||||||||||||||
RMB | RMB | RMB | RMB | RMB | RMB | RMB | ||||||||||||||||||||||
Cost or valuation | ||||||||||||||||||||||||||||
At beginning of the year | 73,133 | 497,632 | 277,364 | 10,829 | 7,051 | 55,597 | 921,606 | |||||||||||||||||||||
Additions | 516 | 4,080 | 656 | 1,597 | 20 | 145,361 | 152,230 | |||||||||||||||||||||
Transfers | 7,156 | 85,178 | 33,621 | — | 989 | (126,944 | ) | — | ||||||||||||||||||||
Disposals or write off | (723 | ) | (11,420 | ) | (3,756 | ) | (297 | ) | (102 | ) | — | (16,298 | ) | |||||||||||||||
Currency translation differences | 61 | (149 | ) | (50 | ) | (17 | ) | 18 | (122 | ) | (259 | ) | ||||||||||||||||
At end of the year | 80,143 | 575,321 | 307,835 | 12,112 | 7,976 | 73,892 | 1,057,279 | |||||||||||||||||||||
Accumulated depreciation and impairment | ||||||||||||||||||||||||||||
At beginning of the year | (16,029 | ) | (203,416 | ) | (128,932 | ) | (5,555 | ) | (3,686 | ) | (98 | ) | (357,716 | ) | ||||||||||||||
Charge for the year | (3,643 | ) | (31,540 | ) | (21,431 | ) | (1,107 | ) | (755 | ) | (199 | ) | (58,675 | ) | ||||||||||||||
Disposals or write off | 418 | 1,186 | 2,544 | 126 | 67 | — | 4,341 | |||||||||||||||||||||
Currency translation differences | (19 | ) | 93 | 35 | 6 | (7 | ) | — | 108 | |||||||||||||||||||
At end of the year | (19,273 | ) | (233,677 | ) | (147,784 | ) | (6,530 | ) | (4,381 | ) | (297 | ) | (411,942 | ) | ||||||||||||||
Net book value | ||||||||||||||||||||||||||||
At end of the year | 60,870 | 341,644 | 160,051 | 5,582 | 3,595 | 73,595 | 645,337 | |||||||||||||||||||||
Carrying value of the property, plant and equipment had they been stated at cost less accumulated depreciation | 57,204 | 338,007 | 145,571 | 5,171 | 3,120 | 73,595 | 622,668 | |||||||||||||||||||||
F-29
Table of Contents
At December 31, | ||||||||
2005 | 2006 | |||||||
RMB | RMB | |||||||
Short-term lease (less than 10 years) | 336 | 363 | ||||||
Medium-term lease (10 to 50 years) | 56,768 | 60,507 | ||||||
57,104 | 60,870 | |||||||
At | ||||||||
December 31, | ||||||||
2005 | 2006 | |||||||
RMB | RMB | |||||||
Exploration and Production | 45 | 45 | ||||||
Refining and Marketing | — | — | ||||||
Chemicals and Marketing | — | — | ||||||
Accumulated depreciation | (12 | ) | (18 | ) | ||||
33 | 27 | |||||||
Year Ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
RMB | RMB | RMB | ||||||||||
Beginning balance at January 1 | 4,335 | 5,751 | 8,296 | |||||||||
Additions to capitalized exploratory well costs pending the determination of proved reserves | 10,913 | 16,181 | 19,076 | |||||||||
Reclassified to wells, facilities, and equipment based on the determination of proved reserves | (4,756 | ) | (7,089 | ) | (8,880 | ) | ||||||
Capitalized exploratory well costs charged to expense | (4,741 | ) | (6,547 | ) | (9,494 | ) | ||||||
Ending balance at December 31 | 5,751 | 8,296 | 8,998 | |||||||||
Number of wells at year end | 783 | 993 | 869 | |||||||||
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At December 31, | ||||||||
2005 | 2006 | |||||||
RMB | RMB | |||||||
One year or less | 8,023 | 8,359 | ||||||
Over one year | 273 | 639 | ||||||
Balance at December 31 | 8,296 | 8,998 | ||||||
Year Ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
RMB | RMB | RMB | ||||||||||
Owned assets | 46,988 | 49,198 | 58,669 | |||||||||
Assets under capital lease | 23 | 13 | 6 | |||||||||
47,011 | 49,211 | 58,675 | ||||||||||
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19 | INVESTMENTS IN EQUITY AFFILIATES AND JOINTLY CONTROLLED ENTITIES |
Country of | Interest | Type of | ||||||||||||||||||||||||||
Name | Incorporation | Assets | Liabilities | Revenue | Income | Held % | Share | |||||||||||||||||||||
At December 31,2005 | ||||||||||||||||||||||||||||
Dalian West Pacific Petrochemical Co., Ltd. | PRC | 3,114 | 2,233 | 8,563 | 135 | 28.4 | ordinary | |||||||||||||||||||||
China Marine Bunker (PetroChina) Co., Ltd. | PRC | 3,210 | 2,098 | 14,021 | 127 | 50.0 | ordinary | |||||||||||||||||||||
Other | 19,832 | 9,447 | 30,579 | 2,139 | 20.0-70.0 | ordinary | ||||||||||||||||||||||
26,156 | 13,778 | 53,163 | 2,401 | |||||||||||||||||||||||||
At December 31,2006 | ||||||||||||||||||||||||||||
Dalian West Pacific Petrochemical Co., Ltd. | PRC | 3,410 | 2,608 | 10,188 | 6 | 28.4 | ordinary | |||||||||||||||||||||
China Marine Bunker (PetroChina) Co., Ltd. | PRC | 3,388 | 2,098 | 19,003 | 139 | 50.0 | ordinary | |||||||||||||||||||||
PetroKazakhstan Inc. | Canada | 22,642 | 1,240 | 144 | 43 | 67.0 | ordinary | |||||||||||||||||||||
Other | 26,995 | 17,533 | 40,903 | 2,089 | 20.0-70.0 | ordinary | ||||||||||||||||||||||
56,435 | 23,479 | 70,238 | 2,277 | |||||||||||||||||||||||||
20 | AVAILABLE-FOR-SALE INVESTMENTS |
At December 31, | ||||||||
2005 | 2006 | |||||||
RMB | RMB | |||||||
Unlisted available-for-sale investments | 1,907 | 2,562 | ||||||
Less: Impairment provision | (677 | ) | (508 | ) | ||||
1,230 | 2,054 | |||||||
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Year Ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
RMB | RMB | RMB | ||||||||||
Balance at beginning of the year | 813 | 755 | 677 | |||||||||
Provision/ (Write back) | 26 | (23 | ) | 32 | ||||||||
Amount written off against provision | (84 | ) | (55 | ) | (201 | ) | ||||||
Balance at end of the year | 755 | 677 | 508 | |||||||||
21 | ADVANCE OPERATING LEASE PAYMENTS |
At | ||||||||
December 31, | ||||||||
2005 | 2006 | |||||||
RMB | RMB | |||||||
Land use rights | 9,786 | 12,184 | ||||||
Advance lease payments | 6,449 | 8,284 | ||||||
16,235 | 20,468 | |||||||
22 | INTANGIBLE AND OTHER ASSETS |
At December 31, | ||||||||||||||||||||||||
2005 | 2006 | |||||||||||||||||||||||
Accumulated | Accumulated | |||||||||||||||||||||||
Cost | Amortization | Net | Cost | Amortization | Net | |||||||||||||||||||
RMB | RMB | RMB | RMB | RMB | RMB | |||||||||||||||||||
Patents | 2,166 | (1,140 | ) | 1,026 | 2,325 | (1,109 | ) | 1,216 | ||||||||||||||||
Technical know-how | 325 | (209 | ) | 116 | 276 | (103 | ) | 173 | ||||||||||||||||
Other | 2,664 | (684 | ) | 1,980 | 3,369 | (1,041 | ) | 2,328 | ||||||||||||||||
Intangible assets | 5,155 | (2,033 | ) | 3,122 | 5,970 | (2,253 | ) | 3,717 | ||||||||||||||||
Other assets | 1,889 | 2,910 | ||||||||||||||||||||||
5,011 | 6,627 | |||||||||||||||||||||||
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23 | ACCOUNTS PAYABLE AND ACCRUED LIABILITIES |
At | ||||||||
December 31, | ||||||||
2005 | 2006 | |||||||
RMB | RMB | |||||||
Trade payable | 13,749 | 22,490 | ||||||
Advances from customers | 7,698 | 9,310 | ||||||
Salaries and welfare payable | 7,353 | 8,844 | ||||||
Accrued expenses | 4 | 10 | ||||||
Dividends payable by subsidiaries to minority shareholders | 93 | 60 | ||||||
Interest payable | 27 | 3 | ||||||
Construction fee and equipment cost payables | 16,420 | 28,349 | ||||||
One-time employee housing remedial payment payable | 1,174 | 933 | ||||||
Other payables | 12,158 | 14,910 | ||||||
Amounts due to related parties | 41,082 | 35,273 | ||||||
99,758 | 120,182 | |||||||
24 | DEBTS |
(a) Short-term debts |
At | |||||||||
December 31, | |||||||||
2005 | 2006 | ||||||||
RMB | RMB | ||||||||
Bank loans | |||||||||
— secured | 34 | 23 | |||||||
— unsecured | 12,753 | 14,812 | |||||||
Loans from fellow CNPC subsidiary | 520 | 320 | |||||||
Other | 57 | 1 | |||||||
13,364 | 15,156 | ||||||||
Current portion of long-term debts | 15,325 | 20,607 | |||||||
28,689 | 35,763 | ||||||||
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(b) Long-term debts |
At December 31, | ||||||
Interest Rate and Final Maturity | 2005 | 2006 | ||||
RMB | RMB | |||||
Renminbi — denominated debts: | ||||||
Bank loans for the development of oil fields and construction of refining plants | Majority floating interest rates ranging from 5.18% to 6.16% per annum as of December 31, 2006, with maturities through 2022 | 9,778 | 8,390 | |||
Bank loans for working capital | Floating interest rate at 5.18% per annum as of December 31, 2006, with maturities through 2007 | 6,030 | 6,000 | |||
Loans from fellow CNPC subsidiary for the development of oil fields and construction of refining plants | Floating interest rates ranging from 4.46% to 5.18% per annum as of December 31, 2006, with maturities through 2032 | 16,462 | 16,782 | |||
Working capital loans from fellow CNPC subsidiary | Majority floating interest rates at 4.61% per annum as of December 31, 2006, with maturities through 2008 | 4,335 | 4,130 | |||
Working capital loans | Fixed interest rates at 6.32% per annum with no fixed repayment term | 5 | 5 | |||
Corporate debenture for the development of oil fields and construction of refining plants | Fixed interest rate at 4.50% per annum with maturities through 2007 | 1,350 | 1,365 | |||
Corporate debenture for the development of oil and gas properties | Fixed interest rates ranging from 3.76% to 4.11% per annum with maturities through 2013 | 1,500 | 3,523 | |||
US Dollar — denominated debts: | ||||||
Bank loans for the development of oil fields and construction of refining plants | Fixed interest rates ranging from free to 9.00% per annum with maturities through 2038 | 1,404 | 969 | |||
Bank loans for the development of oil fields and construction of refining plants | Floating interest rates ranging from 4.72% to 6.17% per annum as of December 31, 2006, with maturities through 2014 | 6,751 | 3,589 | |||
Bank loans for working capital | Floating interest rates ranging from LIBOR plus 0.40% to LIBOR plus 5.00% per annum as of December 31, 2006 with maturities through 2008 | 1,362 | 1,326 | |||
Bank loans for acquisition of overseas oil and gas properties | Floating interest rate at LIBOR plus 0.55% per annum as of December 31, 2006, with maturities through 2009 | 1,614 | 1,368 | |||
Loans from fellow CNPC subsidiary for the development of oil fields and construction of refining plants | Floating interest rates ranging from LIBOR minus 0.25% to LIBOR plus 0.50% per annum as of December 31, 2006, with maturities through 2020 | 2,852 | 4,481 |
