PetroChina Co Ltd

SSE:601857

Earnings Call Transcript 2022-Q2

[Hua Wang, executive]

[Interpreted] Ladies and gentlemen, good afternoon. I'm Wang Hua, Petro China's CFO and Board Secretary. Welcome you all to 2022 interim results announcement. First, allow me to introduce the Board members and top management present today. They are Mr. Dai Houliang, Chairman of the company; Mr. Huang Yongzhang, Executive Director and President; Mr. Ren Lixin, Executive Director and SVP; Mr. Yang Jigang, VP and Chief Engineer; Mr. Wan Jun, Vice President.

The presentation includes 4 parts. First, review on the financial performance in H1. Next, overview of operational performance. Then remarks from the Chairman, followed by a Q&A session.

First, the review of the company's financial performance. Based on the 7-year high operation performance last year, PetroChina sustained growth in H1 and saw all-time best interim revenue and net profit attributable to parent with profits booked across both business segments. Realized oil price averaged USD 94 per barrel, up by USD 35 year-on-year or 59.2%. Revenue of RMB 1.6 trillion, up by 34.9%, OP RMB 119 billion grew 34.5%. Net profit attributable to parent added to RMB 82 billion, up RMB 29.3 billion or 55.3%. Basic EPS, 0.45, up 0.16 year-on-year.

Committed to disciplined policies and wholesaling investments, we optimized investment structure based on oil prices and competitive setup of E&P, remote IT restructuring and to [indiscernible] steps [indiscernible] key projects.

CapEx was RMB 92 billion, up 24.9%, still manageable and well controlled. CapEx in E&P was RMB 73.8 billion, accounting for [ 8.9% ]. R&C took RMB 16.8 billion or 8.2%. We adhere to low-cost growth and enhanced fund management, continue to boost quality and efficiency, minimizing prices of feedstock, fuel and power. Increase of major costs was well contained.

Lifting cost, USD 11.6 per barrel, up 9.6% year-on-year. The cost is USD 12.2 in China, up 9%, mainly driven by higher power and operating costs. Cash processing cost, RMB 209 per tonne, up 5.4% year-on-year, manages through higher fuel and power prices. Marketing costs, RMB 381.29 per tonne, down 1.9% year-on-year.

We continued to step up assets and cash flow management and further optimize debt structure. Financial profile remains sound with high interim net CFFO and FCF. As of June 30, total assets RMB 2.8 trillion, up 10.8% versus the end of last year; interest-bearing debt, RMB 335.7 billion, 1.4% lower; debt-to-capital ratio, 18.3%, down 1.2 percentage points; CFFO 196.06 billion, up by 69%; FCF RMB 93.8 billion, up RMB 89.2 billion.

Next, the breakdown of operating profits. In the first half of the year, we achieved profits across all business segments, E&P was RMB 82.4 billion, up RMB 51 billion year-on-year. Price changes added to the profit by RMB 123 billion. Sales changes added RMB 7.29 billion, including RMB 4.14 billion from higher crude sales and RMB 3.15 billion from more gas sales. More OpEx and others cut profit by RMB 77.86 billion, mainly due to higher prices and outputs. More purchases cut the profit by RMB 39 billion. The higher taxes except income tax cost RMB 31.6 billion.

R&C booked RMB 24.06 billion, up 8.5% year-on-year. OP for refining business, RMB 23.97 billion, up RMB 10.52 billion. Higher refining margin added to the profit by RMB 17.16 billion. Less crude ones cut the profit by RMB 690 million. Higher OpEx cut the profit by RMB 5.95 billion.

For Chemical business, we saw operating profit of RMB 90 billion, down by RMB 8.6 billion year-on-year. Price changes added RMB 15.8 billion, sales changes at RMB 5.27 billion. Higher OpEx cut the profit by RMB 29.7 billion, mainly due to high oil prices and dealer feedstock, fuel and power.

OP for marketing business, RMB 8.52 billion, up RMB 1.88 billion year-on-year. Marketing in China is RMB 3.3 billion, up RMB 670 million. Net sales cut the profit by RMB 1.1 billion and less OpEx added to the profit by RMB 1.7 billion. International trading business booked RMB 5.19 billion, up RMB 1.2 billion year-on-year.

