SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of September 2008
PETROCHINA COMPANY LIMITED
16 ANDELU, DONGCHENG DISTRICT
BEIJING, THE PEOPLE'S REPUBLIC OF CHINA, 100011
(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.)
Form 20-F X Form 40-F
--- ---
(Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes No X
--- ---
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- )
-------
PetroChina Company Limited (the "Registrant") is furnishing under the cover
of Form 6-K the Registrant's announcement with respect to the 2008 Interim
Report.
2008 INTERIM REPORT
PETROCHINA COMPANY LIMITED
(photo)
CONTENTS
002 CORPORATE PROFILE
005 SUMMARY OF ACCOUNTING DATA AND FINANCIAL INDICATORS
007 CHANGES IN SHARE CAPITAL AND INFORMATION ON SHAREHOLDERS
011 DIRECTORS' REPORT
030 SIGNIFICANT EVENTS
041 DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
044 FINANCIAL STATEMENTS
145 DOCUMENTS AVAILABLE FOR INSPECTION
146 CONFIRMATION FROM THE DIRECTORS AND SENIOR MANAGEMENT
2008 INTERIM REPORT 1
IMPORTANT NOTICE
The Board of Directors (the "Board") of PetroChina Company Limited (the
"Company"), the Supervisory Committee and the Directors, Supervisors and Senior
Management of the Company warrant that there are no material omissions from, or
misrepresentation or misleading statements contained in this Interim Report, and
jointly and severally accept full responsibility for the truthfulness, accuracy
and completeness of the information contained in this Interim Report. There is
no occupancy of non-operating funds by the substantial shareholders of the
Company. This Interim Report has been approved during the Second Meeting of the
Fourth Session of the Board (the "Meeting"). Mr Liao Yongyuan, executive
Director of the Company, and each of Mr Chee-Chen Tung and Mr Franco Bernabe,
both independent non-executive Directors of the Company, were absent from the
Second Meeting of the Fourth Session of the Board. Mr Liao Yongyuan, Mr
Chee-Chen Tung and Mr Franco Bernabe respectively authorised Mr Wang Fucheng,
non-executive Director of the Company, Mr Liu Hongru and Mr Cui Junhui, both
independent non-executive Directors of the Company, to attend the meeting of the
Board by proxy and to exercise their voting rights in respect of the resolutions
put forward at the meeting on their behalf. Mr Jiang Jiemin, Chairman of the
Board, Mr Zhou Jiping, Vice-Chairman of the Board and President of the Company
and Mr Zhou Mingchun, Chief Financial Officer and Head of the Finance Department
of the Company, warrant the truthfulness and completeness of the financial
statements included in this Interim Report.
The financial statements of the Company and its subsidiaries (the "Group")
for the six months ended June 30, 2008 and the consolidated interim condensed
financial statements of the Group for the six months ended June 30, 2008 have
been prepared in accordance with China Accounting Standards ("CAS") and the
International Financial Reporting Standards ("IFRS"), respectively. The
financial statements of the Group for the six months ended June 30, 2008,
prepared in accordance with CAS, has been audited by PricewaterhouseCoopers
Zhong Tian CPAs Limited Company and an unqualified opinion on these financial
statements has been issued.
CORPORATE PROFILE
The Company was established as a joint stock company with limited liability
under the Company Law of the People's Republic of China (the "PRC" or "China")
on November 5, 1999 as part of the restructuring of the China National Petroleum
Corporation ("CNPC").
The Company and its subsidiaries (the "Group") are the largest oil and gas
producer and seller occupying a leading position in the oil and gas industry in
the PRC and one of the largest companies in the PRC in terms of revenue and one
of the largest oil companies in the world. The Group engages in a broad range of
petroleum and gas related activities including: the exploration, development,
production and sales of crude oil and natural gas; the refining, transportation,
storage and marketing of crude oil and petroleum products; the production and
sales of basic petrochemical products, derivative chemical products and other
chemical products; and the transmission of natural gas, crude oil and refined
products, and the sales of natural gas.
The American Depositary Shares (the "ADSs"), H shares and A shares of the
Company were listed on the New York Stock Exchange, Inc., The Stock Exchange of
Hong Kong Limited ("HKSE" or "Hong Kong Stock Exchange") and Shanghai Stock
Exchange on April 6, 2000, April 7, 2000 and November 5, 2007 respectively.
2008 INTERIM REPORT 2
Registered Chinese Name of the Company: (CHINESE CHARACTERS)
English Name of the Company: PetroChina Company Limited
Legal Representative of the Company: Jiang Jiemin
Secretary to the Board: Li Huaiqi
Address: World Tower
16 Andelu
Dongcheng District
Beijing, the People's Republic
of China
Telephone: 86(10) 8488 6270
Facsimile: 86(10) 8488 6260
Email Address: xwzou@petrochina.com.cn
Representative on Securities Matters Liang Gang
Address: World Tower
16 Andelu
Dongcheng District
Beijing, the People's Republic
of China
Telephone: 86(10) 8488 6959
Facsimile: 86(10) 8488 6260
Email address: liangg@petrochina.com.cn
Representative of the Hong Kong Mao Zefeng
Address: Suite 3606, Tower 2, Lippo
Centre
89 Queensway, Hong Kong
Telephone: (852) 2899 2010
Facsimile: (852) 2899 2390
Email Address: hko@petrochina.com.hk
Legal Address of the Company: World Tower
16 Andelu, Dongcheng District,
Beijing
The People's Republic of China
Postal Code: 100011
Internet Website: http://www.petrochina.com.cn
Company's Email: xwzou@petrochina.com.cn
Newspapers for Information Disclosure:
A shares: China Securities Journal, Shanghai Securities News and Securities
Times
Internet Website Publishing this Interim Report designated by the China
Securities Regulatory Commission: http://www.sse.com.cn
Copies of this Interim Report is available at: World Tower, 16 Andelu,
Dongcheng District, Beijing,
the People's Republic of China
2008 INTERIM REPORT 3
Places of Listing:
A shares: Shanghai Stock Exchange
Stock Name: PetroChina
Stock Code: 601857
H shares: The Stock Exchange of Hong Kong
Limited
Stock Code: 857
ADS: The New York Stock Exchange,
Inc.
Symbol: PTR
Other relevant information
Names and addresses of Auditors of the Company:
Domestic Auditors:
Name: PricewaterhouseCoopers Zhong Tian CPAs Company Limited
Address: 11th Floor PricewaterhouseCoopers Centre, 202 Hu Bin Road,
Shanghai, PRC
Overseas Auditors:
Name: PricewaterhouseCoopers
Address: 22nd Floor, Prince's Building, Central, Hong Kong
2008 INTERIM REPORT 4
SUMMARY OF ACCOUNTING DATA AND
FINANCIAL INDICATORS
1. KEY ACCOUNTING DATA AND FINANCIAL INDICATORS PREPARED UNDER IFRS
Unit: RMB Million
------------------------------------------------------------------------------------------------------------------------------------
AS AT THE END OF THE AS AT THE END OF THE CHANGES FROM THE END OF THE
ITEMS REPORTING PERIOD PRECEDING YEAR PRECEDING YEAR (%)
------------------------------------------------------------------------------------------------------------------------------------
Total assets 1,123,820 1,060,131 6.0
------------------------------------------------------------------------------------------------------------------------------------
Equity attributable to equity holders of the Company 757,243 733,405 3.3
------------------------------------------------------------------------------------------------------------------------------------
Net assets per share attributable to equity holders
of the Company (RMB) 4.14 4.01 3.2
------------------------------------------------------------------------------------------------------------------------------------
THE REPORTING SAME PERIOD OF THE CHANGES OVER THE SAME
ITEMS PERIOD PRECEDING YEAR PERIOD OF THE PRECEDING YEAR (%)
------------------------------------------------------------------------------------------------------------------------------------
Profit attributable to equity holders of the Company 53,615 81,830 (34.5)
Net cash flows from operating activities 81,159 109,838 (26.1)
Basic and diluted earnings per share (RMB) 0.29 0.46 (37.0)
Net cash flows from operating activities per share (RMB) 0.44 0.61 (27.9)
------------------------------------------------------------------------------------------------------------------------------------
2008 INTERIM REPORT 5
2. KEY ACCOUNTING DATA AND FINANCIAL INDICATORS PREPARED UNDER CAS
Unit: RMB Million
------------------------------------------------------------------------------------------------------------------------------------
AS AT THE END OF THE AS AT THE END OF THE CHANGES FROM THE END OF THE
ITEMS REPORTING PERIOD PRECEDING YEAR PRECEDING YEAR (%)
------------------------------------------------------------------------------------------------------------------------------------
Total assets 1,059,396 994,092 6.6
------------------------------------------------------------------------------------------------------------------------------------
Equity attributable to equity holders
of the Company 696,149 677,367 2.8
------------------------------------------------------------------------------------------------------------------------------------
Net assets per share attributable to equity holders
of the Company (RMB) 3.80 3.70 2.7
------------------------------------------------------------------------------------------------------------------------------------
THE REPORTING SAME PERIOD OF THE CHANGES OVER THE SAME PERIOD
ITEMS PERIOD PRECEDING YEAR OF THE PRECEDING YEAR (%)
------------------------------------------------------------------------------------------------------------------------------------
Operating profit 70,725 105,934 (33.2)
Profit before taxation 73,206 106,294 (31.1)
Profit attributable to equity holders of the Company 48,355 75,882 (36.3)
Profit after deducting non-recurring profit/loss items
attributable to equity holders of the Company 46,489 75,843 (38.7)
Basic earnings per share (RMB) 0.26 0.42 (38.1)
Diluted earnings per share (RMB) 0.26 0.42 (38.1)
Fully diluted return on net assets (%) 6.95 12.87 (5.92 percentage points)
Net cash flows from operating activities 84,006 112,177 (25.1)
------------------------------------------------------------------------------------------------------------------------------------
Net cash flows per share from operating activities (RMB) 0.46 0.63 (27.0)
------------------------------------------------------------------------------------------------------------------------------------
3. NON-RECURRING PROFIT/LOSS ITEMS
Unit: RMB Million
------------------------------------------------------------------------------------------------------------------------------------
NON-RECURRING PROFIT/LOSS ITEMS* FOR THE SIX MONTHS ENDED JUNE 30, 2008(PROFIT)/LOSS
------------------------------------------------------------------------------------------------------------------------------------
Loss on disposal of non-current assets 315
Other net non-operating expenses 2,450
Government grants (4,651)
Tax effect of non-recurring profit/loss items 649
Total (1,237)
------------------------------------------------------------------------------------------------------------------------------------
* Including minority interest in non-recurring profit/loss items
4. DIFFERENCES BETWEEN CAS AND IFRS
Unit: RMB Million
------------------------------------------------------------------------------------------------------------------------------------
CAS IFRS
------------------------------------------------------------------------------------------------------------------------------------
Net profit (including minority interest) 55,297 60,854
Equity (including minority interest) 742,745 809,051
Please refer to the supplemental information by the management set out in
the financial statements of the Group prepared under CAS of this interim
Analysis of differences report for details.
------------------------------------------------------------------------------------------------------------------------------------
2008 INTERIM REPORT 6
CHANGES IN SHARE CAPITAL AND
INFORMATION ON SHAREHOLDERS
1. CHANGES IN SHAREHOLDINGS
-------------------------------------------------------------------------------------------------------------------
PRE-MOVEMENT INCREASE/DECREASE (+, -)
-------------------------------------------------------------------------------------------------------------------
CONVERSION
NUMBER OF PERCENTAGE NEW BONUS FROM
SHARES (%) ISSUE ISSUE RESERVES OTHERS* SUB-TOTAL
-------------------------------------------------------------------------------------------------------------------
I Shares with selling
restrictions 158,922,077,818 86.83 - - - -1,000,000,000 -1,000,000,000
-------------------------------------------------------------------------------------------------------------------
1. State-owned shares 157,922,077,818 86.29 - - - - -
-------------------------------------------------------------------------------------------------------------------
2. Shares held by
state-owned companies - - - - - - -
-------------------------------------------------------------------------------------------------------------------
3. Shares held by
other domestic
investors - - - - - - -
-------------------------------------------------------------------------------------------------------------------
of which:
-------------------------------------------------------------------------------------------------------------------
Shares held by
companies other
than state-owned
companies 1,000,000,000 0.54 - - - -1,000,000,000 -1,000,000,000
-------------------------------------------------------------------------------------------------------------------
Shares held by
domestic
natural persons - - - - - - -
-------------------------------------------------------------------------------------------------------------------
4. Shares held
by foreign investors - - - - - - -
-------------------------------------------------------------------------------------------------------------------
II. Shares without
selling restrictions 24,098,900,000 13.17 - - - +1,000,000,000 +1,000,000,000
-------------------------------------------------------------------------------------------------------------------
1. RMB-denominated
ordinary shares 3,000,000,000 1.64 - - - +1,000,000,000 +1,000,000,000
-------------------------------------------------------------------------------------------------------------------
2. Shares traded in
non-RMB currencies
and listed domestically - - - - - - -
-------------------------------------------------------------------------------------------------------------------
3. Shares listed
overseas 21,098,900,000 11.53 - - - - -
-------------------------------------------------------------------------------------------------------------------
4. Others - - - - - - -
-------------------------------------------------------------------------------------------------------------------
III. Total Shares 183,020,977,818 100 - - - - -
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------
POST-MOVEMENT
-------------------------------------------------------
PERCENTAGE
NUMBER OF SHARES (%)
------------------------------------------------------
I Shares with selling
restrictions 157,922,077,818 86.29
------------------------------------------------------
1. State-owned shares 157,922,077,818 86.29
------------------------------------------------------
2. Shares held by
state-owned companies - -
------------------------------------------------------
3. Shares held by
other domestic
investors - -
------------------------------------------------------
of which:
------------------------------------------------------
Shares held by
companies other
than state-owned
companies 0 0
------------------------------------------------------
Shares held by
domestic
natural persons - -
------------------------------------------------------
4. Shares held
by foreign investors - -
------------------------------------------------------
II. Shares without
selling restrictions 25,098,900,000 13.71
------------------------------------------------------
1. RMB-denominated
ordinary shares 4,000,000,000 2.18
------------------------------------------------------
2. Shares traded in
non-RMB currencies
and listed domestically - -
------------------------------------------------------
3. Shares listed
overseas 21,098,900,000 11.53
------------------------------------------------------
4. Others - -
------------------------------------------------------
III. Total Shares 183,020,977,818 100
------------------------------------------------------
* In October 2007, when the Company offered its RMB-denominated ordinary shares
(A shares) to the public for the first time, shares have been placed with
target placees off-line, which have started circulation on the exchange since
5 February 2008.
2008 INTERIM REPORT 7
2. SHAREHOLDINGS OF MAJOR SHAREHOLDERS
The number of shareholders of the Company as at June 30, 2008 was
1,997,949, including 1,992,211 holders of A shares and 5,738 holders of H shares
(including 312 holders of the American Depositary Shares).
(1) SHAREHOLDINGS OF THE TOP TEN SHAREHOLDERS
Unit: Shares
-------------------------------------------------------------------------------------------------------------------------
INCREASE NUMBER OF
/DECREASE SHARES
PERCENTAGE OF DURING THE NUMBER OF SHARES PLEDGED OR
NATURE OF SHAREHOLDING REPORTING WITH SELLING SUBJECT TO
NAME OF SHAREHOLDERS SHAREHOLDERS NUMBER OF SHARES (%) PERIOD (+,-) RESTRICTIONS LOCK-UPS
-------------------------------------------------------------------------------------------------------------------------
China National Petroleum State-owned
Corporation ("CNPC")(1) shares 157,922,077,818 86.29 0 157,922,077,818 0
-------------------------------------------------------------------------------------------------------------------------
HKSCC Nominees Limited(2) H Shares 20,920,665,230 11.43 -17,088,922 0 0
-------------------------------------------------------------------------------------------------------------------------
Industrial and Commercial
Bank of China-Shanghai 50
Index ETF Securities
Investment Fund A Shares 36,457,925 0.0199 +31,694,279 0 0
-------------------------------------------------------------------------------------------------------------------------
China Life Insurance (Group)
Company-Traditional-Ordinary
Insurance Products A Shares 26,000,000 0.0142 -30,797,000 0 0
-------------------------------------------------------------------------------------------------------------------------
China Construction
Bank-Huabao Xingye
Industry Selected Equity
Securities Investment Fund A Shares 23,436,313 0.0128 +23,436,313 0 0
-------------------------------------------------------------------------------------------------------------------------
Bank of China-Shanghai and
Shenzhen 300 Index Jiashi
Securities Investment Fund A Shares 22,537,221 0.0123 +8,501,795 0 0
-------------------------------------------------------------------------------------------------------------------------
Bank of Communications-Yi
Fang Da 50 Index
Securities Investment Fund A Shares 21,831,200 0.0119 +21,831,200 0 0
-------------------------------------------------------------------------------------------------------------------------
China Life Insurance
Company
Limited-Dividends-Personal
Dividends-005L-FH002
Shanghai A Shares 20,519,708 0.0112 -9,718,862 0 0
-------------------------------------------------------------------------------------------------------------------------
International
Finance-Standard
Chartered-CITIGROUP GLOBAL
MARKETS LIMITED A Shares 19,675,640 0.0108 +15,102,155 0 0
-------------------------------------------------------------------------------------------------------------------------
China Life Insurance Company
Limited-Traditional-Ordinary
Insurance Product-005L-CT001
Shanghai A Shares 18,771,597 0.0103 -6,297,403 0 0
-------------------------------------------------------------------------------------------------------------------------
Notes:
1. CNPC is a substantial shareholder within the meaning of the Securities and
Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (the "Securities and
Futures Ordinance") whose interest is recorded in the register of interests
in shares and short positions kept by the Company pursuant to Section 336 of
the Securities and Futures Ordinance.
2. HKSCC Nominees Limited is a subsidiary of the Hong Kong Stock Exchange and
its principal business is to act as nominee on behalf of institutional
shareholders or individual shareholders.
2008 INTERIM REPORT 8
(2) SHAREHOLDINGS OF TOP TEN SHAREHOLDERS OF SHARES WITHOUT SELLING RESTRICTIONS
Unit: Shares
-------------------------------------------------------------------------------------------------------------
NUMBER NAME OF SHAREHOLDERS NUMBER OF SHARES HELD TYPES OF SHARES
-------------------------------------------------------------------------------------------------------------
1 HKSCC Nominees Limited 20,920,665,230 H Shares
-------------------------------------------------------------------------------------------------------------
2 Industrial and Commercial Bank of China-Shanghai 50
Index ETF Securities Investment Fund 36,457,925 A Shares
-------------------------------------------------------------------------------------------------------------
3 China Life Insurance (Group) Company-Traditional-
Ordinary Insurance Products 26,000,000 A Shares
-------------------------------------------------------------------------------------------------------------
4 China Construction Bank-Huabao Xingye Industry
Selected Equity Securities Investment Fund 23,436,313 A Shares
-------------------------------------------------------------------------------------------------------------
5 Bank of China-Shanghai and Shenzhen 300 Index Jiashi
Securities Investment Fund 22,537,221 A Shares
-------------------------------------------------------------------------------------------------------------
6 Bank of Communications-Yi Fang Da 50 Index Securities
Investment Fund 21,831,200 A Shares
-------------------------------------------------------------------------------------------------------------
7 China Life Insurance Company Limited-Dividends-
Personal Dividends-005L-FH002 Shanghai 20,519,708 A Shares
-------------------------------------------------------------------------------------------------------------
8 International Finance-Standard Chartered-CITIGROUP
GLOBAL MARKETS LIMITED 19,675,640 A Shares
-------------------------------------------------------------------------------------------------------------
9 China Life Insurance Company
Limited-Traditional-Ordinary Insurance
Product-005L-CT001 Shanghai 18,771,597 A Shares
-------------------------------------------------------------------------------------------------------------
10 China Life Insurance Company Limited-Dividends-Group
Dividends-005L-FH001 Shanghai 17,000,000 A Shares
-------------------------------------------------------------------------------------------------------------
Statement on the connection or activities acting in concert among the
above-mentioned shareholders:
Except for China Life Insurance (Group) Company-Traditional-Ordinary
Insurance Products, China Life Insurance Company Limited-Dividends-Personal
Dividends-005L-FH002 Shanghai, China Life Insurance Company
Limited-Traditional-Ordinary Insurance Products-005L-CT001 Shanghai and China
Life Insurance Company Limited-Dividends-Group Dividends-005L-FH001 Shanghai,
all of which are under the management of China Life Insurance Asset Management
Co., Ltd, the Company is not aware of any connection among or between the top
ten shareholders and top ten shareholders of shares without selling restrictions
or that they are persons acting in concert as provided for in the Measures for
the Administration of Acquisitions by Listed Companies.
2008 INTERIM REPORT 9
(3) Shareholdings of Substantial Shareholders of H Shares
As at June 30, 2008, according to the register of interests in shares and
short positions kept by the Company pursuant to Section 336 of the Securities
and Futures Ordinance, the persons in the following table and notes have an
interest or short position in the H shares of the Company:
---------------------------------------------------------------------------------------------------------------
PERCENTAGE OF
SUCH SHARES IN
THE SAME CLASS OF PERCENTAGE OF
THE ISSUED SHARE TOTAL SHARE
NAME OF SHAREHOLDER NUMBER OF SHARES CAPACITY CAPITAL (%) CAPITAL (%)
---------------------------------------------------------------------------------------------------------------
Beneficial Owner/Investment
JPMorgan Chase & Co. (Note 1) 1,065,335,981(L) Manager 5.05 0.58
---------------------------------------------------------------------------------------------------------------
317,095,578(S) Beneficial Owner 1.50 0.17
---------------------------------------------------------------------------------------------------------------
408,813,117(P) Approved Lending Agent 1.94 0.22
---------------------------------------------------------------------------------------------------------------
Beneficial Owner/
Investment Manager/
Deutsche Bank Persons having a security
Aktiengesellschaft (Note 2) 1,303,488,060(L) interest in shares 6.18 0.71
---------------------------------------------------------------------------------------------------------------
Beneficial Owner/Investment
Manager/Persons having a
731,451,830(S) security interest in shares 3.47 0.40
---------------------------------------------------------------------------------------------------------------
(L) Long position
(S) Short position
(P) Lending pool
Note 1: JP Morgan Chase & Co., through various subsidiaries, has an interest in
1,065,335,981 H shares of the Company.
Note 2: Deutsche Bank Aktiengesellschaft, through various subsidiaries, has an
interest in 1,303,488,060 H shares of the Company.
As at June 30, 2008, save as disclosed above, no person (other than a
Director, Supervisor or Senior Management of the Company) has an interest or
short position in the H shares of the Company according to the register of
interests in shares and short positions kept by the Company pursuant to Section
336 of the Securities and Futures Ordinance.
3. INFORMATION ON CHANGES OF CONTROLLING SHAREHOLDER AND THE ULTIMATE CONTROLLER
There was no change in the controlling shareholder or the ultimate controller
during the reporting period.
2008 INTERIM REPORT 10
DIRECTORS' REPORT
The Board of the Company is pleased to present the Directors' report.
1. DISCUSSION AND ANALYSIS OF THE OVERALL OPERATIONS DURING THE REPORTING
PERIOD
(1) REVIEW OF RESULTS OF OPERATIONS
In the first half of 2008, despite being faced with changes in the
operating environment in the domestic and international markets, and hit by
historically rare natural disasters such as cold weather, rain and snow storms,
frost and a severe earthquake, the Company planned in a scientific manner and
responded actively, and realised a continuous development in the principal
operations of the Group, stable production and operations, a steady increase in
the output of major products and further enhancement of the sustainability of
the Group. Excluding the impacts resulting from policy factors such as the
special levy on domestic crude oil sales and the macroeconomic controls over the
prices of refined products, the efficacy of the Company's operations remains at
a robust level.
1) Market Review
o Crude Oil Market Review
In the first half of 2008, international crude oil prices remained high and
maintained its upward trend. Crude oil prices continued to soar to historically
high levels, increasing by more than 50% from US$90 per barrel at the beginning
of the year to US$140 per barrel. Factors such as strong demand for crude oil,
weakening of the US dollars, speculative activities, decline in crude oil
inventories, shortage of proved undeveloped reserves and market concerns over an
interruption in supply caused by geopolitical tensions were the main reasons for
crude oil prices reaching new highs in the first half of the year. In the first
half of 2008, the average prices for WTI and Brent crude oil were US$111.0 and
US$108.8 per barrel respectively, representing an increase of 80% and 72% over
the average prices for the same period of last year.
According to the relevant information, crude oil imports continued to
increase in the first half of 2008 by 11.6% to a net total of 88.97 million tons
compared with the same period of last year. Domestic crude oil output and the
amount of crude oil processed reached 94.35 million tons and 159 million tons,
respectively.
o Refined Products Market Review
Domestic demand for refined products was strong in the first half of 2008.
According to the relevant information, the apparent consumption of domestic
refined products increased by 15.1% to 103 million tons in the first half of
2008. Impacted by the skyrocketing international crude oil prices, domestic
refineries incurred heavy losses in processing. Production progressively ceased
at several local refineries and supply in the refined products market became
very tight. On June 20, 2008, the PRC Government adjusted the prices of refined
products in the domestic market, raising the ex-factory prices of gasoline and
diesel by RMB1,000 per ton and the ex-factory prices of aviation fuel by
RMB1,500 per ton. However, under the macroeconomic controls of the PRC
Government, domestic refined product prices were still lower than the prices in
the international market. In the first half of 2008, the average ex-factory
prices of gasoline and diesel in the domestic market were RMB5,536 per ton and
RMB5,126 per ton respectively, being RMB2,612 per ton and RMB3,779 per ton lower
than the Cost, Insurance and Freight (CIF) per ton price as quoted on the
Singapore market, respectively.
2008 INTERIM REPORT 11
o Chemical Products Market Review
In the first half of 2008, affected by the continual high crude oil prices,
the prices of most basic chemical raw materials surged to the highest level in
the past 20 years. As a result, the cost of production of chemical products
increased markedly, resulting in the prices of chemical products being
maintained at a high level. At the same time, in order to guarantee constant
supply in the domestic refined products market, petrochemical production
enterprises lowered the load of polyethylene degradation, as a result of which
output of basic chemical raw materials decreased and supply in the chemical
product market became inadequate. Demand in the chemical product market,
however, remained steady. Based on the above, in the first half of 2008, the
chemical product market was characterised by steady demand, reduction in supply
and soaring prices.
o Natural Gas Market Review
In the first half of 2008, the domestic natural gas market continued to
develop at a rapid pace with strong growth in demand for natural gas. The
external sales of natural gas reached 24.9 billion cubic metres, representing an
increase of 20% compared to the same period of last year. The average sales
price of the Company's natural gas was RMB821.47 per thousand cubic metres,
representing an increase of 21.4% compared to the same period of last year.
2) Business Review
o Exploration and Production
In the first half of 2008, the Group continued to place emphasis on oil and
gas exploration and stepped up efforts for key projects and in key regions. The
Company achieved major breakthroughs through further research, planning,
assessment and exploration and emphasis on the use of new technologies, all in a
comprehensive manner. In particular, significant progress was achieved in the
oil and gas exploration in Longgang in the Sichuan Basin, Baibao and Sulige in
the Erdos Basin and other basins. The Company has built up a solid foundation
for the growth of reserves for 2008. In the development of oil and gas fields,
organisation and co-ordination efforts were enhanced to overcome threats of cold
weather, rain and snow storms, frost, earthquake and other natural disasters.
New ways in the exploration of oil and gas fields were actively adopted. The
Company has initiated works on the secondary recovery of mature oilfields. The
Company has improved overall maintenance of mature oilfields through controlling
the water level and taking measures to slow down the reduction in the
productivity of mature oilfields. The Company has also built up the production
capacity in new fields through active application of technologies such as
horizontal drilling and the application of technologies to thick oil, tertiary
recovery of oil, low infiltration oilfields and oil reserves with particularly
high water content. As a result, the Company has achieved a steady growth in
crude oil output and rapid growth in natural gas output. In the first half of
2008, the lifting cost for oil and gas operations was US$8.75 per barrel,
representing an increase of 23.2% from US$7.10 per barrel in the first half of
2007. Excluding the effect of exchange rate changes, the lifting cost increased
by 12.8% compared to that of the same period of last year.
2008 INTERIM REPORT 12
(photo)
2008 INTERIM REPORT 13
Summary of Operations of the Exploration and Production Segment
------------------------------------------------------------------------------------------------------------------------------------
UNIT FIRST HALF OF 2008 FIRST HALF OF 2007 CHANGE (%)
------------------------------------------------------------------------------------------------------------------------------------
Crude oil output Million barrels 434.5 419.7 3.5
Marketable natural gas output Billion cubic feet 923.0 798.0 15.7
Oil and natural gas equivalent output Million barrels 588.4 552.7 6.5
------------------------------------------------------------------------------------------------------------------------------------
o Refining and Marketing
In the first half of 2008, the Group organised refining processing
meticulously, modified refining arrangements scientifically, pushed forward with
overall optimisation and emphasis on safety and environmental protection in
respect of production. As a result, safe and steady production was achieved.
Faced with ever growing demand in the market, the Group has continued to enhance
the level of retail sales management and the quality of services. Efforts were
made to ensure steady market supply. Development and optimisation of refined
products sales network were promoted actively. Markets offering high return were
explored, and service stations generating a low return or no return were shut
down. These measures further improved the operating efficiency of the Group.
In the first half of this year, the Group's refineries processed 425
million barrels of crude oil, and the Exploration and Production segment
contributed approximately 78.1% of crude oil processed. The Group produced
approximately 36.79 million tons of gasoline, diesel and kerosene and sold
approximately 44.41 million tons of these products. The refining processing
costs of the Group's refineries was RMB145 per ton, which represents a 6.6%
increase compared to RMB136 per ton for the same period of last year.
Summary of Operations of the Refining and Marketing Segment
------------------------------------------------------------------------------------------------------------------------------------
UNIT FIRST HALF OF 2008 FIRST HALF OF 2007 CHANGE (%)
------------------------------------------------------------------------------------------------------------------------------------
Processed crude oil Million barrels 425.2 407.7 4.3
Gasoline, kerosene and diesel output '000 ton 36,787 35,545 3.5
of which: Gasoline '000 ton 11,861 10,670 11.2
Kerosene '000 ton 1,127 986 14.3
Diesel '000 ton 23,799 23,889 (0.4)
Refining yield % 92.7 93.2 (0.5 percentage points)
------------------------------------------------------------------------------------------------------------------------------------
2008 INTERIM REPORT 14
o Chemicals and Marketing
In the first half of 2008, the Group further kept the production in the
Chemical and Marketing segment under control and achieved large scale,
efficient, safe and steady operation. Key technological and economic indicators
improved continuously. Allocation of resources and production mix were further
optimised. The production of chemical products reached 8.16 million tons,
including 1.32 million tons of ethylene.
Summary of Operations of the Chemicals and Marketing Segment
--------------------------------------------------------------------------------------------------------------------
OUTPUT OF KEY CHEMICAL PRODUCTS UNIT FIRST HALF OF 2008 FIRST HALF OF 2007 CHANGE (%)
--------------------------------------------------------------------------------------------------------------------
Ethylene '000 ton 1,319 1,305 1.1
Synthetic resin '000 ton 2,036 1,997 2.0
Synthetic fibre raw materials and polymer '000 ton 878 701 25.2
Synthetic rubber '000 ton 157 158 (0.6)
Urea '000 ton 2,046 1,897 7.9
--------------------------------------------------------------------------------------------------------------------
(photo)
2008 INTERIM REPORT 15
o Natural Gas and Pipeline
The Group continued with the construction of oil and gas pipelines in an
orderly manner. Construction of the Second West-East Gas Pipeline and the
Yongqing-Tangshan-Qinhuangdao Gas Transmission Pipeline commenced. The
Daqing-Qiqihar Gas Transmission Pipeline was completed and commission is
scheduled to take place in August 2008. Acquisition of the Changqing-Ningxia
Yinchuan Gas Transmission Pipeline was completed. Construction of the LNG
projects in Dalian and Jiangsu Province commenced. Construction of the
Lanzhou-Zhengzhou-Changsha Oil Pipeline progressed smoothly, and the main part
will be completed at the end of this year. Despatch priority of natural gas was
centralised to ensure safety in the gas transmission. Natural gas sales business
has leveraged on the advantage of the nationwide gas pipeline network and
achieved an overall balanced development in the production, transportation,
marketing and storage. While the Group has emphasised on the importance of safe
and steady supply of natural gas in key cities and the public utilities sector
and to key customers, the Group has also concurrently made its best endeavours
to ensure safe and steady supply of natural gas during the Beijing Olympic Games
and to the areas that suffered from cold weather and rain and snow storms in the
Southern part of the PRC. The Lanzhou-Chengdu-Chongqing Refined Oil Pipeline of
the Company was regarded as the lifeline during the rescue operations of the
earthquake occurred in Wenchuan, Sichuan Province on May 12, 2008. The Company
has made every effort to ensure normal operation of such pipeline to support the
rescue operations in the earthquake with a view to guarantee the supply of
refined products in Sichuan Province and Chongqing region.
(photo)
2008 INTERIM REPORT 16
(2) MANAGEMENT DISCUSSION AND ANALYSIS
1) The financial data sets out below is extracted from the consolidated
interim condensed financial statements of the Group for the six months ended
June 30, 2008 prepared under IFRS
o Consolidated Operating Results
Turnover Turnover increased 39.9% from RMB392,726 million for the six
months ended June 30, 2007 to RMB549,522 million for the six months ended June
30, 2008. This was primarily due to the increases in the selling prices and the
sales volume of major products including crude oil, natural gas, gasoline and
diesel oil, and the efforts made by the Group in expanding resources and
developing markets by making use of the opportunities presented by persistently
high prices in crude oil and petrochemical products in the international market.
In addition, the increase in the trading of oil and gas products during the
first half of the year also increased the turnover of the Group.
The table below sets out the external sales volume and average realised
prices for major products sold by the Group for the first half of 2007 and 2008
and the percentages of change in the sales volume and average realised prices
during these periods:
--------------------------------------------------------------------------------------------------------------------
SALES VOLUME ('000 TON) AVERAGE REALISED PRICE (RMB/TON)
--------------------------------------------------------------------------------------------------------------------
FIRST HALF FIRST HALF PERCENTAGE OF FIRST HALF FIRST HALF PERCENTAGE OF
OF 2008 OF 2007 CHANGE (%) OF 2008 OF 2007 CHANGE (%)
--------------------------------------------------------------------------------------------------------------------
Crude oil* 8,988 9,642 (6.8) 5,086 3,207 58.6
Natural gas ('000 million cubic
metre, RMB/'000 cubic metre) 248.98 207.54 20.0 821 677 21.4
Gasoline 14,506 13,396 8.3 5,698 5,031 13.3
Diesel 28,599 26,358 8.5 5,299 4,563 16.1
Kerosene 2,614 1,805 44.8 6,134 4,622 32.7
Heavy oil 4,138 4,464 (7.3) 3,529 2,332 51.3
Polyethylene 1,079 1,023 5.5 11,811 10,264 15.1
Lubricant 1,208 1,119 8.0 7,154 6,464 10.7
--------------------------------------------------------------------------------------------------------------------
* The external sales volume of crude oil listed above is crude oil produced by
the Company.
Operating Expenses Operating expenses increased 66.3% from RMB283,596
million for the six months ended June 30, 2007 to RMB471,758 million for the six
months ended June 30, 2008, which consisted of the following:
Purchases, Services and Other Expenses Purchases, services and other
expenses increased 76.4% from RMB166,995 million for the six months ended June
30, 2007 to RMB294,522 million for the six months ended June 30, 2008. This was
primarily due to an increase in the purchase prices and purchase volume of crude
oil, feedstock oil and refined products from external suppliers that resulted in
the increase in the purchase costs. In addition, the increase in the purchase
expenses also resulted from an increase in the level of trading of oil and gas
products in the first half of 2008.
2008 INTERIM REPORT 17
Employee Compensation Costs The salaries and wages paid by the Group for
the first half of 2008 was RMB15,726 million, which rose by 16.7% or increased
by RMB2,254 million. Other employees' costs were increased by RMB5,731 million.
The increase in the employee compensation costs was primarily due to (1) an
increase in the level of salaries as a result of the increase in commodity
prices (according to the relevant information, the Consumer Products Index (CPI)
for the first half of 2008 rose by 7.9%); (2) an increase in the employees'
compensation costs that resulted from the expansion of the scale of operations
and the retail network of the Group; and (3) in accordance with the relevant
policies of the PRC Government, the Group has established a corporate pension
scheme, thus leading to an increase in the employee benefit expenses resulting
from pension contributions.
