EB SECURITIES: Bullish on PetroChina's (00857) potential for "reserve growth and production increase," maintains "Buy" rating.

EB SECURITIES issued a research report stating that in the first three quarters, PetroChina's (601857.SH, 00857) full-industry-chain advantages were prominent, with results hitting a new record high and in line with expectations. It maintains its earnings forecasts for the company, expecting the company's net profit attributable to parent for 26-28 to be RMB190.2 billion/RMB195.9 billion/RMB201.8 billion respectively, corresponding to EPS of RMB1.04/1.07/1.10 per share respectively. It is bullish on the company's potential for "reserve growth and production increase" and the long-term growth of its natural gas business, and maintains its "Buy" rating on the company's A+H shares. Event: The company released its 2026 third-quarter report. In the first three quarters of 2026, the company achieved operating revenue of RMB2,321.1 billion, up 7.0% year on year (retrospectively adjusted, same below), and net profit attributable to parent of RMB155.8 billion, up 21.9% year on year. In 2026Q3 alone, the company achieved operating revenue of RMB793.6 billion, up 10.4% year on year and up 0.3% quarter on quarter, and net profit attributable to parent of RMB51.8 billion, up 21.6% year on year and down 6.8% quarter on quarter. EB SECURITIES' main views are as follows: 1. The two major oil and gas industry chains operated efficiently, and first-three-quarter results hit a new record high In the first three quarters of 2026, affected by geopolitical conflicts in the Middle East, international oil prices fluctuated upward, with Brent averaging US$88.78/barrel, up 26.9% year on year. Domestic new energy substitution accelerated, and refined oil market demand decreased; domestic natural gas consumption declined slightly. The company actively responded to changes in domestic and international macroeconomic, geopolitical and energy and chemical market conditions such as turbulence in the Middle East geopolitical situation, wide fluctuations in international oil prices, new energy substitution, and declining refined oil demand, actively and effectively organized production and operations, further intensified oil and gas exploration and development, diversified resource procurement, ensured high-load operation of refining and chemical units, safeguarded the safety of the industrial chain and supply chain and stable market supply, and achieved a new historical high in first-three-quarter results. In the first three quarters, the company achieved net profit attributable to parent of RMB155.8 billion, up 21.9% year on year, and operating cash flow of RMB373.5 billion, up 8.8% year on year. In the first three quarters of 2026, affected by rising crude oil sales prices, the company's upstream business achieved operating profit of RMB152 billion, up 19.7% year on year. Benefiting from increased natural gas sales volume and structural optimization at the resource end and customer end, the company's natural gas sales business achieved operating profit of RMB33.3 billion, up 6.4% year on year. Thanks to increased gross profit of refining and chemical products, the company's refining business achieved operating profit of RMB18 billion, up 24.7% year on year, the chemical business achieved operating profit of RMB5.1 billion, up 185.7% year on year, and the marketing business achieved operating profit of RMB14.5 billion, up 24.7% year on year. 2. Review by segment: Upstream adhered to "reserve growth and production increase," and refining and chemical transformation and upgrading were deepened 1. Upstream strengthened domestic resource supply capacity, and the new energy business developed rapidly In the first three quarters of 2026, the company's oil and gas and new energy segment achieved operating profit of RMB152 billion, up 19.7% year on year, of which Q3 alone achieved operating profit of RMB51.6 billion, up 29.4% year on year and down 13.2% quarter on quarter, mainly due to rising crude oil prices, increased natural gas output and the company's vigorous control of oil and gas production costs. In the first three quarters of 2026, the company's average realized crude oil price was US$77.65/barrel, up 18.5% year on year; the average natural gas sales price was RMB2.21/cubic meter, up 1.7% year on year excluding the impact of exchange rates. The company's domestic business intensified exploration and development and continued to advance oil and gas reserve growth and production increase; the overseas business actively responded to changes in the geopolitical situation, strived to promote safe and stable production operations, coordinated the operation of existing projects and the development of new projects, and continued to optimize the asset structure; the new energy business coordinated the advancement of indicator acquisition and project construction and strengthened integrated development with the oil and gas business. In the first three quarters of 2026, the company's oil and gas equivalent output was 1,376.8 million barrels of oil equivalent, basically flat year on year, of which domestic crude oil output was 590.4 million barrels, down 0.2% year on year, domestic natural gas output was 111.82 billion cubic meters, up 2.3% year on year, and domestic oil and gas equivalent output was 1,248.3 million barrels of oil equivalent, up 1.1% year on year. In the first three quarters, the company's new energy business development accelerated, with wind and solar power generation of 7.84 billion kWh, up 35.5% year on year; geothermal heating (cooling) area (including operation and maintenance) built exceeded 80 million square meters; zero-carbon demonstration factory construction was carried out, and carbon dioxide capture, utilization and storage were fully advanced. 