Sinopec Announces 2014 First Quarter Results

Stable production and operations in the first quarter
Efficient construction of Fuling shale gas production capacity
Successful progress in marketing business restructuring

PR Newswire

BEIJING, April 28, 2014 /PRNewswire/ -- China Petroleum & Chemical Corporation ("Sinopec" or "the Company") (HKEX: 386; CH: 600028; NYSE: SNP) today announced its unaudited first quarter results for the three months ended 31 March 2014.

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Key Financials:

  • In accordance with the International Financial Reporting Standards (IFRS), the Company's turnover, other operating revenues and other income was RMB 641.065 billion, a decrease of 7.8% year-on-year, while operating profit was RMB 24.817 billion in the first quarter, down 9.98% year-on-year but increasing 34.17% quarter-on-quarter. Net profit attributable to equity shareholders of the Company was RMB 14.121 billion, down 15.33% year-on-year. Basic earnings per share were RMB 0.121.
  • In accordance with the PRC Accounting Standards for Business Enterprises (ASBE), the Company earned operating income of RMB 641.065 billion and a total profit of RMB 19.3 billion in the first quarter, a decrease of 16.11% year-on-year. Net profit attributable to equity shareholders of the Company was RMB 13.477 billion, a decrease of 14.88% over the same period last year. Basic earnings per share were RMB 0.116.

Business Performance Summary:

  • The Company achieved a steady increase in oil and gas output. In terms of exploration, major progress was made in marine facies natural gas in western Sichuan and central Yuanba exploration in northeastern Sichuan. While in production, construction of Fuling shale gas production capacity progressed smoothly, and the construction of key crude oil production capacity also made further progress.
  • The Company continued to optimize refined oil product slate, increasing the production of high value-added gasoline and jet fuel products; the profitability of refining segment continued to grow;
  • The Company stabilized the retail operations and expanded retail sales volume; restructuring of marketing segment made successful progress, with the ownership and management of the assets under the marketing and distribution segment of the Company transferred to Sinopec Sales Co., Ltd, a wholly-owned subsidiary of the Company; to accelerate the development of non-fuel business, Sinopec Easy Joy Sales Co. Ltd was established.
  • Faced with high and volatile feedstock prices, declining chemical product prices and other challenges, the Company improved the synergy between production and selling, and pushed forward the adjustment of feedstock mix and the utilization of capacity to optimize its operations; adjusted product grade and increased the proportion of high value-added chemical products.

In the first quarter of 2014, China's economy maintained steady growth at a GDP growth rate of 7.4% over the same period last year. According to estimates, domestic apparent consumption of refined oil products rose 2.5% year-on-year. The Company endeavored to optimize its operations and expand market share through deepening reforms, while ensuring safety in production.

Business Review

Exploration and production

The Company strengthened its oil and gas exploration and production activities, achieving steady increase in oil and gas output. In exploration, major progress was made in marine facies natural gas in western Sichuan and in central Yuanba in northeastern Sichuan. While in production, construction of key crude oil development projects progressed smoothly. Construction of shale gas production capacity in Fuling also achieved significant progress. As of March 31, 22 wells have been put into operation in the pilot project. Crude oil production for the first quarter was 89.37 million barrels, increasing 8.76% over the same period last year; natural gas production was 177.37 billion cubic feet, up 8.68% over the same period last year. However, due to the downward trend of international crude oil price and cost increase in upstream production, in the first quarter, the exploration and production segment's operating profit was RMB 13.206 billion, 18.63% lower than the same period last year but nevertheless an increase of 64.07% over the previous quarter. 

Refining

The Company maintained safe and stable operation at its refining units, adjusted utilization according to changing demands, optimized product slate and increased production of gasoline and jet fuel. In the first quarter, the Company processed 57.22 million tonnes of crude oil, down 2.5% over the same period last year; produced 11.97 million tonnes of gasoline, 5.46% higher on a year on year basis; produced 18.27 million tonnes of diesel, down 7.54% year on year; produced 4.86 million tonnes of kerosene, 15.99% higher year on year. In the first quarter, the refining segment realized an operating profit of RMB 3.739 billion, increasing 69.65% over the same period last year and up 92.43% over the previous quarter.

