Sinopec Posts Weak Q1 Earnings

Zacks

China Petroleum and Chemical Corporation (SNP), also known as Sinopec, reported first quarter 2014 net income of 14.12 billion yuan (US$2.26 billion), down 15.3% from the prior-year quarter. Earnings per share of 0.120 yuan ($1.92 per ADS) fell 18.3% year over year. This was due mainly to lower crude prices and higher exploration costs. Revenues in the first quarter fell 7.8% to 641.07 billion yuan (US$104.75 billion).

Operational Performance

During the quarter ended Mar 31, 2014, Sinopec’s crude oil production grew 8.8% year over year to 89.4 million barrels, while natural gas volumes expanded 8.7% to 177.4 billion cubic feet. Domestic crude oil production increased 0.5% year over year to 76.6 million barrels, while overseas volumes increased 114.6% year over year to 12.8 million barrels.

Total oil and gas production expanded 8.8% to 119.0 million barrels of oil equivalent.

The average realized crude oil prices were $95.39 per barrel, down from $98.83 per barrel in the prior-year quarter. Average realized natural gas price was $6.97 per thousand cubic feet compared with $5.86 per thousand cubic feet in the first quarter of 2013.

The company’s Refining business recorded refinery throughput of 57.2 million tons (down nearly 2.5% year over year). It also produced approximately 35.1 million tons of oil products, representing a 0.6% fall from the year-ago quarter.

The Marketing and Distribution segment sold 42.2 million tons of refined oil products, reflecting a 0.1% year-over-year increase.

The output of ethylene from the Chemicals segment was 2.579 million tons, up 5.6% from the year-ago level.

Capital Expenditure

Capital expenditures for the quarter totaled 13.067 billion yuan, of which 4.178 billion yuan was spent on exploration and production projects. In the Refining segment, Sinopec spent 2.115 billion yuan, while the chemical business and marketing and distribution segment were allocated 3.810 billion yuan and 2.590 billion yuan, respectively. The company also spent 374 million yuan on the company’s scientific research facilities and IT projects.

Zacks Rank

Sinopec currently has a Zacks Rank #4 (Sell). However, there are Zacks Ranked #1 (Strong Buy) stocks in the oil and gas sector – Pioneer Energy Services Corp. (PES), RSP Permian, Inc. (RSPP) and Clayton Williams Energy, Inc. (CWEI) – that appear rewarding for the short term.

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