2. Natural gas sales business achieved both volume and efficiency growth, and operating profit rose steadily In the first three quarters of 2026, the company's natural gas sales business achieved operating profit of RMB33.3 billion, up 6.4% year on year, of which Q3 alone achieved operating profit of RMB9.2 billion, down 27.2% year on year and up 76.4% quarter on quarter. The company continued to increase marketing efforts, strived to increase natural gas sales volume, and continuously expanded its domestic market share and the share of sales in high-end and high-efficiency markets; coordinated and optimized the gas source structure, optimized the injection and production rhythm of gas storage facilities, effectively controlled comprehensive procurement costs, and strived to improve sales efficiency; actively expanded the terminal sales network, and the terminal market scale grew steadily. In the first three quarters of 2026, the company sold 231.302 billion cubic meters of natural gas, up 3.0% year on year, of which domestic natural gas sales were 178.735 billion cubic meters, up 1.0% year on year. 3. Refining and chemicals ensured stable unit operation, and transformation and upgrading projects were deeply advanced In the first three quarters of 2026, the company's refining, chemicals and new materials segment achieved operating profit of RMB23.1 billion, up 42.4% year on year, of which the refining business achieved operating profit of RMB18 billion, up 24.7% year on year, mainly due to an increase in unit gross profit of refining products; the chemical business achieved operating profit of RMB5.1 billion, up 185.7% year on year, mainly due to an increase in chemical product sales volume and unit gross profit. In 2026Q3 alone, the company's refining business achieved operating profit of RMB6.3 billion, up 31.4% year on year and up 38.1% quarter on quarter, and the chemical business achieved operating profit of RMB2.3 billion, up 485.6% year on year and up 37.3% quarter on quarter. The company strengthened production and operation organization, ensured safe, stable, long-cycle and high-load operation of refining and chemical units, adhered to reducing oil and increasing chemicals and reducing oil and increasing specialties, continuously optimized the product structure, and effectively met market demand; continued to advance refining and chemical transformation and upgrading, actively developed fine chemicals, high-end new materials and biomanufacturing businesses. PetroChina Dushanzi Petrochemical Company's Tarim 1.2 million tons/year Phase II ethylene and supporting green and low-carbon demonstration project was fully put into commercial operation, and Blue Ocean New Materials Company's high-end polyolefin new materials project achieved mechanical completion. 4. Refined oil market share increased, and non-oil business was vigorously developed In the first three quarters of 2026, the company's marketing business achieved operating profit of RMB14.5 billion, up 24.7% year on year, mainly due to increased profit from international trade business. Q3 alone achieved operating profit of RMB3.1 billion, down 22.8% year on year and down 35.9% quarter on quarter. The company actively responded to market conditions, continued to strengthen marketing, strengthened lean marketing in segmented markets, and strived to promote refined oil sales; continued to vigorously develop LNG terminal refueling, charging and battery-swapping and non-oil businesses, and non-oil business profit maintained growth. As of the end of September 2026, the company had 21,955 gas stations, down 0.8% from the end of 2025, of which 20,436 were self-operated gas stations; 19,993 convenience stores, up 0.9% from the end of 2025. In the first three quarters of 2026, the company sold a total of 114.656 million tons of gasoline, kerosene and diesel, down 5.1% year on year; domestic sales of gasoline, kerosene and diesel were 84.520 million tons, down 5.7% year on year. 3. Relying on full-industry-chain advantages to ride through cycles, the strategic value of energy security is highlighted amid geopolitical uncertainty Recently, the US-Iran military conflict in the Middle East has temporarily eased, but after the midterm elections the US policy attitude toward Iran remains unclear, and the conflict between Saudi Arabia and the Houthi armed forces has intensified. Geopolitical risks have kept oil prices fluctuating at high levels; global refined oil supply is tightening, and tight inventories will continue into the first half of 2027. At present, China's foreign dependence on oil and natural gas remains relatively high, geopolitical conflicts threaten the security of the global energy supply chain, and the task of safeguarding China's oil and gas security remains arduous. The "three barrels of oil" companies, as important central energy SOEs, are expected to continue to intensify oil and gas exploration and development and reserve growth and production increase, consolidate the foundation of domestic output, and at the same time deeply participate in global energy governance, improve the construction of energy transportation corridors, and highlight the strategic value of energy supply security. The company continues to strengthen reserve growth and production increase, with oil and gas equivalent output planned to grow 0.6% in 26; it will accelerate the transformation of mid- and downstream refining and chemical businesses, with the refining segment advancing low-cost "oil-to-chemicals" and high-value "oil-to-specialties," the marketing segment actively transforming into a comprehensive energy service provider of "oil, gas, hydrogen, electricity and services," and the chemical business steadily increasing the proportion of high value-added products. The company will continue to base itself on long-termism, actively respond to changes in the macroeconomic environment and market, fully leverage its own advantages, continuously enhance its value creation capability, and is expected to achieve long-term growth through the oil price cycle. Risk warning: downside risks in crude oil and natural gas prices, and downside risks in refining and chemical industry sentiment.