In H1, natural gas marketing business at RMB 13.6 billion, down by RMB 23.2 billion year-on-year. Gas Marketing made a profit of RMB 6.7 billion, down by RMB 6 billion. Profit for domestic gas was RMB 10.67 billion, up RMB 830 million. City gas suffered a loss of RMB 3.9 billion, RMB 7.07 billion lower than last year. City Gas and Pipeline was RMB 9.5 billion, up RMB 1.9 billion. RS cut the profit by RMB 18.9 billion, including RMB 18.32 billion from proceeds of restructuring on Kunlun Energy last year.

Authorized by the AGM, the Board decided to pay out 45% of the net profit attributable to parent according to IFRS as interim dividends, i.e., RMB 0.20258 per share, totaling RMB 37 billion, the highest interim dividend ever.

Now I'd like to pass the floor to Executive Director and President, Mr. Huang, to brief you on the company's operational performance.

[Yongzhang Huang, executive]

[Interpreted] Thank you, Mr. Wang. Now I would like to brief you on the PetroChina's performance of operation in H1. Facing new changes and challenges, including higher geopolitical risks, solid commodity prices, greater downward pressure for Chinese economic development and frequent COVID threats, PetroChina stick to the 5 corporate strategies of innovation, resources, market, internationalization, green low carbon and sought progress in business growth, reform innovation, quality and efficiency as well as ESG.

Oil and gas industry retain some operation. Realized price for crude was up by 59.2% and average selling price for gas in China was up by 19.6%. We delivered the best-ever interim operation performance.

We seek initiatives in domestic production ramp-up. In the first half of the year, we emphasized efficient exploration and enhanced risk aspiration in new blocks and areas, 14 major discoveries and solid achievements were made in intensive explorations in basins of Junggar, Tarim, Sichuan, Erdos and Hohhot. 3,100 million tonne oil reserves in [indiscernible] Tarim, Qingshuihe Formation of Hohhot and Erdos. And 3,100 Bcm gas reservoirs in Sichuan and Erdos are taking shape.

Fighting on the high oil prices, PetroChina enhanced resource appraisal and production ramp-up. We work to control natural decline in legacy fuels while promoting cost-effective capacity building in new ones. We stepped up economic shale oil and gas development at scale. Crude output in China 390 million barrels. Marketable gas 2.3 Tcf. Production in oil equivalent terms up by 3.9%. Steady steps in overseas corporation in the first half of the year to 100 million-tonne reservoirs were proven in Bilma of Niger and Doseo of Chad. We moved faster in capacity building and completed 81.6 million BOE of net output. We continued to optimize business layouts and asset structure with the completion of Iraq Rumaila restructuring.

In the first half of the year, the company's oil and gas output 850 million BOE, among which: output in China, 760 million BOE, up 3.9% year-on-year; crude output in China, 390 million barrels, up 3.4%; marketable gas output, 2.3 Tcf, up 4.4% year-on-year. Gas takes up a larger share in our domestic production with its mix further optimized.

We made solid progress in refining and chemical structure adjustments. Refining business took coordinating steps in coping with market changes, optimized resource allocation and product mix. Material progress was made in [ hot ] fuels while adding chemicals and specialty products. Crude ones 600 million barrels, down by 1.4%; sales output, 51.5 million tonnes, down by 6.2%; output of gasoline and kerosene, down by 12.8% and 40.8%, respectively; diesel was up by 10.4%; sales yield, 63.7%, down by 3.2 percentage points. Oil products like chemical, light oil, aromatics, LFFO and petroleum coke saw higher output versus last year. Construction of key projects are well underway. Guangdong integrated project is being finalized and preparing for startup.

In the first half of the year, chemical commodities, 15.945 million tons, up by 8.3% year-on-year, a record interim result. The outflows of ethylene, synthetic resin, rubber, urea was up by 23.7%, 16.1%, 8.7% and 25.9%, respectively. New material business picked up pace with 397,000 tons of output. Marked progress was made in R&C restructuring to 1.2 million ton ethylene projects in Jilin and Guangxi completed national certification and approval where the former is now under construction.

Fuel business went for lean marketing. We stay client-oriented work on institutional and end-user clients, differentiated marketing. Key pillars like Winter Olympics for us to provide high-quality products and services. Fuel sales 71.43 million tons in H1, including domestic sales, 50.34 million tons. Gasoline and kerosene in China, down 12.1% and 45.5%, respectively. Diesel grew by 10.2%. Not oil business got into the potential of key categories boosted online marketing and saw fast growth in both revenue and gross margin.

