EB SECURITIES: Maintains "buy" rating on PetroChina (00857) as 26Q1 performance hits new high.

EB SECURITIES released a research report stating that PetroChina (00857) has shown its full industry chain advantage in the first quarter of 2026, achieving record performance again, meeting expectations, maintaining profit forecasts for the company, and expecting the company's net profit attributable to shareholders in 2026-2028 to be 190.2/195.9/201.8 billion yuan, corresponding to EPS of 1.04/1.07/1.10 yuan/share respectively. The report is optimistic about the company's "increased reserves and production" potential and the long-term growth of its natural gas business, maintaining a "buy" rating for the company's A (601857.SH) + H shares. The main viewpoints of EB SECURITIES are as follows: Event The company released its first quarter report for 2026, achieving total operating revenue of 736.4 billion yuan in the first quarter of 2026, down 2.2% year-on-year, up 5.9% quarter-on-quarter, and achieving a net profit attributable to shareholders of 48.3 billion yuan, up 1.9% year-on-year, and up 55.8% quarter-on-quarter. Integration of the industry chain advantage highlights, record performance in the first quarter of 2026 In the first quarter of 2026, affected by conflicts in the Middle East, international oil prices fluctuated upwards, with Brent oil averaging $78.38 per barrel, up 4.5% year-on-year. However, oil prices were under pressure in January and February 2026, which had a certain impact on the operations of oil companies. Domestic natural gas consumption increased by 3.1% year-on-year; domestic demand for refined oil products was mainly affected by alternative energy sources, with a 2.3% year-on-year decrease in consumption; demand for major chemical products continued to grow, with ethylene equivalent consumption increasing by 1.0% year-on-year. The company actively responded to changes in the situation, continued to increase exploration and development efforts, deepened the transformation and upgrading of refining and petrochemicals, relied on the full industry chain advantage to withstand oil price fluctuations, and achieved record-high performance in the first quarter of 2026. Due to the increase in cash occupancy caused by the rise in crude oil and petrochemical product prices, the company's operating cash flow in 2026 was 84.5 billion yuan, down 39.4% year-on-year. In the first quarter of 2026, the company's upstream business achieved operating profit of 41.0 billion yuan, down 11.0% year-on-year, due to the decrease in oil and gas sales prices and reduced crude oil sales volume. Benefiting from the increase in natural gas sales volume and the decrease in imported natural gas costs, the company's natural gas sales business achieved operating profit of 18.9 billion yuan, up 39.7% year-on-year. Due to the increase in profit brought by inventory, the refining business achieved operating profit of 7.2 billion yuan, up 57.7% year-on-year, the chemical business achieved operating profit of 1.1 billion yuan, up 32.3% year-on-year, and the sales business achieved operating profit of 6.5 billion yuan, up 28.3% year-on-year. Sector Review: Upstream business strengthens increased reserves and production, natural gas business profitability significantly increases Continuous growth in upstream oil and gas equivalent production, rapid development of new energy business In the first quarter of 2026, the company's oil and gas and new energy divisions achieved operating profit of 41.0 billion yuan, down 11.0% year-on-year. In the first quarter of 2026, the company's crude oil realized price was $64.08 per barrel, down 8.5% year-on-year; natural gas realized price was $8.96 per thousand cubic feet, down 0.8% year-on-year. In the first quarter of 2026, the company's oil and gas unit operating cost was $9.82 per barrel, up 0.6% year-on-year. The company adheres to efficient exploration, profitable development, continuous promotion of increased reserves and production, coordination of domestic conventional and unconventional oil and gas resources exploration and development, active acquisition of high-quality exploration projects and operator projects overseas, vigorous cost control of oil and gas production, and overall promotion of new energy indicators acquisition, conversion, and project construction. In the first quarter of 2026, the company's oil and gas equivalent production was 470 million barrels, up 0.7% year-on-year, with domestic crude oil production of 198 million barrels, flat year-on-year, domestic natural gas production of 135.3 billion cubic meters, up 2.4% year-on-year, and wind energy production of 23.3 billion kilowatt-hours, up 38.5% year-on-year. Natural gas sales business achieves double-digit growth, operating profit significantly increases In the first quarter of 2026, the