Exploration Expenses Exploration expenses increased 21.1% from RMB10,607
million for the six months ended June 30, 2007 to RMB12,848 million for the six
months ended June 30, 2008. To further boost crude oil and natural gas
resources, the Group continued to pool resources to conduct more exploration
activities for crude oil and natural gas.
Depreciation, Depletion and Amortisation Depreciation, depletion and
amortisation increased 36.9% from RMB31,228 million for the six months ended
June 30, 2007 to RMB42,754 million for the six months ended June 30, 2008. This
was primarily due to (1) an increase in depreciation, depletion and amortisation
that resulted from an increase in the average amount of property, plant and
equipment and the average net value of oil and gas properties (2) impairment
losses recorded during the first half of 2008.
Selling, General and Administrative Expenses Selling, general and
administrative expenses increased 17.1% from RMB23,901 million for the six
months ended June 30, 2007 to RMB27,993 million for the six months ended June
30, 2008. This was primarily due to an increase in transportation, technological
development and other related costs that resulted from the increased scale of
operations of the Group.
Taxes other than Income Taxes Taxes other than income taxes increased
128.7% from RMB28,784 million for the six months ended June 30, 2007 to
RMB65,831 million for the six months ended June 30, 2008. The increase was
primarily due to a sharp increase of special levy on the sale of domestic crude
oil by the Group due to the high international crude oil prices throughout the
first half of 2008. The special levy borne by the Group increased from RMB14,942
million for the first half of 2007 to RMB47,816 million for the first half of
2008.
Other Income, net Other income, net, increased RMB2,256 million from
RMB345 million for the six months ended June 30, 2007 to RMB2,601 million for
the six months ended June 30, 2008. The increase was primarily due to the
recognition of subsidies for imported crude oil and refined products by the PRC
Government in the amount of RMB4,573 million.
Profit from Operations As a result of an increase in the amount of special
levy and macroeconomic controls over the prices of domestic refined products,
profit from operations decreased 28.7% from RMB109,130 million for the six
months ended June 30, 2007 to RMB77,764 million for the six months ended June
30, 2008.
Net Exchange Loss Net exchange loss increased from RMB342 million for the
six months ended June 30, 2007 to RMB1,028 million for the six months ended June
30, 2008. The increase in the net exchange loss was mainly due to the combined
effect of the appreciation of Renminbi against the US dollars and other
currencies.
Net Interest Expenses Net interest expenses decreased 81.2% from RMB1,231
million for the six months ended June 30, 2007 to RMB231 million for the six
months ended June 30, 2008. The decrease in the net interest expense was mainly
due to the combined effect of a decrease in the interest expenses on current
borrowings and an increase in interest income from an increase in the average
outstanding balance of deposits.
2008 INTERIM REPORT 18
Profit Before Taxation As a result of the factors discussed above, profit
before taxation decreased 26.9% from RMB110,342 million for the six months ended
June 30, 2007 to RMB80,712 million for the six months ended June 30, 2008.
Taxation Taxation decreased 17.3% from RMB24,026 million for the six
months ended June 30, 2007 to RMB19,858 million for the six months ended June
30, 2008. The decrease was primarily due to a reduction in the taxable income of
the Group for the first half of 2008.
Profit for the period As a result of the factors discussed above, profit
of the Group for the period decreased 29.5% from RMB86,316 million for the six
months ended June 30, 2007 to RMB60,854 million for the six months ended June
30, 2008.
Profit attributable to minority interest of the Company As the
international crude oil prices remained high during the first half of 2008,
subsidiaries of the Company including CNPC Exploration and Development Company
Limited recorded increase in the profit before taxation for the first half of
2008 to a great extent. This has resulted in an increase in the minority
interest in the results of the Company. The amount of the minority interest in
the Company increased from RMB4,486 million for the six months ended June 30,
2007 to RMB7,239 million for the six months ended June 30, 2008.
Profit attributable to equity holders of the Company As a result of the
factors discussed above, profit attributable to equity holders of the Company
decreased 34.5% from RMB81,830 million for the six months ended June 30, 2007 to
RMB53,615 million for the six months ended June 30, 2008.
o Segment Information
Exploration and Production
Turnover Turnover increased 54.3% from RMB205,390 million for the six
months ended June 30, 2007 to RMB316,876 million for the six months ended June
30, 2008. The increase was primarily due to an increase in the prices and sales
volume of crude oil and natural gas. The average realised crude oil price of the
Group in the first half of 2008 was US$93.45 per barrel, representing an
increase of 62.0% from US$57.69 per barrel compared with the same period of last
year.
Operating Expenses Operating expenses increased 71.3% from RMB108,954
million for the six months ended June 30, 2007 to RMB186,645 million for the six
months ended June 30, 2008. The increase was primarily due to an increase in
purchase costs of imported crude oil and a sharp increase of special levy on the
sale of domestic crude oil by the Group as international crude oil prices
remained high throughout the first half of 2008.
Profit from Operations As a result of the factors discussed above, profit
from operations increased by 35.0% from RMB96,436 million for the six months
ended June 30, 2007 to RMB130,231 million for the six months ended June 30,
2008. The Exploration and Production segment remains the most important
contributor of profit for the Group.
Refining and Marketing
Turnover Turnover rose 43.5% from RMB314,863 million for the six months
ended June 30, 2007 to RMB451,737 million for the six months ended June 30,
2008. The increase was due to an increase in the prices and sales volume of key
refined products and growth in the trading of oil and gas products. The Refining
and Marketing segment is the main contributor of external sales revenue for the
Group.
2008 INTERIM REPORT 19
(photo)
Operating Expenses Operating expenses increased 64.3% from RMB310,938
million for the six months ended June 30, 2007 to RMB510,752 million for the six
months ended June 30, 2008. The increase was primarily due to the persistently
high international crude oil prices and an increase in the purchase costs of
crude oil, feedstock oil and refined products from external suppliers. In
addition, the increase in operating expenses also resulted from an increase in
the level of trading of oil and gas products in the first half of 2008.
Profit/Loss from Operations The loss from the Refining and Marketing
segment amounted to RMB59,015 million for the six months ended June 30, 2008.
The profit from the Refining and Marketing segment amounted to RMB3,925 million
for the six months ended June 30, 2007. The loss from the Refining and Marketing
segment was primarily due to the macroeconomic controls of the prices of refined
products in the domestic market by the PRC Government. Despite persistently high
crude oil prices, prices of refined products in the domestic market were not in
line with the high crude oil prices and were lower than those of the
international market.
Chemicals and Marketing
Turnover Turnover rose 21.3% from RMB49,860 million for the six months
ended June 30, 2007 to RMB60,463 million for the six months ended June 30, 2008.
The growth in turnover was primarily due to an increase in the selling prices
and sales volume of certain chemical products.
Operating Expenses Operating expenses increased 20.9% from RMB44,462
million for the six months ended June 30, 2007 to RMB53,749 million for the six
months ended June 30, 2008. The increase was primarily due to an increase in the
prices of key chemical raw materials.
2008 INTERIM REPORT 20
Profit from Operations As a result of the factors discussed above, profit
from operations of the Marketing and Chemicals segment increased by 24.4% from
RMB5,398 million for the six months ended June 30, 2007 to RMB6,714 million for
the six months ended June 30, 2008. Benefiting from the advantages created by
the better integration of production and marketing of chemical products, the
production volumes of high value-added and special products were greatly
increased, and operating efficiency and profitability continued to improve in
the Chemicals and Marketing segment.
Natural Gas and Pipeline
Turnover Turnover increased 33.1% from RMB23,216 million for the six
months ended June 30, 2007 to RMB30,902 million for the six months ended June
30, 2008. The increase was primarily due to an increase in the selling prices of
natural gas, and an increase in the sales volume and volume of natural gas from
pipeline transmission.
Operating Expenses Operating expenses increased 31.7% from RMB17,088
million for the six months ended June 30, 2007 to RMB22,506 million for the six
months ended June 30, 2008. The increase was primarily due to an increase in the
purchase costs of natural gas.
Profit from Operations As a result of the factors discussed above, profit
from operations of the Natural Gas and Pipeline segment increased by 37.0% from
RMB6,128 million for the six months ended June 30, 2007 to RMB8,396 million for
the six months ended June 30, 2008. The natural gas and pipeline business grew
rapidly and its contribution to the profit of the Group continued to increase.
o Cash Flows
As at June 30, 2008, the primary sources of funds of the Group are cash
generated from operating activities and short-term and long-term borrowings. The
funds of the Group are mainly used for operating activities, capital
expenditures, repayment of short-term and long-term borrowings and distribution
of dividends to equity holders of the Company.
The table below sets forth the cash flows of the Group for the six months
ended June 30, 2008 and June 30, 2007 respectively and the amount of cash and
cash equivalents as at the end of each period:
-------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30,
-----------------------------------------------------
2008 2007
---------------------------- -----------------------
RMB MILLION RMB MILLION
---------------------------- -----------------------
Net cash flows generated from operating activities 81,159 109,838
Net cash flows used for investing activities (67,339) (56,836)
Net cash flows used for financing activities (20,523) (30,192)
Currency translation differences 49 402
Cash and cash equivalents as at the end of year 58,840 71,771
-------------------------------------------------------------------------------------------------------------
2008 INTERIM REPORT 21
Net Cash Flows Generated From Operating Activities
The net cash flows of the Group generated from operating activities for the
six months ended June 30, 2008 were RMB81,159 million, representing a decrease
of 26.1% compared with RMB109,838 million generated for the six months ended
June 30, 2007. The decrease was mainly due to a reduction in the net profit in
the first half of the year. As at June 30, 2008, the Group had cash and cash
equivalents of RMB58,840 million. The cash and cash equivalents were mainly
denominated in Renminbi (approximately 88.5% were denominated in Renminbi,
approximately 11.0% were denominated in United States Dollars and approximately
0.5% were denominated in other currencies).
Net Cash Flows Used for Investing Activities
The net cash flows of the Group used for investing activities for the six
months ended June 30, 2008 were RMB67,339 million, representing an increase of
18.5% compared with RMB56,836 million used for the six months ended June 30,
2007. The increase in cash flows used for investing activities was primarily due
to an increase in capital expenditures during the first half of the year.
Net Cash Flows Used for Financing Activities
The net cash flows of the Group used for financing activities for the six
months ended June 30, 2008 were RMB20,523 million, representing a decrease of
32.0% compared with RMB30,192 million used for the six months ended June 30,
2007. The decrease was primarily due to an increase in the amount of net
borrowings and capital contributions by minority shareholders during the first
half of the year.
The net borrowings of the Group as at June 30, 2008 and December 31, 2007,
respectively, are as follows:
-------------------------------------------------------------------------------------------------------------
AS AT JUNE 30, 2008 AS AT DECEMBER 31, 2007
------------------------------ -----------------------------
RMB MILLION RMB MILLION
-------------------------------------------------------------------------------------------------------------
Short-term borrowings (including current
portion of long-term borrowings) 39,257 30,934
Long-term borrowings 35,287 39,688
------------------------------ -----------------------------
Total borrowings 74,544 70,622
============================== =============================
Less: Cash and cash equivalents (58,840) (65,494)
------------------------------ -----------------------------
Net borrowings 15,704 5,128
------------------------------ -----------------------------
-------------------------------------------------------------------------------------------------------------
Maturities of long-term borrowings (including borrowings maturing within one
year) of the Group are as follows:
-------------------------------------------------------------------------------------------------------------
AS AT JUNE 30, 2008 AS AT DECEMBER 31, 2007
------------------------------- -----------------------------
RMB MILLION RMB MILLION
-------------------------------------------------------------------------------------------------------------
To be repaid within one year 13,440 12,200
To be repaid within one to two years 13,419 5,754
To be repaid within two to five years 7,912 19,898
To be repaid after five years 13,956 14,036
------------------------------- -----------------------------
48,727 51,888
------------------------------- -----------------------------
-------------------------------------------------------------------------------------------------------------
2008 INTERIM REPORT 22
Of the total borrowings of the Group as at June 30, 2008, approximately
15.3% were fixed-rate loans and approximately 84.7% were floating-rate loans. Of
the borrowings as at June 30, 2008, approximately 63.4% were denominated in
Renminbi, approximately 33.7% were denominated in United States Dollars,
approximately 2.5% were denominated in Hong Kong dollars, approximately 0.3%
were denominated in Euro and approximately 0.1% were denominated in Japanese
Yen.
As at June 30, 2008, the gearing ratio of the Group (gearing ratio =
interest-bearing debts/(interest-bearing debts + total equity)) was 8.4% (As at
December 31, 2007: 8.3%).
o Capital Expenditures
The following table sets out the capital expenditures for the various
segments of the Group for the six months ended June 30, 2008 and for the six
months ended June 30, 2007 and the estimated capital expenditures for the
various segments of the Group for the whole year of 2008. For the first half of
2008, capital expenditures of the Group increased 40.5% from RMB51,021 million
for the six months ended June 30, 2007 to RMB71,693 million for the six months
ended June 30, 2008. The increase in capital expenditures was primarily due to
an increase in expenditures relating to crude oil and natural gas exploration
and development, and construction of natural gas pipelines by the Group. In
addition, increase in commodity prices also contributed to an increase in
capital investment.
----------------------------------------------------------------------------------------------------------------
FOR THE FIRST HALF OF 2008 FOR THE FIRST HALF OF 2007 ESTIMATES FOR 2008
-------------------------- -------------------------- --------------------------
RMB MILLION (%) RMB MILLION (%) RMB MILLION (%)
----------------------------------------------------------------------------------------------------------------
Exploration and Production 47,053* 65.6 42,196* 82.7 132,300* 63.6
Refining and Marketing 6,527 9.1 4,841 9.5 23,000 11.1
Chemicals and Marketing 4,307 6.0 1,163 2.3 13,200 6.4
Natural Gas and Pipeline 12,845 17.9 2,471 4.8 37,700 18.1
Other 961 1.4 350 0.7 1,700 0.8
------------- ----------- ------------- ----------- ------------- -----------
Total 71,693 100.0 51,021 100.0 207,900 100.0
============= =========== ============= =========== ============= ===========
----------------------------------------------------------------------------------------------------------------
* If investments related to geological and geophysical exploration costs were
included, the capital expenditures and investments for the Exploration and
Production segment for the first half of 2007 and the first half of 2008, and
the estimates for the same in 2008 would be RMB46,680 million, RMB53,267
million and RMB143,200 million, respectively.
Exploration and Production
The majority of the Group's capital expenditures were related to the
Exploration and Production segment. For the six months ended June 30, 2008,
capital expenditures in relation to the Exploration and Production segment
amounted to RMB47,053 million, including RMB7,684 million for oil and gas
exploration activities and RMB36,355 million for oil and gas development
activities. The capital expenditure for the six months ended June 30, 2008 was
mainly used in large oil and gas exploration projects such as in the large oil
and gas fields located in Changqing, Daqing and Southwestern oil and gas fields
and in the construction of key production facilities at those key oil and gas
exploration projects.
2008 INTERIM REPORT 23
(photo)
The Group anticipates that capital expenditures for the Exploration and
Production segment for the twelve months ending December 31, 2008 will amount to
RMB132,300 million. Approximately RMB24,200 million will be used for oil and gas
exploration, and RMB90,500 million will be used for oil and gas development.
Exploration will mainly emphasise on the overall development of regions in
Longgang in the Sichuan Basin, the west of Sulige in the Erdos Basin and the
Dagang Qikou depression in the Bohai Basin and other regions. Development
activities will be emphasised on the construction of new proved oil and gas
fields, while secondary recovery of and steady production of mature oilfields
will also be emphasised.
Refining and Marketing
Capital expenditures for the Group's Refining and Marketing segment for the
six months ended June 30, 2008 amounted to RMB6,527 million, including RMB5,210
million for the reconstruction of refining facilities. The capital expenditure
for the six months ended June 30, 2008 was mainly used in the construction of
large scale refining facilities with capacity over ten million tons such as the
Dushanzi Petrochemical and Guangxi Petrochemical projects.
2008 INTERIM REPORT 24
The Group anticipates that capital expenditures for the Refining and
Marketing segment for the twelve months ending December 31, 2008 will amount to
RMB23,000 million, of which approximately RMB16,100 million will be used for the
construction and expansion of refining facilities, and approximately RMB6,900
million will be used for investments in the establishment of the sales network
and storage infrastructure facilities for oil products.
Chemicals and Marketing
Capital expenditures for the Chemicals and Marketing segment for the six
months ended June 30, 2008 amounted to RMB4,307 million, which were used mainly
for the construction of petrochemical facilities for large scale ethylene
projects with capacity over million tons such as the Dushanzi Petrochemical and
the Fushun Petrochemical projects and the expansion of key construction projects
such as the redevelopment and expansion of ethylene in the Daqing Petrochemical
project.
The Group anticipates that capital expenditures for the Chemicals and
Marketing segment for the twelve months ending December 31, 2008 will amount to
RMB13,200 million, which are expected to be used primarily for the construction
and expansion of petrochemical facilities including large scale ethylene
projects such as the Dushanzi Petrochemical, the Daqing Petrochemical, the
Fushun Petrochemical and the Sichuan Petrochemical projects.
Natural Gas and Pipeline
Capital expenditures for the Natural Gas and Pipeline segment for the six
months ended June 30, 2008 amounted to RMB12,845 million. The Group incurred
RMB11,726 million of these expenditures on the construction of long distance
pipelines. The capital expenditure for the six months ended June 30, 2008 was
mainly used in the construction of the Second West-East Gas Pipeline project,
the Lanzhou-Zhengzhou-Changsha Oil Pipeline and other gas pipeline projects.
The Group anticipates that capital expenditures for the Natural Gas and
Pipeline segment for the twelve months ending December 31, 2008 will amount to
RMB37,700 million, which are expected to be used primarily for the construction
of key oil and gas transmission pipelines such as the Lanzhou-Zhengzhou-Changsha
Oil Pipeline and the Second West-East Gas Pipeline and associated storage
facilities and LNG projects.
Others
Capital expenditures for Other segment for the six months ended June 30,
2008 were RMB961 million.
The Group anticipates that capital expenditures for Other segment for the
twelve months ending December 31, 2008 will amount to approximately RMB1,700
million, which are expected to be used primarily for scientific research and
development activities and the establishment of information systems.
2008 INTERIM REPORT 25
2) The financial data set out below is extracted from and computed based on
the audited financial statements of the Group prepared under CAS
* Principal operations by segment under CAS
--------------------------------------------------------------------------------------------------------------------------
CHANGE IN
CHANGE IN COST OF
INCOME FROM PRINCIPAL
PRINCIPAL OPERATIONS
OPERATIONS COMPARED
INCOME FROM COST OF COMPARED WITH THE
PRINCIPAL PRINCIPAL WITH THE SAME SAME PERIOD
OPERATIONS FOR OPERATIONS PERIOD OF THE OF THE INCREASE OR
THE FIRST HALF OF FOR THE FIRST GROSS PRECEDING PRECEDING DECREASE IN
2008 HALF OF 2008 MARGIN* YEAR YEAR MARGIN
---------------------------------------------------------------------------------------------
(PERCENTAGE
RMB MILLION RMB MILLION (%) (%) (%) POINTS)
--------------------------------------------------------------------------------------------------------------------------
Exploration and production 308,180 116,385 45.1 52.5 42.2 (5.4)
Refining and marketing 446,994 471,905 (7.4) 43.5 69.6 (15.7)
Chemicals and marketing 59,118 48,148 18.3 21.3 20.9 0.5
Natural gas and pipeline 30,580 21,449 28.4 33.2 31.9 0.8
Other 345 65 - - - -
Inter-segment elimination (311,190) (310,600) - - - -
Total 534,027 347,352 23.5 38.9 61.1 (13.8)
--------------------------------------------------------------------------------------------------------------------------
* Gross margin=Profit from principal operations /Income from principal
operations
During the reporting period, the total amount of connected transactions
between the Group and CNPC and its subsidiaries in respect of sales of products
and provision of services amounted to RMB20,946 million.
* Principal operations by regions under CAS
------------------------------------------------------------------------------------------------------------
FIRST HALF OF 2008 FIRST HALF OF 2007 CHANGE COMPARED WITH THE SAME PERIOD
OF THE PRECEDING YEAR
-----------------------------------------------------------------------------------------
OPERATING INCOME RMB MILLION RMB MILLION (%)
------------------------------------------------------------------------------------------------------------
PRC 519,845 380,444 36.6
Other 29,677 12,282 141.6
Total 549,522 392,726 39.9
------------------------------------------------------------------------------------------------------------
2008 INTERIM REPORT 26
(3) BUSINESS PROSPECT IN THE SECOND HALF OF 2008
During the second half of 2008, the Group will continue to adhere to the
policy of "stability, balance, efficiency, control and co-ordination" in the
conduct of its operations. The Group will organise production and operation in a
scientific manner, enhance technological improvements actively, continually
strengthen corporate management and promote sustained, effective and rapid
development of the Company.
In respect of exploration and production, the Group will continue to place
top priority on resources exploration and maintain a leading position in its
upstream business in China. The Group will stress the parallel development of
oil and gas exploration and implement projects to meet the demands during the
period of peak growth of reserves. The Group will endeavour to discover sizeable
and high quality reserves. The Group will ensure steady output in mature
oilfields on the one hand, and push forward with recovery of mature oilfields at
a steady pace and overall development of new oilfields effectively on the other
hand. The Group will aim to maintain steady growth in domestic crude oil output
at 100 million tons. The Group will view natural gas construction as strategic
and growth-oriented operation. The Group will place great emphasis on key gas
regions, increase production capacity at a quicker pace in order to meet the
rapid growth of natural gas output.
In respect of refining and petrochemicals, the Group will speed up the
modification of the strategic structure of its refinery and petrochemical
business to expedite and facilitate the construction of world-class scale
refinery and petrochemical bases and develop the refining and petrochemicals
business efficiently. The Group will strive to improve the product quality and
modify the structure of refined products with a view to continually increase its
competitiveness.
In respect of the sale of refined products, the Group will place greater
emphasis in building up a modernised sales and distribution system to further
improve the refined products sales and distribution network. Efforts will be
made to explore profitable markets. The Group will speed up the construction of
the storage facilities for retail use and commercial use, thereby creating a
regional hub for storage for retail use and a sales and distribution network at
provincial, regional and municipal levels. Increasing efforts will be made to
achieve overall balance in resources allocation, optimisation and utilisation of
resources in order to ensure supply of refined products in the domestic market
and realise maximum returns on the refined products.
In respect of natural gas and pipeline, sales of natural gas are expected
to maintain its rapid growth. The Group will continue to speed up the domestic
trunk pipeline network and improve storage and transportation facilities. A
nationwide pipeline network and supply system characterised by flexible despatch
priority and stable supply will be established. Upon completion of the
construction of a number of key pipelines, the capability of the Company to
ensure oil and gas supply will be enhanced, and the foundation for the business
development of the Company will become more solid.
In respect of international operations, the Group will continue to speed up
development and endeavour to enlarge business scale. The Group will continue to
leverage on the existing resources with a view to ensure steady production in
the developed oilfields, and at the same time, expedite the development of new
projects in an attempt to increase reserves and production from new oil fields.
The Group aims to boost its international operations, increase its international
trading and improve the standard of its operations so as to meet the
international standards.
2008 INTERIM REPORT 27
2. UTILISATION OF PROCEEDS FROM FUND RAISING
------------------------------------------------------------------------------------------------------------------------------------
In October 2007, the Company TOTAL AMOUNT OF
issued 4 billion A shares. The PROCEEDS USED
TOTAL AMOUNT OF total proceeds and net proceeds DURING THE RMB4,742 million
PROCEEDS from such issuance were REPORTING PERIOD
RMB66,800 million and -----------------------------------------------------------------------
RMB66,243 million respectively. ACCUMULATED AMOUNT
OF PROCEEDS USED RMB47,159 million
------------------------------------------------------------------------------------------------------------------------------------
PROPOSED
COMMITTED PROJECT INVESTMENT MODIFICATION ACTUAL REALISED RETURN PROGRESS AS ESTIMATED
(RMB OF THE PROJECT INVESTMENT ON INVESTMENT PLANNED RETURN ON
MILLION) (RMB MILLION) INVESTMENT
------------------------------------------------------------------------------------------------------------------------------------
Project to increase the To be confirmed To be confirmed
crude oil production 4,342 only upon Yes only upon
capacity of Changqing 6,840 No commissioning commissioning
Oilfield
------------------------------------------------------------------------------------------------------------------------------------
Project to increase the To be confirmed To be confirmed
crude oil production 5,930 No 2,235 only upon Yes only upon
capacity of Daqing commissioning commissioning
Oilfield
------------------------------------------------------------------------------------------------------------------------------------
Project to increase the To be confirmed To be confirmed
crude oil production 1,500 No 495 only upon Yes only upon
capacity of Jidong commissioning commissioning
Oilfield
------------------------------------------------------------------------------------------------------------------------------------
Dushanzi Petrochemical's
projects - processing
and refining sulphur- To be confirmed To be confirmed
bearing crude oil 17,500 No 11,416 only upon Yes only upon
imported from Kazakhstan commissioning commissioning
and ethylene technology
development projects
------------------------------------------------------------------------------------------------------------------------------------
Daqing Petrochemical
1.2 million tons/year To be confirmed Yes To be confirmed
ethylene redevelopment 6,000 No 197 only upon only upon
and expansion project commissioning commissioning
------------------------------------------------------------------------------------------------------------------------------------
Total 37,770 18,685 - -
------------------------------------------------------------------------------------------------------------------------------------
Projects not progressing
as planned and not -
achieving estimated
return
------------------------------------------------------------------------------------------------------------------------------------
Projects modified and
modification procedures -
------------------------------------------------------------------------------------------------------------------------------------
Application and status The unutilised portion of the net proceeds from the A share issuance has been deposited into the
of unused proceeds designated bank accounts maintained by the Company.
------------------------------------------------------------------------------------------------------------------------------------
2008 INTERIM REPORT 28
PROJECTS NOT FUNDED BY PROCEEDS FROM FUND RAISING
Unit: RMB Million
-------------------------------------------------------------------------------------------------------------
TOTAL PROJECT
NAME OF PROJECT AMOUNT PROGRESS OF PROJECT PROJECT RETURN
-------------------------------------------------------------------------------------------------------------
Dalian Petrochemical technological
development project - processing 20 10,789 Commissioning commenced in To be confirmed only
million tons of imported early August 2008. upon commissioning
sulphur-bearing crude oil per year
-------------------------------------------------------------------------------------------------------------
Guangxi Petrochemical project Installation of preliminary
refining 10 million tons of crude 15,166 parts has been completed and To be confirmed only
oil per year construction has commenced. upon commissioning
-------------------------------------------------------------------------------------------------------------
Sichuan Petrochemical project with Preliminary work of the project
an ethylene output of 0.8 million 21,019 has been completed and ordering To be confirmed only
tons per year of equipment has commenced. upon commissioning
-------------------------------------------------------------------------------------------------------------
Fushun Petrochemical one million Preliminary work of the project
tons per year ethylene technology 12,524 has been completed and ordering To be confirmed only
development project of equipment has commenced. upon commissioning
-------------------------------------------------------------------------------------------------------------
Installation of preliminary
Lanzhou-Zhengzhou-Changsha Refined 11,429 parts has been completed and To be confirmed only
Oil Pipeline construction has commenced. upon commissioning
-------------------------------------------------------------------------------------------------------------
Total 70,927 -
-------------------------------------------------------------------------------------------------------------
By order of the Board
PetroChina Company Limited
Jiang Jiemin
Chairman
Beijing, PRC
August 27, 2008
2008 INTERIM REPORT 29
SIGNIFICANT EVENTS
1. GOVERNANCE OF THE COMPANY
During the reporting period, the Company has been operating in accordance
with domestic and overseas regulatory requirements and continuously enhanced the
level of its corporate governance. The members of the fourth session of the
Board and the Supervisory Committee were elected and members of the senior
management have been appointed. The Company has further amended the Articles of
Association of the Company (the "Articles of Association"); adopted the Rules
and Procedures of the Shareholders' General Meeting of the Company, the Rules
and Procedures of the Board of the Company and Regulations on the Information
Disclosure of the Company; revised the Rules of Organisation and Procedures of
the Supervisory Committee and related rules and regulations. Through the
co-ordination and checks and balances between the Shareholders' General Meeting,
the Board and the respective specialised committees, the Supervisory Committee
and the management led by the President of the Company together with the
effective operations of the internal control systems, the internal management
operations of the Company have been standardised and the level of its corporate
governance has been further enhanced.
2. COMPLIANCE WITH CODE ON CORPORATE GOVERNANCE PRACTICES
The Company has complied with the code provisions under the Code on
Corporate Governance Practices set out in Appendix 14 to the Rules Government
the Listing of Securities on the Hong Kong Stock Exchange (the "Hong Kong
Listing Rules") applicable during the six months ended June 30, 2008, except
that from May 20, 2007 to May 16, 2008, the roles of the Chairman and the
President of the Company were concurrently held by Mr Jiang Jiemin. On May 16,
2008, the First Meeting of the Fourth Session of the Board was convened at which
Mr Jiang Jiemin resigned as the President of the Company and Mr Zhou Jiping was
appointed as the President of the Company with immediate effect. Thereafter, the
roles of the Chairman and the President of the Company are held by separate
individuals and thereby the Company complies with the relevant requirement under
the Code on Corporate Governance Practices.
3. AMENDMENT TO ARTICLES OF ASSOCIATION
On May 15, 2008, the Company convened the annual general meeting of the
Company for 2007 approving the proposed amendments to the Articles of
Association. Details of the amendments have been set out in the circular to the
shareholders of H shares dated March 28, 2008 and the meeting materials in
respect of the annual general meeting of the Company published on the website of
the Shanghai Stock Exchange (www.sse.com.cn) on May 9, 2008.
2008 INTERIM REPORT 30
4. DECLARATION OF FINAL DIVIDENDS FOR THE YEAR ENDED DECEMBER 31, 2007 AND
INTERIM DIVIDENDS FOR THE SIX MONTHS ENDED JUNE 30, 2008 AND CLOSURE OF REGISTER
OF MEMBERS
(1) DECLARATION OF FINAL DIVIDENDS FOR THE YEAR ENDED DECEMBER 31, 2007
Final dividends attributable to equity holders of the Company in respect of
2007 of RMB0.156859 per share (inclusive of tax) amounting to a total of
RMB28,708 million were approved by the shareholders at the annual general
meeting of the Company on May 15, 2008 and accounted for in equity as an
appropriation of retained earnings in the six months ended June 30, 2008, and
were paid on June 13, 2008.
(2) INTERIM DIVIDENDS FOR THE SIX MONTHS ENDED JUNE 30, 2008 AND CLOSURE OF
REGISTER OF MEMBERS
The Board was authorised by the shareholders to approve the distribution of
an interim dividend for 2008 at the shareholders meeting held on May 15, 2008.
The Board has resolved to pay an interim dividend of RMB0.131827 per share
(inclusive of tax) for the six months ended June 30, 2008 on the basis of 45% of
the profit attributable to equity holders of the Company for the period. The
interim dividend will be paid to equity holders whose names appear on the
register of members of the Company at the close of business on September 18,
2008. The register of members of H shares will be closed from September 11, 2008
to September 18, 2008 (both days inclusive) during which period no transfer of H
shares will be registered. In order to qualify for the interim dividends,
holders of H shares must lodge all transfer documents together with the relevant
share certificates at Hong Kong Registrars Limited no later than 4:30 p.m. on
September 10, 2008. Equity holders of A shares whose names appear on the
register of members of the Company maintained at China Securities Depository and
Clearing Corporation Limited Shanghai Branch Company at the close of trading on
the Shanghai Stock Exchange in the afternoon of September 18, 2008 will be
eligible for the interim dividends.
In accordance with the relevant provisions of the Company's Articles of
Association, dividends payable to the Company's equity holders shall be declared
in Renminbi. Dividends payable to the holders of A shares shall be paid in
Renminbi while dividends payable to the holders of H shares shall be paid in
Hong Kong Dollars. The amount of Hong Kong Dollars payable shall be calculated
at the rate of HK$1.00 equals to RMB0.87685 which was the average of the closing
exchange rate for Renminbi to Hong Kong Dollar as announced by the People's Bank
of China for the week prior to the declaration of the dividends by the Board of
Directors on August 27, 2008. Accordingly, the dividends payable for each H
share of the Company will be HK$0.150342 (inclusive of tax).
5. IMPLEMENTATION OF STOCK OPTION PLANS DURING THE REPORTING PERIOD
The Company has adopted a share-based compensation scheme which is a share
appreciation right arrangement payable in cash to the recipients upon exercise
of the rights which became effective upon the listing of the H shares of the
Company on April 7, 2000. Directors, Supervisors and senior executives of the
Company are eligible for the scheme and the rights granted thereunder can be
exercised from April 8, 2003 to April 7, 2008. The exercise price is the price
of the H share as at the initial public offering, being HK$1.28 per share. As at
April 7, 2008 (being the expiry date of the exercise of the share appreciation
rights), none of the holders of the share appreciation rights exercised their
rights. The Company therefore derecognised the liability previously accrued of
RMB1,400 million in the financial statements of the Group for the six months
ended June 30, 2008.
2008 INTERIM REPORT 31
6. MATERIAL LITIGATION AND ARBITRATION EVENTS
The Company was not involved in any material litigation or arbitration
during the reporting period.
7. EXTERNAL INVESTMENTS
(1) During the reporting period, no disclosure is required to be made in
respect of the shareholding of the Company in other listed companies.
(2) During the reporting period, no disclosure is required to be made in
respect of the shareholding of the Company in commercial banks, securities
companies, insurance companies, trust companies, future companies and other
financial corporations.
8. ACQUISITION, SALE OF ASSETS AND RESTRUCTURING OF ASSETS
----------------------------------------------------------------------------------------------------------------------------
NET PROFIT NET PROFIT
CONTRIBUTED TO THE CONTRIBUTED TO THE WHETHER
COUNTERPARTY GROUP SINCE THE GROUP FROM THE WHETHER OWNERSHIP OF
AND ASSETS DATE OF ACQUISITION DATE OF THE BEGINNING OF THE CONSTITUTE THE RELEVANT
ACQUIRED ACQUISITION PRICE ACQUISITION TO THE YEAR TO THE END OF CONNECTED ASSETS HAS BEEN
END OF THE THE REPORTING TRANSACTION FULLY
REPORTING PERIOD PERIOD TRANSFERRED
----------------------------------------------------------------------------------------------------------------------------
Acquisition from
CNPC of the
assets and
operations of June 10, 2008 RMB1,004 Not applicable Not applicable Yes, based on No
the refined million valuation
products
marketing
operations and
assets
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
WHETHER
CONTRACTUAL
RIGHTS AND
OBLIGATIONS
HAVE BEEN FULLY
TRANSFERRED
----------------------------------------------------------------------------------------------------------------------------
Acquisition from
CNPC of the
assets and
operations of No
the refined
products
marketing
operations and
assets
----------------------------------------------------------------------------------------------------------------------------
2008 INTERIM REPORT 32
The above transaction did not have any impact on the continuity of the
Group's operation and management and is advantageous to the future financial
position and operating results of the Group. Details of the transaction were
published on the websites of the Hong Kong Stock Exchange and the Shanghai Stock
Exchange on June 10, 2008.
9. PROPOSAL TO ISSUE DOMESTIC CORPORATE BONDS
In order to satisfy the operations needs of the Company, on June 10, 2008,
the Board resolved to issue domestic corporate bonds with an aggregate principal
amount of not more than RMB60 billion in one or more tranches. The proposal was
approved at the extraordinary general meeting of the Company held on July 31,
2008.
10. MATERIAL CONNECTED TRANSACTIONS
(1) ONE-OFF CONNECTED TRANSACTIONS
1) Acquisition of the inspection and maintenance services in relation to
the refining and chemical operations in Northeast China
On April 28, 2008, the Company entered into an acquisition agreement with
CNPC pursuant to which the Company has agreed to acquire the assets relating to
the inspection and maintenance services in relation to the refining and chemical
operations of six entities in Northeast China. Upon completion of the
acquisition agreement, the Company will pay consideration in the sum of
RMB43,832,200 to CNPC, representing the value of the net assets of the Northeast
China inspection and maintenance operations as at September 30, 2007. The
parties will adjust the consideration by reference to the net assets generated
by the Northeast China inspection and maintenance operations for the period from
October 1, 2007 to April 30, 2008 as shown in the management accounts. CNPC is
the controlling shareholder of the Company. Pursuant to the Hong Kong Listing
Rules and the Listing Rules of the Shanghai Listing Rules (the "Shanghai Listing
Rules"), CNPC is a connected person of the Company and the acquisition
constitutes a connected transaction of the Company. Details of the transaction
were published on the websites of the Hong Kong Stock Exchange and the Shanghai
Stock Exchange on April 28, 2008.