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At December 31, | |||||||
Interest Rate and Final Maturity | 2005 | 2006 | |||||
RMB | RMB | ||||||
Loans from fellow CNPC subsidiary for acquisition of overseas oil and gas properties | Floating interest rate at LIBOR plus 0.40% per annum as of December 31, 2006, with maturities through 2006 | 593 | — | ||||
Loans from fellow CNPC subsidiary for working capital | Floating interest rates ranging from LIBOR plus 0.50% to LIBOR plus 0.69% per annum as of December 31, 2006, with maturities through 2008 | 2,557 | 1,471 | ||||
Loans for the development of oil fields and construction of refining plants | Fixed interest rate at 1.55% per annum with maturities through 2022 | 509 | 462 | ||||
Loans for working capital | Floating interest rate at LIBOR plus 0.35% per annum as of December 31, 2006, with maturities through 2008 | 668 | 650 | ||||
Corporate debenture for the development of oil fields and construction of refining plants | Fixed interest rate at 3.00% per annum with maturities through 2019 | 347 | 353 | ||||
Corporate debenture for the development of oil and gas properties | Fixed interest rate at 9.50% per annum with maturities through 2011 | 844 | 817 | ||||
Corporate debenture for the development of oil and gas properties | Fixed interest rate at 15.00% per annum with maturities through 2008 | 292 | 179 | ||||
Japanese Yen — denominated debts: | |||||||
Bank loans for the development of oil fields and construction of refining plants | Fixed interest rates ranging from 2.42% to 5.30% per annum with maturities through 2010 | 226 | 75 | ||||
Euro — denominated debts: | |||||||
Bank loans for the development of oil fields and construction of refining plants | Fixed interest rates ranging from 2.00% to 2.30% per annum with maturities through 2023 | 256 | 257 | ||||
British Pound — denominated debts: | |||||||
Bank loans for the development of oil fields and construction of refining plants | Fixed interest rate at 2.85% per annum with maturities through 2007 | 160 | 49 | ||||
Total long-term debts | 59,895 | 56,241 | |||||
Less: Current portion of long-term debts | (15,325) | (20,607) | |||||
44,570 | 35,634 | ||||||
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At December 31, | |||||||||
2005 | 2006 | ||||||||
RMB | RMB | ||||||||
Total debts: | |||||||||
— interest free | 110 | 68 | |||||||
— at fixed rates | 19,640 | 20,850 | |||||||
— at floating rates | 53,509 | 50,479 | |||||||
73,259 | 71,397 | ||||||||
Weighted average effective interest rates: | |||||||||
— bank loans | 5.26% | 5.51% | |||||||
— loans from fellow CNPC subsidiary | 4.90% | 4.98% | |||||||
— other loans | 3.38% | 3.93% | |||||||
— corporate debentures | 5.86% | 5.04% |
Carrying Amounts | ||||||||
At December 31, | ||||||||
2005 | 2006 | |||||||
RMB | RMB | |||||||
Bank loans | 27,581 | 22,023 | ||||||
Loans from fellow CNPC subsidiary | 26,799 | 26,864 | ||||||
Corporate debentures | 4,333 | 6,237 | ||||||
Other | 1,182 | 1,117 | ||||||
59,895 | 56,241 | |||||||
Fair Values At | ||||||||
December 31, | ||||||||
2005 | 2006 | |||||||
RMB | RMB | |||||||
Bank loans | 27,397 | 21,858 | ||||||
Loans from fellow CNPC subsidiary | 26,795 | 26,861 | ||||||
Corporate debentures | 4,173 | 5,852 | ||||||
Other | 1,049 | 997 | ||||||
59,414 | 55,568 | |||||||
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At December 31, | ||||||||
2005 | 2006 | |||||||
RMB | RMB | |||||||
First year | 15,325 | 20,607 | ||||||
Second year | 18,373 | 11,797 | ||||||
Third year | 11,393 | 6,024 | ||||||
Fourth year | 2,492 | 1,504 | ||||||
Fifth year | 1,057 | 2,921 | ||||||
Thereafter | 11,255 | 13,388 | ||||||
59,895 | 56,241 | |||||||
25 | ASSET RETIREMENT OBLIGATIONS |
Year Ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
RMB | RMB | RMB | ||||||||||
At beginning of the year | 735 | 919 | 14,187 | |||||||||
Liabilities incurred | 48 | 13,258 | 3,589 | |||||||||
Liabilities settled | — | (1 | ) | (105 | ) | |||||||
Accretion expense (Note 8) | 54 | 60 | 796 | |||||||||
Currency translation differences | 82 | (49 | ) | 14 | ||||||||
At end of the year | 919 | 14,187 | 18,481 | |||||||||
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26 | DEFERRED TAXES |
Year Ended December 31, | |||||||||||||
2004 | 2005 | 2006 | |||||||||||
RMB | RMB | RMB | |||||||||||
At beginning of the year | 13,436 | 16,902 | 20,759 | ||||||||||
Income statement charge/(credit) (Note 9) | 3,267 | 3,959 | (1,196 | ) | |||||||||
Charged to/(credit) equity | |||||||||||||
— currency translation difference | 199 | (102 | ) | 20 | |||||||||
At end of the year | 16,902 | 20,759 | 19,583 | ||||||||||
At December 31, | ||||||||||
2005 | 2006 | |||||||||
RMB | RMB | |||||||||
Deferred tax assets | ||||||||||
Current: | ||||||||||
Provisions, primarily for receivables and inventories | (4,767 | ) | (7,107 | ) | ||||||
Tax losses of subsidiaries | (1,014 | ) | (2,175 | ) | ||||||
Non current: | ||||||||||
Shut down of manufacturing assets and impairment of long-term assets | (4,022 | ) | (4,342 | ) | ||||||
Other | (796 | ) | (457 | ) | ||||||
Total deferred tax assets | (10,599 | ) | (14,081 | ) | ||||||
Deferred tax liabilities | ||||||||||
Current: | ||||||||||
Sales | 4,401 | — | ||||||||
Non current: | ||||||||||
Accelerated tax depreciation | 26,615 | 33,398 | ||||||||
Other | 342 | 266 | ||||||||
Total deferred tax liabilities | 31,358 | 33,664 | ||||||||
Net deferred tax liabilities | 20,759 | 19,583 | ||||||||
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Table of Contents
27 | SHARE CAPITAL |
At December 31, | |||||||||
2005 | 2006 | ||||||||
RMB | RMB | ||||||||
Registered, issued and fully paid: | |||||||||
State-owned shares | 157,922 | 157,922 | |||||||
H shares | 21,099 | 21,099 | |||||||
179,021 | 179,021 | ||||||||
Year Ended December 31, | ||||||||||||
Number of Shares of the Company (millions) | 2004 | 2005 | 2006 | |||||||||
RMB | RMB | RMB | ||||||||||
Beginning balance | 175,824 | 175,824 | 179,021 | |||||||||
Issue of shares | — | 3,197 | — | |||||||||
Ending balance | 175,824 | 179,021 | 179,021 | |||||||||
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Table of Contents
28 | RESERVES |
Year Ended | ||||||||
December 31, | ||||||||
2005 | 2006 | |||||||
RMB | RMB | |||||||
Revaluation Reserve | ||||||||
Beginning balance | 79,946 | 79,946 | ||||||
Ending balance | 79,946 | 79,946 | ||||||
Capital Reserve | ||||||||
Beginning balance | (25,376 | ) | (8,881 | ) | ||||
Issue of shares (Note 27) | 16,495 | — | ||||||
Ending balance | (8,881 | ) | (8,881 | ) | ||||
Statutory Common Reserve Fund(Note a) | ||||||||
Beginning balance | 36,071 | 48,736 | ||||||
Transfer from retained earnings | 12,665 | 13,355 | ||||||
Transfer from Statutory Common Welfare Fund | — | 27,837 | ||||||
Ending balance | 48,736 | 89,928 | ||||||
Statutory Common Welfare Fund(Note b) | ||||||||
Beginning balance | 21,504 | 27,837 | ||||||
Transfer from retained earnings | 6,333 | — | ||||||
Transfer to Statutory Common Reserve Fund | — | (27,837 | ) | |||||
Ending balance | 27,837 | — | ||||||
Currency translation differences | ||||||||
Beginning balance | (111 | ) | (379 | ) | ||||
Currency translation adjustments | (268 | ) | (191 | ) | ||||
Ending balance | (379 | ) | (570 | ) | ||||
Other Reserves | ||||||||
Beginning balance | (3,200 | ) | (14,703 | ) | ||||
Payment to CNPC for the acquisition of the refinery and petrochemical business | (9 | ) | — | |||||
Purchase from minority interest of subsidiaries (Note 38) | (1,438 | ) | (2,156 | ) | ||||
Paid-in capital to CNPC E&D (Note 2) | (10,056 | ) | — | |||||
Ending balance | (14,703 | ) | (16,859 | ) | ||||
132,556 | 143,564 | |||||||
(a) | Pursuant to the PRC regulations and the Company’s Articles of Association, the Company is required to transfer 10% of its net profit, as determined under the PRC accounting regulations, to a Statutory Common Reserve Fund (“Reserve Fund”). Appropriation to the Reserve Fund may be ceased when the fund aggregates to 50% of the Company’s registered capital. The transfer to this reserve must be made before distribution of dividends to shareholders. | |
The Reserve Fund shall only be used to make good previous years’ losses, to expand the Company’s production operations, or to increase the capital of the Company. Upon approval by |
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a resolution of shareholders’ general meeting, the Company may convert its Reserve Fund into share capital and issue bonus shares to existing shareholders in proportion to their original shareholdings or to increase the nominal value of each share currently held by them, provided that the balance of the Reserve Fund after such issue is not less than 25% Company’s of the registered capital. | ||
(b) | Pursuant to the Company Law of the PRC revised on October 27, 2005 and carried out as of January 1, 2006, the Company is required to cease to draw the statutory common welfare from January 1, 2006. In accordance with the Circular on Accounting Treatment Following the Implementation of “Company Law” issued by the Ministry of Finance of the PRC on March 15, 2006, the Company transferred the statutory common welfare fund balance as at the December 31, 2005 into the Reserve Fund. | |
(c) | According to the Company’s Articles of Association, the distributable reserve is the lower of the retained earnings computed under PRC accounting regulations and IFRS. As of December 31, 2006, the Company’s distributable reserve amounted to RMB 205,379 million which was computed under IFRS. | |
(d) | As of December 31, 2006, revaluation surplus realized through the depreciation or disposal of revalued assets amounted to approximately RMB 53,717 and RMB 57,832 as of December 31, 2005 and 2006, respectively. |
29 | PENSIONS |
30 | FINANCIAL INSTRUMENTS |
(a) | Credit risk |
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(b) | Interest rate risk |
(c) | Foreign exchange rate risk |
(d) | Commodity price risk |
(e) | Fair values |
