Sinopec profit rises as pipeline sales top up refining boost

Bloomberg

China Petroleum & Chemical Corp. reported its first profit gain in three years as the world’s largest oil refiner got a boost from cheaper crude and took a one-time gain from pipeline sales. Net income in 2016 rose 44 percent to 46.7 billion yuan ($6.8 billion), the company known as Sinopec said in a statement to the Shanghai stock exchange on Sunday. That compares with a
mean of 39.9 billion yuan from 19 estimates compiled by Bloomberg. Revenue fell about 4 percent to 1.93 trillion yuan.
Global oil refiners have fared better than producers during the energy downturn as cheaper crude boosted profit margins and stimulated fuel demand. Along with slashing spending, that has helped the Beijing-based company outperform its state-owned rivals despite falling oil prices and declining production. The company in a separate statement projected income during the first quarter of this year jumped 150 percent under Chinese accounting standards, citing higher oil prices, stable demand and improved profitability.
“Lower crude prices really helped Sinopec’s margins last year,” said Tian Miao, a Beijing-based analyst at North Square Blue Oak Ltd. “Sinopec may continue to benefit from China’s strong fuel demand growth, especially gasoline. The risk for Sinopec going forward is that crude prices rise too high and too fast as higher upstream margins wouldn’t be enough to cover refining losses.”
Gross refining margins in 2016 were 471.9 yuan a ton, about 48 percent higher than the previous year, the company said in its Shanghai filing Sunday. It also booked a 20.56 billion yuan gain from the December sale a 50 percent stake in a pipeline unit, Sinopec Sichuan-to-East China Gas Pipeline Co.
The company expects global crude production to fall a third year, while it aims to boost capital expenditures by 44 percent to 110.2 billion yuan, the first increase in four years. Spending includes building the second-phase of its Fuling shale-gas project and liquefied natural gas import infrastructure in Tianjin, as well as domestic gas-storage facilities.
Sinopec issued a 0.17 yuan dividend, compared with a forecast for 0.08 yuan in data compiled by Bloomberg. Sinopec’s Hong Kong-traded shares rose 1.1 percent to HK$6.20 on Friday, while the city’s benchmark Hang Seng Index added 0.1 percent.
Investors are next eyeing Sinopec’s efforts to revive an initial public offering of its retail business, which could raise as much as $10 billion. The company asked banks to submit proposals by December for roles to manage a potential Hong Kong listing next year, Bloomberg News reported.
China’s biggest offshore explorer, Cnooc Ltd., reported its worst-ever profit on Thursday. It was able to eke out a 637 million yuan net income thanks to bigger income tax credits, cost cutting and a recovery in oil prices. The nation’s largest oil producer, PetroChina Co., will announce results March 30.