2) Acquisition of the refined products sales assets and business
On June 10, 2008, the Company entered into an acquisition agreement with
CNPC pursuant to which the Company has agreed to acquire the refined products
sales assets and business from CNPC. Upon completion of the acquisition
agreement, the Company will pay consideration in the sum of RMB1,004,530,000 to
CNPC, representing the value of the net assets of the refined products sales
assets and business as at the valuation date of those asset and business. The
parties will adjust the consideration by reference to the net assets generated
by the refined products sales assets and business for the period from the
valuation date to the completion date as shown in the management accounts. CNPC
is the controlling shareholder of the Company. Pursuant to the Hong Kong Listing
Rules and Shanghai Listing Rules, CNPC is a connected person of the Company and
the acquisition constitutes a connected transaction of the Company. Details of
the transaction were published on the websites of the Hong Kong Stock Exchange
and the Shanghai Stock Exchange on June 10, 2008.
2008 INTERIM REPORT 33
(2) CONTINUING CONNECTED TRANSACTION
Pursuant to the provision of the Hong Kong Listing Rules and Shanghai
Listing Rules, as at the end of the reporting period, CNPC is directly
interested in approximately 86.29% of the total issued share capital of the
Company, transactions between the Group and CNPC constitute connected
transactions of the Company. The Group and CNPC continue to carry out certain
existing continuing connected transactions. The Company sought independent
shareholders' approval at the general meeting held on November 8, 2005 for a
renewal of the existing continuing connected transactions and the new continuing
connected transactions and proposed the new caps for existing continuing
connected transactions and the new continuing connected transactions for January
1, 2006 to December 31, 2008. The Company further sought independent
shareholders' approval at the general meeting held on November 1, 2006 for a
renewal of the caps for the existing continuing connected transactions for
January 1, 2006 to December 31, 2008 which were previously approved by
shareholders at the general meeting held on November 8, 2005.
The Group and CNPC will continue to carry out the existing continuing
connected transactions referred to in the following agreements:
1) Comprehensive Products and Services Agreement, First Supplemental
Comprehensive Agreement and Second Supplemental Comprehensive Agreement
2) Land Use Rights Leasing Contract
3) Buildings Leasing Contract and Buildings Supplementary Leasing Agreement
4) Intellectual Property Licensing Contracts
5) Contract for the Transfer of Rights under Production Sharing Contracts
6) Guarantee of Debts Contract
Details of the above agreements were set out in the section headed
"Connected Transactions" of the 2007 annual report of the Company published on
March 20, 2008.
(3) PERFORMANCE OF THE CONTINUING CONNECTED TRANSACTION DURING THE
REPORTING PERIOD
During the reporting period, in accordance with the CAS, the transaction
amounts of the connected transactions incurred between the Group and its
connected parties were RMB111,916 million, of which the transaction amounts
resulting from the sales of goods and provision of services by the Group to its
connected parties amounted to RMB25,472 million, representing 4.64% of the total
revenue of the Group, and the transaction amounts resulting from the purchase of
goods and provision of services from the connected parties to the Group amounted
to RMB86,444 million, representing 18.62% of the operating costs of the Group.
The amounts provided by the Group to connected parties (associate companies)
amounted to RMB366 million and the balance of the amounts provided by the
connected parties to the Group amounted to RMB25,131 million.
(4) DETAILS OF THE CONNECTED TRANSACTIONS DURING THE REPORTING PERIOD HAVE
BEEN SET OUT IN NOTE 9 TO THE FINANCIAL STATEMENTS OF THE GROUP PREPARED UNDER
CAS AND NOTE 21 TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF THE GROUP
PREPARED UNDER IFRS.
11. MATERIAL CONTRACTS AND PERFORMANCE
(1) DURING THE REPORTING PERIOD, THERE IS NO ARRANGEMENT FOR ENTRUSTMENT,
CONTRACTING OR HIRING OF OTHER COMPANIES' ASSETS THAT WOULD ACCOUNT FOR MORE
THAN 10% (INCLUDING 10%) OF THE ANNUAL PROFIT OF THE COMPANY IN THE RESPECTIVE
YEAR.
2008 INTERIM REPORT 34
(2) MATERIAL GUARANTEE
At June 30, 2008, the Group had contingent liabilities in respect of
guarantees made to China Petroleum Finance Company Limited ("CP Finance", a
subsidiary of CNPC) as follows:
Unit: RMB Million
---------------------------------------------------------------------------------------------------------------
EXTERNAL GUARANTEES PROVIDED BY THE COMPANY (EXCLUDING GUARANTEES PROVIDED TO SUBSIDIARIES)
---------------------------------------------------------------------------------------------------------------
DATE OF WHETHER
GUARANTEE PROVIDED OCCURRENCE CONSTITUTED
TO (DATE OF GUARANTEE TYPE OF GUARANTEE PERIOD OF WHETHER GUARANTEE TO
EXECUTION OF AMOUNT GUARANTEE GUARANTEE CONNECTED
AGREEMENT) EXPIRED PARTY
(YES OR NO)
---------------------------------------------------------------------------------------------------------------
Huahai Petroleum
Transportation and Joint and several
Marketing Company July 12, 2000 14 liabilities 10 years No No
Limited*
---------------------------------------------------------------------------------------------------------------
Huahai Petroleum
Transportation and September 24, Joint and several
Marketing Company 2001 37 liabilities 11 years No No
Limited*
---------------------------------------------------------------------------------------------------------------
Jinzhou Jinglian
Lubricant October 21, Joint and several
Addicatives 2003 18 liabilities 5 years No No
Company Limited*
---------------------------------------------------------------------------------------------------------------
Total amount of guarantees incurred during the reporting period 0
---------------------------------------------------------------------------------------------------------------
Total amount of guarantees as at the end of the reporting period 69
---------------------------------------------------------------------------------------------------------------
TOTAL AMOUNT OF GUARANTEES BY THE COMPANY (INCLUDING GUARANTEE PROVIDED FOR SUBSIDIARIES)
---------------------------------------------------------------------------------------------------------------
Total amount of guarantees 69
---------------------------------------------------------------------------------------------------------------
Ratio of total amount of guarantees to the net assets of the Company 0.009%
---------------------------------------------------------------------------------------------------------------
of which:
---------------------------------------------------------------------------------------------------------------
Amount of guarantee provided for shareholders, ultimate
controller and their respective related parties -
---------------------------------------------------------------------------------------------------------------
Amount of guarantee provided directly or indirectly for entities with
liabilities to assets ratio exceeding 70% -
---------------------------------------------------------------------------------------------------------------
Amount of guarantee exceeding 50% of the total net asset -
---------------------------------------------------------------------------------------------------------------
Aggregate amount of the above three types of guarantees -
---------------------------------------------------------------------------------------------------------------
* for identification only
2008 INTERIM REPORT 35
(3) THE COMPANY DID NOT ENTRUST ANY OTHER PERSON TO CARRY OUT MONEY
MANAGEMENT DURING THE REPORTING PERIOD NOR WERE THERE ANY SUCH ENTRUSTMENT THAT
WAS EXTENDED FROM PRIOR PERIOD TO THE REPORTING PERIOD.
(4) OTHER MATERIAL CONTRACTS
Save as disclosed in this interim report, during the reporting period, the
Company did not enter into any material contract which requires disclosure.
12. PERFORMANCE OF COMMITMENTS
Specific undertakings made by CNPC, the controlling shareholder of the
Company, as at the end of the reporting period includes:
(1) According to the Restructuring Agreement entered into between CNPC and
the Company on March 10, 2000, CNPC has undertaken to indemnify the Company
against any claims or damages arising or resulting from certain matters in the
Restructuring Agreement.
(2) According to the Non-Competition Agreement entered into between CNPC
and the Company on March 10, 2000, CNPC has undertaken to the Company that CNPC
will not, and will procure its subsidiaries not to, develop, operate, assist in
operating nor participate in any businesses by itself or jointly with another
company within or outside the PRC that will compete with or lead to competition
with the core businesses of the Group. According to the Agreement, CNPC has also
granted to the Company pre-emptive rights to transaction with regards to part of
its assets.
(3) That for a period of 36 months commencing from the date of listing of
the A shares of the Company on the Shanghai Stock Exchange, it will not transfer
or entrust others for the management of the A shares which it holds, or allow
such shares to be repurchased by the Company. However, certain shares held by
CNPC, which may be subsequently listed on overseas stock exchanges after
obtaining necessary approvals in the PRC, are not subject to the restriction of
the 36-month lock-up period.
The above undertakings have been performed in accordance with the manner as
disclosed in the section headed "Performance of Commitments" of the 2007 annual
report of the Company and the performance of the above undertakings have not
been affected.
13. ENGAGEMENT AND DISENGAGEMENT OF FIRM OF ACCOUNTANTS
The Company has, at the annual general meeting of the Company held on May
15, 2008, approved the continuation of appointment of PricewaterhouseCoopers
Zhong Tian CPAs Company Limited as the domestic auditors of the Company and
PricewaterhouseCoopers as the international auditors of the Company and
authorised the Board to fix their remuneration. The interim financial reports
prepared under CAS have been audited by PricewaterhouseCoopers Zhong Tian CPAs
Company Limited, the signing certified public accountants of
PricewaterhouseCoopers Zhong Tian CPAs Company Limited are Feng Heping and Zhang
Liwen.
2008 INTERIM REPORT 36
14. PENALTIES ON THE COMPANY AND ITS DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT,
CONTROLLING SHAREHOLDERS AND DE FACTO CONTROLLER AND REMEDIES THERETO
During the reporting period, none of the Directors, Supervisors, senior
management, controlling shareholders or de facto controllers were subject to any
investigation by the China Securities Regulatory Commission, nor was there any
administrative penalty, denial of participation in the securities market or
deemed unsuitable to act as directors thereby.
15. REPURCHASE, SALE OR REDEMPTION OF SECURITIES
The Company and its subsidiaries did not sell any securities of the
Company, nor did it repurchase or redeem any of the securities of the Company
during the six months ended June 30, 2008.
16. INTERESTS OF DIRECTORS AND SUPERVISORS IN THE SHARE CAPITAL OF THE COMPANY
As at June 30, 2008, save as disclosed herein, none of the Directors or
Supervisors had any interest and short positions in any shares, underlying
shares or debentures of the Company or any associated corporation within the
meaning of Part XV of the SFO required to be recorded in the register mentioned
under Section 352 of the SFO or as otherwise notifiable to the Company and the
Hong Kong Stock Exchange by the Directors and Supervisors pursuant to the Model
Code for Securities Transactions by Directors of Listed Issuers.
17. COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS OF
LISTED ISSUERS
The Company has adopted the Model Code for Securities Transactions for
Directors of Listed Issuers (the "Model Code") set out in Appendix 10 to the
Hong Kong Listing Rules in respect of dealing of the Company's shares by its
directors. Each Director and Supervisor has confirmed to the Company that each
of them has complied with the requirements set out in the Model Code.
18. AUDIT COMMITTEE
The audit committee of the Company formed pursuant to Appendix 14 to the
Hong Kong Listing Rules comprises Mr Franco Bernabe, Mr Chee-Chen Tung, Mr Cui
Junhui and Mr Wang Guoliang. The main responsibilities of the audit committee
are the review and monitoring of the financial reporting and the internal
control mechanism of the Group and giving advice to the Board of Directors.
The audit committee of the Company has reviewed and confirmed the interim
results announcement and the interim report for the six months ended June 30,
2008.
2008 INTERIM REPORT 37
19. QUALIFIED ACCOUNTANT
In an announcement dated October 18, 2004, the Company announced that it
had not been able to find a suitable accountant with professional accounting
qualifications recognised to assume the position of qualified accountant as
required under Rule 3.24 of the Hong Kong Listing Rules by September 30, 2004.
The Company is still in the process of identifying suitable candidates with
professional accounting qualifications to assist the Chief Financial Officer to
oversee the compliance by the Company of the financial reporting and other
related accounting matters. However, despite numerous attempts to find such a
candidate, given the importance of the role and the function of the qualified
accountant, the Company has still not been able to find a suitable candidate
that meets all the requirements in Rule 3.24 of the Hong Kong Listing Rules. The
Company is trying its best to identify a candidate with the appropriate
qualifications, experience and understanding of the oil and gas industry to act
as the joint qualified accountant to assist the Chief Financial Officer of the
Company to carry out his duties. The Company will make an application for a
3-year waiver to the Hong Kong Stock Exchange when it has identified the joint
qualified accountant.
20. OTHER SIGNIFICANT EVENTS
(1) In April 2008, the Company was notified by the Ministry of Finance of
the PRC that in order to ensure supply of crude oil and refined products in the
market, financial support measures would be provided to the Company. During the
reporting period, the Company recognised governmental grants in the amount of
RMB4,573 million.
(2) On May 12, 2008, an earthquake with a magnitude of 8.0 on the Richter
scale struck Wenchuan area of Sichuan Province of the PRC. As a result of the
Company's well-established production facilities and effective contingency
plans, the earthquake did not have material adverse effect on the production and
operations of the Company.
(3) On June 20, 2008, the PRC Government adjusted the prices of refined
products in the domestic market, raising the ex-factory prices of gasoline and
diesel by RMB1,000 per ton and the ex-factory prices of aviation fuel by
RMB1,500 per ton, representing an increase of the ex-factory prices of gasoline,
diesel and aviation fuel by 18.2%, 19.7% and 25.2% respectively.
21. DISCLOSURE OF OTHER INFORMATION
Save as disclosed above, there have been no material changes from the
information disclosed in the annual report of the Group for the year ended
December 31, 2007 in respect of matters required to be disclosed under paragraph
46(3) of Appendix 16 to the Hong Kong Listing Rules.
2008 INTERIM REPORT 38
22. INDEX OF INFORMATION DISCLOSURE
-------------------------------------------------------------------------------------------------------------
MATTER WEBSITE/NAME OF NEWSPAPER DATE OF PUBLICATION /
RELEASE
-------------------------------------------------------------------------------------------------------------
Website of the Hong Kong Stock January 31, 2008
Announcement on the Circulation of A Shares Exchange
Placed Offline (Lock-up period of 3 months) ----------------------------------------------------------------
China Securities Journal, Shanghai February 1, 2008
Securities News and Securities Times
-------------------------------------------------------------------------------------------------------------
Announcement on the Date of Board Meeting Website of the Hong Kong Stock March 6, 2008
Exchange
-------------------------------------------------------------------------------------------------------------
Website of the Hong Kong Stock
Announcement on the delay in publication of Exchange, China Securities Journal,
results announcement Shanghai Securities News and March 19, 2008
Securities Times
-------------------------------------------------------------------------------------------------------------
Results announcement for the year ended Website of the Hong Kong Stock March 19, 2008
December 31, 2007 Exchange
-------------------------------------------------------------------------------------------------------------
Announcement of the Resolutions Passed at
the Seventh Meeting of the Third Session of China Securities Journal, Shanghai March 20, 2008
the Supervisory Committee Securities News and Securities Times
-------------------------------------------------------------------------------------------------------------
Announcement of the Resolutions Passed at
the Tenth Meeting of the Third Session of China Securities Journal, Shanghai March 20, 2008
the Board Securities News and Securities Times
-------------------------------------------------------------------------------------------------------------
Summary of Annual Report China Securities Journal, Shanghai March 20, 2008
Securities News and Securities Times
-------------------------------------------------------------------------------------------------------------
Circular to shareholders of H share on the
proposed amendment to the Articles of
Association, general mandate to issue
shares, proposed adoption of procedural Website of the Hong Kong Stock March 28, 2008
rules and proposed re-election and Exchange
appointment of directors and supervisors,
reply slip and proxy form
-------------------------------------------------------------------------------------------------------------
Website of the Hong Kong Stock
Notice of 2007 Annual General Meeting Exchange, China Securities Journal,
Shanghai Securities News and March 28, 2008
Securities Times
-------------------------------------------------------------------------------------------------------------
Annual Report for 2007 Website of the Hong Kong Stock April 15, 2008
Exchange
-------------------------------------------------------------------------------------------------------------
Announcement on the Date of Board Meeting Website of the Hong Kong Stock April 16, 2008
Exchange
-------------------------------------------------------------------------------------------------------------
Website of the Hong Kong Stock
Supplemental Notice of 2007 Annual General Exchange, China Securities Journal,
Meeting, Supplemental proxy form Shanghai Securities News and April 17, 2008
Securities Times
-------------------------------------------------------------------------------------------------------------
Website of the Hong Kong Stock April 20, 2008
Exchange
Announcement on Financial Support Measures
by the State to Ensure Supply of Crude Oil ----------------------------------------------------------------
and Refined Products China Securities Journal, Shanghai April 21, 2008
Securities News and Securities Times
-------------------------------------------------------------------------------------------------------------
Announcement on Connected Transaction Website of the Hong Kong Stock April 28, 2008
Exchange
-------------------------------------------------------------------------------------------------------------
Website of the Hong Kong Stock April 28, 2008
Exchange
First Quarterly Report for 2008 ----------------------------------------------------------------
China Securities Journal, Shanghai April 29, 2008
Securities News and Securities Times
-------------------------------------------------------------------------------------------------------------
Announcement on the Resolutions Passed at China Securities Journal, Shanghai April 29, 2008
the Meeting of the Board Securities News and Securities Times
-------------------------------------------------------------------------------------------------------------
Announcement on the demise of director/ Website of the Hong Kong Stock May 15, 2008
Change of directors and supervisors Exchange
-------------------------------------------------------------------------------------------------------------
2008 INTERIM REPORT 39
-------------------------------------------------------------------------------------------------------------
MATTER WEBSITE/NAME OF NEWSPAPER DATE OF PUBLICATION /
RELEASE
-------------------------------------------------------------------------------------------------------------
Website of the Hong Kong Stock May 15, 2008
Exchange
Announcement on the Poll Results of the 2007
Annual General Meeting and Payment of ----------------------------------------------------------------
Dividends China Securities Journal, Shanghai May 16, 2008
Securities News and Securities Times
-------------------------------------------------------------------------------------------------------------
Announcement on the Appointment of Chairman, Website of the Hong Kong Stock May 16, 2008
Vice-Chairman and Senior Management Exchange
-------------------------------------------------------------------------------------------------------------
Announcement on the Election of the
Employees Supervisors at the Fourth Session China Securities Journal, Shanghai May 16, 2008
of the Supervisory Committee Securities News and Securities Times
-------------------------------------------------------------------------------------------------------------
Announcement on the Resolutions Passed at
the First Meeting of the Fourth Session of China Securities Journal, Shanghai May 17, 2008
the Board Securities News and Securities Times
-------------------------------------------------------------------------------------------------------------
Announcement on the Resolutions Passed at
the First Meeting of the Fourth Session of China Securities Journal, Shanghai May 17, 2008
the Supervisory Committee Securities News and Securities Times
-------------------------------------------------------------------------------------------------------------
Website of the Hong Kong Stock May 20, 2008
Exchange
Announcement on the Impact of Earthquake in ----------------------------------------------------------------
Sichuan Province on the Company China Securities Journal, Shanghai May 21, 2008
Securities News and Securities Times
-------------------------------------------------------------------------------------------------------------
Announcement on the Declaration of Final China Securities Journal, Shanghai May 23, 2008
Dividends for 2007 to shareholders of A Securities News and Securities Times
shares
-------------------------------------------------------------------------------------------------------------
Announcement on Connected Transaction -
Acquisition of Refined Products Sales Assets Website of the Hong Kong Stock June 11, 2008
and Business Exchange
-------------------------------------------------------------------------------------------------------------
Announcement on the Proposed Issue of Website of the Hong Kong Stock June 11, 2008
Domestic Corporate Bonds in the PRC Exchange
-------------------------------------------------------------------------------------------------------------
Announcement on the Resolutions Passed at China Securities Journal, Shanghai June 11, 2008
the Meeting of the Board Securities News and Securities Times
-------------------------------------------------------------------------------------------------------------
Circular to shareholders of H shares on the
Proposed Issue of Domestic Corporate Bonds Website of the Hong Kong Stock June 11, 2008
in the PRC, proxy form and reply slip Exchange
-------------------------------------------------------------------------------------------------------------
Website of the Hong Kong Stock
Exchange, China Securities Journal,
Notice of Extraordinary General Meeting Shanghai Securities News and June 12, 2008
Securities Times
-------------------------------------------------------------------------------------------------------------
Website of the Hong Kong Stock July 31, 2008
Exchange
Announcement on the Poll Results of ----------------------------------------------------------------
Extraordinary General Meeting China Securities Journal, Shanghai August 1, 2008
Securities News and Securities Times
-------------------------------------------------------------------------------------------------------------
Announcement on the Resolutions Passed at China Securities Journal, Shanghai August 26, 2008
the Meeting of the Board Securities News and Securities Times
-------------------------------------------------------------------------------------------------------------
2008 INTERIM REPORT 40
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
1. ELECTION OF MEMBERS OF THE FOURTH SESSION OF BOARD OF DIRECTORS, MEMBERS OF
THE FOURTH SESSION OF SUPERVISORY COMMITTEE AND APPOINTMENT OF SENIOR MANAGEMENT
AND CHANGE OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
In the first half of 2008, the term of the third session of Board of
Directors and the third session of Supervisory Committee expired. On May 15,
2008, the Company held the annual general meeting for 2007 at which members of
the fourth session of Board of Directors and shareholder representative
Supervisors of the fourth session of Supervisory Committee were elected. At the
same time, the employees of the Company elected Mr Wang Yawei, Mr Qin Gang and
Ms Wang Shali as employee representative Supervisors of the fourth session of
Supervisory Committee who formed the fourth session of Supervisory Committee
with the shareholder representative Supervisors.
The new session of Board of Directors shall comprise 14 members. Amongst
the members of the last session of Board of Directors, apart from Mr Zheng Hu
and Mr Gong Huazhang who retired from their offices due to reaching retirement
age and Mr Duan Wende who passed away due to illness, all other Directors of the
Company were re-elected to be the members of the new session of Board of
Directors. In addition, there shall be six more Directors in the new session of
the Board of Directors (namely Mr Wang Fucheng, Mr Li Xinhua, Mr Liao Yongyuan,
Mr Wang Guoliang, Mr Li Yongwu and Mr Cui Junhui), of whom Mr Li Yongwu and Mr
Cui Junhui shall be appointed independent non-executive Directors of the
Company.
The new session of Supervisory Committee shall comprise 9 members. Amongst
the members of the last session of Supervisory Committee, apart from Mr Zhang
Jinzhu who retired from his office due to reaching retirement age and Mr Wang
Fucheng and Mr Li Yongwu who resigned from their office as Supervisors before
their commencing their office as Directors of the Company, all other Supervisors
of the Company were re-elected to be the members of the new session of
Supervisory Committee. In addition, there shall be five more members in the new
session of Supervisor Committee (namely Mr Chen Ming, Mr Yu Yibo, Mr Wang Yawei,
Ms Wang Shali and Mr Li Yuan), in which Mr Wang Yawei and Ms Wang Shali shall be
the employee representative Supervisors and Mr Li Yuan shall be an independent
supervisor of the Company.
2008 INTERIM REPORT 41
On May 16, 2008, the Company held the first meeting of the fourth session
of Board of Directors, at which Mr Jiang Jiemin was elected to be the Chairman
of the Board of Directors of the Company and Mr Zhou Jiping be the Vice Chairman
of the Board of Directors of the Company. Mr Zhou Jiping was also appointed as
the President of the Company. Mr Zhao Zhengzhang was appointed to be the Vice
President of the Company. Mr Wang Daofu was appointed to be the Chief Geologist
of the Company. Mr Huang Weihe was appointed to be the Chief Engineer of the
Company.
In the afternoon of May 15, 2008, the Company held the first meeting of the
fourth session of Supervisory Committee, at which Mr Chen Ming was elected to be
the Chairman of the fourth session of Supervisory Committee of the Company.
2. BASIC PARTICULARS OF THE CURRENT DIRECTORS, SUPERVISORS AND OTHER SENIOR
MANAGEMENT
Directors
-------------------------------------------------------------------------------------------------------------
NAME GENDER AGE POSITION
-------------------------------------------------------------------------------------------------------------
Jiang Jiemin Male 52 Chairman of the Board of Directors
-------------------------------------------------------------------------------------------------------------
Zhou Jiping Male 56 Vice Chairman, President
-------------------------------------------------------------------------------------------------------------
Wang Yilin Male 51 Non-executive Director
-------------------------------------------------------------------------------------------------------------
Zeng Yukang Male 57 Non-executive Director
-------------------------------------------------------------------------------------------------------------
Wang Fucheng Male 58 Non-executive Director
-------------------------------------------------------------------------------------------------------------
Li Xinhua Male 55 Non-executive Director
-------------------------------------------------------------------------------------------------------------
Liao Yongyuan Male 45 Executive Director, Vice President
-------------------------------------------------------------------------------------------------------------
Wang Guoliang Male 55 Non-executive Director
-------------------------------------------------------------------------------------------------------------
Jiang Fan Male 45 Non-executive Director
-------------------------------------------------------------------------------------------------------------
Chee-Chen Tung Male 65 Independent Non-executive Director
-------------------------------------------------------------------------------------------------------------
Liu Hongru Male 77 Independent Non-executive Director
-------------------------------------------------------------------------------------------------------------
Franco Bernabe Male 59 Independent Non-executive Director
-------------------------------------------------------------------------------------------------------------
Li Yongwu Male 64 Independent Non-executive Director
-------------------------------------------------------------------------------------------------------------
Cui Junhui Male 62 Independent Non-executive Director
-------------------------------------------------------------------------------------------------------------
Supervisors
-------------------------------------------------------------------------------------------------------------
NAME GENDER AGE POSITION
-------------------------------------------------------------------------------------------------------------
Chen Ming Male 57 Chairman of the Supervisory Committee
-------------------------------------------------------------------------------------------------------------
Wen Qingshan Male 49 Supervisor
-------------------------------------------------------------------------------------------------------------
Sun Xianfeng Male 55 Supervisor
-------------------------------------------------------------------------------------------------------------
Yu Yibo Male 44 Supervisor
-------------------------------------------------------------------------------------------------------------
Wang Yawei Male 53 Employee Supervisor
-------------------------------------------------------------------------------------------------------------
Qin Gang Male 54 Employee Supervisor
-------------------------------------------------------------------------------------------------------------
Wang Shali Female 53 Employee Supervisor
-------------------------------------------------------------------------------------------------------------
Wu Zhipan Male 51 Independent Supervisor
-------------------------------------------------------------------------------------------------------------
Li Yuan Male 61 Independent Supervisor
-------------------------------------------------------------------------------------------------------------
2008 INTERIM REPORT 42
Particulars of other Senior Management
-------------------------------------------------------------------------------------------------------------
NAME GENDER AGE POSITION
-------------------------------------------------------------------------------------------------------------
Sun Longde Male 46 Vice President
-------------------------------------------------------------------------------------------------------------
Shen Diancheng Male 49 Vice President
-------------------------------------------------------------------------------------------------------------
Liu Hongbin Male 45 Vice President
-------------------------------------------------------------------------------------------------------------
Zhou Mingchun Male 41 Chief Financial Officer
-------------------------------------------------------------------------------------------------------------
Li Hualin Male 45 Vice President
-------------------------------------------------------------------------------------------------------------
Zhao Zhengzhang Male 51 Vice President
-------------------------------------------------------------------------------------------------------------
Lin Aiguo Male 50 Chief Engineer
-------------------------------------------------------------------------------------------------------------
Wang Daofu Male 52 Chief Geologist
-------------------------------------------------------------------------------------------------------------
Huang Weihe Male 50 Chief Engineer
-------------------------------------------------------------------------------------------------------------
Li Huaiqi Male 59 Secretary to the Board of Directors
-------------------------------------------------------------------------------------------------------------
Information on the Changes in the Shareholding in the Company Held by the
Directors, Supervisors and Senior Management
Unit: Share
---------------------------------------------------------------------------------------------------------------
NUMBER OF NUMBER OF
SHARES IN THE SHARES IN THE
COMPANY HELD INCREASE IN COMPANY HELD
AS AT THE THE NUMBER DECREASE IN AS AT THE
BEGINNING OF OF SHARES THE NUMBER OF END OF THE
NATURE OF THE REPORTING HELD IN THE SHARES HELD IN REPORTING REASON FOR
NAME POSITION SHARES PERIOD COMPANY THE COMPANY PERIOD THE CHANGE
---------------------------------------------------------------------------------------------------------------
Yu Yibo Supervisor A shares 56,500 - - 56,500 -
---------------------------------------------------------------------------------------------------------------
A shares 7,000 - - 7,000 -
Wang Shali Supervisor -------------------------------------------------------------------------------------
H shares 18,000 - - 18,000 -
---------------------------------------------------------------------------------------------------------------
2008 INTERIM REPORT 43
(PRICEWATERHOUSECOOPERS LOGO)
--------------------------------------------------------------------------------
PricewaterhouseCoopers Zhong Tian
CPAs Limited Company
11/F PricewaterhouseCoopers Centre
202 Hu Bin Road
Shanghai 200021
P.R.C
Tel:+86 (21) 2323 8888
Fax:+86 (21) 2323 8800
REPORT OF THE AUDITORS
PWC ZT SHEN ZI (2008) NO. 10056
(PAGE 1/2)
TO THE SHAREHOLDERS OF PETROCHINA COMPANY LIMITED:
We have audited the accompanying financial statements of PetroChina Company
Limited (the "Company") and its subsidiaries (the "Group"), which comprise the
consolidated and company balance sheets as at June 30, 2008, and the
consolidated and company income statements, the consolidated and company cash
flow statements and the consolidated and company statements of changes in equity
for the six months ended June 30, 2008 and notes to these financial statements.
1. MANAGEMENT'S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
Management is responsible for the preparation of these financial statements
in accordance with the Accounting Standards for Business Enterprises. This
responsibility includes:
(i)Designing, implementing and maintaining internal control relevant to the
preparation of financial statements that are free from material misstatement,
whether due to fraud or error;
(ii)Selecting and applying appropriate accounting policies; and
(iii)Making accounting estimates that are reasonable in the circumstances.
2. AUDITOR'S RESPONSIBILITY
Our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit in accordance with the Auditing
Standards for Certified Public Accountants of China. Those standards require
that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance as to whether the financial statements are free from
material misstatement.
2008 INTERIM REPORT 44
PWC ZT SHEN ZI (2008) NO. 10056
(PAGE 2/2)
An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the financial statements. The procedures selected
depend on the auditor's judgment, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control
relevant to the entity's preparation of the financial statements in order to
design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the entity's
internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by
the management, as well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
3. OPINION
In our opinion, the accompanying financial statements present fairly, in
all material respects, the financial position of the Company and of the Group as
at June 30, 2008, and their financial performance and cash flows for the six
months ended June 30, 2008 in accordance with the Accounting Standards for
Business Enterprises.
PricewaterhouseCoopers Zhong Certified Public
Tian CPAs Limited Company Accountant --------------------
Heping Feng
Shanghai, the People's Republic Certified Public
of China, August 27, 2008 Accountant --------------------
Liwen Zhang
2008 INTERIM REPORT 45
PETROCHINA COMPANY LIMITED
CONSOLIDATED AND COMPANY BALANCE SHEETS AS AT
JUNE 30, 2008
(All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------------------------------------
JUNE 30, 2008 DECEMBER 31, 2007 JUNE 30, 2008 DECEMBER 31, 2007
------------- ----------------- ------------- -----------------
ASSETS NOTES THE GROUP THE GROUP THE COMPANY THE COMPANY
--------------------------------------------------------------------------------------------------------------
Current assets
Cash at bank and on hand 7(1) 74,377 88,589 58,730 78,332
Notes receivable 7(2) 5,832 4,735 5,628 3,988
Accounts receivable 7(3a) 27,726 18,419 3,365 2,131
Advances to suppliers 7(4) 51,042 20,386 40,262 16,086
Interest receivable 242 109 242 109
Dividends receivable 25 18 85 85
Other receivables 7(3b) 16,964 15,444 23,757 24,173
Inventories 7(5) 98,560 88,467 80,689 70,284
Current portion of
non-current assets 37 59 35 59
Other current assets 9 2 9 2
------------ ----------------- ------------- ------------------
Total current assets 274,814 236,228 212,802 195,249
------------ ----------------- ------------- -------------------
Non-current assets
Available-for-sale
financial assets 7(6) 2,147 2,530 1,098 1,456
Long-term equity
investments 7(7) 26,855 22,686 120,707 104,691
Fixed assets 7(8) 239,884 247,803 193,382 199,411
Oil and gas properties 7(9) 319,957 326,328 228,086 231,921
Construction in progress 7(11) 134,260 105,634 108,816 85,597
Construction materials 7(10) 8,681 6,927 6,159 5,455
Fixed assets pending
disposal 481 287 481 282
Intangible assets 7(12) 20,943 20,022 16,944 16,356
Goodwill 148 - - -
Long-term prepaid
expenses 7(13) 12,402 12,028 10,365 9,924
Deferred tax assets 7(26a) 18,288 12,871 12,989 9,048
Other non-current assets 536 748 - -
------------ ----------------- ------------- ------------------
Total non-current assets 784,582 757,864 699,027 664,141
------------ ----------------- ------------- ------------------
TOTAL ASSETS 1,059,396 994,092 911,829 859,390
============ ================= ============= ==================
--------------------------------------------------------------------------------------------------------------
The accompanying notes form an integral part of these financial statements.
----------------------- ------------------------- --------------------------
Chairman President Chief Financial Officer
Jiang Jiemin Zhou Jiping Zhou Mingchun
2008 INTERIM REPORT 46
PETROCHINA COMPANY LIMITED
CONSOLIDATED AND COMPANY BALANCE SHEETS AS AT JUNE 30,
2008 (CONTINUED)
(All amounts in RMB millions unless otherwise stated)
------------------------------------------------------------------------------------------------------------
LIABILITIES AND JUNE 30, 2008 DECEMBER 31, 2007 JUNE 30, 2008 DECEMBER 31, 2007
SHAREHOLDERS' ---------------------------------------------------------------------
EQUITY NOTES THE GROUP THE GROUP THE COMPANY THE COMPANY
------------------------------------------------------------------------------------------------------------
Current liabilities
Short-term borrowings 7(15) 25,817 18,734 31,224 17,898
Notes payable 7(16) 1,059 1,143 - -
Accounts payable 7(17) 117,590 104,460 73,848 66,877
Advances from customers 7(18) 15,177 12,433 12,309 10,443
Employee compensation
payable 7(19) 7,961 11,585 6,768 10,751
Taxes payable 7(20) 22,262 22,808 5,668 13,793
Interest payable 178 173 86 61
Dividends payable 874 89 - -
Other payables 7(21) 35,912 17,849 69,696 46,582
Provisions 7(22) 560 715 61 75
Current portion of
non-current liabilities 7(23) 13,440 11,652 11,777 9,029
Other current liabilities 12 13 - -
------------- ----------------- ------------- -----------------
Total current liabilities 240,842 201,654 211,437 175,509
------------- ----------------- ------------- -----------------
Non-current liabilities
Deferred income 79 76 61 62
Long-term borrowings 7(24) 31,044 35,305 23,543 29,044
Debentures payable 7(25) 4,243 4,383 3,500 3,500
Long-term payables 57 57 56 56
Grants payable 743 774 681 710
Provisions 7(22) 25,966 24,761 16,081 15,307
Deferred tax
liabilities 7(26b) 13,550 11,883 7,466 6,598
Other non-current
liabilities 127 128 123 123
------------- ----------------- ------------- -----------------
Total non-current liabilities 75,809 77,367 51,511 55,400
------------- ----------------- ------------- -----------------
Total liabilities 316,651 279,021 262,948 230,909
------------- ----------------- ------------- -----------------
Shareholders' equity
Share capital 7(27) 183,021 183,021 183,021 183,021
Capital surplus 7(28) 122,019 122,192 125,683 125,848
Surplus reserves 7(29) 102,696 102,696 91,596 91,596
Undistributed profits 7(30) 290,191 270,544 248,581 228,016
Currency translation
differences (1,778) (1,086) - -
------------- ----------------- ------------- -----------------
Equity attributable to
equity holders of the
Company 696,149 677,367 648,881 628,481
------------- ----------------- ------------- -----------------
Minority interest 7(31) 46,596 37,704 - -
------------- ----------------- ------------- -----------------
Total shareholders' equity 742,745 715,071 648,881 628,481
------------- ----------------- ------------- -----------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 1,059,396 994,092 911,829 859,390
============= ================= ============= =================
------------------------------------------------------------------------------------------------------------
The accompanying notes form an integral part of these financial statements.