As for gas marketing, efforts to add sales and secure profit proved effective with surging import costs and imbalanced downstream demand. We closely followed market trends, improved resource portfolio, market layout and distribution, explored premium markets and direct supply clients and pushed for online auctions. Marketing profits grew steadily.

In H1, gas sales totaled 130.3 Bcm. Sales within China, 102.7 Bcm, up 7.8% year-on-year, which is a record interim high. End user sales, 23.28 Bcm, up 4.6%. Our new energies advanced at full steam with startup ongoing on low carbon energy demo basis. Clean power projects at oil blocks in Northeast, Northwest and Northern China and geothermal markets in underground basin Xianjing. With our approval for 5.36 gigawatts of wind and solar power added 11.2 million square meters of geothermal heating, the first new carbon diluted heavy and brought online the first floating PV station. Thermal projects of integrated upstream, downstream clean alternatives and [indiscernible] are well underway. Full value chain demo of million tonnes this year was launched in Songliao Basin.

Sci-tech innovation and digitalization was accelerated. In H1, we improved sci-tech committee and build a 3-tiered innovation management system, which further optimized our sci-tech institution. Debottlenecking of key technologies made new progress.

New breakthroughs were made on shale oil E&P tech, CCUS food industry technologies and IUP tech and theory of high [ discounting ] crude. We launched initial demo programs for application of major achievements. Digital transformation and smart development are taking shape, with some milestones well representing progress of the industry. Shenzhen New Energy Institute and Shanghai New Materials Institute are now up and running in an orderly fashion.

Here on this slide is our 2022 annual operation targets and progress of H1 for your reference.

That is all for my presentation. Now let's welcome our Chairman, Mr. Dai Houliang, to say a few words.

[Houliang Dai, executive]

[Interpreted] Dear investors and friends from the media, ladies and gentlemen, good afternoon. It's a real pleasure to e-meet you once again, and thank you for your support to PetroChina.

In 2022, faced with unexpected changes in the macro environment, we prioritized stability and saw steady progress with strong efforts to overcame more hardship and made progress on all fronts. On gas industry remains smooth and efficient with fruitful result in E&P -- sorry, progress in R&C restructuring, transformation and upgrading and continuous marketing improvement. New energies, new materials and new businesses all paced up. Key projects are shaping up and being delivered. High tech innovation and digitalization accelerated. Areas like continental show oil and CCUS saw R&D breakthrough.

Many core tech equipment have achieved industrial application. Quality and efficiency improvement was effective and further boosted corporate value. Operation performance maintains upward trend. Revenue, net profit attributable to parent, FCF and net operating cash flow all scored new interim records. These results would be impossible without the support of shareholders and the public.

On behalf of the Board, the top management and all PetroChina staff, I would like to once again offer my sincere gratitude. Currently, we are still facing rising complexity, difficulty and uncertainties. But with complete industry chain, we are a resilient company with great potential.

China's economy is recovering faster. Oil and gas market further rebounds. National stimulus package yield positive results. Policies like the unified national market are taking shape. Sci-tech and industrial revolutions have posed both higher standards for the industry and also major opportunities for our transformation and development. In H2, we will stick to the overall principle study programs, work on compliance and low base governance, enhanced management follows the strategies of innovation, which was market internationalization and the green low carbon.

Our strategic measures include building quality workforce, improving quality and efficiency, promoting low-cost development and fostering corporate culture for deepen reform and innovation transform for development, maintain stable production operation built on current progress and open new chapters for quality development.

We are going to work on the following aspects. First, further boost reserve and output. Domestic E&P will push for fuel ramp-up in key regions, enhance pre-exploration at economic recovery reserve and profitable production to balance between reserves, output and costs. Overseas E&P will focus on economic explorations, optimized production, improved asset management and smooth operation of key projects.

Second, transformation upgrading of R&C business with the principle of sales stable, sustained [indiscernible] and optimized operations will stay market profit-oriented, adjust products, feedstocks and run rate to produce more marketable and high VA goods.

Third, improved marketing. We'll stay client-oriented, strive to provide top-quality products and services to create value for customers.

Fourth, carbon and low carbon transition. Following the approach of clean alternatives, strategic replacement and ongoing development for push for integrated development of hydrocarbon and new energies, speed up key projects like PV and geothermal heating, wind power, work on CCS and CCUS and build levels of low and zero carbon oil and gas field.