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Table of Contents
(a) | Bank and other guarantees |
At December 31, | |||||||||
2005 | 2006 | ||||||||
RMB | RMB | ||||||||
Guarantee of debts of equity affiliates from | |||||||||
CP Finance | 187 | 162 | |||||||
Guarantee of debts of third party from | |||||||||
a State-controlled bank | — | 41 | |||||||
187 | 203 | ||||||||
(b) | Environmental liabilities |
(c) | Legal contingencies |
(d) | Leasing of roads, land and buildings |
• | CNPC will use its best endeavors 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; |
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• | 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 | |
• | 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. |
(e) | Group insurance |
32 | COMMITMENTS |
(a) Operating lease commitments |
At December 31, | ||||||||
2005 | 2006 | |||||||
RMB | RMB | |||||||
First year | 3,208 | 3,099 | ||||||
Second year | 2,595 | 2,749 | ||||||
Third year | 2,558 | 2,714 | ||||||
Fourth year | 2,437 | 3,040 | ||||||
Fifth year | 2,926 | 3,102 | ||||||
Thereafter | 81,266 | 80,076 | ||||||
94,990 | 94,780 | |||||||
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(b) Capital commitments |
At | |||||||||
December 31, | |||||||||
2005 | 2006 | ||||||||
RMB | RMB | ||||||||
Contracted but not provided for | |||||||||
Oil and gas properties | 847 | 273 | |||||||
Plant and equipment | 12,496 | 8,658 | |||||||
Other | 22 | 262 | |||||||
13,365 | 9,193 | ||||||||
(c) Long-term natural gas supply commitments |
At December 31, | ||||
2005 | ||||
Quantities | ||||
(billion of cubic feet) | ||||
2006 | 451 | |||
2007 | 583 | |||
2008 | 639 | |||
2009 | 704 | |||
2010 | 583 | |||
2011 and thereafter | 5,528 | |||
8,488 | ||||
At December 31, | ||||
2006 | ||||
Quantities | ||||
(billion of cubic feet) | ||||
2007 | 720 | |||
2008 | 885 | |||
2009 | 943 | |||
2010 | 1,002 | |||
2011 | 1,050 | |||
2012 and thereafter | 10,460 | |||
15,060 | ||||
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(d) Exploration and production licenses |
At December 31, | ||||
2005 | ||||
RMB | ||||
2006 | 681 | |||
2007 | 712 | |||
2008 | 712 | |||
2009 | 712 | |||
2010 | 850 |
At December 31, | ||||
2006 | ||||
RMB | ||||
2007 | 750 | |||
2008 | 780 | |||
2009 | 800 | |||
2010 | 850 | |||
2011 | 900 |
33 | MAJOR CUSTOMERS |
Year Ended December 31, | ||||||||||||||||||||||||
2004 | 2005 | 2006 | ||||||||||||||||||||||
% to | % to | % to | ||||||||||||||||||||||
Total | Total | Total | ||||||||||||||||||||||
Revenue | Revenue | Revenue | Revenue | Revenue | Revenue | |||||||||||||||||||
RMB | % | RMB | % | RMB | % | |||||||||||||||||||
Sinopec | 36,977 | 9 | 35,848 | 6 | 44,028 | 6 | ||||||||||||||||||
CNPC | 10,720 | 3 | 19,823 | 4 | 27,714 | 4 | ||||||||||||||||||
47,697 | 12 | 55,671 | 10 | 71,742 | 10 | |||||||||||||||||||
34 | RELATED PARTY TRANSACTIONS |
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(a) Bank deposits |
At | |||||||||||||
December 31, | |||||||||||||
Note | 2005 | 2006 | |||||||||||
RMB | RMB | ||||||||||||
Bank deposits balance | |||||||||||||
CP Finance | (i) | 24,356 | 8,937 | ||||||||||
State-controlled banks and other financial institutions | 55,139 | 37,744 | |||||||||||
79,495 | 46,681 | ||||||||||||
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Year Ended | |||||||||||||||||
December 31, | |||||||||||||||||
Note | 2004 | 2005 | 2006 | ||||||||||||||
RMB | RMB | RMB | |||||||||||||||
Interest income from bank deposits | |||||||||||||||||
CP Finance | (i) | 29 | 33 | 81 | |||||||||||||
State-controlled banks and other financial institutions | 132 | 1,582 | 1,804 | ||||||||||||||
161 | 1,615 | 1,885 | |||||||||||||||
(i) | CP Finance is a subsidiary of CNPC and a non-bank financial institution, established with the approval from the People’s Bank of China. The deposits yield interest at prevailing saving deposit rates. |
(b) Sales of goods and services |
Year Ended December 31, | |||||||||||||
2004 | 2005 | 2006 | |||||||||||
RMB | RMB | RMB | |||||||||||
Sales of goods | |||||||||||||
Equity affiliates and jointly controlled entities | |||||||||||||
— Crude Oil | 2,597 | 883 | 5,023 | ||||||||||
— Refined Products | 6,397 | 9,766 | 19,779 | ||||||||||
— Chemical Products | 153 | 308 | 90 | ||||||||||
Fellow subsidiaries (CNPC Group) | |||||||||||||
— Crude Oil | 100 | 155 | 1,546 | ||||||||||
— Refined Products | 5,720 | 12,364 | 16,847 | ||||||||||
— Chemical Products | 2,927 | 4,805 | 5,691 | ||||||||||
— Natural Gas | 737 | 820 | 1,346 | ||||||||||
— Other | 320 | 650 | 277 | ||||||||||
Other state-controlled enterprises | |||||||||||||
— Crude Oil | 34,212 | 37,168 | 39,632 | ||||||||||
— Refined Products | 61,138 | 86,505 | 68,370 | ||||||||||
— Chemical Products | 14,155 | 18,275 | 8,979 | ||||||||||
— Natural Gas | 5,093 | 8,127 | 7,713 | ||||||||||
133,549 | 179,826 | 175,293 | |||||||||||
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Year Ended | ||||||||||||
December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
RMB | RMB | RMB | ||||||||||
Sales of services | ||||||||||||
Fellow subsidiaries (CNPC Group) | 916 | 1,029 | 2,007 | |||||||||
Other state-controlled enterprises | 3,047 | 3,592 | 7,761 | |||||||||
3,963 | 4,621 | 9,768 | ||||||||||
(c) Purchases of goods and services |
Year Ended December 31, | ||||||||||||||||||
Notes | 2004 | 2005 | 2006 | |||||||||||||||
RMB | RMB | RMB | ||||||||||||||||
Purchases of goods | (i) | |||||||||||||||||
Equity affiliates and jointly controlled entities | 2,185 | 4,220 | 9,868 | |||||||||||||||
Other state-controlled enterprises | 36,048 | 59,719 | 50,995 | |||||||||||||||
Purchases of services | ||||||||||||||||||
Equity affiliates and jointly controlled entities | 29 | 43 | 126 | |||||||||||||||
Fellow subsidiaries (CNPC Group) | ||||||||||||||||||
— Fees paid for construction and technical services | (ii) | |||||||||||||||||
— exploration and development services | (iii) | 30,058 | 39,653 | 50,485 | ||||||||||||||
— other construction and technical services | (iv) | 18,673 | 25,010 | 32,256 | ||||||||||||||
— Fees for production services | (v) | 16,313 | 23,344 | 32,730 | ||||||||||||||
— Social service charges | (vi) | 1,289 | 2,153 | 2,301 | ||||||||||||||
— Ancillary service charges | (vii) | 1,717 | 2,345 | 2,458 | ||||||||||||||
— Commission expense and other charges | (viii) | 884 | 1,612 | 1,241 | ||||||||||||||
Other state-controlled enterprises | (ix) | 4,752 | 6,390 | 7,703 | ||||||||||||||
111,948 | 164,489 | 190,163 | ||||||||||||||||
(i) | Purchases of goods principally represent the purchases of raw materials, spare parts and low cost consumables at market prices. | |
(ii) | Under the Comprehensive Products and Services Agreement entered into between CNPC and the Company, certain construction and technical services provided by CNPC are charged at cost plus an additional margin of no more than 15%, including exploration and development services and oilfield construction services. | |
(iii) | Direct costs for exploration and development services comprise geophysical survey, drilling, well cementing, logging and well testing. | |
(iv) | The fees paid for other construction and technical services comprise fees for construction of refineries and chemical plants and technical services in connection with oil and gas |
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exploration and production activities such as oilfield construction, technology research, engineering and design, etc | ||
(v) | The fees paid for production services comprise fees for the repair of machinery, supply of water, electricity and gas at the state-prescribed prices, provision of services such as communications, transportation, fire fighting, asset leasing, environmental protection and sanitation, maintenance of roads, manufacture of replacement parts and machinery at cost or market prices. | |
(vi) | These represent expenditures for social welfare and support services which are charged at cost. | |
(vii) | Ancillary service charges represent mainly fees for property management, the provision of training centres, guesthouses, canteens, public shower rooms, etc., at market prices. | |
(viii) | CNPC purchases materials on behalf of the Company and charges commission thereon. The commission is calculated at rates ranging from 1% to 5% of the goods purchased. | |
(ix) | Purchases of services from other state-controlled enterprises principally represent the purchases of the construction and technical services at market prices. |
(d) Purchases of assets |
Year Ended December 31, | |||||||||||||
2004 | 2005 | 2006 | |||||||||||
RMB | RMB | RMB | |||||||||||
Purchases of assets | |||||||||||||
Equity affiliates and jointly controlled entities | 9 | 11 | 2 | ||||||||||
Fellow subsidiaries (CNPC Group) | 4,018 | 5,870 | 1,795 | ||||||||||
Other state-controlled enterprises | 3,480 | 6,813 | 6,617 | ||||||||||
7,507 | 12,694 | 8,414 | |||||||||||
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(e) Year-end balances arising from sales/ purchases of goods/ services/assets |
At | |||||||||
December 31, | |||||||||
2005 | 2006 | ||||||||
RMB | RMB | ||||||||
Accounts receivable from related parties at the end of the year | |||||||||
— Equity affiliates and jointly controlled entities | 12 | 82 | |||||||
— Fellow subsidiaries (CNPC Group) | 337 | 599 | |||||||
— Other state-controlled enterprises | 1,796 | 1,566 | |||||||
2,145 | 2,247 | ||||||||
Less: Provision for impairment of accounts receivable | |||||||||
— Equity affiliates and jointly controlled entities | — | (5 | ) | ||||||
— Fellow subsidiaries (CNPC Group) | (246 | ) | (232 | ) | |||||
— Other state-controlled enterprises | (924 | ) | (861 | ) | |||||
(1,170 | ) | (1,098 | ) | ||||||
975 | 1,149 | ||||||||
Prepayments and other receivables from related parties at the end of the year | |||||||||
— Equity affiliates and jointly controlled entities | 3,634 | 4,307 | |||||||
— Parent (CNPC) | 103 | 196 | |||||||
— Fellow subsidiaries (CNPC Group) | 7,430 | 7,220 | |||||||