----------------------- ------------------------- --------------------------
Chairman President Chief Financial Officer
Jiang Jiemin Zhou Jiping Zhou Mingchun
2008 INTERIM REPORT 47
PETROCHINA COMPANY LIMITED
CONSOLIDATED AND COMPANY INCOME STATEMENTS FOR THE SIX
MONTHS ENDED JUNE 30, 2008
(All amounts in RMB millions unless otherwise stated)
-------------------------------------------------------------------------------------------------------
FOR THE SIX FOR THE SIX FOR THE SIX FOR THE SIX
MONTHS MONTHS MONTHS MONTHS
ENDED JUNE ENDED JUNE ENDED JUNE ENDED JUNE
30, 2008 30, 2007 30, 2008 30, 2007
----------- ----------- ----------- -----------
ITEMS NOTES THE GROUP THE GROUP THE COMPANY THE COMPANY
-------------------------------------------------------------------------------------------------------
1. Operating income 7(32) 549,522 392,726 393,015 290,391
Less: Cost of sales 7(32) (361,287) (223,140) (310,500) (195,320)
Tax and levies on
operations 7(33) (61,891) (26,853) (37,130) (16,258)
Selling expenses (21,576) (19,075) (17,078) (15,049)
General and administrative
expenses (29,562) (21,475) (23,565) (15,738)
Finance expenses 7(34) (1,448) (1,656) (205) (944)
Asset impairment losses 7(35) (7,330) 2,317 (7,315) 1,842
Add: Investment income 7(36) 4,297 3,090 44,104 30,404
----------- ----------- ----------- -----------
2. Operating profit 70,725 105,934 41,326 79,328
----------- ----------- ----------- -----------
Add: Non-operating income 7(37a) 5,614 1,441 4,606 856
Less: Non-operating expenses 7(37b) (3,133) (1,081) (1,766) (948)
----------- ----------- ----------- -----------
3. Profit before taxation 73,206 106,294 44,166 79,236
----------- ----------- ----------- -----------
Less: Taxation 7(38) (17,909) (25,997) 5,107 (5,788)
----------- ----------- ----------- -----------
4. Net profit 55,297 80,297 49,273 73,448
----------- ----------- ----------- -----------
Net profit attributable to
equity holders of the
Company 48,355 75,882 49,273 73,448
Minority interest 6,942 4,415 - -
5. Earnings per share (based on net
profit attributable to equity
holders of the Company)
Basic earnings per share
(RMB, Yuan) 7(39) 0.26 0.42 0.27 0.41
Diluted earnings per share
(RMB, Yuan) 7(39) 0.26 0.42 0.27 0.41
=========== =========== =========== ===========
-------------------------------------------------------------------------------------------------------
The accompanying notes form an integral part of these financial statements.
----------------------- ----------------------- --------------------------
Chairman President Chief Financial Officer
Jiang Jiemin Zhou Jiping Zhou Mingchun
2008 INTERIM REPORT 48
PETROCHINA COMPANY LIMITED
CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS FOR THE
SIX MONTHS ENDED JUNE 30, 2008
(All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------------------------------------
FOR THE SIX FOR THE SIX FOR THE SIX FOR THE SIX
MONTHS MONTHS MONTHS MONTHS
ENDED JUNE ENDED JUNE ENDED JUNE ENDED JUNE
30, 2008 30, 2007 30, 2008 30, 2007
----------- ----------- ----------- -----------
ITEMS NOTES THE GROUP THE GROUP THE COMPANY THE COMPANY
--------------------------------------------------------------------------------------------------------------
1. CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from sales of goods
and rendering of services 634,074 444,524 457,759 333,860
Refund of taxes and levies 4,186 536 3,329 501
Cash received relating to other
operating activities 1,674 363 5,274 1,317
----------- ----------- ----------- -----------
SUB-TOTAL OF CASH INFLOWS 639,934 445,423 466,362 335,678
----------- ----------- ----------- -----------
Cash paid for goods and services (374,110) (210,590) (325,820) (193,789)
Cash paid to and on behalf of
employees (34,035) (21,200) (27,280) (14,729)
Payments of taxes and levies (122,470) (80,234) (63,098) (46,070)
Cash paid relating to other
operating activities (25,313) (21,222) (11,597) (13,359)
----------- ----------- ----------- -----------
SUB-TOTAL OF CASH OUTFLOWS (555,928) (333,246) (427,795) (267,947)
----------- ----------- ----------- -----------
NET CASH FLOWS FROM OPERATING
ACTIVITIES 7(40a) 84,006 112,177 38,567 67,731
----------- ----------- ----------- -----------
2. CASH FLOWS FROM INVESTING ACTIVITIES
Cash received from disposal of
investments 7,255 2,731 8,026 1,177
Cash received from returns on
investments 3,498 1,200 44,492 30,196
Net cash received from disposal
of fixed assets,oil and gas
properties, intangible assets
and other long-term assets 98 512 77 17
----------- ----------- ----------- -----------
SUB-TOTAL OF CASH INFLOWS 10,851 4,443 52,595 31,390
----------- ----------- ----------- -----------
Cash paid to acquire fixed
assets, oil and gas
properties, intangible assets
and other long-term assets (78,717) (60,420) (68,431) (46,397)
Cash paid to acquire investments (345) (1,374) (15,761) (918)
Including: Cash paid to
purchase shares of listed
subsidiaries - (86) - (86)
----------- ----------- ----------- -----------
SUB-TOTAL OF CASH OUTFLOWS (79,062) (61,794) (84,192) (47,315)
----------- ----------- ----------- -----------
NET CASH FLOWS FROM INVESTING
ACTIVITIES (68,211) (57,351) (31,597) (15,925)
----------- ----------- ----------- -----------
3. CASH FLOWS FROM FINANCING ACTIVITIES
Cash received from capital
contributions 8,232 266 - -
Including: Cash received from
minority shareholders'
capital contributions to
subsidiaries 8,232 266 - -
Cash received from borrowings 38,272 28,408 27,872 22,237
Cash received relating to other
financing activities 24 64 21 31
----------- ----------- ----------- -----------
SUB-TOTAL OF CASH INFLOWS 46,528 28,738 27,893 22,268
----------- ----------- ----------- -----------
---------------------------------------------------------------------------------------------------------------
2008 INTERIM REPORT 49
PETROCHINA COMPANY LIMITED
CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS FOR THE
SIX MONTHS ENDED JUNE 30, 2008 (CONTINUED)
(All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------------------------------------
FOR THE SIX FOR THE SIX FOR THE SIX FOR THE SIX
MONTHS MONTHS MONTHS MONTHS
ENDED JUNE ENDED JUNE ENDED JUNE ENDED JUNE
30, 2008 30, 2007 30, 2008 30, 2007
----------- ----------- ----------- -----------
ITEMS NOTES THE GROUP THE GROUP THE COMPANY THE COMPANY
--------------------------------------------------------------------------------------------------------------
Cash repayments of borrowings (34,080) (28,931) (16,594) (22,160)
Cash payments for interest
expenses and distribution of
dividends or profits (33,728) (31,638) (29,821) (29,256)
Including: Subsidiaries' cash
payments for distribution of
dividends or profits to
minority shareholders (3,045) (1,895) - -
Capital reduction (1,165) - - -
Cash payments relating to other
financing activities (53) (185) (50) (96)
----------- ----------- ----------- -----------
SUB-TOTAL OF CASH OUTFLOWS (69,026) (60,754) (46,465) (51,512)
----------- ----------- ----------- -----------
NET CASH FLOWS FROM FINANCING
ACTIVITIES (22,498) (32,016) (18,572) (29,244)
----------- ----------- ----------- -----------
4. EFFECT OF FOREIGN EXCHANGE RATE
CHANGES ON CASH AND CASH
EQUIVALENTS 49 402 - -
----------- ----------- ----------- -----------
5. NET (DECREASE) / INCREASE IN CASH
AND CASH EQUIVALENTS (6,654) 23,212 (11,602) 22,562
----------- ----------- ----------- -----------
Add: Cash and cash equivalents at
beginning of the period 7(40b) 65,494 48,559 60,332 45,029
----------- ----------- ----------- -----------
6. CASH AND CASH EQUIVALENTS AT END OF
THE PERIOD 7(40c) 58,840 71,771 48,730 67,591
=========== =========== =========== ===========
--------------------------------------------------------------------------------------------------------------
The accompanying notes form an integral part of these financial statements.
------------------------------------ ---------------------------------- ----------------------------------
Chairman President Chief Financial Officer
Jiang Jiemin Zhou Jiping Zhou Mingchun
2008 INTERIM REPORT 50
PETROCHINA COMPANY LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX
MONTHS ENDED JUNE 30, 2008
(All amounts in RMB millions unless otherwise stated)
-----------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY ATTRIBUTABLE TO THE COMPANY
-------------------------------------------------------- TOTAL
CURRENCY SHAREH-
SHARE CAPITAL SURPLUS UNDISTRIBUTED TRANSLATION MINORITY OLDERS'
ITEMS CAPITAL SURPLUS RESERVES PROFITS DIFFERENCES INTEREST EQUITY
-----------------------------------------------------------------------------------------------------------------------------------
Balance at January 1, 2007 179,021 59,797 89,928 213,255 (534) 26,128 567,595
------- ------- -------- ------------- ---------- -------- -------
Changes in the six months ended June 30, 2007 - (64) - 48,188 (132) 2,549 50,541
------- ------- -------- ------------- ---------- -------- -------
Net profit - - - 75,882 - 4,415 80,297
------- ------- -------- ------------- ---------- -------- -------
Losses recognised directly in equity - (64) - - (132) (237) (433)
------- ------- -------- ------------- ---------- -------- -------
Currency translation differences - - - - (132) (226) (358)
Purchase of minority interest in subsidiaries - (64) - - - (22) (86)
Other - - - - - 11 11
------- ------- -------- ------------- ---------- -------- -------
Sub-total - (64) - 75,882 (132) 4,178 79,864
------- ------- -------- ------------- ---------- -------- -------
Shareholders' contribution and withdrawal - - - - - 266 266
------- ------- -------- ------------- ---------- -------- -------
Capital contribution by shareholders - - - - - 266 266
------- ------- -------- ------------- ---------- -------- -------
Profit distribution - - - (27,694) - (1,895) (29,589)
------- ------- -------- ------------- ---------- -------- -------
Distribution to shareholders - - - (27,694) - (1,895) (29,589)
------- ------- -------- ------------- ---------- -------- -------
Balance at June 30, 2007 179,021 59,733 89,928 261,443 (666) 28,677 618,136
======= ======= ======== ============= ========== ======== =======
-----------------------------------------------------------------------------------------------------------------------------------
2008 INTERIM REPORT 51
PETROCHINA COMPANY LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX
MONTHS ENDED JUNE 30, 2008 (CONTINUED)
(All amounts in RMB millions unless otherwise stated)
-----------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY ATTRIBUTABLE TO THE COMPANY
----------------------------------------------------------
CURRENCY TOTAL
SHARE CAPITAL SURPLUS UNDISTRIBUTED TRANSLATION MINORITY SHAREHOLDERS'
ITEMS CAPITAL SURPLUS RESERVES PROFITS DIFFERENCES INTEREST EQUITY
-----------------------------------------------------------------------------------------------------------------------------------
Balance at January 1, 2008 183,021 122,192 102,696 270,544 (1,086) 37,704 715,071
------- ------- -------- ------------- ----------- -------- -------------
Changes in the six months ended June 30,
2008 - (173) - 19,647 (692) 8,892 27,674
------- ------- -------- ------------- ----------- -------- -------------
Net profit - - - 48,355 - 6,942 55,297
------- ------- -------- ------------- ----------- -------- -------------
Losses recognised directly in equity - (173) - - (692) (1,287) (2,152)
------- ------- -------- ------------- ----------- -------- -------------
Currency translation differences - - - - (692) (1,185) (1,877)
Purchase of minority interest in
subsidiaries - (15) - - - (117) (132)
Fair value changes of available-for-
sale financial assets - (158) - - - - (158)
Other - - - - - 15 15
------- ------- -------- ------------- ----------- -------- -------------
Sub-total - (173) - 48,355 (692) 5,655 53,145
------- ------- -------- ------------- ----------- -------- -------------
Shareholders' contribution and
withdrawal - - - - - 7,067 7,067
------- ------- -------- ------------- ----------- -------- -------------
Capital contribution by shareholders - - - - - 8,232 8,232
Capital reduction - - - - - (1,165) (1,165)
------- ------- -------- ------------- ----------- -------- -------------
Profit distribution - - - (28,708) - (3,830) (32,538)
------- ------- -------- ------------- ----------- -------- -------------
Distribution to shareholders - - - (28,708) - (3,830) (32,538)
------- ------- -------- ------------- ----------- -------- -------------
Balance at June 30, 2008 183,021 122,019 102,696 290,191 (1,778) 46,596 742,745
======= ======= ======== ============= =========== ======== =============
The accompanying notes form an integral part of these financial statements.
------------------------------------ ---------------------------------- ----------------------------------
Chairman President Chief Financial Officer
Jiang Jiemin Zhou Jiping Zhou Mingchun
2008 INTERIM REPORT 52
PETROCHINA COMPANY LIMITED
COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE SIX
MONTHS ENDED JUNE 30, 2008
(All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------------------------------------------
TOTAL
SHARE CAPITAL SURPLUS UNDISTRIBUTED SHAREHOLDERS'
ITEMS CAPITAL SURPLUS RESERVES PROFITS EQUITY
--------------------------------------------------------------------------------------------------------------------
Balance at January 1, 2007 179,021 63,348 78,828 177,618 498,815
------- ------- -------- ------------- -------------
Changes in the six months ended June 30, 2007 - (4) - 45,754 45,750
------- ------- -------- ------------- -------------
Net profit - - - 73,448 73,448
------- ------- -------- ------------- -------------
Losses recognised directly in equity - (4) - - (4)
------- ------- -------- ------------- -------------
Currency translation differences related
to investment in associates and jointly
controlled entities - (4) - - (4)
------- ------- -------- ------------- -------------
Sub-total - (4) - 73,448 73,444
------- ------- -------- ------------- -------------
Profit distribution - - - (27,694) (27,694)
------- ------- -------- ------------- -------------
Distribution to shareholders - - - (27,694) (27,694)
------- ------- -------- ------------- -------------
Balance at June 30, 2007 179,021 63,344 78,828 223,372 544,565
======= ======= ======== ============= =============
Balance at January 1, 2008 183,021 125,848 91,596 228,016 628,481
------- ------- -------- ------------- -------------
Changes in the six months ended June 30, 2008 - (165) - 20,565 20,400
------- ------- -------- ------------- -------------
Net profit - - - 49,273 49,273
------- ------- -------- ------------- -------------
Losses recognised directly in equity - (165) - - (165)
------- ------- -------- ------------- -------------
Currency translation differences related
to investment in associates and jointly
controlled entities - (5) - - (5)
Fair value changes of available-for-sale
financial assets - (160) - - (160)
------- ------- -------- ------------- -------------
Sub-total - (165) - 49,273 49,108
------- ------- -------- ------------- -------------
Profit distribution - - - (28,708) (28,708)
------- ------- -------- ------------- -------------
Distribution to shareholders - - - (28,708) (28,708)
------- ------- -------- ------------- -------------
Balance at June 30, 2008 183,021 125,683 91,596 248,581 648,881
======= ======= ======== ============= =============
-----------------------------------------------------------------------------------------------------------------------
The accompanying notes form an integral part of these financial statements.
------------------------------------ ---------------------------------- ----------------------------------
Chairman President Chief Financial Officer
Jiang Jiemin Zhou Jiping Zhou Mingchun
2008 INTERIM REPORT 53
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
1 COMPANY BACKGROUND
PetroChina Company Limited (the "Company") was established as a joint stock
company with limited liability on November 5, 1999 by China National Petroleum
Corporation ("CNPC") as the sole proprietor in accordance with the approval Guo
Jing Mao Qi Gai [1999] No. 1024 "Reply on the approval of the establishment of
PetroChina Company Limited" from the State Economic and Trade Commission of the
People's Republic of China (the "China" or "PRC"). CNPC restructured ("the
Restructuring") and injected its core business in exploration, development,
production and sale of crude oil and natural gas, refining and marketing of
petroleum products, production and sale of chemicals and research and
development activities, and the related assets and liabilities into the Company.
CNPC is a wholly state-owned company registered in China. The Company and its
subsidiaries are collectively referred to as the "Group".
The Group is principally engaged in: the exploration, development,
production and sale of crude oil and natural gas, the refining and marketing of
the petroleum products, the production and sale of chemicals, etc.. The
principal subsidiaries of the Group are listed in Note 6.
The financial statements were approved by the Board of Directors on August
27, 2008.
2 BASIS OF PREPARATION
The financial statements of the Group are prepared in accordance with the
Basic Standard and 38 specific standards of Accounting Standards for Business
Enterprises issued by the Ministry of Finance (the "MOF") on February 15, 2006,
Application Guidance of Accounting Standard for Business Enterprises,
Interpretation of Accounting Standards for Business Enterprises and other
regulations issued thereafter (hereafter referred to as the "Accounting Standard
for Business Enterprises", "China Accounting Standards" or "CAS").
3 STATEMENT OF COMPLIANCE WITH THE ACCOUNTING STANDARDS FOR BUSINESS
ENTERPRISES
The consolidated and the company's financial statements for the six months
ended June 30, 2008 truly and completely present the financial position of the
Group and the Company as at June 30, 2008 and their financial performance and
their cash flows for the six months ended June 30, 2008 in compliance with the
Accounting Standards for Business Enterprises.
2008 INTERIM REPORT 54
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
4 PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES
(1) ACCOUNTING PERIOD
The accounting period of the Group starts on January 1 and ends on December
31.
(2) RECORDING CURRENCY
The recording currency of the Company and most of its subsidiaries is
Renminbi ("RMB"). The Group's consolidated financial statements are presented in
RMB.
(3) FOREIGN CURRENCY TRANSLATION
(A) FOREIGN CURRENCY TRANSACTIONS
Foreign currency transactions are translated into RMB at the exchange rates
prevailing at the date of the transactions.
Monetary items denominated in foreign currencies at the balance sheet date
are translated into RMB at the exchange rates prevailing at the balance sheet
date. Exchange differences arising from these translations are recognised in the
income statement. Non-monetary items denominated in foreign currencies measured
at historical cost are translated into RMB at the historical exchange rates
prevailing at the date of the transactions at the balance sheet date.
(B) TRANSLATION OF FINANCIAL STATEMENTS REPRESENTED IN FOREIGN CURRENCY
Assets and liabilities of each balance sheet of the foreign operations are
translated into RMB at the closing rates at the balance sheet date, while the
equity items are translated into RMB at the exchange rates at the date of the
transactions, except for the retained earnings. Income and expenses for each
income statement of the foreign operations are translated into RMB at the
average exchange rates for the year. The currency translation differences
resulted from the above-mentioned translations are recognised as a separate
component of equity. The cash flows denominated in foreign currencies and cash
flows of overseas subsidiaries are translated into RMB at the approximate
exchange rates at the date of the transactions. The impact on the cash flow
resulted from the foreign currency translation is presented in the cash flow
statement separately.
2008 INTERIM REPORT 55
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(4) CASH AND CASH EQUIVALENTS
In the cash flow statement, cash refers to all cash on hand and deposit
held at call with banks. Cash equivalents refer to short-term highly liquid
investments that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.
(5) FINANCIAL ASSETS
Financial assets are classified into the following categories at initial
recognition: financial assets at fair value through profit or loss, loans and
receivables, available-for-sale financial assets and held-to-maturity
investments. The classification depends on the Group's intention and the ability
to hold the financial assets. The Group only holds loans and receivables and
available-for-sale financial assets during the reporting period.
(A) LOANS AND RECEIVABLES
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market, including
accounts receivable, notes receivable, other receivables and cash at bank and on
hand etc..
(B) AVAILABLE-FOR-SALE FINANCIAL ASSETS
Available-for-sale financial assets are non-derivative that are either
designated in this category at initial recognition or not classified in any of
the other categories. They are included in other current assets on the balance
sheet if they are intended to be sold within 12 months of the balance sheet
date.
(C) RECOGNITION AND MEASUREMENT
Financial assets are recognised at fair value on the balance sheet when the
Group becomes a party to the contractual provisions of the instrument. Related
transaction costs of loans and receivables and available-for-sale financial
assets are recognised into the initial recognition costs. Financial assets are
derecognised when the rights to receive cash flows from the investments have
expired or all substantial risks and rewards of ownership have been transferred
to the transferee.
Available-for-sale financial assets are subsequently measured at fair
value. The investments in equity instruments that do not have a quoted market
price in an active market and whose fair value cannot be reliably measured are
carried at cost. Loans and receivables are stated at amortised costs using the
effective interest method.
2008 INTERIM REPORT 56
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
Changes in the fair values of available-for-sale financial assets are
recorded into equity except for impairment losses and foreign exchange gains and
losses arising from the transaction of monetary financial assets denominated in
foreign currencies. When the financial asset is derecognised, the cumulative
changes in fair value previously recognised in equity will be recognised in the
income statement. The interest of the available-for-sale debt instruments
calculated using the effective interest method is recognised as investment
income. The cash dividend from the available-for-sale equity instruments is
recognised as investment income when the dividend is declared.
(D) IMPAIRMENT OF FINANCIAL ASSETS
The Group assesses the carrying amount of financial assets at each balance
sheet date. If there is objective evidence that a financial asset is impaired,
an impairment provision shall be made.
If a financial asset carried at amortised cost is impaired, the amount of
the loss is measured as the difference between the asset's carrying amount and
the present value of estimated future cash flow (excluding future credit losses
that have not been incurred). If there is objective evidence that can prove the
value of such financial asset has been recovered, and that it is related to
events occurring subsequent to the recognition of impairment, the previously
recognised impairment losses shall be reversed and the amount of the reversal
will be recognised in the income statement.
When there is significant or nontemporary decline in the fair value of an
available-for-sale financial asset, the cumulative losses that have been
recognised in equity as a result of the decline in the fair value shall be
removed from equity and recognised as impairment losses in the income statement.
For an investment in debt instrument classified as available-for-sale on which
impairment losses have been recognised, if in a subsequent period the fair value
increases and the increase can be objectively related to an event occurring
after the impairment losses were recognised, the previously recognised
impairment losses shall be reversed, and recognised in the income statement. For
an investment in an equity instrument classified as available-for-sale on which
impairment losses have been recognised in a subsequent period, if its fair value
increases and the increase can be objectively related to an event occurring
after the impairment losses were recognised in the income statement, the
impairment losses shall be reversed and directly recognised in equity. The
impairment losses for an investment in an equity instrument that do not have
quoted market prices in active markets and whose fair value cannot be reliably
measured shall not be reversed even if the value of such instruments have been
recovered in a subsequent period.
2008 INTERIM REPORT 57
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(6) INVENTORIES
Inventories include crude oil and other raw materials, work in progress,
finished goods and turnover materials, and are presented at the lower of cost
and net realisable value.
Cost of inventories is determined primarily using the weighted average
method. The cost of finished goods and work in progress comprises cost of raw
materials, direct labour and production overheads allocated based on normal
operating capacity. Turnover materials include low cost consumables and
packaging materials which are expensed off in full when utilised.
Provision for decline in the value of inventories is measured as the excess
of the carrying value of the inventories over their net realisable value. Net
realisable value is the estimated selling price in the ordinary course of
business, less the estimated cost to completion and estimated selling expenses
and related taxes.
The Group adopts perpetual inventory system.
(7) LONG-TERM EQUITY INVESTMENTS
Long-term equity investments comprise the Company's equity investments in
subsidiaries, and the Group's equity investments in jointly controlled entities
and associates.
(A) SUBSIDIARIES
Subsidiaries are those entities over which the Group is able to control,
i.e. has the power to govern the financial and operating policies so as to
obtain benefits from the operating activities of these investees. The potential
voting rights, including currently convertible company bonds and exercisable
share warrants, are considered when assessing whether the Group has controls
over the investees. Investments in subsidiaries are accounted for at cost in the
financial statements of the Company and are consolidated after being adjusted by
the equity method accounting in consolidated financial statements.
Long-term equity investments accounted for at cost are measured at the
initial investment cost. The cash dividends or profit distributions declared by
the investees are recognised as investment income in current period which are
limited to the accumulated profits of the investee arising after the investment
was made. The cash dividends or profit distributions received in excess of such
amounts are recorded as a recovery of investment.
A listing of the Group's principal subsidiaries is set out in Note 6.
2008 INTERIM REPORT 58
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(B) JOINTLY CONTROLLED ENTITIES AND ASSOCIATES
Jointly controlled entities are those over which the Group is able to
exercise joint control together with other ventures. Associates are those in
which the Group has significant influence over the financial and operating
policies.
The investments in jointly controlled entities and associates are initially
recognised at cost and are subsequently accounted for using the equity method
accounting. The excess of the initial cost of the investment over the share of
the fair value of the investee's net identifiable assets is included in the
initial cost of the investment. While the excess of the share of the fair value
of the investee's net identifiable assets over the cost of the investment is
instead recognised in the income statement in the period in which the investment
is acquired and the cost of the long-term equity investment is adjusted
accordingly.
Under the equity method accounting, the Group's share of its investees'
post-acquisition profits or losses is recognised in the income statement. When
the Group's share of losses of an investee equals or exceeds the carrying amount
of the long-term equity investment and other long-term interests which
substantively form the net investment in the investee, the Group does not
recognise further losses, unless it has obligations to bear extra losses which
meet the criteria of recognition for liabilities according to the related
standards for contingencies. Movements in the investee' owner's equity other
than profit or loss should be proportionately recognised in the Group's capital
surplus, provided that the share interest of the investee remained unchanged.
The share of the investee's profit distribution or cash dividends declared is
accounted for as a reduction of the carrying amount of the investment upon
declaration. The profits or losses arising from the intra-group transactions
between the Group and its investees are eliminated to the extent of the Group's
interests in the investees, on the basis of which the investment income or
losses are recognised. The loss on the intra-group transaction between the Group
and its investees, of which nature is asset impairment, is recognised in full
amount, and the relevant unrealised loss is not allowed to be eliminated.
A listing of the Group's principal jointly controlled entities and
associates is set out in Note 7(7a).
(C) IMPAIRMENT OF LONG-TERM EQUITY INVESTMENT
The carrying amount of long-term equity investment is written down to its
recoverable amount when the recoverable amount is lower than the carrying amount
(Note 4(14)).
2008 INTERIM REPORT 59
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(8) FIXED ASSETS
Fixed assets comprise buildings, equipment and machinery, motor vehicles
and other. Fixed assets purchased or constructed are initially recorded at cost.
The fixed assets injected by the state-owned shareholder during the
Restructuring were initially recorded at the valuated amount approved by the
relevant authorities managing state-owned assets.
Subsequent expenditures for fixed assets are included in the cost of fixed
assets only when it is probable that in future economic benefits associated with
the items will flow to the Group and the cost of the items can be measured
reliably. The carrying amount of the replaced part is derecognised. All other
subsequent expenditures are charged to the income statement during the financial
period in which they are incurred.
Fixed assets are depreciated using the straight-line method based on their
costs less estimated residual values over their estimated useful lives. For
those fixed assets being provided for impairment loss, the related depreciation
charge is determined based on the carrying amounts less impairment over their
remaining useful lives.
The estimated useful lives, estimated residual value ratios and annual
depreciation rates of the fixed assets are as follows:
---------------------------------------------------------------------------------------------------------
ESTIMATED USEFUL LIVES ESTIMATED RESIDUAL VALUE RATIO % ANNUAL DEPRECIATION RATE%
---------------------------------------------------------------------------------------------------------
Buildings 8 to 40 years 5 2.4 to 11.9
Equipment and
Machinery 4 to 30 years 3 to 5 3.2 to 24.3
Motor Vehicles 7 to 14 years 5 6.8 to 13.6
Other 5 to 12 years 5 7.9 to 19.0
---------------------------------------------------------------------------------------------------------
The estimated useful lives, estimated residual values and depreciation
method of the fixed assets are reviewed, and adjusted if appropriate, at year
end.
An asset's carrying amount is written down immediately to its recoverable
amount if the asset's carrying amount is greater than its recoverable amount
(Note 4(14)).
The carrying amounts of fixed assets are derecognised when the fixed assets
are disposed or no future economic benefits are expected from their use or
disposal. When fixed assets are sold, transferred, disposed or damaged, gains or
losses on disposal are determined by comparing the proceeds with the carrying
amounts of the assets, adjusted by related taxes and expenses, and are recorded
in the income statement in the disposal period.
2008 INTERIM REPORT 60
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(9) OIL AND GAS PROPERTIES
Oil and gas properties include the mineral interests in properties, wells
and related facilities arising from oil and gas exploration and production
activities.
The costs of obtaining the mineral interests in properties are capitalised
when they are incurred and are initially recognised at acquisition costs.
Exploration license fee, production license fee, rent and other costs for
retaining the mineral interests in properties, subsequent to the acquisition of
the mineral interests in properties, are charged to the income statement.
Oil and gas exploration costs include drilling exploration costs and the
non-drilling exploration costs. The non-drilling exploration costs are recorded
in the income statement when incurred.
Oil and gas development costs are capitalised as the respective costs of
wells and related facilities for oil and gas development based on their intended
use.
The Ministry of Land and Resources in China issues production licenses to
applicants on the basis of the reserve reports approved by relevant authorities.
Future oil and gas price increases may extend the productive lives of crude oil
and natural gas reservoirs beyond the current terms of the relevant production
licenses. Payments on such licenses are made annually and are expensed as
incurred.
Oil and gas properties are depleted using the straight-line method based on
their costs less estimated residual values over their estimated useful lives
except for the mineral interests in unproved properties which are not subjected
to depletion. For those oil and gas properties being provided for impairment
loss, the related depletion charge is determined based on the carrying amounts
less impairment over their remaining useful lives. The estimated useful lives,
estimated residual value ratios and annual depletion rates are as follows:
-------------------------------------------------------------------------------------------------------------
ESTIMATED USEFUL LIVES ESTIMATED RESIDUAL VALUE RATIO% ANNUAL DEPLETION RATE%
-------------------------------------------------------------------------------------------------------------
Oil and gas properties 6 to 14 years - 7.1 to 16.7
-------------------------------------------------------------------------------------------------------------
The carrying amount of oil and gas properties other than the mineral
interests in unproved properties is reduced to the recoverable amount when their
recoverable amount is lower than their carrying amount. The carrying amount of
the mineral interests in unproved properties is reduced to the fair value when
their fair value is lower than their carrying amount (Note 4(14)).
2008 INTERIM REPORT 61
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(10) CONSTRUCTION IN PROGRESS
Construction in progress is recognised at actual cost. The actual cost
comprises construction costs, other necessary costs incurred and the borrowing
costs eligible for capitalisation to prepare the asset for its intended use.
Construction in progress is transferred to fixed assets when the assets are
ready for their intended use, and depreciation begins from the following month.
Oil and gas exploration costs include drilling exploration costs and the
non-drilling exploration costs. The successful efforts method is used for the
capitalisation of the drilling exploration costs. Drilling exploration costs
included in the oil and gas exploration costs are capitalised as wells and
related facilities when the wells are completed and economically proved reserves
are found. Drilling exploration costs related to the wells without economically
proved reserves less the net residual value are recorded in the income
statement. The related drilling exploration costs for the sections of wells with
economically proved reserves are capitalised as wells and related facilities,
and the costs of other sections are recorded in the income statement. Drilling
exploration costs are temporarily capitalised pending the determination of
whether economically proved reserves can be found within one year of the
completion of the wells. For wells that are still pending determination of
whether economically proved reserves can be found after one year of completion,
the related drilling exploration costs remain temporarily capitalised only if
sufficient reserves are found in those wells and further exploration activities
are required to determine whether they are economically proved reserves or not,
and further exploration activities are under way or firmly planned and are about
to be implemented. Otherwise the related costs are expensed as dry holes. If
proved reserves are discovered in a well, for which the drilling exploration
costs have been expensed previously, no adjustment should be made to the
drilling exploration costs that were expensed, while the subsequent drilling
exploration costs and costs for completion of the well are capitalised. The
economically proved reserves are the 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 at the date the
estimate is made.
The carrying amount of construction in progress is reduced to its
recoverable amount when its recoverable amount is lower than its carrying amount
(Note 4(14)).
2008 INTERIM REPORT 62
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(11) INTANGIBLE ASSETS
Intangible assets include land use rights and patents etc., and are
initially recorded at actual cost. The intangible assets injected by the
state-owned shareholder during the Restructuring were initially recorded at the
valued amount approved by the relevant authorities managing the state-owned
assets.
Land use rights obtained through payments of land use fee or acquired are
initially recorded at actual cost. The land use rights obtained through the
Restructuring in 1999 were initially recorded at the valued amount approved by
the relevant authorities managing the state-owned assets. Land use rights are
amortised using the straight-line method over 30 to 50 years. If it is
impracticable to allocate the amount paid for the purchase of land use rights
and buildings between the land use rights and the buildings on a reasonable
basis, the entire amount is accounted for as fixed assets.
Patent and other intangible assets are initially recorded at actual cost,
and amortised using the straight-line method less than 10 years generally.
The carrying amount of intangible assets is written down to its recoverable
amount when the recoverable amount is lower than the carrying amount (Note
4(14)). The estimated useful lives and amortisation method of the intangible
assets with finite useful life are reviewed, and adjusted if appropriate, at
each financial year-end.
(12) RESEARCH AND DEVELOPMENT
Research expenditure incurred is recognised as an expense. Costs incurred
on development projects are recognised as intangible assets to the extent that
such expenditure is expected to generate future economic benefits.
(13) LONG-TERM PREPAID EXPENSES
Long-term prepaid expenses include advance lease payments and other prepaid
expenses that should be borne by current and subsequent periods and should be
amortised over more than one year. Long-term prepaid expenses are amortised
using the straight-line method over the expected beneficial periods and are
presented at cost less accumulated amortisation.
2008 INTERIM REPORT 63
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(14) IMPAIRMENT OF ASSETS
Fixed assets, oil and gas properties except for mineral interests in
unproved properties, intangible assets and long-term equity investments are
tested for impairment if there is any indication that an asset may be impaired
at the balance sheet date. An impairment loss is recognised for the amount by
which the asset's carrying amount exceeds its recoverable amount if the
impairment test indicates that the recoverable amount is less than its carrying
amount. The recoverable amount is the higher of an asset's fair value less costs
to sell and the present value of the estimated future cash flow expected to be
derived from the asset. Impairment should be assessed and recognised for each
individual asset. If it is not possible to estimate the recoverable amount of an
individual asset, the recoverable amount of the group of assets to which the
asset belongs is determined. A group of assets is the smallest group of assets
that is able to generate independent cash flow.
The mineral interests in unproved properties are tested annually for
impairment. If the cost incurred to obtain a single property is significant, the
impairment test is performed and the impairment loss is determined on the basis
of the single property. If the cost incurred to obtain a single property is not
significant and the geological structure features or reserve layer conditions
are identical or similar to those of other adjacent properties, impairment tests
are performed on the basis of a group of properties that consist of several
adjacent mining areas with identical or similar geological structure features or
reserve layer conditions.
Once an impairment loss of these assets is recognised, it is not allowed to
be reversed even if the value can be recovered in subsequent period.
(15) BORROWING COSTS
Borrowing costs incurred that are directly attributable to the acquisition
and construction of fixed assets, which require a substantial period of time for
acquisition and construction activities to get ready for their intended use, are
capitalised as part of the cost of the assets when capital expenditures and
borrowing costs have already incurred and the activities of acquisition and
construction necessary to prepare the assets to be ready for their intended use
have commenced. The capitalisation of borrowing costs ceases when the assets are
ready for their intended use. Borrowing costs incurred thereafter are expensed.
Capitalisation of borrowing costs should be suspended during periods in which
the acquisition or construction of a fixed asset is interrupted abnormally, and
the interruption lasts for more than 3 months, until the acquisition or
construction is resumed.
(16) BORROWINGS
Borrowings are recognised initially at fair value, net of transaction costs
incurred, and subsequently stated at amortised cost using the effective interest
method. The borrowings are classified as short-term borrowings if they need to
be repaid within 12 months (12 months included) of the balance sheet date, and
the others are classified as long-term borrowings.
2008 INTERIM REPORT 64
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(17) EMPLOYEE COMPENSATION
Employee compensation includes wages, bonuses, allowances and subsidies,
employee welfare, social security contributions, housing funds, labour union
funds, employee education funds and other relevant compensation incurred in
exchange for services rendered by employees.
