China’s Sinopec offers record dividend as refining boosts profit

Bloomberg

China Petroleum & Chemical Corp., the world’s biggest refiner, will pay a record-high dividend as its massive fuels and chemical segments helped it post a nearly 10 percent increase in full-year profit.
Net income climbed to 51.2 billion yuan ($8.1 billion), the company known as Sinopec said in a statement to the Shanghai stock exchange on Sunday. The company proposed a 0.5 yuan per share total dividend payout for 2017, the most since its Hong Kong listing in 2000 and above a forecast for 0.17 yuan in data compiled by Bloomberg. The company also flagged 22 billion yuan in impairments, mostly in its upstream assets.
While oil’s rally has helped Sinopec cut losses in its production and exploration segment, its refining and chemicals units have helped it ride out the volatility of oil’s earlier crash as margins from making fuels and petrochemicals improve.
“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.”

GAS SHIFT
The company has also shifted its upstream focus towards producing more natural gas, seeking to support President Xi Jinping’s drive of using more of the fuel instead of coal. The company’s 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 Bloom-berg. Revenue rose 22 percent to 2.36 trillion yuan. Its shares fell 2.2 percent to HK$6.59 compared with the benchmark Hang Seng Index’s 2.5 percent drop.
The company flagged writedowns in its exploration and production segment of 12.6 billion yuan, citing a reduction in oil and gas reserves and high production costs at some fields.