Fifth, scientific and technological innovation will prioritize sci-tech as a driver for development, strive to build world-leading research institute and innovative companies, first integrate industrial and innovation chain, foster new growth drivers and competitive edge.

Sixth, we'll continue to improve quality and efficiency. We speak to disciplined, targeted and cost-effective investment, timely adjust annual investment plan and structure and further improve our value creation capabilities and profitability.

Seventh, send off various risks with preemptive studies and proactive response. We'll closely monitor changes in geopolitics, hydrocarbon market and exchange rates to optimize and change our operation production strategies to send off all kind of risks.

Ladies and gentlemen and friends, I believe that with the support of shareholders and the public, with the tireless efforts of the Board, top management and our staff, we are going to create more value for shareholders and society. Thank you all.

[Hua Wang, executive]

Thank you, Chairman. Now we'll have a Q&A session with English-Chinese consecutive interpreting to give more people the chance to ask. [Operator Instructions] Now the floor is open for questions.

[Operator]

[Interpreted] [Operator Instructions]

The first question is Hayman from Cinda Finance.

[Hayman Chiu, analyst]

[Interpreted] I've got 2 questions. First is I'm wondering why PetroChina got delisted from New York Stock Exchange. And what's your follow-up arrangements?

And the second question is around your latest development in green and low-carbon transition. And what about progress of new energies and new materials projects? And what is your development plan for the 14th 5-year plan period?

[Unknown Executive]

[Interpreted] The CFO and the Board Secretary, Mr. Wang Hua, is taking your first question.

[Hua Wang, executive]

[Interpreted] To better safeguard the interest of our investors, after careful consideration, PetroChina's Board of Directors decided to delist the company and its ADR shares from New York Stock Exchange, and it's mainly based on the following 3 aspects of reasons. The first is the ADR only takes a quite small percentage of the company's shares and total shares, and the trading volume is relatively small compared with global trading volume of its shares.

And second, due to the differences in regulation in the listing places, PetroChina needs to pay a relatively large administrative burden if we want to maintain, got listed on the New York Stock Exchange.

And third, after delisting, our H and A shares will continue to be traded on the Hong Kong and Shanghai stock exchanges, which can meet the demand for both investors and the company.

For the next steps, PetroChina will follow up with the rules and regulations securities supervision of the United States to fulfill our delisting procedures, and we expect to submit our delisting application to SEC on August 29 and to finish the delisting process from New York Exchange on September 8. And after that, when we meet relevant requirements, we will submit our application for the cancellation of ADR and its corresponding shares to SEC. And before it's fully finished, the company will continue to fulfill our information disclosure responsibilities and make sure everything will go on smoothly.

In recent years, guided by science and technical innovation, PetroChina has accelerated its process of digitalization green and low-carbon transition. We continue to upgrade our modernization level of corporate governance and -- given our special actions on quality and efficiency enhancement. We have achieved a great deal in high-quality development and improved operation benefits.

Since we've got listed 22 years ago, PetroChina has balanced the long-term development of the company and the returns to our shareholders. We have maintained a more than 45% payout ratio, which has brought up good returns to our shareholders. Currently, we are facing -- based on the market conditions, starting how to further strengthen our market cap management and taking concrete steps.

I thank you for your long-term support, and I hope looking forward, our investors and shareholders will continue to support PetroChina and share the bright future and development achievements with us.

[Unknown Executive]

Our Chairman will take your next question.

[Houliang Dai, executive]

[Interpreted] I'm taking the question about green and low carbon transition. Energy transition and development globally has been a common understanding. And for the energy transition development in China, currently, China has the landscape of "taking the majority of the energy supply while oil, gas and new energy taking a smaller percentage." And after careful analysis, we believe that after 2050, the situation might change when the new energies might be the predominant source of energy in China, gradually increase its percentage to above 80% while coal, oil and gas will take a smaller percentage.

PetroChina has formulated a 3-step approach of clean alternatives, strategic replacement and green development. Currently, we are working on the clean alternative stage.

Looking from the statistics for the first half of this year, PetroChina has obtained the green light for a -- that 5,360 megawatts of wind and solar power generation, and we have newly added geothermal heating acreage of 11.2 million square meters. And that is to say the achievements we have made is ahead of our expectation. And our annual target for this year for the green light for wind and power generation is 20,000 megawatts, and for the thermal heating acreage is 20 million square meters. And this is remarkable achievement in our clean alternative step.