Employee compensation is recognised as a liability during the period which
employees render services, and it will be allocated into relevant costs and
expenses to whichever the employee service is attributable.
Compensation under the share appreciation right is measured based on the
fair value of the liability incurred and is expensed over the vesting period.
The liability is remeasured at each balance sheet date to its fair value until
settlement with all the changes in liabilities recorded in the income statement.
(18) PROVISIONS
Provisions for pending litigation, product guarantee, quality onerous
contracts etc. are recognised when the Group has present obligations, and it is
probable that an outflow of economic benefits will be required to settle the
obligations, and the amounts can be reliably estimated.
Provisions are measured at the best estimate of the expenditures expected
to be required to settle the present obligation. Factors surrounding the
contingencies such as the risks, uncertainties and the time value of money shall
be taken into account as a whole in reaching the best estimate of provisions.
Where the effect of the time value of money is material, the best estimate is
determined by discounting the related future cash flow. The increase in the
discounted amount of the provision arising from the passage of time is
recognised as interest expense.
Asset retirement obligations which meet the criteria of provisions are
recognised as provisions and the amount recognised is the present value of the
estimated future expenditure determined in accordance with local conditions and
requirements, while a corresponding addition to the related oil and gas
properties of an amount equivalent to the provision is also created. This is
subsequently depleted as part of the costs of the oil and gas properties.
Interest expenses from the assets retirement obligations for each period are
recognised with the effective interest method during the useful life of the
related oil and gas properties.
If the conditions for the recognition of the provisions are not met, the
expenditures for the decommissioning, removal and site cleaning will be expensed
in the income statement when occurred.
2008 INTERIM REPORT 65
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(19) DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES
Deferred tax assets and deferred tax liabilities are calculated and
recognised based on the differences (temporary differences) arising between the
tax bases of assets and liabilities and their carrying amounts. The deductible
losses, which can be utilised against the future taxable profit in accordance
with tax law, are regarded as temporary differences and a deferred tax asset is
recognised accordingly. The deferred tax assets and deferred tax liabilities are
not accounted for the temporary differences resulting from initial recognition
of an asset or liability in a transaction other than a business combination that
at the time of the transaction affects neither accounting nor taxable profit (or
deductible loss). Deferred tax assets and deferred tax liabilities are
determined using tax rates that are expected to apply to the period when the
related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets of the Group are recognised for deductible temporary
differences and deductible losses and tax credits to the extent that it is
probable that future taxable profit will be available against which the
deductible temporary differences, deductible losses and tax credits can be
utilised.
Deferred tax assets and liabilities are recognised for temporary
differences arising from investments in subsidiaries, associates and jointly
controlled entities, except where the timing of the reversal of the temporary
difference is controlled by the Group and it is probable that the temporary
difference will not reverse in the foreseeable future.
(20) REVENUE RECOGNITION
The amount of revenue is determined in accordance with the fair value of
the contractual consideration received or receivable for the sales of goods and
services in the ordinary course of the Group's activities. Revenue is shown net
of value-added tax, rebates, discounts and returns.
Revenue is recognised when specific criteria have been met for each of the
Group's activities as described below:
(A) SALES OF GOODS
Revenue from sales of goods is recognised when the Group has transferred to
the buyer the significant risks and rewards of ownership of the goods, and
retains neither continuing managerial involvement nor effective control over the
goods sold, and it is probable that the economic benefits associated with the
transaction will flow to the Group and related revenue and cost can be measured
reliably.
(B) RENDERING OF SERVICES
The Group recognises its revenue from rendering of services under the
percentage-of-completion (the "POC") method. Under the POC method, revenue is
recognised based on the costs incurred to date as a percentage of the total
estimated costs to be incurred.
2008 INTERIM REPORT 66
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(C) TRANSFER OF THE ASSETS USE RIGHTS
Interest income is recognised on a time-proportion basis using the
effective interest method.
Revenue from operating lease is recognised using the straight-line method
over the period of the lease.
(21) LEASES
Leases that transfer substantially all the risks and rewards incidental to
ownership of assets are classified as finance lease, and the Group had no
significant finance lease. Other leases are classified as operating leases.
Payments made under operating leases are charged to the income statement on
a straight-line basis over the period of the lease.
(22) DIVIDEND DISTRIBUTION
Dividend distribution is recognised as a liability in the period in which
it is approved by the shareholders.
(23) BUSINESS COMBINATION
(A) BUSINESS COMBINATION UNDER COMMON CONTROL
The consideration paid and the net assets obtained by the acquirer are
measured at their carrying value. The difference between the carrying value of
the net assets obtained and the carrying value of the consideration is adjusted
against the capital surplus. If the capital surplus is not sufficient to be
offset, the remaining balance is adjusted against retained earnings.
Costs incurred directly attributable to the business combination are
recorded in the income statement when incurred.
(B) BUSINESS COMBINATION NOT UNDER COMMON CONTROL
The acquisition costs paid and the identifiable net assets acquired by the
acquirer are measured at their fair value at the acquisition date. Where the
cost of combination exceeds the acquirer's interest in the fair value of the
acquiree's identifiable net assets, the difference is recognised as goodwill.
Where the cost of combination is less than the acquirer's interest in the fair
value of the acquiree's identifiable net assets, the difference is recognised
directly in the income statement.
Costs which are directly attributable to the business combination are
included in the cost of the combination.
2008 INTERIM REPORT 67
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(24) BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
The scope of consolidated financial statements includes the Company and its
subsidiaries.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are de-consolidated from the date that control
ceases. All material intercompany balances, transactions and unrealised gains
within the Group are eliminated upon consolidation. The portion of the
shareholders' equity of the subsidiaries that is not attributable to the parent
is treated as minority interest and presented separately within shareholders'
equity in the consolidated balance sheet.
When the accounting policies and accounting periods of subsidiaries are not
consistent with those of the Company, the Company will make necessary
adjustments to the financial statements of the subsidiaries in accordance with
the Company's accounting policies and accounting periods.
The financial statements of the subsidiaries acquired from the business
combination not under common control are adjusted on the basis of the fair value
of the identifiable net assets at the acquisition date when preparing the
consolidated financial statements. The assets, liabilities, operating result and
cash flow of the subsidiaries acquired from the business combination under
common control are included in the consolidated financial statements from the
beginning of the earliest period of the reporting period, as if the business
combination occurred at that point.
(25) SEGMENT REPORTING
A business segment is a distinguishable component of the Group that is
engaged in providing an individual product or service or a group of related
products or services and that is subject to risks and returns that are different
from those of other business segments. A geographical segment is a
distinguishable component of the Group that is engaged in providing products or
services within a particular economic environment and that is subject to risks
and returns that are different from those of components operating in other
economic environments.
The Group uses the business segment as the primary reporting format and the
geographical segment as the secondary reporting format. The prices for
inter-segment transfers or transactions are determined according to the market
prices. Expenses related to the usage of the assets that are jointly used by all
segments are allocated to segments basing on the proportion of the revenues of
each segment.
2008 INTERIM REPORT 68
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(26) CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on
historical experience and other factors, including expectations of future events
that are believed to be reasonable under the circumstances.
The critical accounting estimates and key assumptions that have a
significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year are outlined below:
(A) ESTIMATION OF OIL AND NATURAL GAS RESERVES
Oil and natural gas reserves are key factors in the Group's investment
decision-making process. They are also an important element in testing for
impairment. Proved reserve estimates are subject to revision, either upward or
downward, based on new information, such as from development drilling and
production activities or from changes in economic factors, including product
prices, contract terms, evolution of technology or development plans.
(B) ESTIMATED IMPAIRMENT OF FIXED ASSETS AND OIL AND GAS PROPERTIES
Fixed assets and oil and gas properties are reviewed for possible
impairment when events or changes in circumstances indicate that the carrying
amount may not be recoverable. Determination as to whether and how much an asset
is impaired involves management estimates and judgements such as future prices
of crude oil, refined products and chemical products and production profile.
However, the impairment reviews and calculations are based on assumptions that
are consistent with the Group's business plans. Favourable changes to some
assumptions may allow the Group to avoid the need to impair any assets in these
years, whereas unfavourable changes may cause the assets to become impaired.
(C) ESTIMATION OF ASSETS RETIREMENT OBLIGATIONS
Provision is recognised for the future decommissioning and restoration of
oil and gas properties. The amounts of the provision recognised are the present
values of the estimated future expenditures. The estimation of the future
expenditures is based on current local conditions and requirements, including
legal requirements, technology, price level, etc. In addition to these factors,
the present values of these estimated future expenditures are also impacted by
the estimation of the economic lives of oil and gas properties. Changes in any
of these estimates will impact the operating results and the financial position
of the Group over the remaining economic lives of the oil and gas properties.
2008 INTERIM REPORT 69
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
5 TAXATION
The principal taxes and related tax rates of the Group are presented as
below:
--------------------------------------------------------------------------------------------------------------
TYPES OF TAXES TAX RATE TAX BASIS
--------------------------------------------------------------------------------------------------------------
Value Added Tax (the "VAT") 13% or 17% Based on taxable value added amount. Tax payable is
calculated using the taxable sales amount multiplied
by the applicable tax rate less current period's
deductible VAT input.
Resource Tax Based on From July 1, 2005, the rate for crude oil increased
quantities from RMB 8-30 yuan per ton to RMB 14 -30 yuan per
ton, the rate for natural gas increased from RMB 2-15
yuan per thousand of cubic meter to RMB 7-15 yuan
per thousand of cubic meter.
Business Tax 3% Based on income generated from transportation of
crude oil and natural gas.
Consumption Tax Based on RMB 0.2 yuan per litre for unleaded gasoline, RMB 0.28
quantities yuan per litre for leaded gasoline, RMB 0.1 yuan per
litre for diesel. From April 1, 2006, this tax was
imposed on naphtha, solvent oil and lubricant at RMB
0.2 yuan per litre and fuel oil at RMB 0.1 yuan per
litre, and temporarily 30% of the tax is payable.
Corporate Income Tax 25% Based on taxable income.
Mineral Resources Compensation Fee 1% Based on the revenue from sales of crude oil and
natural gas.
Crude Oil Special Levy 20% to 40% Base on the sales of domestic crude oil at prices
higher than a specific level.
City Maintenance and Construction Tax 1%, 5% or 7% Based on the actually paid business tax, VAT and
consumption tax.
-------------------------------------------------------------------------------------------------------------
On March 16, 2007, the National People's Congress approved the Corporate
Income Tax Law of the PRC (the "new CIT Law"), which is effective from January
1, 2008. Under the new CIT Law, the corporate income tax rate applicable to the
Group is reduced to 25% from January 1, 2008, replacing the previously
applicable tax rate of 33%.
In accordance with the regulations by the State Administration of Taxation
(the "SAT") and MOF Cai Shui [2004] No. 156 "Notice of the MOF and the SAT on
the Issues related to the expanding the deduction scope of VAT in the Northeast
Area of China", some branches and subsidiaries of the Company deduct the input
VAT included in the purchased fixed assets, goods of taxable services for
self-manufacturing of fixed assets and transportation expenses paid for fixed
assets against the VAT incurred in current year. The unused input VAT for the
year can be carried forward to the following years if there is no VAT incurred
or the VAT incurred is not sufficient.
In accordance with the SAT Guo Shui Han [2007] No. 434 "Supplemental Notice
of the SAT on Reporting Taxable Income on a Consolidated Basis by PetroChina
Company Limited", Guo Shui Han [2004] No. 1072 "Notice of the SAT on Reporting
Taxable Income on a Consolidated Basis by PetroChina Company Limited" and Guo
Shui Han [2001] No. 434 "Supplemental Notice of the SAT on Reporting Taxable
Income on a Consolidated Basis by PetroChina Company Limited"), the Company and
its affiliates included under this consolidated basis pay income taxes with a
method of "uniform calculation, hierarchical management, on-site prepayment and
centralised settlement".
2008 INTERIM REPORT 70
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
In accordance with the SAT Guo Shui Fa [2002] No. 47 "Notice of the SAT on
the Detailed Implementation Opinions of Fulfilling the Tax Policies related to
the Great Development of the Western China", some branches of the Company got
the approval for the preferential tax rate of 15% in 2002 and the preferential
tax rate will be valid until 2010. In accordance with the regulations by the
Central People's Government of the People's Republic of China (the "GOV") Guo Fa
[2007] No. 39 "Notice of the GOV on the transitional preferential policy of
Corporate Income Tax", the above preferential tax rate will be valid
continuously until 2010, when the policy will expire.
In accordance with Cai Shui [2002] No. 111 "Notice of the MOF and the SAT
on Tax Policy related to the West-East Pipeline Project", the application tax
rate for the West-East pipeline branch of the Company is 15%. While in
accordance with Guo Fa [2007] No. 39 "Notice of the GOV on the transition
favourable policy of Corporate Income Tax", the above preferential tax policy
will cease to implement. Therefore from 2008 the application tax rate for the
West-East pipeline branch of the Company is 25%.
6 PRINCIPAL SUBSIDIARIES
--------------------------------------------------------------------------------------------------------------
ATTRIBUTABLE ATTRIBUTABLE
COMPANY NAME COUNTRY OF REGISTERED PRINCIPAL EQUITY INTEREST % VOTING RIGHTS %
INCORPORATION CAPITAL ACTIVITIES ---------------- -----------------
DIRECT INDIRECT DIRECT INDIRECT
--------------------------------------------------------------------------------------------------------------
Daqing Oilfield PRC 47,500 Exploration, 100.00 - 100.00 -
Company Limited production and
sale of crude oil
and natural gas;
production and
sale of refined
products
CNPC Exploration PRC 16,100 Exploration and 50.00 - 57.14 -
and Development production and
Company Limited sale of crude
oil and natural
gas in and
outside PRC
Daqing Yu Shu Lin PRC 1,272 Exploration, - 88.16 - 88.16
Oilfield Company production and
Limited sale of crude oil
and natural gas
PetroKazakhstan Inc. Canada US Dollar Exploration, - 67.00 - 67.00
("USD") production and
1,965 sale of crude
million oil and natural
gas outside PRC
--------------------------------------------------------------------------------------------------------------
2008 INTERIM REPORT 71
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
7 NOTES TO THE FINANCIAL STATEMENTS (ALL AMOUNTS ARE FOR THE GROUP UNLESS
OTHERWISE STATED)
(1) CASH AT BANK AND ON HAND
--------------------------------------------------------------------------------
JUNE 30, 2008 DECEMBER 31, 2007
--------------------------------------------------------------------------------
Cash on hand 243 149
Cash at bank 72,692 88,344
Other cash balances 1,442 96
------------- -----------------
74,377 88,589
============= =================
--------------------------------------------------------------------------------
The Group's cash at bank and on hand included the following foreign
currencies as at June 30, 2008 and December 31, 2007:
--------------------------------------------------------------------------------
JUNE 30, 2008 DECEMBER 31, 2007
-------------------------------- --------------------------------
FOREIGN EXCHANGE RMB FOREIGN EXCHANGE RMB
CURRENCY RATE EQUIVALENT CURRENCY RATE EQUIVALENT
--------------------------------------------------------------------------------
USD 1,747 6.8591 11,981 1,678 7.3046 12,257
Tenge 3,958 0.0571 226 - -
Other 62 81
---------- ----------
12,269 12,338
========== ==========
--------------------------------------------------------------------------------
As at June 30, 2008, time deposit of USD 602 million (December 31, 2007:
USD 450 million) is pledged as collateral for its subsidiaries' long-term
borrowings of USD 602 million (December 31, 2007: USD 450 million) (Note 7(24));
and time deposit of USD 68 million (December 31, 2007: USD 240 million) is
pledged as collateral for its associates' borrowings.
(2) NOTES RECEIVABLE
Notes receivable represent mainly bank acceptance bill received for sales
of goods and products.
As at June 30, 2008, notes receivable of RMB 1,020 is impawned for the
Group's short-term borrowings of RMB 1,020 (December 31, 2007: RMB 300) (Note 7
(15)). All notes receivable of the Group other than the above-mentioned notes
receivable are unsecured, and all notes receivable of the Group are due within
one year.
2008 INTERIM REPORT 72
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(3) ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES
(A) ACCOUNTS RECEIVABLE
--------------------------------------------------------------------------------
GROUP COMPANY
-------------------- --------------------
JUNE DECEMBER JUNE DECEMBER
30, 2008 31, 2007 30, 2008 31, 2007
--------------------------------------------------------------------------------
Accounts receivable 30,554 21,298 5,957 4,785
Less: Provision for bad debts (2,828) (2,879) (2,592) (2,654)
-------- -------- -------- --------
27,726 18,419 3,365 2,131
======== ======== ======== ========
--------------------------------------------------------------------------------
The aging of accounts receivable and related provision for bad debts are
analysed as follows:
--------------------------------------------------------------------------------
GROUP
-----------------------------------------------------------------
JUNE 30, 2008 DECEMBER 31, 2007
------------------------------- -------------------------------
PERCENTAGE PROVISION PERCENTAGE PROVISION
OF TOTAL FOR BAD OF TOTAL FOR BAD
AMOUNT BALANCE % DEBTS AMOUNT BALANCE % DEBTS
--------------------------------------------------------------------------------
Within 1 year 27,587 91 (1) 18,260 86 (1)
1 to 2 years 42 - - 39 - -
2 to 3 years 39 - (1) 32 - (1)
Over 3 years 2,886 9 (2,826) 2,967 14 (2,877)
------ ---------- --------- ------ ---------- ---------
30,554 100 (2,828) 21,298 100 (2,879)
====== ========== ========= ====== ========== =========
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPANY
-----------------------------------------------------------------
JUNE 30, 2008 DECEMBER 31, 2007
------------------------------- -------------------------------
PERCENTAGE PROVISION PERCENTAGE PROVISION
OF TOTAL FOR BAD OF TOTAL FOR BAD
AMOUNT BALANCE % DEBTS AMOUNT BALANCE % DEBTS
--------------------------------------------------------------------------------
Within 1 year 3,282 55 (1) 2,025 42 (1)
1 to 2 years 13 - - 22 - -
2 to 3 years 22 - - 31 1 -
Over 3 years 2,640 45 (2,591) 2,707 57 (2,653)
------ ---------- --------- ------ ---------- ---------
5,957 100 (2,592) 4,785 100 (2,654)
====== ========== ========= ====== ========== =========
--------------------------------------------------------------------------------
2008 INTERIM REPORT 73
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
As at June 30, 2008, accounts receivable of the Group from shareholders who
hold 5% or more of the voting rights in the Company amounted to RMB 2,271
(December 31, 2007: RMB 3,796). As at June 30, 2008, accounts receivable of the
Company from shareholders who hold 5% or more of the voting rights in the
Company amounted to RMB 638 (December 31, 2007: RMB 415).
As at June 30, 2008, the five largest debtors of accounts receivable of the
Group amounted to RMB 10,916 representing 36% of total accounts receivable; the
five largest debtors of accounts receivable of the Company amounted to RMB 2,341
representing 39% of total accounts receivable.
During the six months ended June 30, 2008 and the six months ended June 30,
2007, the Group had no significant write off of the provision for bad debts of
accounts receivable.
(B) OTHER RECEIVABLES
----------------------------------------------------------------------------------------------------------
GROUP COMPANY
---------------------------------- ------------------------------
JUNE DECEMBER JUNE DECEMBER
30, 2008 31, 2007 30, 2008 31, 2007
----------------------------------------------------------------------------------------------------------
Other receivables 21,007 19,495 25,837 26,266
Less: Provision for bad debts (4,043) (4,051) (2,080) (2,093)
---------------- ------------ ----------- -------------
16,964 15,444 23,757 24,173
================ ============ =========== =============
-------------------------------------------------------------------------------------------------------------
The aging analysis of other receivables and the related provision for bad
debts are analysed as follows:
----------------------------------------------------------------------------------------------------------
GROUP
------------------------------------------------------------------------------
JUNE 30, 2008 DECEMBER 31, 2007
------------------------------------- -----------------------------------
PERCENTAGE PROVISION PERCENTAGE PROVISION
OF TOTAL FOR BAD OF TOTAL FOR BAD
AMOUNT BALANCE % DEBTS AMOUNT BALANCE % DEBTS
----------------------------------------------------------------------------------------------------------
Within 1 year 9,359 45 - 12,751 65 -
1 to 2 years 7,222 34 (3) 2,316 12 (5)
2 to 3 years 92 - (6) 111 1 (5)
Over 3 years 4,334 21 (4,034) 4,317 22 (4,041)
-------- ---------- -------- ------ ---------- ---------
21,007 100 (4,043) 19,495 100 (4,051)
======== ========== ======== ====== ========== =========
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
COMPANY
------------------------------------------------------------------------------
JUNE 30, 2008 DECEMBER 31, 2007
------------------------------------- -----------------------------------
PERCENTAGE PROVISION PERCENTAGE PROVISION
OF TOTAL FOR BAD OF TOTAL FOR BAD
AMOUNT BALANCE % DEBTS AMOUNT BALANCE % DEBTS
----------------------------------------------------------------------------------------------------------
Within 1 year 16,198 62 - 15,962 61 -
1 to 2 years 6,901 27 (3) 7,939 30 (4)
2 to 3 years 423 2 (5) 46 - (5)
Over 3 years 2,315 9 (2,072) 2,319 9 (2,084)
-------- ---------- --------- ------ ---------- ---------
25,837 100 (2,080) 26,266 100 (2,093)
======== ========== ========= ====== ========== =========
----------------------------------------------------------------------------------------------------------
2008 INTERIM REPORT 74
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
As at June 30, 2008, other receivables of the Group from shareholders who
hold 5% or more of the voting rights in the Company amounted to RMB 1,987
(December 31, 2007: RMB 2,351). As at June 30, 2008, other receivables of the
Company from shareholders who hold 5% or more of the voting rights in the
Company amounted to RMB 673 (December 31, 2007: RMB 141).
As at June 30, 2008, the five largest debtors of other receivables of the
Group amounted to RMB 9,327 representing 44% of total other receivables; the
five largest debtors of other receivables of the Company amounted to RMB 15,081
representing 58% of total other receivables.
During the six months ended June 30, 2008 and the six months ended June 30,
2007, the Group had no significant write off of the provision for bad debts of
other receivables.
(4) ADVANCES TO SUPPLIERS
------------------------------------------------------------------------------------------------------------
GROUP
------------------------------------------
JUNE 30, 2008 DECEMBER 31, 2007
------------------------------------------------------------------------------------------------------------
Advances to suppliers 51,069 20,414
Less: Provision for bad debts (27) (28)
------------------- --------------------
51,042 20,386
=================== ====================
-------------------------------------------------------------------------------------------------------------
As at June 30, 2008 and December 31, 2007, advances to suppliers of the
Group are mainly aged within one year.
As at June 30, 2008, advances to suppliers from shareholders who hold 5% or
more of the voting rights in the Company amounted to RMB 32,147 (December 31,
2007: RMB 7,984).
Advances to suppliers as at June 30, 2008, mainly comprise of advance
payments for materials and equipments in-transit, and are not settled.
(5) INVENTORIES
----------------------------------------------------------------------------------------------------------
JUNE 30, 2008 DECEMBER 31, 2007
----------------------------------------------------------------------------------------------------------
Cost
Crude oil and other raw materials 40,276 30,308
Work in progress 4,162 6,083
Finished goods 56,243 52,791
Turnover materials 32 32
----------------- -----------------
100,713 89,214
Less: Provision for declines in the value of inventories (2,153) (747)
----------------- -----------------
Net book value 98,560 88,467
================= =================
----------------------------------------------------------------------------------------------------------
As at June 30, 2008 and December 31, 2007, inventories of RMB 29 are
impawned as collateral for the Group's short-term borrowings of RMB 20 (Note
7(15)).
2008 INTERIM REPORT 75
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(6) AVAILABLE-FOR-SALE FINANCIAL ASSETS
--------------------------------------------------------------------------------
JUNE 30, 2008 DECEMBER 31, 2007
--------------------------------------------------------------------------------
Available-for-sale debenture 16 17
Available-for-sale equity instrument 2,675 3,066
------------- -----------------
2,691 3,083
Less: Provision for impairment (544) (553)
------------- -----------------
2,147 2,530
============= =================
--------------------------------------------------------------------------------
(7) LONG-TERM EQUITY INVESTMENTS
-----------------------------------------------------------------------------------------------------------------
GROUP
--------------------------------------------------------------
DECEMBER 31, 2007 ADDITION REDUCTION JUNE 30, 2008
-----------------------------------------------------------------------------------------------------------------
Associates and jointly controlled entities (a) 22,841 7,692 (3,509) 27,024
-------- ---------
Less : Provision for impairment (155) (169)
----------------- -------------
22,686 26,855
================= =============
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
COMPANY
--------------------------------------------------------------
DECEMBER 31, 2007 ADDITION REDUCTION JUNE 30, 2008
-----------------------------------------------------------------------------------------------------------------
Subsidiaries (b) 99,983 16,139 (32) 116,090
Associates and jointly controlled entities 4,863 250 (322) 4,791
-------- ---------
Less: Provision for impairment (155) (174)
------------------ -------------
104,691 120,707
================== =============
-----------------------------------------------------------------------------------------------------------------
As at June 30, 2008, the above-mentioned investments are not subject to
restriction on conversion into cash or remittance of investment income.
(A)INVESTMENTS IN PRINCIPAL ASSOCIATES AND JOINTLY CONTROLLED ENTITIES
----------------------------------------------------------------------------------------------------------------------
FOR THE SIX
AS AT MONTHS ENDED
JUNE 30, 2008 JUNE 30, 2008
COUNTRY OF REGIS- EQUITY VOTING --------------------------------------
INCORPOR- PRINCIPAL TERED INTEREST RIGHTS TOTAL TOTAL NET
ATION ACTIVITIES CAPITAL % % ASSETS LIABILITIES REVENUE PROFIT
----------------------------------------------------------------------------------------------------------------------
Dalian West PRC Production and USD 28.44 28.44 14,377 12,587 23,821 (1,120)
Pacific sale of petroleum 258
Petrochemical and petrochemical million
Co., Ltd. products
China Marine PRC Oil import and 1,000 50.00 50.00 9,421 6,933 22,070 252
Bunker export trade and
(PetroChina) transportation,
Co., Ltd. sale and storage
----------------------------------------------------------------------------------------------------------------------
2008 INTERIM REPORT 76
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
Investments in associates and jointly controlled entities are listed below:
---------------------------------------------------------------------------------------------------------------------------
SHARE OF
PROFIT OF ASSOCIATE
INVESTEES TRANSFERR-
INITIAL DECEM- UNDER CASH CURRENCY ED TO
INVEST- BER ADDI- REDU- EQUITY DIVIDEND TRANSLATION SUBSIDIAR- JUNE
MENT COST 31, 2007 TION CTION METHOD DECLARED DIFFERENCES IES 30, 2008
---------------------------------------------------------------------------------------------------------------------------
Dalian West 566 948 - (7) (318) (114) - - 509
Pacific
Petrochemical
Co., Ltd.
China Marine 740 1,059 - (1) 126 - (5) - 1,179
Bunker
(PetroChina)
Co., Ltd.
Other 20,834 3,466 (25) 4,418 (2,021) (1,280) (56) 25,336
--------- ----- ----- --------- -------- ----------- ----------- --------
22,841 3,466 (33) 4,226 (2,135) (1,285) (56) 27,024
========= ===== ===== ========= ======== =========== =========== ========
---------------------------------------------------------------------------------------------------------------------------
(B) SUBSIDIARIES
Principal subsidiaries:
---------------------------------------------------------------------------------------------------------------
AS AT FOR THE SIX MONTHS ENDED
JUNE 30, 2008 JUNE 30, 2008
--------------------------------- -------------------------
TOTAL ASSETS TOTAL LIABILITIES REVENUE NET PROFIT
---------------------------------------------------------------------------------------------------------------
Daqing Oilfield Company Limited 149,289 35,024 128,856 41,643
CNPC Exploration and Development Company Limited 91,065 28,353 29,677 9,207
---------------------------------------------------------------------------------------------------------------
Investment in subsidiaries:
-------------------------------------------------------------------------------------------------------------
INITIAL ADDITIONAL DECEMBER JUNE
INVESTMENT COST INVESTMENT 31, 2007 ADDITION REDUCTION 30, 2008
-------------------------------------------------------------------------------------------------------------
Daqing Oilfield
Company Limited 66,720 - 66,720 - - 66,720
CNPC Exploration and
Development Company
Limited 13,924 8,000 13,924 8,000 - 21,924
Other 19,339 8,139 (32) 27,446
-------- -------- --------- --------
Total 99,983 16,139 (32) 116,090
======== ======== ========= ========
-------------------------------------------------------------------------------------------------------------
2008 INTERIM REPORT 77
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(8) FIXED ASSETS
---------------------------------------------------------------------------------------------------------------
BUILDINGS EQUIPMENT AND MOTOR OTHER TOTAL
MACHINERY VEHICLES
---------------------------------------------------------------------------------------------------------------
Cost
On December 31, 2007 92,240 334,551 15,336 8,600 450,727
Transferred from construction in progress 1,423 10,677 - 179 12,279
Other addition 162 993 577 85 1,817
Reduction (797) (1,734) (230) (41) (2,802)
Currency translation differences (162) (301) (63) (99) (625)
--------- ------------ -------- ----- -------
On June 30, 2008 92,866 344,186 15,620 8,724 461,396
--------- ------------ -------- ----- -------
Accumulated depreciation
On December 31, 2007 (22,461) (158,774) (7,738) (4,157) (193,130)
Charge for the year (2,394) (10,734) (608) (361) (14,097)
Reduction 207 800 109 - 1,116
Currency translation differences 38 97 34 55 224
--------- ------------ -------- ------ ---------
On June 30, 2008 (24,610) (168,611) (8,203) (4,463) (205,887)
--------- ------------ -------- ------- ---------
Provision for Impairment
On December 31, 2007 (2,222) (7,561) (8) (3) (9,794)
Addition (563) (5,297) (28) (17) (5,905)
Reduction 15 59 - - 74
--------- ------------ -------- ------ ---------
On June 30, 2008 (2,770) (12,799) (36) (20) (15,625)
--------- ------------ -------- ------ ---------
Net book value
On June 30, 2008 65,486 162,776 7,381 4,241 239,884
========= ============ ======== ======= =========
On December 31, 2007 67,557 168,216 7,590 4,440 247,803
========= ============ ======== ======= =========
---------------------------------------------------------------------------------------------------------------
As at June 30, 2008, fixed assets of RMB 372 was pledged as collateral for
RMB 60 short-term borrowing (Note 7(15)) and RMB 70 long-term borrowings (Note
7(24)); As at December 31, 2007, no fixed assets was pledged as collateral for
short-term borrowing (Note 7(15)) and long term borrowings (Note 7(24)).
As at June 30, 2008, the fixed assets which were temporarily idle amounted
to RMB 360.
As at June 30, 2008, the cost of fixed assets fully depreciated but still
in use include: buildings of RMB 2,393, equipment and machinery of RMB 33,752,
motor and vehicles of RMB 2,164 and other of RMB 640 and amounted to RMB 38,949
in total.
Fixed assets under operating leases are mainly equipment and machinery
which amounted to RMB 68.
2008 INTERIM REPORT 78
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(9) OIL AND GAS PROPERTIES
----------------------------------------------------------------------------------------------------------
CURRENCY
TRANSLATION JUNE 30,
DECEMBER 31, 2007 ADDITION REDUCTION DIFFERENCES 2008
----------------------------------------------------------------------------------------------------------
Cost
Mineral interests in
unproved properties 2,469 - - (151) 2,318
Mineral interests in
proved properties - - - - -
Wells and related
facilities 667,403 20,757 (1,154) (2,339) 684,667
----------------- --------- --------- ----------- ---------
669,872 20,757 (1,154) (2,490) 686,985
----------------- --------- --------- ----------- ---------
Accumulated depletion
Mineral interests in
proved properties - - - - -
Wells and related
facilities (340,333) (25,864) 852 1,517 (363,828)
----------------- --------- --------- ----------- ---------
(340,333) (25,864) 852 1,517 (363,828)
----------------- --------- --------- ----------- ---------
Provision for impairment
Mineral interests in
unproved properties - - - - -
Mineral interests in
proved properties - - - - -
Wells and related
facilities (3,211) - 11 - (3,200)
----------------- --------- --------- ----------- ---------
(3,211) - 11 - (3,200)
----------------- --------- --------- ----------- ---------
Net book value
Mineral interests in
unproved properties 2,469 - - (151) 2,318
Mineral interests in
proved properties - - - - -
Wells and related
facilities 323,859 (5,107) (291) (822) 317,639
----------------- --------- --------- ----------- ---------
326,328 (5,107) (291) (973) 319,957
================= ========= ========= =========== =========
-------------------------------------------------------------------------------------------------------------
As at June 30, 2008, the assets retirement obligations capitalised in the
cost of oil and gas properties amounted to RMB 22,942 (December 31, 2007: RMB
22,499). Depletion charge for the six months ended June 30, 2008 was RMB 1,090
(for the six months ended June 30, 2007: RMB 779).
(10) CONSTRUCTION MATERIALS
The Group's construction materials mainly represent the actual cost of
materials purchased for construction projects.
2008 INTERIM REPORT 79
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(11) CONSTRUCTION IN PROGRESS
------------------------------------------------------------------------------------------------------------------------------------
TRANSFERRED PROPORTION
TO JUNE 30, 2008 OF
DECEMBER FIXED ASSETS -------------------- CONSTRUCTION
2007 ADDITION OR OIL AND CURRENCY CAPITALISED SOURCE COMPARE
-------- -------- GAS OTHER TRANSLATION INTEREST OF THE TO
PROJECT NAME BUDGET AMOUNT AMOUNT PROPERTIES REDUCTION(i) DIFFERENCES AMOUNT EXPENSE FUND BUDGET%
------------------------------------------------------------------------------------------------------------------------------------
Dushanzi
Petrochemical
10 million
tons / year Self&
of Kazakh oil 9,149 5,043 881 - - - 5,924 157 Loan 66
Dushanzi
Petrochemical
1 million
tons / year Self&
ethylene 21,000 8,235 1,788 - - - 10,023 381 Loan 48
Dalian
Petrochemical
20 million
tons / year
sulphur crude
oil
technology Self&
transformation 10,789 6,523 731 (6,666) - - 588 27 Loan 68
GuangXi
Petrochemical
10 million
tons / year
refining Self&
project 15,166 1,906 1,652 (1) - - 3,557 34 Loan 23
Lanzhou-
Zhengzhou Self&
Pipeline 11,429 1,839 4,002 - - - 5,841 69 Loan 51
East West
Pipeline 2nd Self&
phase 142,243 49 3,868 (1) - - 3,916 63 Loan 3
Other 82,324 55,186 (25,829) (6,634) (360) 104,687 1,099
------- ------ ------- ------ ---- ------- -----
105,919 68,108 (32,497) (6,634) (360) 134,536 1,830
Less:
Provision for
impairment (285) (276)
------- -------
105,634 134,260
======= =======
------------------------------------------------------------------------------------------------------------------------------------
For the six months ended June 30, 2008, the capitalised interest expense
amounted to RMB 1,119 (for the six months ended June 30, 2007: RMB 574). The
interest rate used to determine the capitalised amount in 2008 is 6.966% (during
the six months ended June 30, 2007: 6.237%).
2008 INTERIM REPORT 80
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(i) Other reduction refers to expensing of drilling and exploration costs
when it fails to discover economical proved oil and gas reserve, or not sure
whether economical proved reserves are found within one year of completion and
no longer meets the conditions of capitalisation.
(12) INTANGIBLE ASSETS
-------------------------------------------------------------------------------------------------------------------------
CURRENCY
DECEMBER 31, TRANSLATION JUNE 30, ACCUMULATED
COST 2007 ADDITION REDUCTION AMORTISATIION DIFFERENCES 2008 AMORTISATION
-------------------------------------------------------------------------------------------------------------------------
Land use rights 17,789 14,937 994 (18) (252) (6) 15,655 (2,134)
Patents 2,787 1,440 78 - (96) - 1,422 (1,365)
Other (i) 6,261 4,220 648 (7) (346) (52) 4,463 (1,798)
------ ------------ -------- --------- ------------- ----------- -------- ------------
26,837 20,597 1,720 (25) (694) (58) 21,540 (5,297)
====== ============ ======== ========= ============= =========== ======== ============
Less:
Provision
for
impairment
Land use rights (333) (2) - - - (335)
Patents (179) (1) - - - (180)
Other (i) (63) (19) - - - (82)
------------ -------- --------- ------------- ----------- --------
20,022 1,698 (25) (694) (58) 20,943
============ ======== ========= ============= =========== ========
-----------------------------------------------------------------------------------------------------------
Research and development expenditures for the six months ended June 30,
2008 amounted to RMB 5,153 (for the six months ended June 30, 2007: RMB 2,796),
which have been recognised in the income statement.