Marketing and Distribution

The Company made further progress in the restructuring of the marketing segment and introduction of social and private capital. Taking a market-oriented approach and focusing on operational quality and efficiency, the Company expanded its retail operation and stabilized sales volumes. The Company accelerated the development of non-fuel business through the establishment of Sinopec Easy Joy Sales Co., Ltd. In the first quarter, total sales volume of oil products was 42.15 million tonnes, generally flat year on year, of which, retail volume was 27.29 million tonnes, up 2.44% over the same period last year; non-fuel product turnover approximated RMB 3.6 billion, representing an increase of 11% over the same period last year. In the first quarter, the marketing and distribution segment realized an operating profit of RMB 8.832 billion, 3.22% lower than the same period last year but 8.92% increase on a quarter on quarter basis.

Chemical

Faced with high and volatile feedstock prices, declining chemical product prices and other challenges, the Company improved the synergy between production and selling, and pushed forward the adjustment of feedstock mix and the utilization of capacity to optimize its operations. In the first quarter, production of ethylene, synthetic resin, synthetic rubber and synthetic fiber was 2.579 million tonnes, 3.519 million tonnes, 254 thousand tonnes and 326 thousand tonnes respectively, representing year on year growths of 5.61%, 3.65%, 2.42% and decrease of 7.39%, respectively. The proportion of high value-added rubber products reached 15.6%, 360 basis points higher than the same period last year; the proportion of special purpose polyester and differential fiber products was 75.01%, 790 basis points higher than the same period last year. The operating loss for chemicals segment for the first quarter was RMB 1.342 billion.

Capital Expenditure

The capital expenditure of the Company in the first quarter of 2014 was approximately RMB 13,067 million.

Capital expenditure for exploration and production segment was RMB 4,178 million, mainly for the construction of oil and gas production capacity in Shengli oilfield, Tahe oilfield, Yuanba marine facies gas field in southwest China, and Daniudi gas field in northern China, etc.; development of shale gas in Chongqing Fuling Jiaoshiba block and coal-bed methane in southern Yanchuan; LNG projects and natural gas pipeline construction in Shandong and Guangxi provinces, etc.; overseas projects as Angola block 18 and Russia UDM, etc..

Capital expenditure for refining segment was RMB 2,115 million, mainly for refinery revamping projects in Shijiazhuang, Yangzi and Jiujiang, and quality upgrading of refined oil products.

Capital expenditure for the chemicals segment was RMB 3,810 million, mainly for projects like the acquisition of equity interest in the Ningdong coal chemical project, investment in Zhongan coal chemical project, product mix adjustment in Qilu acrylonitrile and Maoming polypropylene and the construction of other basic chemical projects.

Capital expenditure for the marketing and distribution segment was RMB 2,590 million, mainly for the revamping of service (gas) stations and the construction of facilities like refined oil product pipeline, oil depots and non-fuel business. 125 service (gas) stations have been developed in the first quarter.

Capital expenditure for corporate and others was RMB 374 million, mainly on the construction of scientific research facilities and IT projects.

Progress in the restructuring of marketing segment

The Company held the fourteenth meeting of the Company's Fifth Session of the Board of Directors on 19 February 2014, and approved the proposal to start the restructuring of the Company's marketing segment and to introduce social and private capital to realize diversified ownership of this segment. The Company has since started the audit and valuation process of the relevant assets. As of 1 April 2014, the ownership and management of the assets under the marketing and distribution segment of the Company have been transferred to Sinopec Sales Co. Ltd., a wholly-owned subsidiary of the Company. Sinopec has selected China International Capital Corporation Limited, Deutsche Bank AG, CITIC Securities Company Limited and Bank of America as the financial advisors to the restructuring of the marketing segment.
Operating data for the first quarter


