PetroChina Strong Upstream Earnings in Q3 2022 Partly Offset by Weaker Downstream Contributions

PetroChina’s cumulative nine months' 2022 net profit was CNY 120.3 billion, up 60.1% year on year and beats FactSet's consensus estimate, likely due to robust earnings from the upstream segment. We keep PetroChina’s fair value estimate at HKD 4.92 per H-share (CNY 4.28 per A-share), after updating our energy price and foreign exchange assumptions. We think PetroChina’s H-shares are undervalued, but we prefer CNOOC as our top pick in the sector given its upstream focus (a direct beneficiary of higher oil prices) and attractive risk/reward.