HONG KONG (AFX-ASIA) – PetroChina Co Ltd expects its 2002 capital expenditure to come in at 65 billion yuan, while 2003 and 2004 could be higher at 65-70 billion yuan, UBS Warburg said in a note issued after a visit to the company. (US$1=8.28 yuan).

“This has far exceeded their IPO targets of reducing their capex, as the target was for an average of 33.5 billion yuan per year between 2000 and 2004,” the brokerage said.

In addition, UBS Warburg said management indicated there are no plans to reduce staff numbers, thus cost savings through staff reduction is unlikely.

“We were disappointed with its high capex plans and the difficulty for further cost-cutting,” UBS Warbug said.

On a positive note, however, UBS Warburg said management expects oil and gas production to remain stable, as opposed to expectations of falling production outlined in the IPO.

In addition, the company’s management indicated that its dividend policy remains unchanged, with a payout ratio of 40-50%.

“We continue to forecast a 45% payout in our model,” UBS Warburg said.

It has a “neutral” stance on the stock, with a target price of HK$1.70 per share. (US$1=HK$7.78).