— Other state-controlled enterprises | 2,357 | 4,202 | |||||||
13,524 | 15,925 | ||||||||
Less: Provision for impairment of other receivables | |||||||||
— Equity affiliates and jointly controlled entities | (240 | ) | (212 | ) | |||||
— Fellow subsidiaries (CNPC Group) | (70 | ) | (4 | ) | |||||
— Other state-controlled enterprises | (330 | ) | (299 | ) | |||||
(640 | ) | (515 | ) | ||||||
12,884 | 15,410 | ||||||||
Accounts payable and accrued liabilities to related parties at the end of the year | |||||||||
— Equity affiliates and jointly controlled entities | 3,118 | 1,444 | |||||||
— Parent (CNPC) | 2,516 | 2,321 | |||||||
— Fellow subsidiaries (CNPC Group) | 20,285 | 26,046 | |||||||
— Other state-controlled enterprises | 15,163 | 5,462 | |||||||
41,082 | 35,273 | ||||||||
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Year Ended | |||||||||||||
December 31, | |||||||||||||
2004 | 2005 | 2006 | |||||||||||
RMB | RMB | RMB | |||||||||||
Provision for impairment of accounts receivable from related parties charged to the consolidated statements of income | |||||||||||||
— Equity affiliates and jointly controlled entities | — | — | 5 | ||||||||||
— Fellow subsidiaries (CNPC Group) | 42 | 24 | (11 | ) | |||||||||
— Other state-controlled enterprises | (36 | ) | (62 | ) | (52 | ) | |||||||
6 | (38 | ) | (58 | ) | |||||||||
Provision for impairment of prepayment and other receivables from related parties charged to the consolidated statements of income | |||||||||||||
— Equity affiliates and jointly controlled entities | 49 | (55 | ) | (20 | ) | ||||||||
— Fellow subsidiaries (CNPC Group) | 47 | 55 | (32 | ) | |||||||||
— Other state-controlled enterprises | 82 | (35 | ) | 12 | |||||||||
178 | (35 | ) | (40 | ) | |||||||||
(f) Leases |
Year Ended | |||||||||||||||||
December 31, | |||||||||||||||||
Notes | 2004 | 2005 | 2006 | ||||||||||||||
RMB | RMB | RMB | |||||||||||||||
Advance operating lease payments paid to related parties | (i | ) | |||||||||||||||
— Parent (CNPC) | 186 | 232 | — | ||||||||||||||
— Other state-controlled enterprises | 15 | 33 | 49 | ||||||||||||||
201 | 265 | 49 | |||||||||||||||
Other operating lease payments paid to related parties | |||||||||||||||||
— Parent (CNPC) | (ii | ) | 2,106 | 2,192 | 2,276 | ||||||||||||
— Other state-controlled enterprises | 5 | 5 | 16 | ||||||||||||||
2,111 | 2,197 | 2,292 | |||||||||||||||
(i) | Advance operating lease payments principally represent the advance payment paid for the long-term operating lease of land and gas stations at prices prescribed by local governments or market prices. | |
(ii) | Other operating lease payments to CNPC principally represent the rental paid for the operating lease of land and buildings at the prices prescribed in the Land Use Rights |
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Leasing Contract, the Buildings Leasing Contract and Supplemental Buildings Leasing Agreement with CNPC. |
At | |||||||||
December 31, | |||||||||
2005 | 2006 | ||||||||
RMB | RMB | ||||||||
Operating lease payable to related parties | |||||||||
— Parent (CNPC) | 2 | — | |||||||
— Other state-controlled enterprises | 1 | 7 | |||||||
3 | 7 | ||||||||
(g) Loans |
Year Ended December 31, | |||||||||||||
Loans to related parties | 2004 | 2005 | 2006 | ||||||||||
RMB | RMB | RMB | |||||||||||
Loans to equity affiliates: | |||||||||||||
Beginning of the year | 1,718 | 569 | 1,640 | ||||||||||
Loans advanced during year | 235 | 1,392 | 1,034 | ||||||||||
Loans repayments received | (1,384 | ) | (321 | ) | (884 | ) | |||||||
Interest charged | 41 | 29 | 154 | ||||||||||
Interest received | (41 | ) | (29 | ) | (144 | ) | |||||||
End of the year | 569 | 1,640 | 1,800 | ||||||||||
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Year Ended December 31, | |||||||||||||||||
Loans from related parties | Notes | 2004 | 2005 | 2006 | |||||||||||||
RMB | RMB | RMB | |||||||||||||||
Loans from CP Finance: | (i | ) | |||||||||||||||
Beginning of the year | 29,575 | 29,932 | 27,319 | ||||||||||||||
Loan received during year | 12,003 | 10,187 | 7,408 | ||||||||||||||
Loan repayments paid | (11,646 | ) | (12,803 | ) | (7,565 | ) | |||||||||||
Interest charged | 1,234 | 1,297 | 1,327 | ||||||||||||||
Interest paid | (1,234 | ) | (1,294 | ) | (1,305 | ) | |||||||||||
End of the year | 29,932 | 27,319 | 27,184 | ||||||||||||||
Loans from state-controlled banks and other financial institutions: | (ii | ) | |||||||||||||||
Beginning of the year | 38,341 | 36,562 | 31,178 | ||||||||||||||
Loan received during year | 24,990 | 24,715 | 28,457 | ||||||||||||||
Loan repayments paid | (26,739 | ) | (30,105 | ) | (26,797 | ) | |||||||||||
Interest charged | 1,847 | 1,670 | 1,598 | ||||||||||||||
Interest paid | (1,877 | ) | (1,664 | ) | (1,626 | ) | |||||||||||
End of the year | 36,562 | 31,178 | 32,810 | ||||||||||||||
Loans from other related parties: | (iii | ) | |||||||||||||||
Beginning of the year | 13 | 16 | 62 | ||||||||||||||
Loan received during year | 5 | 51 | — | ||||||||||||||
Loan repayments paid | (2 | ) | (5 | ) | (57 | ) | |||||||||||
Interest charged | — | 1 | 2 | ||||||||||||||
Interest paid | — | (1 | ) | (2 | ) | ||||||||||||
End of the year | 16 | 62 | 5 | ||||||||||||||
(i) | The loans from CP Finance are mainly with interest rates ranging from 4.45% to 5.70% and 4.46% to 6.06% per annum as of December 31, 2005 and 2006, respectively with maturities through 2032. | |
(ii) | The loans from state-controlled banks and other financial institutions are mainly with interest rates ranging from zero to 8.66% and zero to 8.66% per annum as of December 31, 2005 and 2006, respectively with maturities through 2038. | |
(iii) | The loans from other related parties are mainly with interest rates at 6.32% and 6.32% per annum as of December 31, 2005 and 2006, respectively and with no fixed repayment term. |
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(h) Key management compensation |
Year Ended December 31, | |||||||||||||
2004 | 2005 | 2006 | |||||||||||
RMB’000 | RMB’000 | RMB’000 | |||||||||||
Fee for key management personnel | |||||||||||||
— Directors and supervisors | 120 | 897 | 1,473 | ||||||||||
Salaries, allowances and other benefits | |||||||||||||
— Directors and supervisors | 2,012 | 4,031 | 3,937 | ||||||||||
— Other key management | 1,330 | 2,207 | 2,447 | ||||||||||
Contribution to retirement benefit scheme | |||||||||||||
— Directors and supervisors | 43 | 57 | 165 | ||||||||||
— Other key management | 31 | 37 | 133 | ||||||||||
3,536 | 7,229 | 8,155 | |||||||||||
(i) Contingent liabilities |
(j) Collateral for debts |
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35 | EMOLUMENTS OF DIRECTORS AND SUPERVISORS |
2006 | 2005 | 2004 | |||||||||||||||||||||||
Contribution | |||||||||||||||||||||||||
Fee for | Salaries, | to retirement | |||||||||||||||||||||||
directors and | allowances and | benefit | |||||||||||||||||||||||
Name | supervisors | other benefits | scheme | Total | Total | Total | |||||||||||||||||||
RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | ||||||||||||||||||||
Chairman: | |||||||||||||||||||||||||
Mr. Chen Geng | — | 770 | 27 | 797 | 790 | 389 | |||||||||||||||||||
Vice Chairman: | |||||||||||||||||||||||||
Mr. Jiang Jiemin | — | 695 | 27 | 722 | 625 | 130 | |||||||||||||||||||
Executive directors: | |||||||||||||||||||||||||
Mr. Su Shulin(iii) | — | 657 | 27 | 684 | 686 | 352 | |||||||||||||||||||
Mr. Duan Wende | — | 657 | 27 | 684 | 686 | 222 | |||||||||||||||||||
Mr. Wang Fucheng(ii) | — | — | — | — | — | 300 | |||||||||||||||||||
1,314 | 54 | 1,368 | 1,372 | 874 | |||||||||||||||||||||
Non-executive directors: | |||||||||||||||||||||||||
Mr. Zheng Hu | — | — | — | — | — | — | |||||||||||||||||||
Mr. Zhou Jiping | — | — | — | — | — | — | |||||||||||||||||||
Mr. Wang Yilin | — | — | — | — | — | — | |||||||||||||||||||
Mr. Zeng Yukang | — | — | — | — | — | — | |||||||||||||||||||
Mr. Gong Huazhang | — | — | — | — | — | — | |||||||||||||||||||
Mr. Jiang Fan | — | 444 | 17 | 461 | 33 | — | |||||||||||||||||||
Mr. Chee-chen Tung | 275 | — | — | 275 | 275 | 29 | |||||||||||||||||||
Mr. Liu Hongru | 279 | — | — | 279 | 274 | 33 | |||||||||||||||||||
Mr. Franco Bernabè | 259 | — | — | 259 | 279 | 33 | |||||||||||||||||||
Mr. Ren Chuanjun(ii) | — | — | — | — | — | — | |||||||||||||||||||
Mr. Zou Haifeng(ii) | — | — | — | — | 283 | 238 | |||||||||||||||||||
Mr. Ma Fucai(i) | — | — | — | — | — | — | |||||||||||||||||||
Mr. Wu Yaowen(i) | — | — | — | — | — | — | |||||||||||||||||||
813 | 444 | 17 | 1274 | 1,144 | 333 | ||||||||||||||||||||
Supervisors: | |||||||||||||||||||||||||
Mr. Wang Fucheng | — | — | — | — | 530 | — | |||||||||||||||||||
Mr. Wen Qingshan | — | — | — | — | — | — | |||||||||||||||||||
Mr. Sun Xianfeng | — | — | — | — | — | — | |||||||||||||||||||
Mr. Xu Fengli | — | 432 | 27 | 459 | 374 | 153 | |||||||||||||||||||
Mr. Qin Gang | — | 282 | 13 | 295 | — | — | |||||||||||||||||||
Mr. Li Yongwu | 330 | — | — | 330 | 12 | — | |||||||||||||||||||
Mr. Wu Zhipan | 330 | — | — | 330 | 57 | 12 | |||||||||||||||||||
Mr. Li Kecheng(ii) | — | — | — | — | — | — |
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2006 | 2005 | 2004 | ||||||||||||||||||||||
Contribution | ||||||||||||||||||||||||
Fee for | Salaries, | to retirement | ||||||||||||||||||||||
directors and | allowances and | benefit | ||||||||||||||||||||||
Name | supervisors | other benefits | scheme | Total | Total | Total | ||||||||||||||||||
RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | |||||||||||||||||||
Mr. Sun Chongren(ii) | — | — | — | — | 81 | 272 | ||||||||||||||||||
Mr. Zhang Youcai(ii) | — | — | — | — | — | 12 | ||||||||||||||||||
Mr. Bai Xinhe(i) | — | — | — | — | — | — | ||||||||||||||||||
Mr. Chen Weizhang(i) | — | — | — | — | — | — | ||||||||||||||||||
660 | 714 | 40 | 1,414 | 1,054 | 449 | |||||||||||||||||||
1,473 | 3,937 | 165 | 5,575 | 4,985 | 2,175 | |||||||||||||||||||
(i) | No longer a director or supervisor since May 18, 2004. |
