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Sinopec Boosts Spending to 2014 High, Refining Profit Sinks

Aibing Guo
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.

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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.

(Updates with fourth-quarter results under Get More section.)

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, Jason Rogers

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