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Bloomberg: PetroChina’s Value Tops $1 Trillion, Surpassing Exxon (Update3)

By Ying Lou

Nov. 5 (Bloomberg) — PetroChina Co. surged past Exxon Mobil Corp. to become the world’s first $1 trillion company as investors in China started trading the stock.

PetroChina’s Class-A shares almost tripled on their Shanghai debut today, valuing the Beijing-based state-owned oil company at as much as $1.1 trillion, more than Exxon and General Electric Co. combined.

The rally makes PetroChina shares four times more expensive relative to earnings than those of Exxon, whose sales are almost four times higher. China’s entire stock market was valued at less than $1.1 trillion before tripling this year and giving the communist nation five of the world’s 10 biggest companies.

“A-share prices don’t reflect global benchmarks of value,” said Lorraine Tan, head of equity research at Standard & Poor’s Investment Services in Singapore. “There should be other measures of a company’s position, including revenue and profitability. Market cap is not necessarily accurate.”

PetroChina rose as high as 48.62 yuan from the sale price of 16.7 yuan and closed at 43.96 yuan at 3 p.m. in Shanghai, giving it a market value of $1 trillion, or 55 times earnings.

In Hong Kong, PetroChina fell 6.6 percent to HK$18.30. Exxon is worth $488 billion on the New York Stock Exchange and trades at 13 times earnings.

`Sense of Responsibility’

“I feel very excited today and also feel a very strong sense of responsibility,” Chairman Jiang Jiemin said at the Shanghai Stock Exchange. “This is PetroChina returning to our investors and the society.”

Jiang struck a gong as the market opened at 9:30 a.m., then toasted the start of trading with glasses of red wine.

China’s largest oil and gas producer had 20.5 billion barrels of oil and gas reserves in 2006, compared with 22.1 billion for Irving, Texas-based Exxon, data compiled by Bloomberg show. PetroChina has been adding new reserves at an average annual rate of 5 percent for the past three years, a faster pace than Exxon, Royal Dutch Shell Plc and BP Plc, the world’s largest oil companies by sales.

The share sale, the world’s biggest this year, surpassed the 66.6 billion yuan raised by China Shenhua Energy Co. in September. PetroChina raised 66.8 billion yuan selling 4 billion shares last week as investors applied for more than 3.3 trillion yuan of stock, almost 50 times the amount PetroChina sold.

Record Oil

Those investors were until now prevented from directly buying PetroChina stock, missing out on a 15-fold surge as economic growth turned the nation into the largest oil consumer after the U.S. and as crude prices reached a record $96.24 a barrel in New York.

The CSI 300 Index of shares listed on the Shanghai and Shenzhen exchanges has increased about 170 percent this year as mainland Chinese investors seek returns on $2.3 trillion of savings, raising investor concerns that the market is too expensive.

Billionaire investor Warren Buffett’s Berkshire Hathaway Inc. sold its stake in PetroChina this year, reaping an eightfold gain that contributed to a 64 percent increase in third-quarter profit for the Omaha-based company. Berkshire had 2.34 billion shares as of the end of 2006, the largest holding after state-owned China National Petroleum Corp.

Buffett said on Oct. 24 that Chinese share prices have risen too fast.

`Carried Away’

“It’s easy to be carried away in the stock market when things are going very well,” he said in the northern Chinese city of Dalian. “We at Berkshire never buy stocks when we see prices soaring.”

Gains in PetroChina’s shares in Shanghai may have more to do with Chinese investors seeking better returns than the outlook for the company’s exploration and production operations, or its refining business, known as downstream, said Larry Grace, an oil analyst at Kim Eng Securities Co. in Hong Kong.

“Production is static with limited upside for the next three to four years,” Grace said. “As for the downstream, the price controls and overall regulatory trend limit the company’s earnings.”

China controls fuel prices to shield consumers in the world’s most-populous nation from accelerating inflation. The policy limits the ability of PetroChina and China Petroleum & Chemical Corp. to pass on the burden of higher crude oil costs.

The other Chinese companies that rank among the world’s 10 largest by market value are China Petroleum, known as Sinopec, China Mobile Ltd., Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp.

To contact the reporter on this story: Ying Lou in Shanghai at [email protected] .

Last Updated: November 5, 2007 02:06 EST

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