(ii) | No longer a director or supervisor since November 8, 2005. |
(iii) | No longer a director since November 24, 2006 |
2006 | 2005 | 2004 | ||||||||||
Number | Number | Number | ||||||||||
RMB Nil – RMB 1 | 20 | 25 | 24 | |||||||||
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Exploration | Refining | Chemicals | Natural Gas | |||||||||||||||||||||
and | and | and | and | |||||||||||||||||||||
Year Ended December 31, 2004 | Production | Marketing | Marketing | Pipeline | Other | Total | ||||||||||||||||||
RMB | RMB | RMB | RMB | RMB | RMB | |||||||||||||||||||
Sales and other operating revenues (including intersegment) | 233,948 | 296,427 | 57,179 | 18,255 | — | 605,809 | ||||||||||||||||||
Less: Intersegment sales | (180,129 | ) | (21,862 | ) | (2,679 | ) | (3,785 | ) | — | (208,455 | ) | |||||||||||||
Total sales and other operating revenues from external customers | 53,819 | 274,565 | 54,500 | 14,470 | — | 397,354 | ||||||||||||||||||
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Exploration | Refining | Chemicals | Natural Gas | |||||||||||||||||||||
and | and | and | and | |||||||||||||||||||||
Year Ended December 31, 2004 | Production | Marketing | Marketing | Pipeline | Other | Total | ||||||||||||||||||
RMB | RMB | RMB | RMB | RMB | RMB | |||||||||||||||||||
Depreciation, depletion and amortization | (30,915 | ) | (8,957 | ) | (5,741 | ) | (2,645 | ) | (104 | ) | (48,362 | ) | ||||||||||||
Segment result | 138,129 | 28,445 | 11,025 | 2,475 | (518 | ) | 179,556 | |||||||||||||||||
Other costs | (7,916 | ) | (16,554 | ) | (3,370 | ) | 60 | (638 | ) | (28,418 | ) | |||||||||||||
Income/(loss) from operations | 130,213 | 11,891 | 7,655 | 2,535 | (1,156 | ) | 151,138 | |||||||||||||||||
Finance costs | (1,515 | ) | ||||||||||||||||||||||
Equity in income of equity affiliates and jointly controlled entities accounted for by equity method | 225 | 75 | 211 | 16 | 1,094 | 1,621 | ||||||||||||||||||
Income before income taxes | 151,244 | |||||||||||||||||||||||
Income taxes | (43,598 | ) | ||||||||||||||||||||||
Income for the year | 107,646 | |||||||||||||||||||||||
Interest income (including intersegment) | 2,598 | 895 | 205 | 27 | 4,723 | 8,448 | ||||||||||||||||||
Less: Intersegment interest income | (7,075 | ) | ||||||||||||||||||||||
Interest income from external sources | 1,373 | |||||||||||||||||||||||
Interest expense (including intersegment) | (3,096 | ) | (1,777 | ) | (502 | ) | (693 | ) | (3,903 | ) | (9,971 | ) | ||||||||||||
Less: Intersegment interest expense | 7,075 | |||||||||||||||||||||||
Interest expense to external sources | (2,896 | ) | ||||||||||||||||||||||
Segment assets | 364,477 | 142,480 | 55,568 | 61,631 | 507,164 | 1,131,320 | ||||||||||||||||||
Elimination of intersegment balances | (502,771 | ) | ||||||||||||||||||||||
Investments in equity affiliates and jointly controlled entities | 3,352 | 2,862 | 280 | 192 | 3,212 | 9,898 | ||||||||||||||||||
Total assets | 638,447 | |||||||||||||||||||||||
Segment capital expenditure-for property, plant and equipment | 62,868 | 17,684 | 4,319 | 13,901 | 174 | 98,946 | ||||||||||||||||||
Segment liabilities | 109,602 | 75,664 | 18,484 | 35,385 | 99,711 | 338,846 | ||||||||||||||||||
Other liabilities | 39,440 | |||||||||||||||||||||||
Elimination of intersegment balances | (182,811 | ) | ||||||||||||||||||||||
Total liabilities | 195,475 | |||||||||||||||||||||||
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Exploration | Refining | Chemicals | Natural Gas | |||||||||||||||||||||
and | and | and | and | |||||||||||||||||||||
Year Ended December 31, 2005 | Production | Marketing | Marketing | Pipeline | Other | Total | ||||||||||||||||||
RMB | RMB | RMB | RMB | RMB | RMB | |||||||||||||||||||
Sales and other operating revenues (including intersegment) | 337,208 | 428,494 | 73,978 | 26,214 | — | 865,894 | ||||||||||||||||||
Less: Intersegment sales | (270,943 | ) | (33,019 | ) | (4,754 | ) | (4,949 | ) | — | (313,665 | ) | |||||||||||||
Total sales and other operating revenues from external customers | 66,265 | 395,475 | 69,224 | 21,265 | — | 552,229 | ||||||||||||||||||
Depreciation, depletion and amortization | (30,896 | ) | (8,964 | ) | (6,869 | ) | (4,478 | ) | (98 | ) | (51,305 | ) | ||||||||||||
Segment result | 220,452 | 2,116 | 6,896 | 3,639 | (1,357 | ) | 231,746 | |||||||||||||||||
Other costs | (12,372 | ) | (21,926 | ) | (3,620 | ) | (456 | ) | (1,201 | ) | (39,575 | ) | ||||||||||||
Income/(loss) from operations | 208,080 | (19,810 | ) | 3,276 | 3,183 | (2,558 | ) | 192,171 | ||||||||||||||||
Finance costs | (750 | ) | ||||||||||||||||||||||
Equity in income of affiliates and jointly controlled entities accounted for by equity method | 1,851 | 165 | 15 | — | 370 | 2,401 | ||||||||||||||||||
Income before income taxes | 193,822 | |||||||||||||||||||||||
Income taxes | (54,180 | ) | ||||||||||||||||||||||
Income for the year | 139,642 | |||||||||||||||||||||||
Interest income (including intersegment) | 3,912 | 998 | 387 | 100 | 5,763 | 11,160 | ||||||||||||||||||
Less: Intersegment interest income | (9,236 | ) | ||||||||||||||||||||||
Interest income from external sources | 1,924 | |||||||||||||||||||||||
Interest expense (including intersegment) | (3,631 | ) | (2,659 | ) | (636 | ) | (1,105 | ) | (3,967 | ) | (11,998 | ) | ||||||||||||
Less: Intersegment interest expense | 9,236 | |||||||||||||||||||||||
Interest expense to external sources | (2,762 | ) | ||||||||||||||||||||||
Segment assets | 460,814 | 207,724 | 76,439 | 69,232 | 631,696 | 1,445,905 | ||||||||||||||||||
Elimination of intersegment balances | (680,216 | ) | ||||||||||||||||||||||
Investments in equity affiliates and jointly controlled entities | 5,470 | 4,531 | 250 | — | 2,127 | 12,378 | ||||||||||||||||||
Total assets | 778,067 | |||||||||||||||||||||||
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Exploration | Refining | Chemicals | Natural Gas | |||||||||||||||||||||
and | and | and | and | |||||||||||||||||||||
Year Ended December 31, 2005 | Production | Marketing | Marketing | Pipeline | Other | Total | ||||||||||||||||||
RMB | RMB | RMB | RMB | RMB | RMB | |||||||||||||||||||
Segment capital expenditure- for property, plant and equipment | 83,214 | 16,454 | 13,569 | 11,137 | 427 | 124,801 | ||||||||||||||||||
Segment liabilities | 146,616 | 97,918 | 30,559 | 40,847 | 161,753 | 477,693 | ||||||||||||||||||
Other liabilities | 47,731 | |||||||||||||||||||||||
Elimination of intersegment balances | (291,024 | ) | ||||||||||||||||||||||
Total liabilities | 234,400 | |||||||||||||||||||||||
Exploration | Refining | Chemicals | Natural Gas | |||||||||||||||||||||
and | and | and | and | |||||||||||||||||||||
Year Ended December 31, 2006 | Production | Marketing | Marketing | Pipeline | Other | Total | ||||||||||||||||||
RMB | RMB | RMB | RMB | RMB | RMB | |||||||||||||||||||
Sales and other operating revenues (including intersegment) | 421,340 | 543,299 | 82,791 | 38,917 | 1,080 | 1,087,427 | ||||||||||||||||||
Less: Intersegment sales | (339,619 | ) | (44,806 | ) | (7,983 | ) | (5,617 | ) | (424 | ) | (398,449 | ) | ||||||||||||
Total sales and other operating revenues from external customers | 81,721 | 498,493 | 74,808 | 33,300 | 656 | 688,978 | ||||||||||||||||||
Depreciation, depletion and amortization | (37,080 | ) | (12,080 | ) | (6,417 | ) | (5,263 | ) | (548 | ) | (61,388 | ) | ||||||||||||
Segment result | 232,404 | (5,206 | ) | 8,208 | 9,470 | (3,058 | ) | 241,818 | ||||||||||||||||
Other costs | (12,544 | ) | (23,958 | ) | (3,150 | ) | (484 | ) | (3,706 | ) | (43,842 | ) | ||||||||||||
Income/(loss) from operations | 219,860 | (29,164 | ) | 5,058 | 8,986 | (6,764 | ) | 197,976 | ||||||||||||||||
Finance costs | (1,080 | ) | ||||||||||||||||||||||
Equity in income of affiliates and jointly controlled entities accounted for by equity method | 1,889 | 333 | 38 | 1 | 16 | 2,277 | ||||||||||||||||||
Income before income taxes | �� | 199,173 | ||||||||||||||||||||||
Income taxes | (49,776 | ) | ||||||||||||||||||||||
Income for the year | 149,397 | |||||||||||||||||||||||
Interest income (including intersegment) | 4,853 | 1,471 | 634 | 157 | 7,171 | 14,286 | ||||||||||||||||||
Less: Intersegment interest income | (12,220 | ) | ||||||||||||||||||||||
Interest income from external sources | 2,066 | |||||||||||||||||||||||
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Exploration | Refining | Chemicals | Natural Gas | |||||||||||||||||||||
and | and | and | and | |||||||||||||||||||||
Year Ended December 31, 2006 | Production | Marketing | Marketing | Pipeline | Other | Total | ||||||||||||||||||
RMB | RMB | RMB | RMB | RMB | RMB | |||||||||||||||||||
Interest expense (including intersegment) | (5,043 | ) | (3,790 | ) | (679 | ) | (1,614 | ) | (4,314 | ) | (15,440 | ) | ||||||||||||
Less: Intersegment interest expense | 12,220 | |||||||||||||||||||||||
Interest expense to external sources | (3,220 | ) | ||||||||||||||||||||||
Segment assets | 507,073 | 248,027 | 81,032 | 75,433 | 729,079 | 1,640,644 | ||||||||||||||||||
Elimination of intersegment balances | (801,437 | ) | ||||||||||||||||||||||
Investments in equity affiliates and jointly controlled entities | 27,127 | 5,587 | 153 | 20 | 69 | 32,956 | ||||||||||||||||||
Total assets | 872,163 | |||||||||||||||||||||||
Segment capital expenditure- for property, plant and equipment | 105,192 | 19,206 | 10,681 | 11,309 | 2,358 | 148,746 | ||||||||||||||||||
Segment liabilities | 185,185 | 115,352 | 28,024 | 43,644 | 171,059 | 543,264 | ||||||||||||||||||
Other liabilities | 62,021 | |||||||||||||||||||||||
Elimination of intersegment balances | (350,713 | ) | ||||||||||||||||||||||
Total liabilities | 254,572 | |||||||||||||||||||||||
Note (a) — | Intersegment sales are conducted principally at market price. |
Note (b) — | Segment result is income from operations before other costs. Other costs include selling, general and administrative expenses and other net expense. |