(i) Other intangible assets include non-proprietary technology and
trademark use right.
(13) LONG-TERM PREPAID EXPENSES
-------------------------------------------------------------------------------------------------------------
JUNE 30, 2008 DECEMBER 31, 2007
-------------------------------------------------------------------------------------------------------------
Advance lease payments (i) 9,547 9,006
Other 2,855 3,022
------------------------------- --------------------------------
12,402 12,028
=============================== ================================
-------------------------------------------------------------------------------------------------------------
(i) Advance lease payments are principally for use of land sub-leased from
entities other than the PRC land authorities.
2008 INTERIM REPORT 81
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(14) PROVISION FOR ASSETS
----------------------------------------------------------------------------------------------------------
DECEMBER 31, 2007 PROVISION REVERSAL WRITE OFF JUNE 30, 2008
----------------------------------------------------------------------------------------------------------
Bad debts provision for
accounts receivable 2,879 11 (51) (11) 2,828
Bad debts provision for
other receivables 4,051 11 (19) - 4,043
Bad debts provision for
advances to suppliers 28 - - (1) 27
Provision for declines
in the value of
inventories 747 1,422 - (16) 2,153
Provision for impairment
of available-for-sale
financial assets 553 10 - (19) 544
Provision for impairment
of long-term equity
investments 155 19 - (5) 169
Provision for impairment
of fixed assets 9,794 5,905 - (74) 15,625
Provision for impairment
of oil and gas properties 3,211 - - (11) 3,200
Provision for impairment
of construction in
progress 285 - - (9) 276
Provision for impairment
of intangible assets 575 22 - - 597
----------------- --------- -------- --------- -------------
Total 22,278 7,400 (70) (146) 29,462
================= ========= ======== ========= =============
----------------------------------------------------------------------------------------------------------
(15) SHORT-TERM BORROWINGS
-------------------------------------------------------------------------------------------------------------
JUNE 30, 2008 DECEMBER 31, 2007
-------------------------------------------------------------------------------------------------------------
Secured borrowings
Guarantee -- RMB 30 30
Pledge -- RMB 60 -
Impawn -- RMB 1,040 320
Unsecured borrowings
Unsecured -- USD 10,452 5,318
Unsecured -- RMB 12,348 11,056
Unsecured -- HKD 1,887 2,010
------------------- --------------------
25,817 18,734
=================== ====================
-------------------------------------------------------------------------------------------------------------
As at June 30, 2008 and December 31, 2007, the above-mentioned short-term
guaranteed borrowings are from China Petroleum Finance Company Limited ("CP
Finance"), and are guaranteed by the Company and other third parties.
2008 INTERIM REPORT 82
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
As at June 30, 2008, the above-mentioned short-term pledged borrowings and
RMB 70 long-term pledged borrowings (Note 7(24)) are secured over the fixed
assets with a net book value of RMB 372 (Note 7(8)) (December 31, 2007: Nil).
As at June 30, 2008, the above-mentioned short-term impawned borrowings are
secured over notes receivable of RMB 1,020 (Note 7(2)) (December 31, 2007: RMB
300) and inventories with a net book value of RMB 29 (Note 7(5)) (December 31,
2007: RMB 29).
As at June 30, 2008, the short-term unsecured borrowings include loans from
fellow CNPC subsidiary, CP Finance of RMB 876 (December 31, 2007: RMB 20).
The weighted average interest rate for short-term borrowings as at June 30,
2008 is 4.88% per annum (December 31, 2007: 5.14%).
(16) NOTES PAYABLE
As at June 30, 2008 and December 31, 2007, notes payable represented mainly
trade accepted notes. All notes are maturing within one year.
As at June 30, 2008 and December 31, 2007, there are no notes payable to
shareholders who hold 5% or more of the voting rights in the Company.
(17) ACCOUNTS PAYABLE
As at June 30, 2008, accounts payable included amount payable to
shareholders who hold 5% or more of the voting rights in the Company RMB 35,385
(December 31, 2007: RMB 29,507).
As at June 30, 2008, accounts payable aged over one year amounted to RMB
8,027 (December 31, 2007: RMB 7,323), and mainly comprised of payables to
several major customers and were not settled.
(18) ADVANCES FROM CUSTOMERS
As at June 30, 2008, advances from customers included amount payable to
shareholders who hold 5% or more of the voting rights in the Company RMB 1,215
(December 31, 2007: RMB 924).
2008 INTERIM REPORT 83
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(19) EMPLOYEE COMPENSATION PAYABLE
---------------------------------------------------------------------------------------------------------
DECEMBER 31, 2007 ADDITION REDUCTION JUNE 30, 2008
---------------------------------------------------------------------------------------------------------
Wages and salaries, bonuses,
allowances and subsidies 7,751 16,321 (19,527) 4,545
Staff welfare 1,799 1,330 (2,552) 577
Social security contributions 708 9,324 (8,718) 1,314
Housing fund 44 1,511 (1,467) 88
Labour union funds and employee
education funds 1,076 719 (495) 1,300
Other 207 1,206 (1,276) 137
----------------- -------- -------- -------------
11,585 30,411 (34,035) 7,961
================= ======== ======== =============
------------------------------------------------------------------------------------------------------------
As at June 30, 2008, employee compensation payable did not contain any
balance in arrears.
(20) TAXES PAYABLE
-------------------------------------------------------------------------------------------------------
JUNE 30, 2008 DECEMBER 31, 2007
-------------------------------------------------------------------------------------------------------
Corporate income tax 2,096 11,709
Prepaid VAT payable (13,468) (12,133)
Business tax payable 153 255
Consumption tax payable 1,065 1,335
City maintenance and construction tax payable 908 795
Educational surcharge payable 803 407
Compensation on mineral resources 1,891 1,493
Resources tax payable 436 515
Crude oil special levy payable 25,919 17,001
Other 2,459 1,431
--------------- -----------------
22,262 22,808
=============== =================
-------------------------------------------------------------------------------------------------------
2008 INTERIM REPORT 84
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(21) OTHER PAYABLES
As at June 30, 2008, other payables included amount payable to shareholders
who hold 5% or more of the voting rights in the Company RMB 5,717 (December 31,
2007: RMB 2,625).
As at June 30, 2008, other payables that aged over one year amounted to RMB
3,750 (December 31, 2007: RMB 2,619), and mainly comprised of payable to several
major counterparts that had not been settled.
As at June 30, 2008, other payables mainly comprised of deposits and
payments made on behalf.
(22) PROVISIONS
----------------------------------------------------------------------------------------------------------
DECEMBER 31, 2007 ADDITION REDUCTION JUNE 30, 2008
----------------------------------------------------------------------------------------------------------
Assets retirement
obligations (i) 24,761 1,303 (98) 25,966
Other 715 62 (217) 560
------------------ -------------- ----------- ----------------
25,476 1,365 (315) 26,526
================== ============== =========== ================
-------------------------------------------------------------------------------------------------------------
(i) Assets retirement obligations are related to oil and gas properties.
(23) CURRENT PORTION OF NON-CURRENT LIABILITIES
------------------------------------------------------------------------------------------------------------
JUNE 30, 2008 DECEMBER 31, 2007
------------------------------------------------------------------------------------------------------------
Long-term borrowings due within one year
Secured borrowings
Guarantee -- USD 61 62
Unsecured borrowings
Unsecured -- RMB 10,253 7,552
Unsecured -- USD 2,929 3,761
Unsecured -- Other 26 37
------------------ -------------------
13,269 11,412
Debentures payable due within one year 171 240
------------------ -------------------
13,440 11,652
================== ===================
------------------------------------------------------------------------------------------------------------
As at June 30, 2008, unsecured borrowings of RMB 10,462 (December 31, 2007:
RMB 5,520) were from CP Finance.
The above-mentioned long-term guaranteed borrowings due within one year
were guaranteed by CNPC.
2008 INTERIM REPORT 85
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(24) LONG-TERM BORROWINGS
----------------------------------------------------------------------------------------------------------
JUNE 30, 2008 DECEMBER 31, 2007
----------------------------------------------------------------------------------------------------------
Secured borrowings
Pledge -- RMB 70 -
Pledge -- USD 4,129 3,287
Guarantee -- USD 439 498
Unsecured borrowings
Unsecured -- RMB 30,197 32,687
Unsecured -- USD 9,209 9,961
Unsecured -- Other 269 284
----------------- ------------------
44,313 46,717
Less: Long-term borrowings due within one year (Note 7(23)) (13,269) (11,412)
----------------- ------------------
31,044 35,305
================= ==================
----------------------------------------------------------------------------------------------------------
As at June 30, 2008, the above-mentioned RMB 4,129 long-term pledged
borrowings are secured by time deposits of USD 602 million (Note 7(1)) (December
31, 2007: USD 450 million); the above-mentioned RMB 70 long-term pledged
borrowings and RMB 60 short-term pledged borrowings (Note 7(15)) are secured by
fixed assets with a net book value of RMB 372 (Note 7(8)) (December 31, 2007:
Nil).
The above-mentioned long-term guaranteed borrowings are guaranteed by CNPC.
As at June 30, 2008, long-term unsecured borrowings of RMB 24,225 (December
31, 2007: RMB 24,432) are from CP Finance.
The maturities of long-term borrowings at the dates indicated are analysed
as follows:
----------------------------------------------------------------------------------------------------------
JUNE 30, 2008 DECEMBER 31, 2007
----------------------------------------------------------------------------------------------------------
Between one to two years 13,248 5,572
Between two to five years 5,655 17,533
After five years 12,141 12,200
------------------ -------------------
31,044 35,305
================== ===================
-------------------------------------------------------------------------------------------------------------
The weighted average interest rate for long-term borrowings on June 30,
2008 is 5.36 % (December 31, 2007: 5.47%).
2008 INTERIM REPORT 86
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
Long-term borrowings including long-term borrowings due within one year are
listed by bank as below:
----------------------------------------------------------------------------------------------------------
JUNE 30, 2008 DECEMBER 31, 2007
----------------------------------------------------------------------------------------------------------
Industrial and Commercial Bank of China Ltd. 7,400 7,400
China Construction Bank Corporation 2,446 2,913
Bank of China 2,619 2,851
Bank of Communications - 1,000
China Development Bank 900 1,800
The World Bank 439 498
CP Finance 24,225 24,432
Other bank borrowings 5,341 5,353
Other foreign government or company borrowings 943 470
------------------ -------------------
44,313 46,717
================== ===================
----------------------------------------------------------------------------------------------------------
The fair value of the above-mentioned borrowings amounted to RMB 43,977
(December 31, 2007: RMB 46,343). The fair value is based on discounted cash
flows using an applicable discount rate which is based on the prevailing market
rates as at balance sheet date of the Group's availability of financial
instruments (terms and characteristics similar to the borrowings).
(25) DEBENTURES PAYABLE
--------------------------------------------------------------------------------------------------------------------------
DATE OF TERM OF ANNUAL DECEMBER 31, JUNE 30,
DEBENTURES' NAME CURRENCY ISSUE DEBENTURES RATE% 2007 ADDITION REDUCTION 2008
--------------------------------------------------------------------------------------------------------------------------
2003 PetroChina RMB October 28, 10 - year 4.11 1,500 - - 1,500
Company 2003
Limited
Corporate
debentures
2006 PetroChina RMB October 23, 5 - year 3.76 2,000 - - 2,000
Company 2006
Limited
Corporate
debentures
Other 1,123 - (209) 914
------------ -------- --------- --------
4,623 - (209) 4,414
======== =========
Less:
Debentures
Payable due
within one
year (240) (171)
------------ --------
4,383 4,243
============ ========
--------------------------------------------------------------------------------------------------------------------------
The above-mentioned debentures were issued at the par value, without
premium or discount.
2008 INTERIM REPORT 87
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
The fair value of the debentures amounts to RMB 3,919 (December 31, 2007:
RMB 4,104). The fair value is based on discounted cash flows using an applicable
discount rate which is based on the prevailing market rates as at the balance
sheet date of the Company's availability of financial instruments (terms and
characteristics similar to the borrowings).
(26) DEFERRED TAX ASSETS AND LIABILITIES
(A) DEFERRED TAX ASSETS
----------------------------------------------------------------------------------------------------------
JUNE 30, 2008 DECEMBER 31, 2007
-----------------------------------------------------------------
DEDUCTIBLE DEDUCTIBLE
DEFERRED TEMPORARY DEFERRED TEMPORARY
TAX ASSETS DIFFERENCES TAX ASSETS DIFFERENCES
----------------------------------------------------------------------------------------------------------
Provision for assets impairment 6,414 28,187 4,934 21,288
Asset retirement obligations 1,875 7,992 1,517 6,128
Wages and welfare 417 1,782 1,301 5,271
Loss that can be carried forward 102 377 95 343
Other 9,480 37,823 5,024 20,149
--------------- ----------- ---------- -----------
18,288 76,161 12,871 53,179
=============== =========== ========== ===========
----------------------------------------------------------------------------------------------------------
(B) DEFERRED TAX LIABILITIES
----------------------------------------------------------------------------------------------------------
JUNE 30, 2008 DECEMBER 31, 2007
-----------------------------------------------------------------
DEFERRED TAXABLE DEFERRED TAXABLE
TAX TEMPORARY TAX TEMPORARY
LIABILITIES DIFFERENCES LIABILITIES DIFFERENCES
----------------------------------------------------------------------------------------------------------
Depreciation and depletion of fixed
assets and oil and gas properties 13,439 52,463 11,681 45,380
Amortisation of intangible assets 76 302 109 435
Other 35 141 93 375
-------------- ----------- ----------- -----------
13,550 52,906 11,883 46,190
============== =========== =========== ===========
----------------------------------------------------------------------------------------------------------
2008 INTERIM REPORT 88
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(27) SHARE CAPITAL
----------------------------------------------------------------------------------------------------------
JUNE 30, 2008 DECEMBER 31, 2007
----------------------------------------------------------------------------------------------------------
H shares 21,099 21,099
A shares 161,922 161,922
-------------------------- ---------------------------
183,021 183,021
========================== ===========================
----------------------------------------------------------------------------------------------------------
The assets and liabilities injected by CNPC in 1999 had been valued by
China Enterprise Appraisal Co., and the result of the valuation had been
approved by the MOF issuing Cai Ping Zi [1999] No. 490 "Letter regarding the
appraisal report on the valuation of CNPC's assets proposed to be injected into
PetroChina Company Limited". In accordance with MOF's approval Cai Guan Zi
[1999] No. 335 "Reply to the query in relation to PetroChina Company Limited's
(in the progress of registration) state-owned equity management", the
above-mentioned net assets injected by CNPC had been exchanged for 160 billion
state-owned shares of the Company with a par value of RMB 1.00 yuan per share.
The excess of the value of the net assets injected over the par value of the
state-owned shares had been recorded as capital surplus.
Pursuant to the approval of China Securities Regulatory Commission ("CSRC")
Zheng Jian Fa Xing Zi [2000] No.1 "Reply regarding the approval of PetroChina
Company Limited's issuance of foreign capital stock", on April 7, 2000, the
Company issued 17,582,418,000 foreign capital stock, in which 1,758,242,000
shares were converted from the prior state-owned shares of the Company owned by
CNPC.
The above-mentioned foreign capital stock represented by 13,447,897,000 H
shares and 41,345,210 ADS (each representing 100 H shares), were listed on the
Stock Exchange of Hong Kong Limited and the New York Stock Exchange Inc. on
April 7, 2000 and April 6, 2000, respectively.
Pursuant to the approval of CSRC Zheng Jian Guo He Zi [2005] No.23 "Reply
regarding the approval of PetroChina Company Limited issuance of additional
foreign capital stock", the Company issued 3,196,801,818 new H shares with a par
value of RMB 1.00 yuan per share on September 15, 2005. CNPC also converted
319,680,182 state-owned shares it held into H shares and sold them concurrently
with PetroChina's issuance of new H shares.
Pursuant to the approval of CSRC Zheng Jian Fa Xing Zi [2007] No.349 "The
Circular regarding the approval of PetroChina Company Limited's initial public
offering", the Company issued 4,000,000,000 A shares with a par value of RMB
1.00 yuan per share with the price of RMB 16.70 yuan per share on October 31,
2007, and the net proceeds to the Company amounted to approximately RMB 66,243.
The A shares were listed on the Shanghai Stock Exchange on November 5, 2007.
Following the issuance of the A shares, all the existing state-owned shares
issued before November 5, 2007 held by CNPC have been registered with the China
Securities Depository and Clearing Corporation Limited as A shares.
2008 INTERIM REPORT 89
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(28) CAPITAL SURPLUS
DECEMBER 31, JUNE 30,
2007 ADDITION REDUCTION 2008
------------ -------- --------- --------
Capital premium 83,251 -- -- 83,251
Other capital surplus
Capital surplus under the old CAS 40,955 -- -- 40,955
Fair value gains of available-for-sale investments 261 -- (158) 103
Purchase of minority interests in subsidiaries (2,275) -- (15) (2,290)
------- --- ---- -------
122,192 -- (173) 122,019
======= === ==== =======
(29) SURPLUS RESERVES
DECEMBER 31, JUNE 30,
2007 ADDITION REDUCTION 2008
------------ -------- --------- --------
Statutory Surplus Reserves 102,656 -- -- 102,656
Discretionary Surplus Reserves 40 -- -- 40
------- --- --- -------
102,696 -- -- 102,696
======= === === =======
Pursuant to the Company Law of PRC, the Company's Articles of Association
and the resolution of Board of Director, the Company is required to transfer 10%
of its net profit to a Statutory Surplus Reserves. Appropriation to the
Statutory Surplus Reserves may be ceased when the fund aggregates to 50% of the
Company's registered capital. The Statutory Surplus Reserves may be used to make
good previous years' losses or to increase the capital of the Company upon
approval.
The Discretionary Surplus Reserves is approved by a resolution of
shareholders' general meeting after BOD's proposal. The Company may convert its
Discretionary Surplus Reserves to make good previous years' losses or to
increase the capital of the Company. The Company have not extracted
Discretionary Surplus Reserves for the six months ended June 30, 2008 (for the
six months ended June 30, 2007: Nil).
2008 INTERIM REPORT 90
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(30) UNDISTRIBUTED PROFITS
At the meeting on August 27, 2008, the Board of Directors proposed interim
dividends attributable to equity holders of the Company of RMB 0.131827 yuan per
share amounting to a total of RMB 24,127, according to the issued 183,021
million shares, as authorised by shareholders in the Annual General Meeting on
May 15, 2008.
At the meeting on March 19, 2008, the Board of Directors proposed final
cash dividends attributable to equity holders of the Company in respect of 2007
of RMB 0.156859 yuan per share, amounting to a total of RMB 28,708, according to
the issued 183,021 million shares as approved by shareholders in the Annual
General Meeting at May 15, 2008.
At the meeting on March 19, 2007, the Board of Directors proposed final
cash dividends attributable to equity holders of the Company in respect of 2006
of RMB 0.154699 yuan per share, amounting to a total of RMB 27,694, according to
the issued 179,021 million shares, as approved by shareholders in the Annual
General Meeting on May 16, 2007.
(31) MINORITY INTEREST
Minority interest attributable to minority shareholders of subsidiaries:
JUNE 30, DECEMBER 31,
2008 2007
-------- ------------
Daqing Yu Shu Lin Oilfield Company Limited 348 336
CNPC Exploration and Development Company Limited 26,578 16,773
PetroKazakhstan Inc. 7,187 8,163
Other 12,483 12,432
------ ------
46,596 37,704
====== ======
2008 INTERIM REPORT 91
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(32) OPERATING INCOME AND COST OF SALES
GROUP COMPANY
----------------------------- -----------------------------
FOR THE SIX FOR THE SIX FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
JUNE 30, 2008 JUNE 30, 2007 JUNE 30, 2008 JUNE 30, 2007
------------- ------------- ------------- -------------
Income from principal operations (a) 534,027 384,478 385,270 284,361
Income from other operations 15,495 8,248 7,745 6,030
------- ------- ------- -------
549,522 392,726 393,015 290,391
======= ======= ======= =======
Income from principal operations from the Group's five largest customers
for the year ended June 30, 2008 was RMB 99,582, representing 18% of the Group's
total operating income. Income from principal operations from the Company's five
largest customers for the year ended June 30, 2008 was RMB 56,683, representing
14% of the Company's total operating income.
(A) INCOME FROM AND COST OF PRINCIPAL OPERATIONS
GROUP
-----------------------------------------
FOR THE SIX MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, 2008 ENDED JUNE 30, 2007
------------------- -------------------
INCOME COST INCOME COST
-------- -------- -------- --------
Exploration and production 308,180 116,385 202,117 81,844
Refining and marketing 446,994 471,905 311,471 278,264
Chemicals and marketing 59,118 48,148 48,747 39,819
Natural gas and pipeline 30,580 21,449 22,953 16,267
Other 345 65 276 50
Intersegment elimination (311,190) (310,600) (201,086) (200,683)
-------- -------- -------- --------
Total 534,027 347,352 384,478 215,561
======== ======== ======== ========
COMPANY
-----------------------------------------
FOR THE SIX MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, 2008 ENDED JUNE 30, 2007
------------------- -------------------
INCOME COST INCOME COST
-------- -------- -------- --------
Exploration and production 252,805 151,537 158,805 104,412
Refining and marketing 304,858 332,973 219,192 191,768
Chemicals and marketing 58,742 47,831 42,608 34,825
Natural gas and pipeline 27,387 20,133 20,646 15,126
Other 39 53 -- --
Intersegment elimination (258,561) (249,179) (156,890) (156,486)
-------- -------- -------- --------
Total 385,270 303,348 284,361 189,645
======== ======== ======== ========
2008 INTERIM REPORT 92
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(33) TAX AND LEVIES ON OPERATIONS
FOR THE SIX MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, 2008 ENDED JUNE 30, 2007
------------------- -------------------
Business tax 462 380
City maintenance and construction tax 3,167 2,408
Educational surcharge 1,546 1,152
Consumption tax 7,035 6,345
Resource tax 1,635 1,538
Crude oil special levy 47,816 14,942
Other 230 88
------ ------
61,891 26,853
====== ======
(34) FINANCE EXPENSES
FOR THE SIX MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, 2008 ENDED JUNE 30, 2007
------------------- -------------------
Interest expense 1,635 2,050
Less: Interest income (1,404) (819)
Exchange losses 2,332 923
Less: Exchange gains (1,304) (581)
Other 189 83
------ ------
1,448 1,656
====== ======
(35) ASSET IMPAIRMENT LOSSES
FOR THE SIX MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, 2008 ENDED JUNE 30, 2007
------------------- -------------------
Impairment losses for bad debts provision (48) (2,254)
Impairment losses for declines in the value of inventories 1,422 (68)
Impairment losses for available-for-sale financial assets 10 --
Impairment losses for fixed assets and oil and gas properties 5,905 --
Impairment losses for intangible assets 22 --
Impairment losses for long-term equity investments 19 5
------ ------
7,330 (2,317)
====== ======
2008 INTERIM REPORT 93
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(36) INVESTMENT INCOME
GROUP
-----------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, 2008 JUNE 30, 2007
------------- -------------
Gains on available-for-sale financial assets 108 187
Share of profit of associates and jointly controlled
entities 4,226 2,593
(Losses)/Gains on disposal of long-term equity
investments (3) 310
Other (34) --
----- -----
4,297 3,090
===== =====
COMPANY
-----------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, 2008 JUNE 30, 2007
------------- -------------
Gains on available-for-sale financial assets 92 169
Share of profit of associates and jointly controlled
entities 119 392
Dividends declared by subsidiaries 43,823 29,533
(Losses)/Gains on disposal of long-term equity
investments (5) 310
Other 75 --
------ ------
44,104 30,404
====== ======
(37) NON-OPERATING INCOME AND EXPENSES
(A) NON-OPERATING INCOME
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, 2008 JUNE 30, 2007
------------- -------------
Gains on disposal of fixed assets and oil and gas
properties 68 549
Government grants (i) 5,251 536
Other 295 356
----- -----
5,614 1,441
===== =====
(i) Mainly includes government subsidy provided by the State to ensure supply
of crude oil and refined oil recognised by the Group for the six months
ended June 30, 2008.
2008 INTERIM REPORT 94
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(B) NON-OPERATING EXPENSES
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, 2008 JUNE 30, 2007
------------- -------------
Losses on disposal of fixed assets and oil and gas
properties 386 289
Fines 1,278 10
Donation 96 97
Extraordinary losses 493 267
Other 880 418
----- -----
3,133 1,081
===== =====
(38) TAXATION
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, 2008 JUNE 30, 2007
------------- -------------
Income tax 21,515 25,415
Deferred tax (3,606) 582
------ ------
17,909 25,997
====== ======
The reconciliation from profit before taxation presented in the financial
statements to the taxation is as follows:
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, 2008 JUNE 30, 2007
------------- -------------
Profit before taxation 73,206 106,294
Tax calculated at a tax rate of 25% (2007: 33%) 18,302 35,077
Prior year tax return adjustment 25 451
Effect of income taxes from international
operations in excess of taxes at the PRC
statutory tax rate 4,638 399
Effect of preferential tax rate (5,752) (8,131)
Effect of the new CIT law on deferred tax -- (1,245)
Tax effect of income not subject to tax (1,193) (1,274)
Tax effect of expenses not deductible for tax
purposes 1,889 720
------ ------
Taxation 17,909 25,997
====== ======
2008 INTERIM REPORT 95
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(39) EARNINGS PER SHARE
Basic and diluted earnings per share
Basic and diluted earnings per share for the six months ended June 30, 2008
have been computed by dividing profit attributable to equity holders of the
Company by the number of 183,021 million shares issued and outstanding during
the period.
Basic and diluted earnings per share for the six months ended June 30, 2007
have been computed by dividing profit attributable to equity holders of the
Company by the number of 179,021 million shares issued and outstanding during
the period.
There are no potential dilutive ordinary shares, and the diluted earnings
per share are equal to the basic earnings per share.
(40) NOTES TO CONSOLIDATED CASH FLOW STATEMENTS
(A) RECONCILIATION FROM THE NET PROFIT TO THE CASH FLOW OPERATING
ACTIVITIES
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, 2008 JUNE 30, 2007
------------- -------------
Net profit 55,297 80,297
Add: Assets impairment losses 7,330 (2,317)
Depreciation and depletion of fixed assets
and oil and gas properties 39,961 34,323
Amortisation of intangible assets 694 573
Amortisation of long-term prepaid expenses 899 786
Losses on disposal of fixed assets, oil and
gas properties, intangible assets and other
long-term assets (including dry holes) 6,954 5,863
Finance expenses 231 1,231
Investment income (4,297) (3,090)
(Increase)/Decrease in deferred tax assets (5,451) 1,442
Increase/(Decrease) in deferred tax
liabilities 1,845 (860)
Increase in inventories (11,515) (8,221)
Increase in operating receivables (32,968) (20,519)
Increase in operating payables 25,026 22,669
------- -------
Net cash from operating activities 84,006 112,177
======= =======
2008 INTERIM REPORT 96
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(B) NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, 2008 JUNE 30, 2007
------------- -------------
Cash at end of the period 58,840 71,771
Less: Cash at beginning of the period (65,494) (48,559)
Add: Cash equivalents at end of the period -- --
Less: Cash equivalents at beginning of the period -- --
------- -------
Net (decrease)/increase in cash and cash
equivalents (6,654) 23,212
======= =======
(C) CASH AND CASH EQUIVALENTS
JUNE 30, 2008 DECEMBER 31, 2007
------------- -----------------
Cash at bank and on hand 74,377 88,589
Less: Time deposits with maturities over 3 months (15,537) (23,095)
------- -------
Cash and cash equivalents at end of the period 58,840 65,494
======= =======
2008 INTERIM REPORT 97
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
8 SEGMENT REPORTING
(1) PRINCIPAL REPORTING FORMAT OF THE GROUP - BUSINESS SEGMENTS
(A) SEGMENT INFORMATION AS AT AND FOR THE SIX MONTHS ENDED JUNE 30, 2008 IS
AS FOLLOWS:
EXPLORATION REFINING CHEMICALS NATURAL
AND AND AND GAS AND
PRODUCTION MARKETING MARKETING PIPELINE OTHER TOTAL
----------- --------- --------- -------- ------- ---------
Revenue 316,876 451,737 60,463 30,902 734 860,712
Less: Intersegment revenue (255,871) (46,481) (5,145) (3,390) (303) (311,190)
-------- -------- ------- ------ ------ ---------
Revenue from external customers 61,005 405,256 55,318 27,512 431 549,522
======== ======== ======= ====== ====== =========
Segment expenses(i) (170,755) (264,395) (22,718) (7,400) (9,048) (474,316)
---------
Segment result 127,105 (57,909) 6,149 8,207 (8,346) 75,206
---------
Unallocated expenses (4,481)
---------
Operating profit 70,725
=========
Segment assets 539,018 341,316 102,422 101,340 891,161 1,975,257
Deferred tax assets 18,288
Elimination of intersegment
balances (934,149)
---------
Total assets 1,059,396
=========
Segment liabilities 266,115 195,465 34,847 59,913 242,882 799,222
Deferred tax liabilities 13,550
Other 22,262
Elimination of intersegment
balances (518,383)
---------
Total liabilities 316,651
=========
Depreciation, depletion and
amortisation 29,332 5,658 3,025 3,169 370 41,554
Capital expenditure
- Tangible assets 47,053 6,527 4,307 12,845 961 71,693
- Intangible assets 174 1,370 81 35 68 1,728
2008 INTERIM REPORT 98
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(B) SEGMENT INFORMATION AS AT AND FOR THE YEAR ENDED JUNE 30, 2007 IS AS
FOLLOWS:
EXPLORATION REFINING CHEMICALS NATURAL
AND AND AND GAS AND
PRODUCTION MARKETING MARKETING PIPELINE OTHER TOTAL
----------- --------- --------- -------- ------- ---------
Revenue 205,390 314,863 49,860 23,216 483 593,812
Less: Intersegment revenue (165,789) (26,842) (5,036) (3,191) (228) (201,086)
-------- -------- ------- ------ ------- ---------
Revenue from external customers 39,601 288,021 44,824 20,025 255 392,726
======== ======== ======= ====== ======= =========
Segment expenses (i) (110,861) (151,058) (18,833) (6,299) (3,492) (290,543)
---------
Segment result 90,954 3,552 4,587 6,101 (3,011) 102,183
---------
Unallocated expenses 3,751
---------
Operating profit 105,934
=========
Segment assets 448,685 230,998 80,129 74,501 626,958 1,461,271
Deferred tax assets 12,949
Elimination of intersegment
balances (594,747)
---------
Total assets 879,473
=========
Segment liabilities 232,335 138,376 35,049 42,527 80,855 529,142
Deferred tax liabilities 11,628
Other 22,670
Elimination of intersegment
balances (302,103)
---------
Total liabilities 261,337
=========
Depreciation, depletion and
amortisation 24,234 5,314 2,938 2,895 301 35,682
Capital expenditure
- Tangible assets 42,196 4,841 1,163 2,471 350 51,021
- Intangible assets 94 789 4 37 -- 924
(i) Segment expenses include operating costs, tax and levies on operations, and
selling, general and administrative expenses.
2008 INTERIM REPORT 99
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(2) SECONDARY REPORTING FORMAT OF THE GROUP - GEOGRAPHICAL SEGMENTS
FOR THE SIX MONTHS FOR THE SIX MONTHS
ENDED ENDED
REVENUE FROM EXTERNAL CUSTOMERS JUNE 30, 2008 JUNE 30, 2007
------------------------------- ------------------ -------------------
PRC 519,845 380,444
Other (Exploration and Production) 29,677 12,282
------- -------
549,522 392,726
======= =======
TOTAL ASSETS JUNE 30, 2008 JUNE 30, 2007
------------ ------------- -------------
PRC 968,331 826,235
Other (Exploration and Production) 91,065 53,238
--------- -------
1,059,396 879,473
========= =======
9 RELATED PARTIES AND RELATED PARTY TRANSACTIONS
(1) PARENT COMPANY AND SUBSIDIARIES
Details about subsidiaries and related information are disclosed in Note 6.
The parent company of the Company is CNPC. CNPC is registered in China
which is principally engaged in exploration, development, production,
transportation, sale of petroleum products and cooperation. As at June 30, 2008,
equity interest and voting interest of CNPC were 86.29% (December 31, 2007:
86.29%).
(2) NATURE OF RELATED PARTIES THAT ARE NOT CONTROLLED BY THE COMPANY
NAMES OF RELATED PARTIES RELATIONSHIP WITH THE COMPANY
------------------------ -----------------------------
Dalian West Pacific Petrochemical Co., Ltd. Associate
China Marine Bunker (Petrochina) Co., Ltd. Jointly controlled entity
Dagang Oilfield (Company) Company Limited Fellow subsidiary of CNPC
CNPC Oriental Geophysical Exploration Company Limited Fellow subsidiary of CNPC
China Petroleum Logging Company Limited Fellow subsidiary of CNPC
Daqing Petroleum Administrative Bureau Fellow subsidiary of CNPC
Liaohe Petroleum Exploration Bureau Fellow subsidiary of CNPC
China Petroleum Pipeline Bureau Fellow subsidiary of CNPC
Daqing Petrochemical Factory Fellow subsidiary of CNPC
China Petroleum Material Equipment Company Fellow subsidiary of CNPC
China Petroleum Finance Company Limited Fellow subsidiary of CNPC
China National Oil and Gas Exploration and Development Corporation Fellow subsidiary of CNPC
China National United Oil Corporation Fellow subsidiary of CNPC
2008 INTERIM REPORT 100
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(3) SUMMARY OF SIGNIFICANT RELATED PARTY TRANSACTIONS
Related party transactions with CNPC and its subsidiaries:
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED
NOTE JUNE 30, 2008 JUNE 30, 2007
---- ------------- -------------
Sales of goods and services rendered to CNPC and its
subsidiaries (1) 20,946 13,611
Purchase of services from CNPC and its subsidiaries:
Fees paid for construction and technical services: (2)
- Exploration and development services (2a) 24,426 22,994
- Other construction and technical services (2b) 18,047 9,921
Fees for production services (3) 38,350 11,653
Social services charges (4) 1,152 998
Ancillary services charges (5) 1,185 1,038
Commission expenses and other charges (6) 295 307
Interest income received from related companies (7) 64 70
Interest expense paid to CP Finance (8) 672 490
Rental paid to CNPC Company (9) 1,036 1,018
Purchases of assets from CNPC and its subsidiaries (10) 1,720 956
Note:
(1) Sales of goods and services represent sales of crude oil, petroleum
products and chemicals at market prices.
(2) 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 not more
than 15%, including exploration and development services and oilfield
construction services.
(2a) Direct costs for exploration and development services comprise geophysical
survey, drilling, well cementing, logging and well testing.
(2b) 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 exploration and production activities such
as oilfield construction, technology research, engineering and design,
etc..
(3) 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 etc.
at cost or market prices.
(4) These represent expenditures for social welfare and support services based
on the number of employees, total income or total assets which are charged
at cost.
2008 INTERIM REPORT 101
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(5) Ancillary service charges represent mainly fees for property management,
the provision of training centres, guesthouses, canteens, public shower
rooms, etc. at market prices.
(6) CNPC purchases raw materials on behalf of the Group and charges commission
thereon. The commission is calculated at rates ranging from 1% to 5% of the
goods purchased.
(7) The bank deposits in CP Finance as at June 30, 2008 were RMB 7,337
(December 31, 2007: RMB 8,393). Interest income is calculated according to
the prevailing interest rates.
(8) The loans from CP Finance including short-term borrowings, long-term
borrowings due within one year and long-term borrowings as at June 30, 2008
were RMB 25,131 (December 31, 2007: RMB 24,482).
(9) Rental was paid for the operating lease of land and buildings at the prices
prescribed in the Building and Land Use Rights leasing contract with CNPC.
(10) Purchases of assets principally represent the purchases of manufacturing
equipment, office equipment, transportation equipment, etc. at market
prices.
(11) Besides the investment in CP Finance RMB 377 as at June 30, 2008 (December
31, 2007: RMB 377), the Group did not have any individual investment in
CNPC and its subsidiaries greater than RMB 100. The Group's equity interest
in CP Finance as at June 30, 2008 was 9.5% (December 31, 2007: 9.5%). CP
Finance's operating period started in 1995, without limited date for
ending.