company's natural gas sales business achieved operating profit of 18.9 billion yuan, up 39.7% year-on-year. The company coordinates the optimization of the natural gas resource structure, strives to control procurement costs, increases market marketing efforts, actively develops direct sales customers and efficient markets, and strives to expand domestic sales volume. In the first quarter of 2026, the company sold 93.9 billion cubic meters of natural gas, up 6.9% year-on-year, including 73.8 billion cubic meters of domestic sales, up 3.5% year-on-year. The transformation and upgrading of refining business are advancing, and the output of new materials increases by 53.5% year-on-year In the first quarter of 2026, the company's refining, chemical, and new materials divisions achieved operating profit of 8.3 billion yuan, up 53.7% year-on-year, including refining business operating profit of 7.2 billion yuan, up 57.7% year-on-year, chemical business operating profit of 1.1 billion yuan, up 32.3% year-on-year. The company enhances integrated operation of supply-production-sales, increases production and sales of high value-added petroleum and petrochemical products; adheres to green, intelligent direction, orderly promotes the second phase of the Dushanzi Petrochemical Tarim Ethylene project, Blue Ocean new material high-end polyethylene transformation and upgrading project construction. In the first quarter of 2026, the company processed 343 million barrels of crude oil, up 1.7% year-on-year, produced 28.55 million tons of refined oil, down 0.1% year-on-year, produced 2.76 million tons of ethylene, up 21.4% year-on-year, produced 10.78 million tons of chemical goods, up 8.2% year-on-year, and produced 1.23 million tons of new materials, up 53.5% year-on-year. Sales business vigorously develops electric vehicle charging and LNG refueling businesses, and operating performance grows against the trend In the first quarter of 2026, the companys sales business achieved operating profit of 6.5 billion yuan, up 28.3% year-on-year. The company coordinates the allocation of refined oil resources, market marketing, and inventory management, conducts refined marketing by region and product category, strives to promote the stabilization and growth of domestic refined oil sales volume and market share, ensures the smooth and efficient operation of the crude oil industrial chain; actively deploys and develops LNG refueling for vehicles, electric vehicle charging, and non-oil businesses. In the first quarter of 2026, the company sold a total of 385.3 million tons of gasoline, kerosene, and diesel, up 4.8% year-on-year; domestic sales totaled 280.2 million tons of gasoline, kerosene, and diesel, up 1.8% year-on-year. Relying on the full industry chain advantage to cross the cycle, the strategic value of energy security underscores uncertainties in geopolitics The company will continue to maintain high capital expenditure, with planned upstream capital expenditures of 220.8 billion yuan in 2026, a 7.7% increase from 2025, and high capital expenditure investment will effectively guarantee the growth of upstream reserves. The company will continue to strengthen increased reserves and production, with a planned increase of 0.6% in oil and gas equivalent production in 2026; accelerate the transformation of midstream and downstream refining business, promote low-cost "oil conversion" and high-value "oil to special" in the refining sector, and actively transform the sales sector into a comprehensive energy service provider of "oil, gas, hydrogen, and electricity", steadily increase the proportion of high-value-added products in the chemical business. The company will continue to be long-term oriented, actively respond to macroeconomic environment and market changes, fully leverage its own advantages, continuously enhance value creation capabilities, and is expected to achieve long-term growth across oil price cycles. The recent ongoing conflict between the U.S. and Iran, with Iran maintaining its blockade of the Strait of Hormuz, cutting off energy exports from the Middle East, has had a significant impact on the supply side of crude oil, naphtha, and liquefied natural gas, severely disrupting transportation of key raw materials for China's energy and petrochemical industries. As an important state-owned enterprise in the energy sector, the "Big Three Oil Companies" are expected to continue to increase their efforts in oil and gas exploration and development and increased reserves and production, consolidate the domestic production base, deeply participate in global energy governance, improve energy transportation channels, and highlight the strategic value of energy security. Risk Warning: Downward risks in crude oil and natural gas prices, and downward risks in the prosperity of refining and chemical industries.