Note (c) — | Segment results for the years ended December 31, 2004, 2005 and 2006 included impairment of property, plant and equipment (Note 18) and shut down of manufacturing assets (Note 6). |
Note (d) — | Other liabilities mainly include income tax payable, other taxes payable and deferred taxation. |
Note (e) — | Elimination of intersegment balances represents elimination of intersegment accounts and investments. |
Note (f) — | Effective January 1, 2006, the results of operations, together with the corresponding assets and liabilities, of certain research and development activities of the Group are reclassified from the Exploration and Production segment, the Refining and Marketing segment, the Chemicals and Marketing segment and the Natural Gas and Pipeline segment to the Other segment to reflect the changes in the manner under which these activities are managed. The results of operations, together with the corresponding assets and liabilities, of these research and development activities were included in the previously reported segments in the segment information for the year ended December 31, 2005. Selected financial data of these research and development activities |
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as of December 31, 2005 and 2006 and for the year ended December 31, 2005 and 2006 are as follows: |
Exploration | Refining | Chemicals | Natural Gas | |||||||||||||||||
and | and | and | and | |||||||||||||||||
Year Ended December 31, 2005 | Production | Marketing | Marketing | Pipeline | Total | |||||||||||||||
RMB | RMB | RMB | RMB | RMB | ||||||||||||||||
Sales and other operating revenues (including intersegment) | 558 | 4 | 40 | — | 602 | |||||||||||||||
Sales and other operating revenues from external customers | 28 | — | 37 | — | 65 | |||||||||||||||
Depreciation, depletion and amortization | (310 | ) | (18 | ) | (30 | ) | (3 | ) | (361 | ) | ||||||||||
Segment result | (543 | ) | (63 | ) | (96 | ) | (14 | ) | (716 | ) | ||||||||||
Other costs | (523 | ) | (103 | ) | (72 | ) | (31 | ) | (729 | ) | ||||||||||
Loss from operations | (1,066 | ) | (166 | ) | (168 | ) | (45 | ) | (1,445 | ) | ||||||||||
Share of profit of equity affiliates and jointly controlled entities | — | — | — | — | — | |||||||||||||||
Interest income | — | — | — | — | — | |||||||||||||||
Interest expense | — | (1 | ) | — | — | (1 | ) | |||||||||||||
Segment assets | 2,050 | 251 | 295 | 51 | 2,647 | |||||||||||||||
Segment liabilities | 995 | 249 | 128 | 13 | 1,385 |
Exploration | Refining | Chemicals | Natural Gas | |||||||||||||||||
and | and | and | and | |||||||||||||||||
Year ended December 31, 2006 | Production | Marketing | Marketing | Pipeline | Total | |||||||||||||||
RMB | RMB | RMB | RMB | RMB | ||||||||||||||||
Sales and other operating revenues (including intersegment) | 543 | — | 39 | — | 582 | |||||||||||||||
Sales and other operating revenues from external customers | 21 | — | 29 | — | 50 | |||||||||||||||
Depreciation, depletion and amortization | (295 | ) | (26 | ) | (64 | ) | (6 | ) | (391 | ) | ||||||||||
Segment result | (714 | ) | (88 | ) | (162 | ) | (21 | ) | (985 | ) | ||||||||||
Other costs | (664 | ) | (96 | ) | (81 | ) | (42 | ) | (883 | ) | ||||||||||
Loss from operations | (1,378 | ) | (184 | ) | (243 | ) | (63 | ) | (1,868 | ) | ||||||||||
Share of profit of equity affiliates and jointly controlled entities | 3 | — | — | — | 3 | |||||||||||||||
Interest income | — | — | — | — | — | |||||||||||||||
Interest expense | (15 | ) | — | — | — | (15 | ) | |||||||||||||
Segment assets | 2,163 | 272 | 374 | 52 | 2,861 | |||||||||||||||
Segment liabilities | 1,183 | 320 | 164 | 21 | 1,688 |
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Capital | ||||||||||||||||||||||||
Revenue | Total assets | expenditure | ||||||||||||||||||||||
Year Ended December 31, | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | ||||||||||||||||||
RMB | RMB | RMB | RMB | RMB | RMB | |||||||||||||||||||
PRC | 531,520 | 665,267 | 717,934 | 811,919 | 119,505 | 142,371 | ||||||||||||||||||
Other (Exploration and Production) | 20,709 | 23,711 | 60,133 | 60,244 | 5,296 | 6,375 | ||||||||||||||||||
552,229 | 688,978 | 778,067 | 872,163 | 124,801 | 148,746 | |||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||
2004 | 2005 | 2006 | 2006 | |||||||||||||||
RMB | RMB | RMB | US$ | |||||||||||||||
Income for the year under IFRS | 107,646 | 139,642 | 149,397 | 19,143 | ||||||||||||||
US GAAP adjustments: | ||||||||||||||||||
Share of income of jointly controlled entities | — | 2 | 2,735 | 350 | ||||||||||||||
Depreciation charges on property, plant and equipment revaluation gain | 8,170 | 6,528 | 3,828 | 491 | ||||||||||||||
Depreciation charges on property, plant and equipment revaluation loss | (830 | ) | (149 | ) | — | — | ||||||||||||
Loss on disposal of revalued property, plant and equipment | 523 | 432 | 287 | 37 | ||||||||||||||
Income tax effect | (2,595 | ) | (2,248 | ) | (1,358 | ) | (174 | ) | ||||||||||
Minority interest | (3,863 | ) | (6,341 | ) | (8,600 | ) | (1,102 | ) | ||||||||||
Depreciation charges on property, plant and equipment arising from purchase from minority interest of subsidiaries | — | — | (202 | ) | (26 | ) | ||||||||||||
Net income under US GAAP | 109,051 | 137,866 | 146,087 | 18,719 | ||||||||||||||
Basic and diluted net income per share under US GAAP (RMB) | 0.62 | 0.78 | 0.82 | 0.10 | ||||||||||||||
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At December 31, | |||||||||||||
2005 | 2006 | 2006 | |||||||||||
RMB | RMB | US$ | |||||||||||
Equity under IFRS | 543,667 | 617,591 | 79,137 | ||||||||||
US GAAP adjustments: | — | ||||||||||||
Acquisition of PetroKazakhstan Inc. | 22,129 | 22,129 | 2,836 | ||||||||||
Share of income of jointly controlled entities | 2 | 2,737 | 351 | ||||||||||
Deemed distribution to CNPC International Limited | — | (3,044 | ) | (390 | ) | ||||||||
Payment for the acquisition of PetroKazakhstan Inc. | — | (21,376 | ) | (2,739 | ) | ||||||||
Reversal of property, plant and equipment revaluation gain | (80,555 | ) | (80,555 | ) | (10,322 | ) | |||||||
Depreciation charges on property, plant and equipment revaluation gain | 51,971 | 55,799 | 7,150 | ||||||||||
Reversal of property, plant and equipment revaluation loss | 1,513 | 1,513 | 194 | ||||||||||
Depreciation charges on property, plant and equipment revaluation loss | (1,459 | ) | (1,459 | ) | (187 | ) | |||||||
Loss on disposal of revalued property, plant and equipment | 1,746 | 2,033 | 261 | ||||||||||
Deferred tax assets on revaluation | 8,843 | 7,485 | 959 | ||||||||||
Minority interest | (39,100 | ) | (30,953 | ) | (3,966 | ) | |||||||
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 | ) | (327 | ) | |||||||
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 | 327 | ||||||||||
Purchase from minority interest of subsidiaries (Note 38) | 1,438 | 3,594 | 461 | ||||||||||
Depreciation charges on property, plant and equipment arising from purchase from minority interest of subsidiaries | — | (202 | ) | (26 | ) | ||||||||
Currency translation differences | (54 | ) | (822 | ) | (108 | ) | |||||||
Shareholders’ equity under US GAAP | 510,141 | 574,470 | 73,611 | ||||||||||
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Year Ended December 31, | |||||||||||||||||
2004 | 2005 | 2006 | 2006 | ||||||||||||||
RMB | RMB | RMB | US$ | ||||||||||||||
Balance at beginning of the year | 330,520 | 405,573 | 510,141 | 65,368 | |||||||||||||
Net income for the year | 109,051 | 137,866 | 146,087 | 18,719 | |||||||||||||
Acquisition of PetroKazakhstan Inc. | — | 11,064 | — | — | |||||||||||||
Deemed distribution to CNPC International Limited | — | — | (1,522 | ) | (195 | ) | |||||||||||
Payment for the acquisition of PetroKazakhstan Inc. | — | — | (10,688 | ) | (1,370 | ) | |||||||||||
Final dividends for year 2003 | (13,947 | ) | — | — | — | ||||||||||||
Interim dividends for year 2004 | (20,381 | ) | — | — | — | ||||||||||||
Final dividends for year 2004 | — | (25,936 | ) | — | — | ||||||||||||
Interim dividends for year 2005 | — | (27,731 | ) | — | — | ||||||||||||
Final dividends for year 2005 | — | — | (32,282 | ) | (4,136 | ) | |||||||||||
Interim dividends for year 2006 | — | — | (36,307 | ) | (4,652 | ) | |||||||||||
Payment to CNPC for acquisition of refinery and petrochemical businesses (Note 2) | — | (9 | ) | — | — | ||||||||||||
Issue of H shares (Notes 27 and 28) | — | 19,692 | — | — | |||||||||||||
Capital contribution to CNPC E&D (Note 2) | — | (10,056 | ) | — | — | ||||||||||||
Currency translation differences | 330 | (322 | ) | (959 | ) | (123 | ) | ||||||||||
Balance at end of the year | 405,573 | 510,141 | 574,470 | 73,611 | |||||||||||||
(a) | Acquisition of PetroKazakhstan Inc. |
As described in Note 19 to the consolidated financial statements of the Group, the Group acquired a 67% equity interest in PetroKazakhstan Inc. from CNPC International Limited (CNPCI), a subsidiary of CNPC, effective on December 28, 2006 for RMB 21,376. As both CNPCI and the Group are under common control by CPNC, the acquisition of the 67% equity interest in PetroKazakhstan Inc. has been accounted for in a manner similar to pooling of interests under US GAAP accounting and the US GAAP financial data reflects the acquisition of the 67% equity interest in PetroKazakhstan Inc. since PetroKazakhstan Inc. was first acquired by CNPCI on October 26, 2005. |
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On December 15, 2006, PetroKazakhstan Inc. paid to CNPCI a dividend amount to RMB 3,044 and was recorded as a deemed distribution to CNPCI. | |
The purchase consideration for the acquisition of the 67% equity interest in PetroKazakhstan Inc. was paid by the Group to CNPCI on December 28, 2006. |
(b) | Revaluation of property, plant and equipment |
As described in note 18, the property, plant and equipment, excluding oil and gas reserves, transferred to the Company by CNPC were appraised during 1999 by a firm of independent valuers on a depreciated replacement cost basis. The 1999 revaluation resulted in RMB 80,549 in excess of the carrying value immediately prior to the revaluation and a revaluation loss of RMB 1,122 on certain property, plant and equipment. | |