Related party transactions with associates and jointly controlled entities:
FOR THE SIX MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, 2008 JUNE 30, 2007
------------------------ ------------------------
(a) Sales of goods
- Crude oil -- 1,570
- Refined products 4,436 11,131
- Chemical products 90 753
(b) Purchases of goods 184 12,136
(c) Purchases of services 49 27
2008 INTERIM REPORT 102
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(4) COMMISSIONED LOANS
The Company, its subsidiaries and associates commissioned CP Finance and
other financial institutions to provide loans with interest in accordance with
the prevailing interest rates. Loans between the Company and its subsidiaries
have been eliminated in the consolidated financial statements. As at June 30,
2008, the eliminated commissioned loans totalled RMB 28,411 including short-term
loans of RMB 17,444, loans due within one year of RMB 1,265 and long-term loans
of RMB 9,702.
(5) GUARANTEES
The Group provided guarantees of loans for associates, see Note 10(1).
CNPC provided guarantees of loans for the Group, see Note 7(23) and 7(24).
(6) RECEIVABLES AND PAYABLES WITH RELATED PARTIES
(A) ACCOUNTS RECEIVABLE / OTHER RECEIVABLES / ADVANCES TO SUPPLIERS
JUNE 30, 2008 DECEMBER 31, 2007
------------- -----------------
CNPC and its subsidiaries
Accounts receivable 2,271 3,796
Other receivables 1,987 2,351
Advances to suppliers 32,147 7,984
Associates and jointly controlled entities
Accounts receivable 172 296
Other receivables 1,399 2,300
Advances to suppliers 175 112
As at June 30, 2008, the receivables from related parties represented 37%
(December 31, 2007: 28%) of total receivables.
2008 INTERIM REPORT 103
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(B) ACCOUNTS PAYABLE / OTHER PAYABLES / ADVANCES FROM CUSTOMERS
JUNE 30, 2008 DECEMBER 31, 2007
------------- -----------------
CNPC and its subsidiaries
Accounts payable 35,385 29,507
Other payables 5,717 2,625
Advances from customers 1,215 924
Associates and jointly controlled entities
Accounts payable 27 35
Other payables 577 3
Advances from customers 280 65
As at June 30, 2008, the payables to related parties represented 26%
(December 31, 2007: 25%) of total payables.
(7) SUMMARY OF TRANSACTIONS WITH SUBSIDIARIES
Significant related party transactions with subsidiaries:
FOR THE SIX MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, 2008 JUNE 30 , 2007
------------------------ ------------------------
(a) Sales of goods 3,353 2,521
(b) Purchase of goods 154,216 100,643
Receivables and payables with subsidiaries:
JUNE 30, 2008 DECEMBER 31, 2007
------------- -----------------
Other receivables 11,965 12,997
Other payables 42,612 33,227
(8) KEY MANAGEMENT PERSONNEL COMPENSATION
FOR THE SIX MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, 2008 JUNE 30, 2007
------------------------ ------------------------
RMB'000 RMB'000
Key management personnel compensation 4,015 3,334
2008 INTERIM REPORT 104
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
10 CONTINGENT LIABILITIES
(1) BANK AND OTHER GUARANTEES
At June 30, 2008, the Group had contingent liabilities in respect of
guarantees made to CP Finance, a subsidiary of CNPC from which it is anticipated
that no material liabilities will arise.
JUNE 30, 2008 DECEMBER 31, 2007
------------- -----------------
Guarantee of borrowings of associates from
CP Finance 69 77
--- ---
69 77
=== ===
(2) ENVIRONMENTAL LIABILITIES
CNPC and the Group have operated in China for many years. China has adopted
extensive environmental laws and regulations that affect the operation of the
oil and gas industry. The outcome of environmental liabilities under proposed or
future environmental legislation cannot be reasonably estimated at present, and
could be material. Under existing legislation, however, the management believes
that there are no probable liabilities, except for the amounts which have
already been reflected in the consolidated financial statements that will have a
material adverse effect on the financial position of the Group.
(3) LEGAL CONTINGENCIES
The Group is the named defendant in certain insignificant lawsuits as well
as the named party in other proceedings arising in the ordinary course of
business. While the outcomes of such contingencies, lawsuits or other
proceedings cannot be determined at present, the management believes that any
resulting liabilities will not have a material adverse effect on the financial
position of the Group.
(4) LEASING OF ROADS, LAND AND BUILDINGS
According to the Restructuring Agreement entered into between the Company
and CNPC in 2000:
CNPC will use its best endeavours to obtain formal land use right
certificates to replace the entitlement certificates in relation to the 28,649
parcels of land which were leased or transferred to the Company from CNPC,
within one year from August, September and October 1999 when the relevant
entitlement certificates were issued;
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.
2008 INTERIM REPORT 105
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
As at June 30, 2008, CNPC had obtained formal land use right certificates
in relation to 27,554 out of the above-mentioned 28,649 parcels of land and some
building ownership certificates for the above-mentioned buildings, but has
completed none of the necessary governmental procedures for the above-mentioned
service stations located on collectively-owned land. The management of the
Company confirm that the use of and the conduct of relevant activities at the
above-mentioned parcels of land, service stations and buildings are not affected
by the fact that the relevant land use right certificates or individual building
ownership certificates have not been obtained or the fact that the relevant
governmental procedures have not been completed. In management's opinion, the
outcome of the above events will not have a material adverse effect on the
financial position of the Group.
(5) GROUP INSURANCE
Except for limited insurance coverage for vehicles and certain assets
subject to significant operating risks, the Group does not carry any other
insurance for property, facilities or equipment with respect to its business
operations. In addition, the Group does not carry any third-party liability
insurance against claims relating to personal injury, property and environmental
damages or business interruption insurance since such insurance coverage is not
customary in China. While the effect of under-insurance on future incidents
cannot be reasonably assessed at present, management believes that it will not
have a material adverse effect on the financial position of the Group.
11 COMMITMENTS
(1) OPERATING LEASE COMMITMENTS
Operating lease commitments of the Group are mainly for leasing of land and
buildings and equipment. Leases range from one to fifty years and usually do not
contain renewal options. Future minimum lease payments as at June 30, 2008,
under non-cancellable operating leases are as follows:
JUNE 30, 2008 DECEMBER 31, 2007
------------- -----------------
Within one year 3,523 3,394
Between one to two years 3,180 3,077
Between two to three years 3,153 2,927
Thereafter 85,918 84,997
------ ------
95,774 94,395
====== ======
Operating lease expenses for the six months ended on June 30, 2008 was RMB
3,071 (for the six months ended June 30, 2007: RMB 3,166).
2008 INTERIM REPORT 106
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(2) CAPITAL COMMITMENTS
At June 30, 2008, the Group's capital commitments contracted but not
provided for was RMB 9,480 (December 31, 2007: RMB 11,621).
(3) EXPLORATION AND PRODUCTION LICENSES
The Group is obligated to make annual payments with respect to its
exploration and production licenses to the Ministry of Land and Resources.
Payments incurred were RMB 399 for the six months ended June 30, 2008 (for the
six months ended June 30, 2007: RMB 354).
Estimated annual payments for the next five years are as follows:
JUNE 30, 2008
-------------
First year 507
Second year 906
Third year 906
Fourth year 906
Fifth year 906
12 FINANCIAL RISK MANAGEMENT
The Group's activities expose it to a variety of financial risks, including
market risk, credit risk.
(1) FOREIGN EXCHANGE RATE RISK
The Group conducts its business primarily in RMB, but maintains a portion
of its assets in other currencies to meet its needs for normal business
operations. The RMB is not a freely convertible currency and is regulated by the
PRC government. Limitation in foreign exchange transactions imposed by the PRC
government could cause future exchange rates to vary significantly from current
or historical exchange rates. Management is not in a position to anticipate
changes in the PRC foreign exchange regulations and as such is unable to
reasonably anticipate the impacts on the Group's results of operations or
financial position arising from future changes in exchange rates. The Group did
not enter into material hedge contracts during any of the years presented to
hedge against its foreign exchange rate risk.
2008 INTERIM REPORT 107
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(2) CASH FLOW AND FAIR VALUE INTEREST RATE RISK
The Group is exposed to the risk arising from changes in interest rates. An
analysis of the Group's borrowings, together with their respective interest
rates and maturity dates, are included in Note 7(24).
(3) PRICE RISK
The Group is engaged in a wide range of petroleum-related activities.
Prices of crude oil and petroleum products are affected by a wide range of
global and domestic factors which are beyond the control of the Group. The
fluctuations in such prices may have favourable or unfavourable impacts to the
Group. The Group historically has not used commodity derivative instruments to
hedge against potential price fluctuations of crude oil or petroleum products
and therefore the Group is exposed to general price fluctuations of crude oil
and petroleum products.
(4) CREDIT RISK
Credit risk arises primarily from cash at bank and on hand, accounts
receivable, other receivables and notes receivable. As the majority of cash at
bank and on hand are placed with state-owned banks and financial institutions,
the corresponding credit risk is relatively low. The Group has controls in place
to assess the credit quality of its customers. The carrying amounts of cash at
bank and on hand, accounts receivable, other receivables and notes receivable
etc. included in the consolidated balance sheet represent the Group's maximum
exposure to credit risk. No other financial assets carry a significant exposure
to credit risk.
The Group has no significant concentration of credit risk.
(5) FAIR VALUE ESTIMATION
The methods and assumptions applied in determining the fair value of each
class of financial assets and financial liabilities of the Group at June 30,
2008 and December 31, 2007 are disclosed in the respective accounting policies.
The carrying amounts of the following financial assets and financial
liabilities approximate their fair value as all of them are short-term in
nature: cash at bank and on hands, accounts receivable, other receivables,
accounts payable, other payables and short-term borrowings. The fair values of
fixed rate long-term borrowings are likely to be different from their respective
carrying amounts. Analysis of the fair values and carrying amounts of long-term
borrowings are presented in Note 7(24).
2008 INTERIM REPORT 108
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
13 OTHER SIGNIFICANT MATTERS
The Company has adopted a share-based compensation scheme which is a share
appreciation right arrangement payable in cash to the recipients upon exercise
of the rights which became effective upon the listing of the H shares of the
Company on April 7, 2000. Directors, Supervisors and senior executives of the
Company are eligible for the scheme and the rights granted thereunder can be
exercised from April 8, 2003 to April 7, 2008. The exercise price is the price
of the H share as at the initial public offering, being HK$1.28 per share.
As at April 7, 2008 (being the expiry date of the exercise of the share
appreciation rights), none of the holders of the share appreciation rights
exercised their rights. The Company therefore derecognised the liability
previously accrued of RMB1,400 million in the financial statements of the Group
for the six months ended June 30, 2008.
14 CONSOLIDATED NET PROFIT AFTER DEDUCTING NON-RECURRING ITEMS
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, 2008 JUNE 30, 2007
------------- -------------
Consolidated net profit 55,297 80,297
Net gains/(losses) on disposal
of non-current assets 315 (682)
Other net non-operating expenses 2,450 436
Government grants (4,651) (41)
Tax impact on non-recurring items 649 72
------ ------
Consolidated net profit after deducting
non-recurring items 54,060 80,082
====== ======
15 EVENTS AFTER BALANCE SHEET DATE
At the Extraordinary General Meeting on July 31, 2008, the shareholders
approved a proposed issuance of Domestic Corporate Bonds in the PRC with an
aggregate principal amount of not more than RMB 60 billion in one or more
tranches.
2008 INTERIM REPORT 109
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
SIGNIFICANT DIFFERENCES BETWEEN IFRS AND CAS
The financial statements of the Group prepared in accordance with CAS
differ in certain material aspects from those in accordance with IFRS. A
statement of reconciliation of such differences is set out below:
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED
NOTES JUNE 30, 2008 JUNE 30, 2007
----- ------------- -------------
Consolidated profit for the period under IFRS 60,854 86,316
Adjustments:
Depletion of oil and gas properties (1) (4,453) (3,899)
Amortisation of revaluation for assets other than fixed
assets and oil and gas properties in 1999 (2) (140) (39)
Depreciation and depletion of revaluation for fixed
assets and oil and gas properties in 2003 (3) (129) (80)
Reversal of reversed impairment for non-current assets (4) (18) --
Adjustment of safety fund (5) (2,932) --
Other 166 (30)
Deferred taxation (6) 1,949 (1,971)
------ ------
Consolidated profit for the period under CAS 55,297 80,297
====== ======
JUNE DECEMBER
NOTES 30, 2008 31, 2007
----- -------- --------
Consolidated shareholders' equity under IFRS 809,051 776,347
Adjustments:
Depletion of oil and gas properties (1) (84,115) (79,662)
Revaluation, amortisation of disposal of assets other
than fixed assets and oil and gas properties in 1999 (2) 269 409
Revaluation,and depreciation and depletion of fixed
assets and oil and gas properties revalued in 2003 (3) 208 337
Reversal of reversed impairment for non-current assets
and related difference on disposal of such non-current
assets (4) (110) (92)
Adjustment of safety fund (5) (6,491) (3,559)
Currency translation differences 137 (390)
Other 691 525
Deferred taxation (6) 23,105 21,156
------- -------
Consolidated shareholders' equity under CAS 742,745 715,071
======= =======
2008 INTERIM REPORT 110
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
PETROCHINA COMPANY LIMITED (All amounts in RMB millions unless otherwise stated)
--------------------------------------------------------------------------------
(1) Depletion of oil and gas properties is provided using the unit of
production method under IFRS, while the straight-line method is used under CAS.
(2) During the restructuring of CNPC and establishment of the Company in
1999 a valuation was carried out on June 30, 1999 for the assets and liabilities
CNPC invested in the Company. The valuation results from China Enterprise
Appraisals are all recognised in the financial statements under CAS. However, in
the financial statements under IFRS, revaluation model is used in subsequent
measurement by the Group only for fixed assets and oil and gas properties.
Consequently, valuation results other than for fixed assets and oil and gas
properties are not recognised in the financial statements under IFRS.
(3) As the revaluation model is used in subsequent measurement for fixed
assets and oil and gas properties by the Group under IFRS, revaluations were
carried out by independent appraisers with sufficient regularity. In order to
meet the requirements of IFRS, on September 30, 2003, a revaluation of the
Group's refining and chemical production equipment was undertaken by a firm of
independent valuers, China United Assets Appraiser Co., Ltd., in the PRC on a
depreciated replacement cost basis. The results of the revaluation were
recognised in the financial statements under IFRS. However, fixed assets and oil
and gas properties are recognised using the historical cost model under CAS.
Consequently, these revaluation results were not recognised in the financial
statements under CAS.
(4) Under CAS, once recognised, any impairment losses for long-term assets,
such as fixed assets, oil and gas properties, intangible assets and long-term
equity investments, cannot be reversed in subsequent accounting periods.
However, under IFRS, if there are changes to the factors which resulted in the
original impairment of the long-term asset which result in the recoverable
amount being higher than the carrying amount the impairment loss previously
recognised shall be reversed.
(5) In accordance with the "Temporary regulation for safety expense
financial management of high risk industry" from MOF and State Administration of
Work Safety of PRC, a safety fund has been accrued for the Group's oil and gas
exploration, refinery and chemical production activities within the PRC from
January 1, 2007. This safety fund has been recognised into the Group's income
statement. As the Group did not have specific utilisation plan for this accrued
safety fund as at June 30, 2008, it was reversed under IFRS.
(6) The consequences of (1)-(5) and other differences between IFRS and CAS
on deferred taxation.
2008 INTERIM REPORT 111
PETROCHINA COMPANY LIMITED
UNAUDITED CONSOLIDATED INTERIM CONDENSED
PROFIT AND LOSS ACCOUNT
For the six months ended June 30, 2008 and June 30, 2007
(Amounts in millions)
SIX MONTHS
ENDED JUNE 30
-------------------
NOTES 2008 2007
----- -------- --------
RMB RMB
TURNOVER 4 549,522 392,726
-------- --------
OPERATING EXPENSES
Purchases, services and other (294,522) (166,995)
Employee compensation costs (30,411) (22,426)
Exploration expenses, including exploratory dry holes (12,848) (10,607)
Depreciation, depletion and amortisation (42,754) (31,228)
Selling, general and administrative expenses (27,993) (23,901)
Taxes other than income taxes 5 (65,831) (28,784)
Other income, net 2,601 345
-------- --------
TOTAL OPERATING EXPENSES (471,758) (283,596)
-------- --------
PROFIT FROM OPERATIONS 77,764 109,130
-------- --------
FINANCE COSTS
Exchange gain 1,304 581
Exchange loss (2,332) (923)
Interest income 1,404 819
Interest expense (1,635) (2,050)
-------- --------
TOTAL NET FINANCE COSTS (1,259) (1,573)
-------- --------
SHARE OF PROFIT OF ASSOCIATES AND JOINTLY CONTROLLED
ENTITIES 4,207 2,785
-------- --------
PROFIT BEFORE TAXATION 6 80,712 110,342
TAXATION 7 (19,858) (24,026)
-------- --------
PROFIT FOR THE PERIOD 60,854 86,316
======== ========
ATTRIBUTABLE TO:
Equity holders of the Company 53,615 81,830
Minority interest 7,239 4,486
-------- --------
60,854 86,316
======== ========
BASIC AND DILUTED EARNINGS PER SHARE FOR PROFIT
ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY (RMB
YUAN) 8 0.29 0.46
======== ========
DIVIDENDS ATTRIBUTABLE TO EQUITY HOLDERS OF THE
COMPANY DURING THE PERIOD
Interim dividends declared after the balance sheet date 9 24,127 36,823
======== ========
The accompanying notes are an integral part of these financial statements.
2008 INTERIM REPORT 112
PETROCHINA COMPANY LIMITED
UNAUDITED CONSOLIDATED INTERIM CONDENSED
BALANCE SHEET
As of June 30, 2008 and December 31, 2007
(Amounts in millions)
JUNE 30, DECEMBER
NOTES 2008 31, 2007
----- -------- --------
RMB RMB
NON CURRENT ASSETS
Property, plant and equipment 10 783,087 762,882
Investments in associates and jointly controlled entities 30,382 26,535
Available-for-sale financial assets 2,193 2,581
Advance operating lease payments 24,637 23,417
Intangible and other assets 8,707 8,488
Time deposits with maturities over one year 4,605 5,053
------- -------
TOTAL NON CURRENT ASSETS 853,611 828,956
------- -------
CURRENT ASSETS
Inventories 11 98,560 88,467
Accounts receivable 12 27,726 18,419
Prepaid expenses and other current assets 68,319 36,018
Notes receivable 13 5,832 4,735
Time deposits with maturities over three months but
within one year 10,932 18,042
Cash and cash equivalents 58,840 65,494
------- -------
TOTAL CURRENT ASSETS 270,209 231,175
------- -------
CURRENT LIABILITIES
Accounts payable and accrued liabilities 14 172,832 144,353
Income tax payable 2,096 11,709
Other taxes payable 20,166 11,099
Short-term borrowings 15 39,257 30,934
------- -------
TOTAL CURRENT LIABILITIES 234,351 198,095
------- -------
NET CURRENT ASSETS 35,858 33,080
------- -------
TOTAL ASSETS LESS CURRENT LIABILITIES 889,469 862,036
======= =======
EQUITY
Equity attributable to equity holders of the Company:
Share capital 183,021 183,021
Retained earnings 357,339 332,432
Reserves 216,883 217,952
------- -------
757,243 733,405
Minority interest 51,808 42,942
------- -------
TOTAL EQUITY 809,051 776,347
------- -------
NON CURRENT LIABILITIES
Long-term borrowings 15 35,287 39,688
Asset retirement obligations 16 25,966 24,761
Deferred taxation 18,159 20,205
Other long-term obligations 1,006 1,035
------- -------
TOTAL NON CURRENT LIABILITIES 80,418 85,689
------- -------
TOTAL EQUITY AND NON CURRENT LIABILITIES 889,469 862,036
======= =======
The accompanying notes are an integral part of these financial statements.
2008 INTERIM REPORT 113
PETROCHINA COMPANY LIMITED
UNAUDITED CONSOLIDATED INTERIM CONDENSED
CASH FLOW STATEMENT
For the six months ended June 30, 2008 and June 30, 2007
(Amounts in millions)
SIX MONTHS ENDED
JUNE 30
-----------------
NOTES 2008 2007
----- ------- -------
RMB RMB
CASH FLOWS FROM OPERATING ACTIVITIES
PROFIT FOR THE PERIOD 60,854 86,316
Adjustments for:
Taxation 7 19,858 24,026
Depreciation, depletion and amortisation 42,754 31,228
Capitalised exploratory costs charged to expense 6,634 6,123
Share of profit of associates and jointly controlled entities (4,207) (2,785)
Reversal of provision for impairment of receivables, net 6 (48) (2,254)
Write down/(Reversal of write down) in inventories, net 6 1,422 (68)
Impairment of available-for-sale financial assets, net 6 10 --
Impairment of investments in associates and jointly controlled entities, net 6 19 5
Loss on disposal of property, plant and equipment 6 498 407
Loss/(Gain) on disposal of investments in associates and jointly controlled entities 3 (371)
Gain on disposal of available-for-sale financial assets (4) (105)
Dividend income 6 (100) (75)
Interest income (1,404) (819)
Interest expense 6 1,635 2,050
Advance payments on long-term operating leases (2,143) (1,350)
Changes in working capital:
Accounts receivable and prepaid expenses and other current assets (32,808) (20,616)
Inventories (11,515) (8,221)
Accounts payable and accrued liabilities 31,533 30,365
------- -------
CASH GENERATED FROM OPERATIONS 112,991 143,856
Interest received 1,271 835
Interest paid (1,975) (2,039)
Income taxes paid (31,128) (32,814)
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 81,159 109,838
======= =======
The accompanying notes are an integral part of these financial statements.
2008 INTERIM REPORT 114
PETROCHINA COMPANY LIMITED
UNAUDITED CONSOLIDATED INTERIM CONDENSED
CASH FLOW STATEMENT
For the six months ended June 30, 2008 and June 30, 2007
(Amounts in millions)
SIX MONTHS ENDED
JUNE 30
-----------------
NOTES 2008 2007
----- ------- -------
RMB RMB
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (75,660) (58,304)
Acquisition of investments in associates and jointly controlled entities (203) (1,018)
Acquisition of available-for-sale financial assets (10) (300)
Acquisition of intangible assets (587) (265)
Acquisition of other non-current assets (327) (501)
Purchase of minority interest in listed subsidiaries -- (86)
Purchase of minority interest in subsidiaries (132) --
Repayment of capital by associates and jointly controlled entities -- 1,552
Proceeds from disposal of property, plant and equipment 98 512
Proceeds from disposal of investments in associates and jointly controlled entities 2 1,015
Proceeds from disposal of available-for-sale financial assets 25 164
Dividends received 2,227 365
Decrease in time deposits with maturities over three months 7,228 30
------- -------
NET CASH USED FOR INVESTING ACTIVITIES (67,339) (56,836)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of short-term borrowings (29,969) (15,405)
Repayments of long-term borrowings (4,111) (13,741)
Dividends paid to minority interest (3,045) (1,905)
Dividends paid to equity holders of the Company 9 (28,708) (27,694)
Increase in short-term borrowings 37,450 16,139
Increase in long-term borrowings 822 12,269
Capital contribution from minority interest 8,232 266
Capital reduction (1,165) --
Decrease in other long-term obligations (29) (121)
------- -------
NET CASH USED FOR FINANCING ACTIVITIES (20,523) (30,192)
------- -------
TRANSLATION OF FOREIGN CURRENCY 49 402
------- -------
(Decrease)/Increase in cash and cash equivalents (6,654) 23,212
Cash and cash equivalents at beginning of the period 65,494 48,559
------- -------
Cash and cash equivalents at end of the period 58,840 71,771
======= =======
The accompanying notes are an integral part of these financial statements.
2008 INTERIM REPORT 115
PETROCHINA COMPANY LIMITED
UNAUDITED CONSOLIDATED INTERIM CONDENSED
STATEMENT OF CHANGES IN EQUITY
For the six months ended June 30, 2008 and June 30, 2007
(Amounts in millions)
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, 2007 179,021 264,092 143,564 586,677 30,914 617,591
Currency translation differences -- -- (258) (258) (164) (422)
------- ------- ------- ------- ------ -------
Net loss recognised directly in equity -- -- (258) (258) (164) (422)
Profit from January 1 to June 30, 2007 -- 81,830 -- 81,830 4,486 86,316
------- ------- ------- ------- ------ -------
Total recognised income/(loss) from
January 1 to June 30, 2007 -- 81,830 (258) 81,572 4,322 85,894
------- ------- ------- ------- ------ -------
Final dividends for 2006 (Note 9) -- (27,694) -- (27,694) -- (27,694)
Dividends to minority interest -- -- -- -- (1,895) (1,895)
Purchase of minority interest in listed
subsidiaries -- -- (64) (64) (22) (86)
Capital contribution from minority
interest -- -- -- -- 266 266
Other -- -- -- -- 11 11
------- ------- ------- ------- ------ -------
Balance at June 30, 2007 179,021 318,228 143,242 640,491 33,596 674,087
======= ======= ======= ======= ====== =======
Balance at January 1, 2008 183,021 332,432 217,952 733,405 42,942 776,347
Currency translation differences -- -- (896) (896) (1,508) (2,404)
------- ------- ------- ------- ------ -------
Net loss recognised directly in equity -- -- (896) (896) (1,508) (2,404)
Profit from January 1 to June 30, 2008 -- 53,615 -- 53,615 7,239 60,854
------- ------- ------- ------- ------ -------
Total recognised income/(loss) from
January 1 to June 30, 2008 -- 53,615 (896) 52,719 5,731 58,450
------- ------- ------- ------- ------ -------
Final dividends for 2007 (Note 9) -- (28,708) -- (28,708) -- (28,708)
Dividends to minority interest -- -- -- -- (3,830) (3,830)
Capital reduction -- -- -- -- (1,165) (1,165)
Purchase of minority interest in
subsidiaries -- -- (15) (15) (117) (132)
Capital contribution from minority
interest -- -- -- -- 8,232 8,232
Fair value loss from available-for-sale
financial assets -- -- (158) (158) -- (158)
Other -- -- -- -- 15 15
------- ------- ------- ------- ------ -------
Balance at June 30, 2008 183,021 357,339 216,883 757,243 51,808 809,051
======= ======= ======= ======= ====== =======
The accompanying notes are an integral part of these financial statements.
2008 INTERIM REPORT 116
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
1 ORGANISATION AND PRINCIPAL ACTIVITIES
PetroChina Company Limited (the "Company") was established in the People's
Republic of China ( "PRC" or "China") on November 5, 1999 as a joint stock
company with limited liability as a result of a group restructuring (the
"Restructuring") of China National Petroleum Corporation ("CNPC") in preparation
for the listing of the Company's shares in Hong Kong and in the United States of
America in 2000. The Company and its subsidiaries are collectively referred to
as the "Group".
In accordance with the restructuring agreement between CNPC and the Company
effective as of November 5, 1999, the Company issued 160 billion state-owned
shares in exchange for the assets and liabilities transferred to the Company by
CNPC. The 160 billion state-owned shares were the initial registered capital of
the Company with a par value of RMB1.00 per share. On April 7, 2000, the Company
issued 17,582,418,000 shares, represented by 13,447,897,000 H shares and
41,345,210 American Depositary Shares ("ADSs", each representing 100 H shares)
in a global offering and the trading of the H shares and the ADSs on the Stock
Exchange of Hong Kong Limited and the New York Stock Exchange commenced on April
7, 2000 and April 6, 2000, respectively. Pursuant to the approval of the China
Securities Regulatory Commission, 1,758,242,000 state-owned shares of the
Company owned by CNPC were converted into H shares for sale in the global
offering.
In September 2005, the Company issued 3,196,801,818 new H shares at HK$
6.00 per share and net proceed to the Company was approximately RMB 19,692. CNPC
also sold 319,680,182 state-owned shares it held concurrently with PetroChina's
sale of new H shares in September 2005.
On November 5, 2007, the Company issued 4,000,000,000 new A shares at RMB
16.70 yuan per share and net proceeds to the Company amounted to approximately
RMB 66,243 and the listing and trading of the A Shares on the Shanghai Stock
Exchange commenced on November 5, 2007.
Following the issuance of the A shares, all the existing state-owned shares
issued before November 5, 2007 held by CNPC have been registered with the China
Securities Depository and Clearing Corporation Limited as A shares.
The Group is principally engaged in (i) the exploration, development and
production and sale of crude oil and natural gas, (ii) the refining,
transportation, storage and marketing of crude oil and petroleum products, (iii)
the production and sale of chemicals, and (iv) the transmission, marketing and
sale of natural gas (Note 18).
2008 INTERIM REPORT 117
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
2 BASIS OF PREPARATION AND ACCOUNTING POLICIES
The unaudited consolidated interim condensed financial statements have been
prepared in accordance with International Accounting Standard ("IAS") 34
"Interim Financial Reporting" issued by the International Accounting Standards
Board. The accounting policies and methods of computation used in the
preparation of the unaudited consolidated interim condensed financial statements
are consistent with those used in the preparation of the consolidated financial
statements for the year ended December 31, 2007.
The unaudited consolidated interim condensed financial statements presented
herein should be read in conjunction with the consolidated financial statements
and notes thereto included in the annual report of the Company for the year
ended December 31, 2007. The consolidated interim condensed financial statements
as of June 30, 2008 and for the six month periods ended June 30, 2008 and June
30, 2007 included herein are unaudited but reflect, in the opinion of the Board
of Directors, all adjustments (which include only normal recurring adjustments)
necessary to properly prepare the unaudited consolidated interim condensed
financial statements, in all material respects, in accordance with IAS 34. The
results of operations for the six months ended June 30, 2008 are not necessarily
indicative of the results of operations expected for the year ending December
31, 2008.
Costs that are incurred unevenly during the financial year are accrued or
deferred in the unaudited consolidated interim condensed financial statements
only if it would be also appropriate to accrue or defer such costs at the end of
the financial year.
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are regularly evaluated and are based on
historical experience and other factors, including expectations of future events
that are believed to be reasonable under the circumstances.
The matters described below are considered to be the most critical in
understanding the estimates and judgements that are involved in preparing the
Group's unaudited consolidated interim condensed financial statements.
(A)ESTIMATION OF OIL AND NATURAL GAS RESERVES
Estimates of oil and natural gas reserves are key elements in the Group's
investment decision-making process. They are also an important element in
testing for impairment. Changes in proved oil and natural gas reserves,
particularly proved developed reserves, will affect unit-of-production
depreciation, depletion and amortisation recorded in the Group's unaudited
consolidated condensed financial statements for property, plant and equipment
related to oil and gas production activities. A reduction in proved developed
reserves will increase depreciation, depletion and amortisation charges
(assuming constant production) and reduce net profit. Proved reserve estimates
are subject to revision, either upward or downward, based on new information,
such as from development drilling and production activities or from changes in
economic factors, including product prices, contract terms, evolution of
technology or development plans.
2008 INTERIM REPORT 118
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
(B) ESTIMATION OF IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, including oil and gas properties, are
reviewed for possible impairments when events or changes in circumstances
indicate that the carrying amount may not be recoverable. Determination as to
whether and how much an asset is impaired involves management estimates and
judgements such as the future price of crude oil, refined and chemical products
and the production profile. However, the impairment reviews and calculations are
based on assumptions that are consistent with the Group's business plans.
Favourable changes to some assumptions may allow the Group to avoid the need to
impair any assets in these years, whereas unfavourable changes may cause the
assets to become impaired.
(C)ESTIMATION OF ASSET RETIREMENT OBLIGATIONS
Provision is recognised for the future decommissioning and restoration of
oil and gas properties. The amounts of the provision recognised are the present
values of the estimated future expenditures. The estimation of future
expenditure is based on current local conditions and requirements, including
legal requirements, technology, price level, etc.. In addition to these factors,
the present values of these estimated future expenditures are also impacted by
the estimation of the economic lives of oil and gas properties. Changes in any
of these estimates will impact the operating results and the financial position
of the Group over the remaining economic lives of the oil and gas properties.
4 TURNOVER
Turnover represents revenues from the sale of crude oil, natural gas,
refined products and petrochemical products and from the transportation of crude
oil and natural gas. Analysis of turnover by segment is shown in Note 18.
5 TAXES OTHER THAN INCOME TAXES
Taxes other than income taxes include RMB 47,816 for the six months ended
June 30, 2008 (six months ended June 30, 2007: RMB 14,942) of special levy which
is paid or payable on the portion of income realised from the sales of
domestically-produced crude oil at prices above a certain level. This levy was
imposed by the PRC government and became effective from March 26, 2006.
2008 INTERIM REPORT 119
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
6 PROFIT BEFORE TAXATION
SIX MONTHS ENDED JUNE 30
------------------------
2008 2007
---------- -----------
RMB RMB
Profit before taxation is arrived at after crediting and charging of
the following items:
Crediting
Dividend income from available-for-sale financial assets 100 75
Reversal of provision for impairment of receivables 70 2,321
Reversal of write down in inventories -- 68
Charging
Amortisation of intangible and other assets 732 688
Cost of inventories (approximates cost of goods sold) recognised as expense 343,727 208,074
Depreciation of property, plant and equipment, including impairment provision
- owned assets 41,161 29,916
- assets under finance leases 3 3
Impairment of available-for-sale financial assets 10 --
Impairment of investments in associates and jointly controlled entities 19 5
Provision for impairment of receivables 22 67
Interest expense (Note (i)) 1,635 2,050
Loss on disposal of property, plant and equipment 498 407
Operating lease expenses 3,071 3,166
Repair and maintenance 4,145 3,687
Research and development expenses 5,153 2,796
Write down in inventories 1,422 --
Note (i): Interest expense
Interest expense 2,754 2,624
Less: Amounts capitalised (1,119) (574)
------ -------
1,635 2,050
====== =======
2008 INTERIM REPORT 120
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
7 TAXATION
SIX MONTHS ENDED JUNE 30
------------------------
2008 2007
---------- -----------
RMB RMB
Income tax 21,515 25,415
Deferred tax (1,657) (1,389)
------ ------
19,858 24,026
====== ======
In accordance with the relevant PRC income tax rules and regulations, the
PRC corporate income tax rate applicable to the Group is principally 25% (2007:
33%). Operations of the Group in certain regions in China have qualified for
certain tax incentives in the form of a reduced income tax rate of 15% through
the year 2010 and accelerated depreciation of certain property, plant and
equipment.
The tax on the Group's profit before taxation differs from the theoretical
amount that would arise using the corporate income tax rate in the PRC
applicable to the Group as follows:
SIX MONTHS ENDED JUNE 30
------------------------
2008 2007
---------- -----------
RMB RMB
Profit before taxation 80,712 110,342
------ -------
Tax calculated at a tax rate of 25% (2007: 33%) 20,178 36,413
Prior year tax return adjustment 25 451
Effect of income taxes from international operations in excess of taxes
at the PRC statutory tax rate 4,716 389
Effect of preferential tax rate (5,735) (8,256)
Effect of change in PRC corporate income tax rate on deferred taxes -- (4,482)
Tax effect of income not subject to tax (1,215) (1,226)
Tax effect of expenses not deductible for tax purposes 1,889 737
------ -------
Taxation 19,858 24,026
====== =======
2008 INTERIM REPORT 121
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
8 BASIC AND DILUTED EARNINGS PER SHARE
Basic and diluted earnings per share for the six months ended June 30, 2008
have been computed by dividing the profit attributable to equity holders of the
Company by 183,021 million shares issued and outstanding during the period.
Basic and diluted earnings per share for the six months ended June 30, 2007
have been computed by dividing the profit attributable to equity holders of the
Company by 179,021 million shares issued and outstanding during the period.
There are no potential dilutive ordinary shares.
9 DIVIDENDS ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
SIX MONTHS ENDED JUNE 30
------------------------
2008 2007
---------- -----------
RMB RMB
Final dividends attributable to equity holders of the Company for 2006
(note a) -- 27,694
Final dividends attributable to equity holders of the Company for 2007
(note b) 28,708 --
------ ------
28,708 27,694
====== ======
(a) Final dividends attributable to equity holders of the Company in respect of
2006 of RMB 0.154699 yuan per share amounting to a total of RMB 27,694 were
approved by the shareholders in the Annual General Meeting on May 16, 2007
and accounted for in equity as an appropriation of retained earnings in the
six months ended June 30, 2007, and were paid on June 1, 2007.
(b) Final dividends attributable to equity holders of the Company in respect of
2007 of RMB 0.156859 yuan per share amounting to a total of RMB 28,708 were
approved by the shareholders in the Annual General Meeting on May 15, 2008
and accounted for in equity as an appropriation of retained earnings in the
six months ended June 30, 2008, and were paid on June 13, 2008.
