Sinopec’s (SNP) Q4 Earnings Miss Estimates, Revenues Up Y/Y

China Petroleum and Chemical Corporation SNP or Sinopec reported fourth-quarter 2017 earnings per American Depositary Receipt (ADR) of $1.11, lagging the Zacks Consensus Estimate of $1.29 but improving from 16 cents in the year-ago quarter.

Revenues were up 14% year over year to 93,012 million yuan. The upside can be attributed to higher natural gas production and increased refinery throughput, which were partially offset by lower crude oil production.

Dividend

The company’s board of directors proposed a final dividend of 0.40 yuan per share. Additionally, an interim dividend of 0.10 yuan takes the full-year dividend to 0.50 yuan, an increase of 100.8% from the previous year. Dividend payout ratio reached 118%. In 2017, the company paid dividend of 60.5 billion yuan, highest since its listing.

Operational Performance

During the twelve-month period ending Dec 31, 2017, Sinopec’s crude oil production declined 3.2% year over year to 293.66 million barrels. Natural gas volumes rose 19.1% year over year to 912.5 billion cubic feet over the same period. Domestic crude oil production fell 1.7% year over year to 248.9 million barrels, while overseas volumes were down 11.1% year over year to 44.8 million barrels. Total oil and gas production jumped 4.1% year over year to 448.8 million barrels of oil equivalent.

The company’s Refining business recorded a 1.3% year-over-year growth in refinery throughput to 238.5 million tons. Production of petroleum products inched up 0.2% from 2016 to approximately 38.6 million tons.

The Marketing and Distribution segment sold 198.8 million tons of refined oil products, up 2% year over year.

Capital Expenditure

Capital expenditures in 2017 totaled 99.4 billion yuan, up 30% year over year. Out of this, 31.3 billion yuan was spent on exploration and production. Sinopec spent 21.1 billion yuan on the Refining segment, while the Chemical Business segment was allocated 23.1 billion yuan. The company used 21.5 billion yuan for the Marketing and Distribution segment. The company also spent 2.4 billion yuan on its scientific research facilities and IT projects.

Guidance

For 2018, capital expenditures are estimated at 117 billion yuan. Of the total, 48.5 billion yuan will be spent on exploration and production, 28.8 billion yuan on the Refining segment, 17.7 billion yuan for the Chemical Business segment, 18.5 billion yuan for the Marketing and Distribution segment and the remaining 3.5 billion yuan will be allocated toward its scientific research facilities and IT projects.

Q4 Price Performance

Sinopec’s shares have lost 3.1% during the fourth quarter, as against the industry’s 5.6% rally.

Zacks Rank & Key Picks

Currently, Sinopec carries a Zacks Rank #3 (Hold).

A few other better-ranked players in the same sector are Continental Resources, Inc CLR, Pioneer Natural Resources Company PXD and Concho Resources Inc CXO. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Continental Resources is an independent oil and natural gas exploration and production company. It delivered an average positive earnings surprise of 64.9% over the last four quarters.

Headquartered at Irving, TX, Pioneer Natural Resources Company is an independent oil and gas exploration and production entity. It pulled off an average beat of 66.92% in the trailing four quarters.

Concho Resources is an independent oil and natural gas company. It delivered a positive surprise of 48.9% during the same time frame.

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