Sinopec Offers Record Dividend as Fuels Power Profit Higher

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(Bloomberg) -- China Petroleum & Chemical Corp., the world’s biggest refiner, will pay a record-high dividend as its massive fuels and chemical segments helped boost annual profit about 10 percent.

Net income climbed to 51.1 billion yuan ($8.1 billion), the company known as Sinopec said in a statement to the Hong Kong stock exchange Sunday. The company proposed a 0.5 yuan per share total dividend payout for 2017, the most since its listing in 2000 and above a forecast for 0.17 yuan in data compiled by Bloomberg. The company also flagged about 22 billion yuan in impairments, mostly in its upstream assets.

Sinopec’s refining and chemicals divisions have continued to support its earnings, with margins from turning crude into fuels rising 7 percent and the company reported selling greater volumes of higher value-added products.

“The strong result was driven by better profitability in refining and chemicals divisions,” analysts at Goldman Sachs Group Inc. including Mark Wiseman wrote in a research note. The dividend payout was “the major positive surprise.”

To read more about analyst reaction to Sinopec’s earnings, click here.

Shares rose as much as 3.6 percent to HK$6.83 before paring gains to 2.1 percent as of 10:32 a.m. Hong Kong time. The city’s benchmark Hang Seng Index lost 0.2 percent.

Gas Shift

The company has been shifting its upstream focus toward producing more natural gas, seeking to support President Xi Jinping’s drive of using more of the fuel instead of coal. Total output gained 3.4 percent to 446 million barrels of oil equivalent last year, it said in January, with gas rising 19 percent while crude slid 3.3 percent. It forecasts crude production will drop for a fourth year in 2018 and gas will rise further.

Sinopec’s profit missed a 53.6 billion yuan median estimate from 18 analysts surveyed by Bloomberg. Revenue rose 22 percent to 2.36 trillion yuan.

The company’s Hong Kong statement identified writedowns in its exploration and production segment of almost 13.6 billion yuan, citing a reduction in oil and gas reserves and high operating and development costs at some fields. Impairment losses in chemicals and refining were 4.92 billion yuan and 1.9 billion yuan, respectively.

While the company reported a narrower loss on E&P using Chinese accounting standards, they widened using international standards, which the company said in a Hong Kong filing was hit by higher liquefied natural gas procurement costs and expenses related to the restructuring of the Sichuan-to-East China Natural Gas Pipeline Co.

“It just shows how difficult it was for Sinopec to make a profit in oil and gas production, even as oil prices were edging toward $60 a barrel,” said Anna Yu, a Hong Kong-based analyst at ICBC International Research Ltd. “Refining and chemicals are the backbone of Sinopec’s assets and those sectors will continue to benefit from China’s growing fuel demand.”

Sinopec also reported Sunday:

  • Capital expenditure will rise almost 18 percent to 117 billion yuan, with about 41 percent of that going to exploration and production
  • Aims to produce 290 million barrels of crude oil, with 41 million coming from overseas, and 974.1 billion cubic feet of natural gas
  • Plans to process 239 million tons of crude oil, with total oil product sales in China reaching 179 million tons

State-owned peer PetroChina Co., the country’s biggest oil and gas producer, said Thursday full-year profit tripled to 22.8 billion yuan. Cnooc Ltd., China’s top offshore oil and gas explorer, will probably report that earnings jumped about 50-fold last year when it announces results on March 29, according to estimates in a Bloomberg survey.

©2018 Bloomberg L.P.

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