For the 14th 5-year plan period, our new energies production capacity is expected to be 15 million tonnes of oil equivalent and to fulfill our clean alternative stage development goals. And our target for 2035 is to have new energies, oil and gas taking 1/3 of our total production capacity, respectively. And by 2050, new energies are expected to take about half of our total capacity, and this is in line with our national goal.

While developing new energies, PetroChina takes energy conservation as most important step. And for carbon reduction, we take it as a priority in our daily work and we have achieved a great deal in CCS and CCUS. For instance, in the storage of carbon dioxide and related enhanced oil recovery, this year, we have achieved a carbon storage of 1 million tonnes in enhancing oil recovery.

Looking forward, we will continue to achieve our targets in green transition and development. We'll surely make long-term progress in developing new energies and new materials and make PetroChina's steel contribution to the oil and gas industry.

[Operator]

[Interpreted] the next question now is [indiscernible] from China Energy.

[Unknown Analyst]

[Interpreted] My first question is how do you look at China's economic development in the following years? And how do you look at China's only gas demand?

And second, could you please give us more color on your reserve situation for the first half of this year? And what's your expectation for the reserve changes within the year? And what major discoveries have you made in oil and gas exploration?

[Unknown Executive]

[Interpreted] President Huang Yongzhang is taking your 2 questions.

[Yongzhang Huang, executive]

[Interpreted] I'm happy to take your questions about China's economy and China's oil and gas demand. This year, the macro environment in China and in the world has undergone tremendous changes, which are beyond our expectation. For instance, the resurgence of COVID cases and fluctuations in the prices of bulk commodities. International environment is becoming more and more complicated and stringent.

But on the other hand, Chinese economic development has also enjoyed many favorable strategic conditions. China is very resilient and has a lot of growth potential and fundamentals. Supporting China's long-term good prospects will not change. And the government is launching a series of policy measures to stabilize the economy, and the effect will gradually be seen.

And other policy dividends, such as the development of an integrated large market in China will also emerge. We believe Chinese economy will accelerate its recovery. And along with the recovery of the oil and gas demand in China, we believe in the following months, our economic growth will be maintained within a proper range. This will create favorable conditions for PetroChina's development, and we are bullish about our prospects.

As for the demand for refined oil products, we believe the domestic economic recovery will support a steady growth of demand. And we expect for the second half of this year the apparent assumption -- apparent consumption of refined oil products in China will stand at 180 million tonnes, an increase of 1.6% year-on-year. And gasoline, diesel and jet fuel will increase differently. And the air travel will boost the demand for aviation jet fuel. And as our Chairman just said, the new energies are also developing very rapidly in China and also for PetroChina. There's increasing ownership of EVs. So we believe in the following years, the consumption of refined oil will maintain slow growth, which is different from the previous years.

Like refined products, along with the recovery of Chinese economy, our natural gas demand will continue to increase. And if the coming winter is a cold winter, we believe the increase will be substantial. And we estimate the apparent consumption of natural gas in China in the second half of the year will grow by around 5.5%, and the annual apparent consumption will be 380 Bcm. And in following years, the natural gas demand will continue to increase fairly rapidly by 2025. The demand in China might reach 450 to 500 Bcm.

And for your second question about the reserves. In the first half of this year, we have more focus on PetroChina's exploration and production, and we have achieved a great deal in this regard.

As I just reported in our results announcement, we have focused on efficient exploration and the risk-taking exploration in new zones and new areas and concentrate exploration in key areas. 13 important progress and 14 important discoveries have been made in many basins, including the Bongor Basin.

In this year, we have made proven and recoverable reserves of crude oil of 83.74 million tonnes; natural gas, 200 Bcm. It is estimated our annual proven recoverable reserve of crude oil will be more than 100 million tonnes; natural gas, 300 Bcm. And for the SEC standards of proved reserves, the first half of this year, we have recognized a proven and developed reserve of crude oil of 49.5 million tonnes; natural gas, 25 Bcm; oil and gas equivalent, 69.49 million tonnes.

To give you several examples to demonstrate that we have increased more focus on E&P, in the first half of this year, we have made some 30 important progress in Mahu [indiscernible] of Junggar Basin, Kuche of Tarim Basin, Central Sichuan of Sichuan Basin, the Taiwan Qingshuihe Formation of Erdos Basin and [indiscernible] Basin. And we have recognized a series of reserve areas with considerable size.