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 September 2003 revaluation resulted in RMB 872 in excess of the carrying value immediately prior to the revaluation and a revaluation loss of RMB 1,257 on certain property, plant and equipment. | |
As at March 31, 2006, a revaluation of the Group’s oil and gas properties was undertaken by independent valuers, China United Assets Appraiser Co., Ltd and China Enterprise Appraisals, on a depreciated replacement cost basis. The revaluation did not result in significant difference from their carrying value. | |
The depreciation charge, which includes impairment charge, on the revaluation surplus from January 1, 2006 to December 31, 2006 was RMB 3,828 and from January 1, 2005 to December 31, 2005 was RMB 6,528, respectively. | |
The depreciation charge, which includes impairment charge, on the revaluation loss from January 1, 2006 to December 31, 2006 was Nil, and from January 1, 2005 to December 31, 2005 was RMB 149. | |
The loss on disposal of revalued property, plant and equipment from January 1, 2006 to December 31, 2006 was RMB 287, and from January 1, 2005 to December 31, 2005 was RMB 432 which includes shut down of manufacturing assets. | |
For purposes of reconciling to the US GAAP financial data, the effect of the revaluation, the related depreciation charges and loss on disposal was reversed. A deferred tax asset relating to the reversal of the effect of revaluation in 1999 was established, together with a corresponding increase in the 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. |
(c) | One-time remedial payments for staff housing |
The Ministry of Finance of the PRC issued several public notices and regulations during the years ended December 31, 2000 and 2001 with respect to the one-time remedial payments for staff housing payable to certain employees who joined the workforce prior to December 31, 1998 and have housing conditions below local standards as determined in accordance with government regulations and guidelines. These Ministry of Finance notices and regulations also provided that the portion of remedial payments attributable to the periods prior to a restructuring |
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of the employer enterprise from a wholly state-owned status to a less than wholly state-owned status is to be borne by the state shareholder of the enterprise. | |
The restructuring that resulted in the formation of the Group took place in November 1999. As such, the one-time remedial housing payments payable to the eligible employees of the Group are to be borne by the state shareholder of the Company. | |
Under IFRS, such direct payments to employees or reimbursements will not be recorded through the consolidated statements of income 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 statements of income. In the last quarter of year 2002, the Group and CNPC completed the process of estimating the amount payable to qualified employees of the Group. This amount, RMB 2,553, was reflected in determining net income of the Group for the year ended December 31, 2002, under US GAAP. Since this amount is borne by CNPC, a corresponding amount has been included as an addition to the other reserves in the equity of the Group. There were no significant changes in this estimate during 2005 and 2006. |
(d) | Minority interest |
In accordance with the revised IFRS 1“Presentation of Financial Statements”and IAS 27“Consolidated and Separate Financial Statements”, minority interest becomes part of the profit for the year and total equity of the Group, respectively, whereas under US GAAP, it is respectively excluded from the net income and equity of the Group. | |
This reconciling item includes the impact of minority interest’s share of the revaluation gain and loss, on the property, plant and equipment of non-wholly owned subsidiaries and the impact of minority interest arising from the acquisition of the 67% equity interest in PetroKazakhstan Inc. by a non-wholly owned subsidiary of the Group to net income and equity under US GAAP. |
(e) | Purchase from minority interest of listed subsidiaries |
As described in note 38, the Company acquired certain outstanding A shares from the minority interest of Jinzhou Petrochemical Company Limited (“JPCL”) and Liaohe Jinma Oilfield Company Limited (“LJOCL”) and certain A shares and H shares (including ADSs) from the minority interest of Jilin Chemical Industrial Company Limited (“JCIC”). Under IFRS, the Company applies a policy of treating transactions with minority interest as transactions with equity participants of the Group. Therefore, the assets and liabilities of JPCL, LJOCL and JCIC additionally acquired by the Company from minority interest were recorded by the Company at cost. The difference between the Company’s purchase cost and the book value of the interests in JPCL LJOCL and JCIC acquired by the Company from minority interest was recorded in equity. Under US GAAP, the acquisition of additional minority interest is accounted for under purchase method. Assets and liabilities additionally acquired were restated to fair value and the difference of purchase cost over fair value of the minority interest acquired and identified intangible assets was recorded as goodwill. Additional depreciation charges were provided for the assets which were restated to fair value. |
(f) | Recent US accounting pronouncements |
In September 2005, the Emerging Issues Task Force (“EITF”) reached consensus on Issue No. 04-13,“Accounting for Purchases and Sales of Inventory with the Same Counterparty”(“EITF 04-13”) which requires two or more inventory purchase and sales transactions with the |
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same counterparty that are entered into in contemplation of one another should be combined for purposes of applying Opinion 29, “Accounting for Nonmonetary Transactions”. The Task Force also agreed that an entity should disclose the amount of revenue and costs (or gains and losses) associated with inventory exchanges recognized at fair value. This Issue should be applied to new arrangements entered into, or modifications or renegotiations of existing arrangements, beginning in the first interim or annual reporting period beginning after March 15, 2006 and early application is permitted in periods for which financial statements have not been issued. The Group did not early adopt EITF 04-13 and does not expect the adoption of EITF 04-13 to have a material impact on the Group’s financial position or results of operations. | |
In June 2006, EITF issued No. 06-3,“How Sales Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement”(“EITF 06-3”). EITF 06-3 requires disclosure of the presentation of taxes on either a gross or a net basis as an accounting policy decision. The provisions of EITF 06-3 are effective for interim and annual reporting periods beginning after December 15, 2006, and early application is permitted. The Group did not early adopt EITF 06-3 and does not expect the adoption of EITF 06-3 to have a material impact on the presentation of the Group’s financial statements. | |
In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 prescribes a comprehensive model for recognising, measuring, presenting and disclosing in the financial statements uncertain tax positions that the Group has taken or expects to take in its tax returns. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006. Earlier adoption is permitted as of the beginning of an enterprise’s fiscal year, provided the enterprise has not yet issued financial statements, including financial statements for any interim period, for that fiscal year. The cumulative effect of applying the provisions of this Interpretation should be reported as an adjustment to the opening balance of retained earnings for that fiscal year. The Group is currently evaluating the impact of adopting FIN 48. | |
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157,“Fair Value Measurements”(“FAS157”), which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. FAS 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. FAS 157 will be effective for fiscal years beginning after November 15, 2007, and all interim periods within those fiscal years. Earlier application is permitted if the entity has not issued interim or annual financial statements for that fiscal year. The Group is currently evaluating the impact of adopting FAS 157 but does not expected to have a material effect on the Group’s consolidated financial position and results of operations. | |
In September 2006, the U.S. Securities and Exchange Commission (“SEC”) released SAB No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 provides interpretive guidance on the SEC’s views on the consideration of effects of prior year misstatements in quantifying current year misstatements for the purpose of determining whether the current year’s financial statements are materially misstated. The provisions of SAB 108 are effective for fiscal years ending after November 15, 2006. The application of SAB 108 did not have any material effect on the Group’s consolidated financial position, and results of operations. |
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Country | Type of | Attributable | ||||||||||||||||
of | Paid-up | Legal | Equity | Principal | ||||||||||||||
Company Name | Incorporation | Capital | Entity | Interest | Activities | |||||||||||||
RMB | % | |||||||||||||||||
*Daqing Oilfield Company Limited | PRC | 47,500 | PHI | 100.00 | Exploration, production and sale of crude oil and natural gas; production and sale of refined products | |||||||||||||
*Jinzhou Petrochemical Company Limited (i) | PRC | 788 | PSI | 98.92 | Production and sale of oil and chemical products | |||||||||||||
*Jilin Chemical Industrial Company Limited (ii) | PRC | 3,561 | PSI | 99.61 | Production and sale of chemical products | |||||||||||||
