Sinopec's Profit Drops on Lower Oil Prices and Refining Earnings

(Bloomberg) -- Sinopec said its first-quarter profit declined 20 percent amid lower crude prices and shrinking refining earnings.

• Net income dropped to 15.47 billion yuan ($2.3 billion) from 19.31 billion a year ago, the company said in a statement to the Hong Kong stock exchange on Monday, using international accounting standards.

Key Insights

• A drop in oil prices typically drags down the value of the company’s inventories, which was seen in the 37 percent slump in operating profit from its key refining business to 11.96 billion yuan.
• The company, known officially as China Petroleum & Chemical Corp, turned its exploration and production business around. The segment realized an operating profit of 2.14 billion yuan compared with losses of 318 million yuan the year before. It’s the first time the upstream unit has been profitable since the fourth quarter of 2014.
• China’s energy producers are under pressure to raise capital expenditures to boost domestic output. Sinopec’s 11.9 billion yuan of spending in the first quarter hit just 8.7 percent of its annual capex target. That compares with 6.41 billion in the same period last year.

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• Oil and gas production rose 1.9 percent to 113.5 million barrels of oil equivalent.
  • Domestic crude oil production increased 0.2 percent, while overseas supply fell 6.7 percent.
  • Natural gas output gained 6.7 percent.
• Realized crude prices dropped 3.6 percent to $57.66 a barrel, while natural gas prices advanced 13 percent to $7.07 per thousand cubic feet.
• Refinery throughput climbed 2.7 percent to 61.78 million tons.
• Almost half of the capex went to E&P during the quarter, including for Fuling and Weirong shale gas development projects. Sinopec spent 17 percent on its refining business.
• Its marketing and distribution segment posted an operating profit of 7.87 billion yuan from 8.93 billion last year.
• Profit from the chemicals operations declined to 6.95 billion yuan from 8.45 billion.

To contact the reporter on this story: Aibing Guo in Hong Kong at aguo10@bloomberg.net

To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Jasmine Ng

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