In the Junggar Basin, the daily gas production have aerial depths of 5,000 meters in the Qingshuihe Formation of the Southern [ Bilma ] with 758,000 cubic meters. Oil was 127 cubic meters, when we have achieved important breakthroughs in the exploration in this new type of area.

[indiscernible] in the format oil field of the Tarim Basin has achieved a high production of more than 1 million tonnes. The oil and gas bearing area has expanded, which have laid a more solid foundation for the development of a big oil field of around 1 billion tonne.

Two formations in the risk-taking wells of Central Sichuan Basin has made an industrial gas flow of 20.3 -- of 203,000 and 83,000 cubic meters steady production. It has been a very historical breakthrough in these formations.

Important progress has been made in the exploration of the liner depression of [indiscernible] Basin. And 2 members of a well in this area have made a daily production of oil of 367 and 173 cubic meters, and 6 wells have made a high production of more than 100 tonnes.

This important exploration discoveries has set the stage for our reserve increase and also set a very solid foundation for the sustainable and high-quality development of the company and for us to ensure China's energy supply. Thank you.

[Operator]

[Interpreted] The next question is Zhao Nai Di from Everbright Securities.

[Nai Di Zhao, analyst]

[Interpreted] My first question is around the oil supply and demand because we can see the oil prices for this year has been affected by multiple factors. Then how do you look at the oil and gas demand internationally in the future? And what's your price assumptions for both oil and gas?

And my second question is around COVID. COVID continued to impact China and also its oil and gas demand. So I'm wondering about its impact on PetroChina's production and operation.

[Unknown Executive]

[Interpreted] Senior Vice President, Ren Lixin, are taking your 2 questions.

[Lixin Ren, executive]

[Interpreted] Your first question, impacted by multiple factors, including COVID and the slow growth of global economy, the crude oil demand is growing less than expected. And there are a lot of uncertainties in the supply side, and the international oil prices have been fluctuating at a very high level. For the longer term, along with the rebalancing of the global economy, we believe the oil and gas demand -- the oil demand will be returned to a proper level, along with its prices.

For natural gas, impacted by the Ukraine crisis and other factors, despite demand of the international natural gas has undergone profound changes. In the international market, the spot price of LNG skyrocketed for the second half of this year, impacted by the fundamentals of supply and demand. We believe the spot LNG will continue to be maintained at a very high level, but the increase of prices will also curb the demand growth of major consuming countries.

Looking forward, when the Ukraine crisis abates and when the -- some of the LNG liquefaction projects come on stream, we believe the spot price of LNG in the international market will be only downward trend and be returned to a proper range.

Generally speaking, the COVID cases has impacted China's refined oil markets. And for PetroChina, in general, our refined oil sales volume was also in the decline, a decrease of 6.1% year-on-year. But the diesel sales volume increased substantially, up by more than 10%.

In face of the many surprises in the domestic and international macro environment, PetroChina has followed closely with market changes and respond quickly. While ensuring the increase of reserve and production, we have made timely adjustments in our resource allocation, product structure and processing utilization to ensure the stable and controlled operation of our oil and gas value chain. And we have achieved satisfactory operational results.

[Operator]

[Interpreted] The next question is Hu Xin from Haitong Securities.

[Xin Hu, analyst]

[Interpreted] Congratulations on your stellar results. My first question, could you please explain why your company's performance has achieved such substantial growth year-on-year? And what's your expectations for the annual result?

And second question is one that has attracted a lot of attention. That is what is your interim payout policy? And how do you look at your annual dividend?

[Houliang Dai, executive]

[Interpreted] CFO and Board Secretary, Wang Hua is taking your questions.

[Hua Wang, executive]

[Interpreted] This year, our results have improved substantially, and it has been the best for the same period of PetroChina's history. And there are mainly 2 kinds of reasons. The first is the increase of crude prices. The second is hard work pays off.

In face of the fluctuations in international situations, the resurgence of COVID in China and the decrease of demand in the refined oil in China, PetroChina has increased more efforts in quality and efficiency enhancement as our Chairman just mentioned. A lot of achievements and progress have been made in various aspects of our production and operation.