Daqing Yu Shu Lin Oilfield Company Limited | PRC | 1,272 | PHI | 88.16 | Exploration and production and sale of crude oil and natural gas | |||||||||||||
*Liaohe Jinma Oilfield Company Limited (iii) | PRC | 1,100 | PSI | 99.49 | Exploration, production, transportation and sale of crude oil and natural gas | |||||||||||||
*CNPC Exploration and Development Company Limited | PRC | 100 | PHI | 50.00 | Exploration and production and sale of crude oil and natural gas outside of the PRC |
PHI — | Limited liability company. |
PSI — | Joint stock company with limited liability. |
* — | Subsidiaries directly held by the Company as of December 31, 2006 |
(i) | Pursuant to the resolution passed at the Board of Directors’ meeting held on October 26, 2005, the Company offered to acquire all of the 150,000,000 outstanding A shares of Jinzhou Petrochemical Company Limited (“JPCL”) from minority shareholders at RMB 4.25 per share. As at December 31, 2006, the Company had paid a total cash consideration of RMB 602 and acquired 141,497,463 A shares, representing approximately 17.97% of the total issued shares of JPCL. Upon this acquisition, the Company owns 98.92% of the outstanding shares of JPCL. The excess of the cost of purchase over the carrying value of the underlying assets and liabilities acquired was recorded in equity. As approved by China Securities Regulatory Commission, JPCL was delisted from the Shenzhen Stock Exchange on January 4, 2006. |
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(ii) | Pursuant to the resolution passed by the Board of Directors’ meeting held on October 26, 2005, the Company offered to acquire all the 200,000,000 outstanding A shares and 964,778,000 H shares (including ADS) of Jilin Chemical Industrial Company Limited (“JCIC”) from minority shareholders at RMB 5.25 per A share and HK$2.80 per H share respectively. As at December 31, 2006, the Company had paid a total cash consideration of RMB 3,799 and acquired 189,357,726 A shares and 961,495,999 H shares (including ADS), representing approximately 32.32% of the total issued shares of JCIC. Upon this acquisition, the Company owns 99.61% of the outstanding shares of JCIC. The excess of the cost of purchase over the carrying value of the underlying assets and liabilities acquired was recorded in equity. JCIC was delisted from the Stock Exchange of Hong Kong Limited and the New York Stock Exchange on January 23, 2006 and February 15, 2006, respectively. As approved by China Securities Regulatory Commission, JCIC was delisted from the Shenzhen Stock Exchange on February 20, 2006. |
(iii) | Pursuant to the resolution passed by the Board of Directors’ meeting held on October 26, 2005, the Company offered to acquire all of the 200,000,000 outstanding A shares of Liaohe Jinma Oilfield Company Limited (“LJOCL”) from minority shareholders at RMB 8.80 per share. As at December 31, 2006, the Company had paid a total cash consideration of RMB 1,713 and acquired 194,360,943 A shares, representing approximately 17.67% of the total issued shares of LJOCL. Upon this acquisition, the Company owns 99.49% of the outstanding shares of LJOCL. The excess of the cost of purchase over the carrying value of the underlying assets and liabilities acquired was recorded in equity. As approved by China Securities Regulatory Commission, LJOCL was delisted from the Shenzhen Stock Exchange on January 4, 2006. |
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Year Ended December 31, | |||||||||||||
2004 | 2005 | 2006 | |||||||||||
RMB | RMB | RMB | |||||||||||
Sales and other operating revenues | |||||||||||||
Sales to third parties | 53,819 | 66,265 | 81,721 | ||||||||||
Intersegment sales | 176,894 | 261,558 | 313,654 | ||||||||||
230,713 | 327,823 | 395,375 | |||||||||||
Production costs excluding taxes | (34,821 | ) | (41,713 | ) | (54,800 | ) | |||||||
Exploration expenses | (12,090 | ) | (15,566 | ) | (18,822 | ) | |||||||
Depreciation, depletion and amortization | (26,287 | ) | (25,819 | ) | (31,540 | ) | |||||||
Taxes other than income taxes | (7,712 | ) | (10,239 | ) | (41,354 | ) | |||||||
Accretion expense | (54 | ) | (60 | ) | (796 | ) | |||||||
Income before income taxes | 149,749 | 234,426 | 248,063 | ||||||||||
Income taxes | (42,089 | ) | (64,816 | ) | (65,554 | ) | |||||||
Results of operations from producing activities | 107,660 | 169,610 | 182,509 | ||||||||||
Income from equity affiliates’ and jointly controlled entities’ results of operations from producing activities | 767 | 1,880 | 4,424 | ||||||||||
Year Ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
RMB | RMB | RMB | ||||||||||
Property costs | — | — | — | |||||||||
Producing assets | 303,784 | 359,539 | 425,172 | |||||||||
Support facilities | 124,793 | 138,093 | 150,149 | |||||||||
Construction-in-progress | 15,856 | 19,394 | 25,461 | |||||||||
Total capitalized costs | 444,433 | 517,026 | 600,782 | |||||||||
Accumulated depreciation, depletion and amortization | (180,926 | ) | (203,416 | ) | (233,677 | ) | ||||||
Net capitalized costs | 263,507 | 313,610 | 367,105 | |||||||||
Share of equity affiliates’ and jointly controlled entities’ net capitalized costs | 1,632 | 20,597 | 25,136 | |||||||||
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Year Ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
RMB | RMB | RMB | ||||||||||
Property acquisition costs | — | — | — | |||||||||
Exploration costs | 18,338 | 25,335 | 30,567 | |||||||||
Development costs | 47,508 | 72,551 | 79,902 | |||||||||
Total | 65,846 | 97,886 | 110,469 | |||||||||
Share of equity affiliates’ and jointly controlled entities’ costs of property acquisition, exploration, and development | 1,143 | 2,590 | 4,371 | |||||||||
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Crude Oil and | |||||||||||
Condensate | Natural Gas | ||||||||||
(millions of | (billions of | ||||||||||
barrels) | cubic feet) | ||||||||||
Proved developed and undeveloped | |||||||||||
Reserves at January 1, 2004 | 11,495 | 41,787 | |||||||||
Changes resulting from: | |||||||||||
Revisions of previous estimates | 141 | 83 | |||||||||
Improved recovery | 109 | 43 | |||||||||
Extensions and discoveries | 573 | 4,405 | |||||||||
Production | (817 | ) | (1,069 | ) | |||||||
Reserves at December 31, 2004 | 11,501 | 45,249 | |||||||||
Changes resulting from: | |||||||||||
Revisions of previous estimates | 157 | 213 | |||||||||
Improved recovery | 101 | — | |||||||||
Extensions and discoveries | 606 | 4,005 | |||||||||
Production | (829 | ) | (1,344 | ) | |||||||
Reserves at December 31, 2005 | 11,536 | 48,123 | |||||||||
Changes resulting from: | |||||||||||
Revisions of previous estimates | 197 | 686 | |||||||||
Improved recovery | 81 | — | |||||||||
Extensions and discoveries | 635 | 6,248 | |||||||||
Production | (831 | ) | (1,588 | ) | |||||||
Reserves at December 31, 2006 | 11,618 | 53,469 | |||||||||
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Crude Oil and | |||||||||
Condensate | Natural Gas | ||||||||
(millions of | (billions of | ||||||||
barrels) | cubic feet) | ||||||||
Proved developed reserves at: | |||||||||
December 31, 2004 | 9,068 | 17,255 | |||||||
December 31, 2005 | 9,195 | 19,858 | |||||||
December 31, 2006 | 9,185 | 22,564 | |||||||
Proportional interest in proved reserves of equity affiliates and jointly controlled entities | |||||||||
December 31, 2004 | 439 | 100 | |||||||
December 31, 2005 | 631 | 145 | |||||||
December 31, 2006 | 543 | 105 |
At December 31, 2004 | ||||
Future cash inflows from sales of oil and gas | 4,046,151 | |||
Future production costs | (912,881 | ) | ||
Future development costs | (106,332 | ) | ||
Future income tax expense | (934,068 | ) | ||
Future net cash flows | 2,092,870 | |||
Discount at 10% for estimated timing of cash flows | (1,092,412 | ) | ||
Standardized measure of discounted future net cash flows | 1,000,458 | |||
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At December 31, 2005 | |||||
Future cash inflows from sales of oil and gas | 5,337,329 | ||||
Future production costs | (1,043,358 | ) | |||
Future development costs | (156,575 | ) | |||
Future income tax expense | (1,279,133 | ) | |||
Future net cash flows | 2,858,263 | ||||
Discount at 10% for estimated timing of cash flows | (1,472,069 | ) | |||
Standardized measure of discounted future net cash flows | 1,386,194 | ||||
At December 31, 2006 | |||||
Future cash inflows from sales of oil and gas | 5,611,306 | ||||
Future production costs | (1,620,761 | ) | |||
Future development costs | (296,175 | ) | |||
Future income tax expense | (1,202,980 | ) | |||
Future net cash flows | 2,491,390 | ||||
Discount at 10% for estimated timing of cash flows | (1,336,045 | ) | |||
Standardized measure of discounted future net cash flows | 1,155,345 | ||||
Share of equity affiliates’ and jointly controlled entities’ standardized measure of discounted future net cash flows | |||||
At December 31, 2004 | 10,851 | ||||
At December 31, 2005 | 31,703 | ||||
At December 31, 2006 | 59,825 |
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Year Ended December 31, | |||||||||||||
2004 | 2005 | 2006 | |||||||||||
RMB | RMB | RMB | |||||||||||
CHANGES IN STANDARDISED MEASURE OF DISCOUNTED FUTURE CASH FLOWS | |||||||||||||
Beginning of year | 715,114 | 1,000,458 | 1,386,194 | ||||||||||
Sales and transfers of oil and gas produced, net of production costs | (187,020 | ) | (274,921 | ) | (328,001 | ) | |||||||
Net changes in prices and production costs and other | 366,417 | 523,089 | (317,593 | ) | |||||||||
Extensions, discoveries and improved recovery | 119,790 | 157,343 | 166,249 | ||||||||||
Development costs incurred | 14,829 | (11,282 | ) | (47,551 | ) | ||||||||
Revisions of previous quantity estimates | 13,420 | 21,678 | 32,306 | ||||||||||
Accretion of discount | 101,787 | 144,709 | 200,771 | ||||||||||
Net change in income taxes | (143,879 | ) | (174,880 | ) | 62,970 | ||||||||
End of year | 1,000,458 | 1,386,194 | 1,155,345 | ||||||||||
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