Operating data

Unit

For three-month period ended 31 March

Changes

(%)

2014

2013

Exploration and production

Oil and gas production1

million BOE

118.96

109.37

8.77

Crude oil production

million barrels

89.37

82.17

8.76

China

million barrels

76.60

76.22

0.50

Overseas2

million barrels

12.77

5.95

114.62

Natural gas production

billion cubic feet

177.37

163.20

8.68

China

billion cubic feet

176.34

163.20

8.05

Overseas3

billion cubic feet

1.03

-

-

Realized crude oil price4

USD/barrel

95.39

98.83

(3.48)

Realized natural gas price

USD/thousand cubic feet

6.97

5.86

18.94

Refining7

Refinery throughput

million tonnes

57.22

58.69

(2.50)

Gasoline, diesel and kerosene production

million tonnes

35.09

35.30

(0.59)


Gasoline

million tonnes

11.97

11.35

5.46


Diesel

million tonnes

18.27

19.76

(7.54)


Kerosene

million tonnes

4.86

4.19

15.99

Light chemical feedstock

million tonnes

10.13

9.77

3.68

Light products yield

%

76.98

76.44

54 bps

Refining yield

%

94.79

94.72

7 bps

Marketing and Distribution

Total sales of refined oil products

million tonnes

42.15

42.13

0.05

Total domestic sales of refined oil products

million tonnes

38.67

38.92

(0.64)


Retail

million tonnes

27.29

26.64

2.44


Distribution

million tonnes

7.17

7.63

(6.03)


Wholesale

million tonnes

4.21

4.65

(9.46)

Total number of domestic service station5

stations

30,554

30,536

0.06


Company-owned and company-operated

stations

30,541

30,523

0.06

Throughput per domestic service station of company-owned and company-operated6

tonnes/station

3,575

3,473

2.94

Chemicals7

Ethylene

thousand tonnes

2,579

2,442

5.61

Synthetic resins

thousand tonnes

3,519

3,395

3.65

Synthetic rubbers

thousand tonnes

254

248

2.42

Monomers and polymers for synthetic fibers

thousand tonnes

2,196

2,267

(3.13)

Synthetic fibers

thousand tonnes

326

352

(7.39)


Note.

1. Conversion convention: for domestic gas, 1 barrel of oil equivalent (BOE) = 6,000 cubic feet; for overseas gas, 1 BOE=5238 cubic feet.

2. Overseas crude oil production in 2014 includes 8.69 million barrels of equity production in CIR, Taihu and Mansarovar.

3. Overseas natural gas production in 2014 refers to production in CIR.

4. Realized price for overseas crude oil is 107.3 USD/barrel. Prices for CIR, Taihu and Mansarovar production are not included.

5. The number of service stations in 2013 was the number as at 31 December 2013.

6. Throughput per service station data was an annualized average.

7. Including 100% output of the joint ventures companies.

Appendix

Principal financial data and indicators

Principal financial data and indicators prepared in accordance with the China Accounting Standards for Business Enterprises ("ASBE")

Items

31 March

2014

31 December

2013

Changes from the end of the preceding year to the end of the reporting period(%)

Total assets (RMB millions)

1,408,367

1,382,916

1.8

Total equity attributable to equity shareholders of the Company (RMB millions)

585,225

570,346

2.6

Net assets attributable to equity shareholders of the Company per share (RMB)

5.017

4.912

2.1


In the reporting period

From the beginning of the preceding year to the end of the preceding reporting period

Changes over the same period of the preceding year(%)

Net cash flows from operation activities

(RMB millions)

12,621

8,220

53.5


In the reporting period

From the beginning of the preceding year to the end of the preceding reporting period

Changes over the same period of the preceding year(%)

Operating income (RMB millions)

641,065

695,571

(7.8)

Net profit attributable to equity shareholders of the Company (RMB millions)

13,477

15,834

(14.9)

Net profit attributable to equity shareholders of the Company excluding extraordinary gain and loss (RMB millions)

