PetroChina cut to "SELL"TP HKD 9

HONG KONG (Thomson Financial) - Citigroup said Thursday it has cut its rating on PetroChina Co to "sell" from "hold" as it expects the oil producer to incur greater losses in its refining division given the high oil price environment. Citi reduced PetroChina's earnings per share estimate for 2008 by 15.4 percent and for 2009 by 5.5 percent. "While higher oil prices will drive higher E&P [exploration and production] division earnings, we expect this to be more than offset by higher losses in PetroChina's refining division," said Citi analyst Graham Cunningham in a note to investors. The brokerage also cut its target price on the stock to HK$9 from HK$10.26. Shares in PetroChina fell 2.7 percent to HK$9.98 in the morning session after international crude oil prices topped $112 per barrel for the first time last night. The Hong Kong-listed arm of China's biggest oil producer announced last month a lower-than-expected 2.4 percent increase in its 2007 earnings. PetroChina booked an operating loss of 20.7 billion yuan from its refining business because of the widening gap between global crude oil prices and the regulated prices of refined products in China. First-quarter earnings are also expected to disappoint due to high refining losses, said Cunningham. The breakeven point for PetroChina's refining segment is $66-$67 per barrel of oil. The company earlier said that for every $1 rise in the crude oil price above that breakeven point, PetroChina will suffer a full-year loss of 32.4 billion yuan from its refining segment. (not very convincing!!)