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China’s oil and gas sector has become a relative “safe haven” as market uncertainty persists, and the sector will remain so for investors in the second half of the year, said Citi Research in a note, citing expected benefits from higher earnings visibility, strong balance sheets and cash flows.
Kunlun Energy, PetroChina and Sinopec Engineering are expected to increase their dividend payouts in the next three months, it forecast.
The broker expected Petro China and China Oilfield to be the main beneficiaries of the yuan’s depreciation and said its top picks in the sector are PetroChina, China Oilfield and Kulun.
A sensitivity analysis show that PetroChina’s earnings are the most sensitive to the yuan depreciation and assuming no change in oil prices and a 5% depreciation of the yuan, PetroChina’s earnings could rise by 7.2%, while Sinopec’s earnings are expected to rise by 5.2%, it said.