Sinopec ups spending to 2014 high as refining profit sinks

Capex is budgeted at RM82.5b this year, with 44% spending on E&P to expand natural gas output

HONG KONG • China Petroleum & Chemical Corp (Sinopec) 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 (4Q).

Capital expenditure (capex) is budgeted at 136.3 billion yuan (RM82.51 billion) this year, the world’s largest refiner said in a statement to the Shanghai stock exchange yesterday. Spending was 118 billion yuan in 2018, above the 117 billion yuan estimated by Sinopec.

The refiner allocated a larger portion of spending on exploration and production (E&P) this year, which will account for 44% of capex from 36% 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 ageing, 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 in the previous year.

Full-year net income rose to 61.6 billion yuan from 51.2 billion a year ago, the company said. That compares to a mean estimate of 65.8 billion yuan based on 15 analysts surveyed by Bloomberg. Profit tumbled 88% in 4Q from the previous year, according to Bloomberg calculations.

Sinopec’s refining business generated an operating profit of 54.8 billion yuan, down 16% from a record in 2017. Refining profit plunged in 4Q 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 its full-year dividend to 0.42 yuan. Sinopec disbursed 82.5% of its net income.

Oil trading unit China International United Petroleum & Chemicals Co Ltd lost 4.02 billion yuan in 2018, compared to 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 to 288.5 million barrels in 2018, with 39.6 million from overseas.

Gas output is projected at 1.02 trillion cu ft (28.9 cu m) in 2019 compared to 977 billion cu ft last year.

The refiner plans to process 246 million tonnes of crude in 2019 from 244 million tonnes last year. — Bloomberg