In the high oil price environment, we have worked on reserve and production ramp-up. Our domestic oil and gas production grew by 3.9% year-on-year and marketable natural gas production achieved the highest volume for the same period in history. We have focused on the market orientation approach and more on efficiency enhancement, and we have optimized our product mix, produced more products with higher value added.

The chemical commodities and chemical new materials output has been the highest ever, and we focus more on low-carbon -- low-cost development while the materials, fuel and power, has increased substantially. Our costs and fees have been properly and effectively controlled.

And meanwhile, we also work on green and low-carbon transition. Our efforts in new energies, new materials and new businesses has accelerated, and concrete results have been seen in the development of major projects. And we deepened the quality and efficiency enhancement activities, and many key performance indicators has reaped the best results and even better when the oil prices were higher.

For the whole year, we will continue to guard against various kinds of risks and challenges, deeper reform and innovation, quality, efficiency enhancement, transition development and guard against risks. We will maintain the stable and efficient operation of oil and gas value chains to maintain a good momentum in our operations and production. Hopefully, we will create more value for our shareholders.

According to the Articles of Association of PetroChina, we have a policy of cash dividend percentage of no less than 30% of the net income attributable to the parent. To reward our shareholders decided by our general meeting, the Board of Directors decided to apply a 45% payout ratio, 45% of the net income attributable to the parent according to the International Financial Reporting Standards, and the total dividend will be CNY 37.1 billion, the highest ever. And the dividend per share is CNY 0.20258, up by 55.3%. The annualized dividend yield of A shares and A shares is 7.6% and 12.7%, respectively, far higher than relevant interest rates in the capital markets. The payout ratio and dividend yield is at a fairly high level compared with industry peers.

For our annual dividend, we will continue to carry forward the achievements we've made in the first half of this year and maintain this good momentum. We will balance the returns to our investors and the company's sustainable and high-quality development to decide on a proper dividend.

[Unknown Executive]

In the interest of time, one final question, please.

[Operator]

[Interpreted] The last question now is Toby from Citibank.

[Toby Shek, analyst]

[Interpreted] My first question is about the company's CapEx. In this year, the CapEx has increased quite substantially, especially in the E&P segment. So could you please give us more color about your CapEx allocation for the first half of this year? And what is your average return on invested capital? And how about your investment in new energies business?

And second question is about the downstream business segment. In the second quarter, impacted by the crude prices, the profitability of your Refining and Chemicals business has been impacted. So could you please give us more color about the concrete impact?

[Unknown Executive]

[Interpreted] Your first question will be answered by our Vice President, Mr. Ren Lixin. And second will be answered by Vice President and Chief Engineer, Mr. Yang Jigang.

[Lixin Ren, executive]

[Interpreted] This year, we have focused more on enhancing efficiency, more on our core business and the strategic industries. We implemented the targeted investment approach and strictly controlled the size of our CapEx, and we continue to optimize our investment structure. And total CapEx stood at CNY 92.31 billion, up by 24.9%. As you just mentioned, the E&P segment was CNY 72.82 billion, up by 34.7%; refining chemicals, CNY 16.83 billion, up by 1.1%. The average return of invested capital for the first half of this year was 5.6%.

The investment in new energy businesses is included in our E&P segment. As our Chairman just mentioned, for the following months of this year, the new energy business of PetroChina will accelerate and the relevant indexes will also be enhanced. We will fully consider this year's crude oil development and the development of company's fundamentals and to apply the principles of stringent investment targeted investment and cost-effective investment to properly optimize and adjust our annual CapEx plan.

[Unknown Executive]

[Interpreted] Vice President Yang Jigang is taking your question about refining.

[Jigang Yang, executive]

[Interpreted] As you mentioned, in this year, in face of high oil prices, the gross refining margin was relatively low. And we face tremendous pressure, and we focus our work on the following aspects. The first is to maintain the stable operation of our business. And second is focused on the optimization of the full value chain to better coordinate the production with market demand with the sales of products and also with the demand of chemicals.

And another aspect is to strictly control the costs, which have been -- had shown quite positive results for the first half of this year because we have seen increasing prices of fuels and materials, but costs have been very effectively controlled, especially in the field, power, steam and water for use.

The profitability or earnings acquired by the refining business has mainly 2 reasons. The first one is our efforts in quality and efficiency enhancement. The second is the inventory gain due to high prices.

[Operator]

[Interpreted] Ladies and gentlemen, this is the end of our interim results announcement. Thank you for your participation.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]