(c) As authorised by shareholders in the Annual General Meeting on May 15,
2008, the Board of Directors, in a meeting held on August 27, 2008,
resolved to distribute interim dividends attributable to equity holders of
the Company in respect of 2008 of RMB 0.131827 yuan per share amounting to
a total of RMB 24,127. These unaudited consolidated interim condensed
financial statements do not reflect this dividend payable, as it was not
declared until after the balance sheet date.
2008 INTERIM REPORT 122
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
10 PROPERTY, PLANT AND EQUIPMENT
RMB
----------
COST OR VALUATION
At January 1, 2008 1,230,046
Additions 72,218
Disposals or write off (10,338)
Currency translation differences (3,465)
----------
At June 30, 2008 1,288,461
----------
ACCUMULATED DEPRECIATION AND IMPAIRMENT
At January 1, 2008 (467,164)
Charge for the period (41,164)
Disposals or write off 1,834
Currency translation differences 1,120
----------
At June 30, 2008 (505,374)
----------
NET BOOK VALUE
At June 30, 2008 783,087
==========
RMB
----------
COST OR VALUATION
At January 1, 2007 1,057,279
Additions 51,163
Disposals or write off (13,504)
Currency translation differences (63)
----------
At June 30, 2007 1,094,875
----------
ACCUMULATED DEPRECIATION AND IMPAIRMENT
At January 1, 2007 (411,942)
Charge for the period (29,919)
Disposals or write off 4,082
Currency translation differences (55)
----------
At June 30, 2007 (437,834)
----------
NET BOOK VALUE
At June 30, 2007 657,041
==========
RMB
----------
COST OR VALUATION
At July 1, 2007 1,094,875
Additions 135,135
Consolidation of PetroKazakhstan Inc. 10,166
Disposals or write off (8,912)
Currency translation differences (1,218)
----------
At December 31, 2007 1,230,046
----------
ACCUMULATED DEPRECIATION AND IMPAIRMENT
At July 1, 2007 (437,834)
Charge for the period (33,436)
Disposals or write off 3,600
Currency translation differences 506
----------
At December 31, 2007 (467,164)
----------
NET BOOK VALUE
At December 31, 2007 762,882
==========
2008 INTERIM REPORT 123
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
The depreciation charge of the Group for the six months ended June 30, 2008
included impairment losses of RMB 5,979 (six months ended June 30, 2007: RMB
Nil) on certain of the Group's refining production assets. The carrying values
of the refining production assets were written down to their recoverable values.
A valuation of all of the Group's property, plant and equipment, excluding
oil and gas reserves, was carried out during 1999 by 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,
China United Assets Appraiser Co., Ltd., in the PRC 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 any significant differences from their carrying
values.
Bank borrowings are secured on property, plant and equipment with a net
book value of RMB 372 at June 30, 2008 (December 31, 2007: RMB Nil).
11 INVENTORIES
JUNE 30, 2008 DECEMBER 31, 2007
------------- -----------------
RMB RMB
Crude oil and other raw materials 40,276 30,308
Work in progress 4,162 6,083
Finished goods 56,243 52,791
Spare parts and consumables 32 32
------- ------
100,713 89,214
Less: Write down in inventories (2,153) (747)
------- ------
98,560 88,467
======= ======
2008 INTERIM REPORT 124
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
12 ACCOUNTS RECEIVABLE
JUNE 30, 2008 DECEMBER 31, 2007
------------- -----------------
RMB RMB
Accounts receivable due from third parties 22,439 15,296
Accounts receivable due from related parties 8,115 6,002
------ ------
30,554 21,298
Less: Provision for impairment of receivables (2,828) (2,879)
------ ------
27,726 18,419
====== ======
Amounts due from related parties are interest free and unsecured (Note 21).
The aging analysis of accounts receivable at June 30, 2008 and December 31, 2007
is as follows:
JUNE 30, 2008 DECEMBER 31, 2007
------------- -----------------
RMB RMB
Within 1 year 27,587 18,260
Between 1 to 2 years 42 39
Between 2 to 3 years 39 32
Over 3 years 2,886 2,967
------ ------
30,554 21,298
====== ======
The Group offers its customers credit terms up to 180 days, except for certain
selected customers.
Movements in the provision for impairment of accounts receivables are as
follows:
SIX MONTHS ENDED JUNE 30
------------------------
2008 2007
----- ------
RMB RMB
At beginning of the period 2,879 3,257
Provision for impairment of accounts receivables 11 21
Receivables written off uncollectible (11) (9)
Reversal of provision for impairment of accounts
receivables (51) (43)
----- -----
At end of the period 2,828 3,226
===== =====
2008 INTERIM REPORT 125
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
13 NOTES RECEIVABLE
Notes receivable represents mainly bills of acceptance issued by banks for
sale of goods and products. All notes receivable are due within one year.
14 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
JUNE 30, 2008 DECEMBER 31, 2007
------------- -----------------
RMB RMB
Trade payables 41,396 40,447
Advances from customers 11,817 9,846
Salaries and welfare payable 7,961 11,585
Accrued expenses 9,636 5
Dividends payable by subsidiaries to minority shareholders 27 67
Interest payable 130 65
Construction fee and equipment cost payables 36,784 30,784
One-time employee housing remedial payment payable 104 221
Amounts due to related parties 51,502 40,334
Other payables 13,475 10,999
------- -------
172,832 144,353
======= =======
Other payables consist primarily of customer deposits.
Amounts due to related parties are interest-free, unsecured and have no fixed
terms of repayments (Note 21).
The aging analysis of trade payables at June 30, 2008 and December 31, 2007 is
as follows:
JUNE 30, 2008 DECEMBER 31, 2007
------------- -----------------
RMB RMB
Within 1 year 39,875 39,005
Between 1 to 2 years 985 819
Between 2 to 3 years 233 307
Over 3 years 303 316
------ ------
41,396 40,447
====== ======
2008 INTERIM REPORT 126
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
15 BORROWINGS
JUNE 30, 2008 DECEMBER 31, 2007
------------- -----------------
RMB RMB
Short-term borrowings (including current portion of
long-term borrowings) 39,257 30,934
Long-term borrowings 35,287 39,688
------ ------
74,544 70,622
====== ======
The movements in the borrowings can be analysed as follows:
RMB
------
Balance at January 1, 2008 70,622
Increase in borrowings 39,345
Repayments of borrowings 34,080)
Currency translation differences (1,343)
------
Balance at June 30, 2008 74,544
======
The long-term borrowings can be analysed as follows:
JUNE 30, 2008 DECEMBER 31, 2007
------------- -----------------
RMB RMB
Unsecured loans 44,528 48,601
Secured loans 4,199 3,287
Current portion of long-term borrowings (13,440) (12,200)
------- -------
35,287 39,688
======= =======
The long-term borrowings can be further analysed as follows:
Bank loans
- Wholly repayable within five years 15,497 18,072
- Not wholly repayable within five years 3,648 3,743
Loans other than bank loans
- Wholly repayable within five years 18,643 19,104
- Not wholly repayable within five years 10,939 10,969
------- -------
48,727 51,888
Current portion of long-term borrowings (13,440) (12,200)
------- -------
35,287 39,688
======= =======
2008 INTERIM REPORT 127
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
Loans other than bank loans not wholly repayable within five years are
repayable by installments through April 2032. Interest is charged on the
outstanding balances at rates ranging from 1.55% to 6.26% per annum (December
31, 2007: 1.55% to 5.69% per annum).
At June 30, 2008 and December 31, 2007, the Group's long-term borrowings
were repayable as follows:
BANK LOANS LOANS OTHER THAN BANK LOANS
--------------------------------- ---------------------------------
JUNE 30, 2008 DECEMBER 31, 2007 JUNE 30, 2008 DECEMBER 31, 2007
------------- ----------------- ------------- -----------------
RMB RMB RMB RMB
Within 1 year 2,778 5,861 10,662 6,339
Between 1 to 2 years 8,707 424 4,712 5,330
Between 2 to 5 years 4,511 12,322 3,401 7,576
After 5 years 3,149 3,208 10,807 10,828
------ ------ ------ ------
19,145 21,815 29,582 30,073
====== ====== ====== ======
16 ASSET RETIREMENT OBLIGATIONS
RMB
------
At January 1, 2008 24,761
Liabilities incurred 529
Liabilities settled --
Accretion expense 774
Currency translation differences (98)
------
At June 30, 2008 25,966
======
17 SUBSIDIARIES
The principal subsidiaries of the Group are:
PAID-UP TYPE OF ATTRIBUTABLE
COUNTRY OF CAPITAL LEGAL EQUITY PRINCIPAL
COMPANY NAME INCORPORATION RMB ENTITY INTEREST % ACTIVITIES
------------ ------------- --------- --------- ------------ ------------------
Daqing Oilfield PRC 47,500 Limited 100.00 Exploration,
Company Limited liability production and
company sale of crude oil
and natural gas;
production and
sale of refined
products
Daqing Yu Shu Lin PRC 1,272 Limited 88.16 Exploration,
Oilfield Company liability production and
Limited company sale of crude oil
and natural gas
CNPC Exploration PRC 16,100 Limited 50.00 Exploration,
and Development liability production and
Company Limited company sale of crude oil
and natural gas
in and outside of
the PRC
PetroKazakhstan Canada US Dollar Joint 67.00 Exploration,
Inc. ("USD") stock production and
1,965 company sale of crude oil
million with and natural gas
limited outside of the PRC
liability
2008 INTERIM REPORT 128
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
18 SEGMENT INFORMATION
The Group is engaged in a broad range of petroleum related activities
through its four major business segments: Exploration and Production, Refining
and Marketing, Chemicals and Marketing and Natural Gas and Pipeline.
The Exploration and Production segment is engaged in the exploration,
development, production and sale of crude oil and natural gas.
The Refining and Marketing segment is engaged in the refining,
transportation, storage and marketing of crude oil and petroleum products.
The Chemicals and Marketing segment is engaged in the production and sale
of basic petrochemical products, derivative petrochemical products, and other
chemical products.
The Natural Gas and Pipeline segment is engaged in the sale of natural gas
and the transmission of natural gas, crude oil and refined products.
In addition to these four major business segments, the Other segment
includes the assets, liabilities income and expenses relating to cash
management, financing activities, the corporate center, research and
development, and other business services supporting the operating business
segments of the Group.
Most assets and operations of the Group are located in the PRC, which is
considered as one geographic location in an economic environment with similar
risks and returns. In addition to its operations in the PRC, the Group also has
overseas operations through subsidiaries engaging in the exploration and
production of crude oil and natural gas.
The accounting policies of the operating segments are the same as those
described in Note 2 - " Basis of Preparation and Accounting Policies".
Operating segment information for the six months ended June 30, 2008 and
2007 is presented below:
2008 INTERIM REPORT 129
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
PRIMARY REPORTING FORMAT - BUSINESS SEGMENTS
EXPLORATION REFINING CHEMICALS NATURAL
SIX MONTHS ENDED AND AND AND GAS AND
JUNE 30, 2007 PRODUCTION MARKETING MARKETING PIPELINE OTHER TOTAL
------------- ----------- --------- --------- -------- ------- ---------
RMB RMB RMB RMB RMB RMB
Turnover 205,390 314,863 49,860 23,216 483 593,812
Less: Intersegment
sales (165,789) (26,842) (5,036) (3,191) (228) (201,086)
-------- ------- ------ ------ ------ ---------
Turnover from
external
customers 39,601 288,021 44,824 20,025 255 392,726
======== ======= ====== ====== ====== =========
Depreciation,
depletion and
amortisation (20,249) (4,961) (2,828) (2,895) (295) (31,228)
Segment result 101,388 18,562 7,586 6,352 (1,202) 132,686
Other costs (4,952) (14,637) (2,188) (224) (1,555) (23,556)
-------- ------- ------ ------ ------ ---------
Profit/(loss) from
operations 96,436 3,925 5,398 6,128 (2,757) 109,130
-------- ------- ------ ------ ------
Finance costs (1,573)
Share of profit of
associates and
jointly
controlled entities 2,518 240 20 -- 7 2,785
---------
Profit before taxation 110,342
Taxation (24,026)
---------
Profit for the year 86,316
=========
Interest income 3,475 795 367 50 3,951 8,638
Less: Intersegment
interest income (7,819)
---------
Interest income from
external entities 819
=========
Interest expense (3,705) (2,239) (416) (922) (2,587) (9,869)
Less: Intersegment
interest expense 7,819
---------
Interest expense to
external entities (2,050)
=========
Segment assets 498,819 225,496 78,682 74,322 626,882 1,504,201
Elimination of
intersegment
balances (594,611)
Investments in
associates and
jointly controlled
entities 27,088 5,143 132 20 64 32,447
---------
Total assets 942,037
=========
Segment capital
expenditure
- for property,
plant and
equipment 42,196 4,841 1,163 2,471 350 51,021
Segment liabilities 192,988 138,291 34,560 42,528 101,461 509,828
Other liabilities 60,222
Elimination of
intersegment
balances (302,100)
---------
Total liabilities 267,950
=========
2008 INTERIM REPORT 130
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
PRIMARY REPORTING FORMAT - BUSINESS SEGMENTS (CONTINUED)
EXPLORATION REFINING CHEMICALS NATURAL
SIX MONTHS ENDED AND AND AND GAS AND
JUNE 30, 2008 PRODUCTION MARKETING MARKETING PIPELINE OTHER TOTAL
------------- ----------- --------- --------- -------- ------- ---------
RMB RMB RMB RMB RMB RMB
Turnover 316,876 451,737 60,463 30,902 734 860,712
Less: Intersegment sales (255,871) (46,481) (5,145) (3,390) (303) (311,190)
------- ------- ------ ------ ------- ---------
Turnover from
external
customers 61,005 405,256 55,318 27,512 431 549,522
======= ======= ====== ====== ======= =========
Depreciation,
depletion and
amortisation (25,278) (10,990) (2,963) (3,155) (368) (42,754)
Segment result 138,135 (48,623) 9,476 8,642 (4,474) 103,156
Other costs (7,904) (10,392) (2,762) (246) (4,088) (25,392)
------- ------- ------ ------ ------- ---------
Profit/(loss) from
operations 130,231 (59,015) 6,714 8,396 (8,562) 77,764
------- ------- ------ ------ -------
Finance costs (1,259)
Share of profit of
associates and
jointly controlled
entities 4,270 (90) 15 2 10 4,207
---------
Profit before taxation 80,712
Taxation (19,858)
---------
Profit for the year 60,854
=========
Interest income 5,000 1,690 467 78 3,920 11,155
Less: Intersegment
interest income (9,751)
---------
Interest income from
external entities 1,404
=========
Interest expense (5,063) (3,367) (559) (924) (1,473) (11,386)
Less: Intersegment
interest expense 9,751
---------
Interest expense to
external entities (1,635)
=========
Segment assets 597,461 336,360 101,532 101,175 891,059 2,027,587
Elimination of
intersegment balances (934,149)
Investments in
associates and
jointly
controlled entities 25,551 4,577 153 17 84 30,382
---------
Total assets 1,123,820
=========
Segment capital
expenditure
- for property,
plant and equipment 47,053 6,527 4,307 12,845 961 71,693
Segment liabilities 263,059 192,893 34,432 59,465 242,882 792,731
Other liabilities 40,421
Elimination of
intersegment balances (518,383)
---------
Total liabilities 314,769
=========
2008 INTERIM REPORT 131
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
Note (a) - Intersegment sales are conducted principally at market prices.
Note (b) - Segment result is profit from operations before other costs.
Other costs include selling, general and administrative expenses
and other income, net.
Note (c) - Segment results for the six months ended June 30, 2008 include
impairment for property, plant and equipment (Note 10).
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.
SECONDARY REPORTING FORMAT - GEOGRAPHICAL SEGMENTS
CAPITAL
TURNOVER TOTAL ASSETS EXPENDITURE
----------------- ------------------- ---------------
SIX MONTHS ENDED JUNE 30 2008 2007 2008 2007 2008 2007
------------------------ ------- ------- --------- ------- ------ ------
RMB RMB RMB RMB RMB RMB
PRC 519,845 380,444 1,020,951 878,198 67,287 46,955
Other (Exploration and Production) 29,677 12,282 102,869 63,839 4,406 4,066
------- ------- --------- ------- ------ ------
549,522 392,726 1,123,820 942,037 71,693 51,021
======= ======= ========= ======= ====== ======
19 CONTINGENT LIABILITIES
(A)BANK AND OTHER GUARANTEES
At June 30, 2008, the Group had contingent liabilities in respect of
guarantees made to China Petroleum Finance Company Limited ("CP Finance", a
subsidiary of CNPC) from which it is anticipated that no material liabilities
will arise.
JUNE 30, 2008 DECEMBER 31, 2007
------------- -----------------
RMB RMB
Guarantee of borrowings of associates provided by 69 77
CP Finance
--- ---
69 77
=== ===
(B) ENVIRONMENTAL LIABILITIES
CNPC and the Group have operated in China for many years. China has adopted
extensive environmental laws and regulations that affect the operation of the
oil and gas industry. The outcome of environmental liabilities under proposed or
future environmental legislation cannot reasonably be estimated at present, and
could be material. Under existing legislation, however, management believes that
there are no probable liabilities, except for the amounts which have already
been reflected in the unaudited consolidated interim condensed financial
statements, that may have a material adverse effect on the financial position of
the Group.
2008 INTERIM REPORT 132
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
(C) LEGAL CONTINGENCIES
The Group is the named defendant in certain insignificant lawsuits as well
as the named party in other proceedings arising in the ordinary course of
business. While the outcome of such contingencies, lawsuits or other proceedings
cannot be determined at present, the management believes that any resulting
liabilities will not have a material adverse effect on the financial position of
the Group.
(D) LEASING OF ROADS, LAND AND BUILDINGS
According to the Restructuring Agreement entered into between the Company
and CNPC in 2000:
- CNPC will use its best endeavours to obtain formal land use right
certificates to replace the entitlement certificates in relation to
the 28,649 parcels of land which were leased or transferred to the
Company from CNPC, within one year from August, September and October
1999 when the relevant entitlement certificates were issued;
- 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.
As at June 30, 2008, CNPC had obtained formal land use right certificates
in relation to 27,554 out of the above-mentioned 28,649 parcels of land and some
building ownership certificates for the above-mentioned buildings, but has
completed none of the necessary governmental procedures for the above-mentioned
service stations located on collectively-owned land. The Directors of the
Company confirm that the use of and the conduct of relevant activities at the
above-mentioned parcels of land, service stations and buildings are not affected
by the fact that the relevant land use right certificates or individual building
ownership certificates have not been obtained or the fact that the relevant
governmental procedures have not been completed. In management's opinion, the
outcome of the above events will not have a material adverse effect on the
financial position of the Group.
(E) GROUP INSURANCE
Except for limited insurance coverage for vehicles and certain assets
subject to significant operating risks, the Group does not carry any other
insurance for property, facilities or equipment with respect to its business
operations. In addition, the Group does not carry any third-party liability
insurance against claims relating to personal injury, property and environmental
damages or business interruption insurance as such insurance coverage is not
customary in China. The potential effect of under-insurance on future incidents
on the financial position of the Group cannot be estimated at present.
2008 INTERIM REPORT 133
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
20 COMMITMENTS
(A) OPERATING LEASE COMMITMENTS
Operating lease commitments of the Group are mainly for leasing of land,
buildings and equipment. Leases range from one to 50 years and usually do not
contain renewal options. Future minimum lease payments as of June 30, 2008 and
December 31, 2007 under non-cancellable operating leases are as follows:
JUNE 30, 2008 DECEMBER 31, 2007
------------- -----------------
RMB RMB
First year 3,523 3,394
Second year 3,180 3,077
Third year 3,153 2,927
Fourth year 3,499 3,322
Fifth year 2,822 2,650
Thereafter 79,597 79,025
------ ------
95,774 94,395
====== ======
(B) CAPITAL COMMITMENTS
At June 30, 2008, the Group's capital commitments contracted but not
provided for was RMB 9,480 (December 31, 2007: RMB 11,621).
(C) EXPLORATION AND PRODUCTION LICENSES
The Company is obligated to make annual payments with respect to its
exploration and production licenses to the Ministry of Land and Resources.
Payments incurred were approximately RMB 399 for the six months ended June 30,
2008 (six months ended June 30, 2007: RMB 354).
Estimated annual payments for the next five years are as follows:
JUNE 30, 2008
-------------
RMB
2008 507
2009 906
2010 906
2011 906
2012 906
2008 INTERIM REPORT 134
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
21 RELATED PARTY TRANSACTIONS
CNPC, the immediate parent of the Company, is a state-controlled enterprise
directly controlled by the PRC government. The PRC government is the Company's
ultimate controlling party. State-controlled enterprises and their subsidiaries,
in addition to CNPC Group companies, directly or indirectly controlled by the
PRC government are also related parties of the Group. Neither CNPC nor the PRC
government publishes financial statements available for public use.
The Group has extensive transactions with other companies of the CNPC
Group. Due to the relationship, it is possible that the terms of the
transactions between the Group and other members of the CNPC Group are not the
same as those that would result from transactions with other related parties or
wholly unrelated parties.
The Company and CNPC entered into a Comprehensive Products and Services
Agreement on March 10, 2000 for a range of products and services which may be
required and requested by either party; a Land Use Rights Leasing Contract under
which CNPC leases 42,476 parcels of land located throughout the PRC to the
Company; and a Buildings Leasing Contract under which CNPC leases 191 buildings
located throughout the PRC to the Company.
The terms of the current Comprehensive Products and Services Agreement were
amended in 2005 and the agreement is effective through December 31, 2008. The
products and services to be provided by the CNPC Group to the Company under the
Comprehensive Products and Services Agreement include construction and technical
services, production services, supply of material services, social services,
ancillary services and financial services. The products and services are
provided in accordance with (1) state-prescribed prices; or (2) where there is
no state-prescribed price, relevant market prices; or (3) where neither (1) nor
(2) is applicable, actual cost incurred; or the agreed contractual price, being
the actual cost plus a margin of not more than 15% for certain construction and
technical services, and 3% for all other types of services.
The Land Use Rights Leasing Contract provides for the lease of an aggregate
area of approximately 1,145 million square meters of land located throughout the
PRC to business units of the Group for a term of 50 years at an annual fee of
RMB 2,000. The total fee payable for the lease of all such property may, after
every 10 years, be adjusted by agreement between the Company and CNPC.
Under the Buildings Leasing Contract, 191 buildings covering an aggregate
area of 269,770 square meters located throughout the PRC are leased at an
aggregate annual fee of RMB 39 for a term of 20 years. The Company also entered
into a Supplemental Buildings Leasing Agreement with CNPC in September 2002 to
lease an additional 404 buildings covering approximately 442,730 square meters
at an annual rental of RMB 157. The Supplemental Buildings Leasing Agreement
will expire at the same time as the Buildings Leasing Contract.
2008 INTERIM REPORT 135
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
In addition to the related party information shown elsewhere in the
unaudited consolidated interim condensed financial statements, the following is
a summary of significant related party transactions entered into in the ordinary
course of business between the Group and its related parties during the years
and balances arising from related party transactions at the end of the periods
indicated below:
(A) BANK DEPOSITS
NOTE JUNE 30, 2008 DECEMBER 31, 2007
---- ------------- -----------------
RMB RMB
Bank deposits
CP Finance (i) 7,337 8,393
State-controlled banks and other
financial institutions 46,001 66,611
------ ------
53,338 75,004
====== ======
SIX MONTHS
ENDED JUNE 30
-------------
NOTE 2008 2007
---- ----- ----
RMB RMB
Interest income from bank deposits
CP Finance (i) 64 70
State-controlled banks and other
financial institutions 993 439
----- ---
1,057 509
===== ===
(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.
2008 INTERIM REPORT 136
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
(B) SALES OF GOODS AND SERVICES
SIX MONTHS ENDED JUNE 30
------------------------
2008 2007
----------- ----------
RMB RMB
Sales of goods
Associates and jointly controlled entities
- Crude oil -- 1,570
- Refined products 4,436 11,131
- Chemical products 90 753
CNPC and its subsidiaries
- Crude oil 2,036 1,208
- Refined products 8,643 7,238
- Chemical products 5,620 3,208
- Natural gas 848 887
- Other 157 199
Other state-controlled enterprises
- Crude oil 34,902 21,901
- Refined products 52,636 43,380
- Chemical products 2,003 2,847
- Natural gas 6,724 4,883
------- -------
118,095 99,205
======= =======
Sales of goods to related parties are conducted at market prices.
SIX MONTHS ENDED JUNE 30
------------------------
2008 2007
----------- ----------
RMB RMB
Sales of services
- CNPC and its subsidiaries 3,642 871
- Other state-controlled enterprises 3,035 4,177
----- -----
6,677 5,048
===== =====
Sales of services principally represent the provision of services in
connection with the transportation of crude oil and natural gas at market
prices.
2008 INTERIM REPORT 137
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
(C) PURCHASES OF GOODS AND SERVICES
SIX MONTHS ENDED JUNE 30
------------------------
NOTES 2008 2007
----- ----------- ----------
RMB RMB
Purchases of goods (i)
Associates and jointly controlled entities 184 12,136
Other state-controlled enterprises 37,761 27,482
Purchases of services
Associates and jointly controlled entities 49 27
CNPC and its subsidiaries
- Fees paid for construction and technical services (ii)
- Exploration and development services (iii) 24,426 22,994
- Other construction and technical services (iv) 18,047 9,921
- Fees for production services (v) 38,350 11,653
- Social service charges (vi) 1,152 998
- Ancillary service charges (vii) 1,185 1,038
- Commission expense and other charges (viii) 295 307
Other state-controlled enterprises (ix) 2,303 833
------- ------
123,752 87,389
======= ======
(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 actual cost plus a margin of not 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, etc..
(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 exploration and production activities such
as oilfield construction, technology research, engineering and design,
etc..
2008 INTERIM REPORT 138
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
(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 etc.
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 construction and technical services at market
prices.
(D) PURCHASES OF ASSETS
SIX MONTHS ENDED JUNE 30
------------------------
2008 2007
----------- ----------
RMB RMB
Purchases of assets
CNPC and its subsidiaries 1,720 956
Other state-controlled enterprises 929 548
----- -----
2,649 1,504
===== =====
Purchases of assets principally represent the purchases of manufacturing
equipment, office equipment and transportation equipment, etc., at market
prices.
2008 INTERIM REPORT 139
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
(E) PERIOD-END BALANCES ARISING FROM SALES/PURCHASES OF
GOODS/SERVICES/ASSETS
JUNE 30, 2008 DECEMBER 31, 2007
------------- -----------------
RMB RMB
Accounts receivable from related parties at the end of the
period:
Associates and jointly controlled entities 172 296
Fellow subsidiaries (CNPC Group) 2,271 3,796
Other state-controlled enterprises 5,672 1,910
------- -------
8,115 6,002
Less: Provision for impairment
Fellow subsidiaries (CNPC Group) (156) (189)
Other state-controlled enterprises (700) (708)
------- -------
(856) (897)
------- -------
7,259 5,105
======= =======
Prepayments and other receivables from related parties at the
end of the period:
Associates and jointly controlled entities 1,574 2,412
Fellow subsidiaries (CNPC Group) 34,134 10,335
Other state-controlled enterprises 6,940 6,809
------- -------
42,648 19,556
Less: Provision for impairment
Associates and jointly controlled entities (31) (39)
Fellow subsidiaries (CNPC Group) (12) (22)
Other state-controlled enterprises (88) (79)
------- -------
(131) (140)
------- -------
42,517 19,416
======= =======
Accounts payable and accrued liabilities to related parties
at the end of the period:
Associates and jointly controlled entities 885 117
Parent (CNPC) 943 922
Fellow subsidiaries (CNPC Group) 42,249 32,154
Other state-controlled enterprises 7,425 7,141
------- -------
51,502 40,334
======= =======
2008 INTERIM REPORT 140
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30
------------------------
2008 2007
---- ----
RMB RMB
Net changes in provision for impairment of accounts receivable from
related parties charged/(credited) to profit and loss account:
Associates and jointly controlled entities -- (1)
Fellow subsidiaries (CNPC Group) (22) (9)
Other state-controlled enterprises (8) (1)
--- ---
(30) (11)
=== ===
Net changes in provision for impairment of prepayments and other
receivables from related parties charged/(credited) to profit and
loss account:
Associates and jointly controlled entities (8) (18)
Fellow subsidiaries (CNPC Group) (10) 5
Other state-controlled enterprises 9 --
--- ---
(9) (13)
=== ===
(F) LEASES
SIX MONTHS ENDED JUNE 30
------------------------
NOTES 2008 2007
----- ----- -----
RMB RMB
Advance operating lease payments paid to related parties: (i)
Other state-controlled enterprises -- 1
----- -----
-- 1
===== =====
Other operating lease payments paid to related parties:
Parent (CNPC) (ii) 1,036 1,018
----- -----
1,036 1,018
===== =====
(i) Advance operating lease payments principally represent the advance payment
paid for the long-term operating leases 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 Leasing Contract, the Buildings Leasing Contract and
Supplemental Buildings Leasing Agreement with CNPC.
2008 INTERIM REPORT 141
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
JUNE 30, 2008 DECEMBER 31, 2007
------------- -----------------
RMB RMB
Operating lease payable to related parties
Parent (CNPC) 44 16
--- ---
44 16
=== ===
(G) LOANS
SIX MONTHS ENDED JUNE 30
------------------------
2008 2007
LOANS TO RELATED PARTIES ------- ------
------------------------ RMB RMB
Loans to associates:
Beginning of the period 1,853 1,800
Loans advanced 157 210
Loan repayments received (1,605) (64)
Interest charged 4 83
Interest received (2) (72)
------ ------
End of the period 407 1,957
====== ======
Loans to associates are included in prepaid expenses and other current
assets.
The loans to related parties are mainly with interest rates ranging from
zero to 10.49% per annum as of June 30, 2008 (December 31, 2007: 5.20% to
8.60%).
2008 INTERIM REPORT 142
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30
------------------------
LOANS FROM RELATED PARTIES NOTES 2008 2007
----- ------- -------
RMB RMB
Loans from CP Finance: (i)
Beginning of the period 24,493 27,184
Loans received 2,116 2,246
Loan repayments paid (1,170) (2,346)
Interest charged 666 486
Interest paid (672) (490)
Currency translation differences (297) (36)
------- -------
End of the period 25,136 27,044
======= =======
Loans from state-controlled banks and other
financial institutions: (ii)
Beginning of the period 34,263 32,810
Loans received 24,510 22,138
Loan repayments paid (24,804) (23,446)
Interest charged 797 895
Interest paid (807) (909)
Currency translation differences (622) (148)
------- -------
End of the period 33,337 31,340
======= =======
Loans from other related parties: (iii)
Beginning of the period 5 5
Loans received -- --
Loans repayments paid -- --
Interest charged -- --
Interest paid -- --
------- -------
End of the period 5 5
======= =======
(i) The loans from CP Finance are mainly with interest rates ranging from 2.86%
to 7.47% per annum as of June 30, 2008 (December 31, 2007: 4.46% to 7.47%),
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% per annum as of June
30, 2008 (December 31, 2007: zero to 8.66%), with maturities through 2038.
(iii) The loans from other related parties are mainly with interest rate at
6.32% per annum as of June 30, 2008 (December 31, 2007: 6.32%), and with no
fixed repayment terms.
The guaranteed loans amounted to RMB 469 at June 30, 2008 (December 31,
2007: RMB 528). Borrowings of RMB 439 are from non-related parties, long-term
and guaranteed by CNPC and borrowings of RMB 30 are from non-related parties,
short-term and guaranteed by the Company and third parities.
2008 INTERIM REPORT 143
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM
CONDENSED FINANCIAL STATEMENTS
For the six months ended June 30, 2008
PETROCHINA COMPANY LIMITED (Amounts in millions unless otherwise stated)
--------------------------------------------------------------------------------
(H) KEY MANAGEMENT COMPENSATION
SIX MONTHS ENDED JUNE 30
------------------------
2008 2007
------- -------
RMB'000 RMB'000
Emoluments and other benefits 3,783 3,190
Contribution to retirement benefit scheme 232 144
----- -----
4,015 3,334
===== =====
(I) CONTINGENT LIABILITIES
The Group disclosed in Note 19 its contingent liabilities arising from the
guarantees made for related parties.
(J) COLLATERAL FOR BORROWINGS
The Group pledged time deposits with maturities over one year as collateral
with certain banks for the borrowings of subsidiaries and associates.
As at June 30, 2008, time deposits with maturities over one year of USD 670
million (December 31, 2007: USD 690 million), were secured including for the
borrowings of subsidiaries of USD 602 million (December 31, 2007: USD 450
million) and for the borrowings of associates of USD 68 million (December 31,
2007: USD 240 million).
22 SHARE APPRECIATION RIGHTS
The Company has adopted a share-based compensation scheme which is a share
appreciation right arrangement payable in cash to the recipients upon exercise
of the rights which became effective upon the listing of the H shares of the
Company on April 7, 2000. Directors, Supervisors and senior executives of the
Company are eligible for the scheme and the rights granted thereunder can be
exercised from April 8, 2003 to April 7, 2008. The exercise price is the price
of the H share as at the initial public offering, being HK$1.28 per share.
As at April 7, 2008 (being the expiry date of the exercise of the share
appreciation rights), none of the holders of the share appreciation rights
exercised their rights. The Company therefore derecognised the liability
previously accrued of RMB1,400 million in the financial statements of the Group
for the six months ended June 30, 2008.
23 SUBSEQUENT EVENT
At the Extraordinary General Meeting on July 31, 2008, the shareholders
approved a proposed issuance of Domestic Corporate Bonds in the PRC with an
aggregate principal amount of not more than RMB 60 billion in one or more
tranches.
2008 INTERIM REPORT 144
DOCUMENTS AVAILABLE FOR INSPECTION
The following documents will be available for inspection at the registered
office of the Company upon requests by the relevant regulatory authorities and
shareholders in accordance with the Articles of Association and the laws and
regulations of the PRC:
1. The original of the interim report for 2008 signed by the Chairman of
the Board.
2. The financial statements under the hand and seal of the Legal
Representative, Chief Financial Officer, the Chief Accountant and the Person in
Charge of the Accounting Department of the Company.
3. The original of the interim report of the Company under the seal of the
Auditors and under the hand of Certified Public Accountants.
4. The original copies of the documents and announcement of the Company
published in the newspaper stipulated by the China Securities Regulatory
Commission during the reporting period.
5. The Articles of Association of the Company.
2008 INTERIM REPORT 145
CONFIRMATION FROM THE DIRECTORS AND SENIOR MANAGEMENT
According to the relevant provisions and requirements of the Securities Law
of the People's Republic of China and Measures for Information Disclosure of
Companies Offering Shares to the Public promulgated by the China Securities
Regulatory Commission, as the Board Directors and senior management of
PetroChina Company Limited, we have carefully reviewed the interim report for
the six months ended June 30, 2008 and concluded that this interim report truly
and objectively represents the business performance of the Company in the first
half 2008, it contains no false representations, misleading statements or
material omissions and complies with the requirements of the China Securities
Regulatory Commission and other relevant regulatory authorities.
Signatures of the Directors and Senior Management:
/s/ Jiang Jiemin /s/ Zhou Jiping /s/ Wang Yilin /s/ Zeng Yukang
Jiang Jiemin Zhou Jiping Wang Yilin Zeng Yukang
/s/ Wang Fucheng /s/ Li Xinhua /s/ Liao Yongyuan /s/ Wang Guoliang
Wang Fucheng Li Xinhua Liao Yongyuan Wang Guoliang
/s/ Jiang Fan /s/ Chee-Chen Tung /s/ Liu Hongru /s/ Franco Bernabe
Jiang Fan Chee-Chen Tung Liu Hongru Franco Bernabe
/s/ Li Yongwu /s/ Cui Junhui /s/ Sun Longde /s/ Shen Diancheng
Li Yongwu Cui Junhui Sun Longde Shen Diancheng
/s/ Liu Hongbin /s/ Zhou Mingchun /s/ Li Hualin /s/ Zhao Zhengzhang
Liu Hongbin Zhou Mingchun Li Hualin Zhao Zhengzhang
/s/ Lin Aiguo /s/ Wang Daofu /s/ Huang Weihe /s/ Li Huaiqi
Lin Aiguo Wang Daofu Huang Weihe Li Huaiqi
August 27, 2008
This interim report is published in English and Chinese. In the event of any
inconsistency between the two versions, the Chinese version shall prevail.
2008 INTERIM REPORT 146
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this announcement to be signed on its behalf by the
undersigned, thereunto duly authorized.
PetroChina Company Limited
Dated: September 16, 2008 By: /s/ Li Huaiqi
-----------------------------------
Name: Li Huaiqi
Title: Company Secretary