Sinopec Boosts Spending to 2014 High, Refining Profit Sinks

(Bloomberg) -- Sinopec Corp. aims to raise spending to the highest since 2014, joining state-owned peers in their mission to churn out more domestic oil and gas to ease China’s reliance on imports. Refining profit tumbled in the fourth quarter.

• Capital expenditure is budgeted at 136.3 billion yuan ($20.3 billion) this year, the world’s largest refiner said in a statement to the Shanghai stock exchange on Sunday. Spending was 118 billion yuan in 2018, above the 117 billion yuan estimated by Sinopec.

Key Insights

• The refiner allocated a larger portion of spending on exploration and production this year, which will account for 44 percent of capex from 36 percent in 2018.
• Sinopec has focused its upstream efforts in recent years on expanding natural gas output. The strategy is in line with a state drive to use more of the cleaner-burning fuel and is crucial in helping offset crude output declines from its aging, high-cost fields.
• Its E&P business remains in the red, even as the segment is less of a drag on earnings. Operating losses narrowed to 10.1 billion yuan in 2018 from 45.9 billion yuan the previous year.

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• Full-year net income rose to 61.6 billion yuan from 51.2 billion a year ago, the company known officially as China Petroleum & Chemical Corp. said. That compares with a mean estimate of 65.8 billion yuan based on 15 analysts surveyed by Bloomberg.
  • Profit tumbled 88 percent in the fourth quarter from the previous year, according to Bloomberg calculations
• Sinopec’s refining business generated operating profit of 54.8 billion yuan, down 16 percent from a record in 2017.
  • Refining profit plunged in the fourth quarter to 1.15 billion yuan from 21.9 billion yuan year-on-year, according to data compiled by Bloomberg.
• The company posted a final dividend of 0.26 yuan a share, taking full-year dividend to 0.42 yuan. Sinopec disbursed 82.5 percent of its net income.
• Oil trading unit Unipec lost 4.02 billion yuan in 2018, compared with an estimate of 4.65 billion yuan in January.
• Sinopec targets crude production of 288 million barrels this year, with 39 million barrels from overseas projects.
  • That compares with 288.5 million barrels in 2018, with 39.6 million from overseas.
• Gas output is projected at 1.02 trillion cubic feet in 2019 compared with 977 billion cubic feet last year.
• The refiner plans to process 246 million tons of crude in 2019 from 244 million tons last year.

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