13,433

15,881

(15.4)

Weighted average return on net assets (%)

2.33

2.98

(0.65)

percentage points

Basic earnings per share (RMB)

0.116

0.138

(15.9)

Diluted earnings per share (RMB)

0.115

0.137

(16.1)


Extraordinary gains and losses items

From the beginning of the year to the end of the reporting period

(gains)/losses (RMB millions)

Net loss on disposal of non-current assets

48

Donations

3

Gain on holding and disposal of various investments

(80)

Other non-operating income, net

(28)

subtotal

(57)

Tax effect

14

Total

(43)

Equity shareholders of the Company

(44)

Minority interests     

1

Principal financial data and indicators prepared in accordance with International Financial Reporting standards ("IFRS")


31 March

2014

31 December

2013

Changes from the end of the preceding year to the end of the reporting period(%)

Total assets (RMB millions)

1,408,367

1,382,916

1.8

Total equity attributable to equity shareholders of the Company (RMB millions)

583,705

568,803

2.6

Net assets attributable to the equity shareholders of the Company per share (RMB)

5.004

4.880

2.5


In the reporting period

From the beginning of the preceding year to the end of the preceding reporting period

Changes over the same period of the preceding year(%)

Net cash generated from operating activities (RMB millions)

12,621

8,111

55.6


In the reporting period

From the beginning of the preceding year to the end of the preceding reporting period

Changes over the same period of the preceding year(%)

Net profit attributable to equity shareholders of the Company (RMB millions)

14,121

16,677

(15.3)

Basic earnings per share (RMB)

0.121

0.145

(16.6)

Diluted earnings per share (RMB)

0.120

0.144

(16.7)

Return on net assets(%)

2.42

3.05

(0.63)

percentage points

About Sinopec:

Sinopec is one of the largest integrated energy and chemical companies with upstream, midstream and downstream operations in China. Its principal operations include: the exploration and production, pipeline transportation and sales of petroleum and natural gas; the sales, storage and transportation of petroleum products, petrochemical products, coal chemical products, synthetic fiber, fertilizer and other chemical products; import and export, as well as import and export agency business of oil, natural gas, petroleum products, petrochemical and chemical products, and other commodities and technologies; and research, development and application of technologies and information.

Adhering to its corporate mission of enterprise development, contribution to the country, shareholder value creation, social responsibility and employee wellbeing, Sinopec implements strategies of resources, markets, integration, internationalisation, differentiation and green low-carbon development with a view to realize its vision of building a world first class energy and chemical company.

Disclaimer:

This press release includes "forward-looking statements". All statements, other than statements of historical facts that address activities, events or developments that Sinopec Corp. expects or anticipates will or may occur in the future (including but not limited to projections, targets, reserve volume, other estimates and business plans) are forward-looking statements. Sinopec Corp.'s actual results or developments may differ materially from those indicated by these forward-looking statements as a result of various factors and uncertainties, including but not limited to the price fluctuation, possible changes in actual demand, foreign exchange rate, results of oil exploration, estimates of oil and gas reserves, market shares, competition, environmental risks, possible changes to laws, finance and regulations, conditions of the global economy and financial markets, political risks, possible delay of projects, government approval of projects, cost estimates and other factors beyond Sinopec Corp.'s control. In addition, Sinopec Corp. makes the forward-looking statements referred to herein as of today and undertakes no obligation to update these statements.

Investor Inquiries:  

Media Inquiries:

Beijing


Tel: (86 10) 5996 0028  

Tel: (86 10) 5996 0028

Fax: (86 10) 5996 0386  

Fax: (86 10) 5996 0386

Email: ir@sinopec.com   

Email: media@sinopec.com



Hong Kong


Tel: (852) 2824 2638 

Tel: (852) 3512 5000

Fax: (852) 2824 3669  

Fax: (852) 2259 9008

Email: ir@sinopechk.com  

Email: sinopec@brunswickgroup.com

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