China Petroleum & Chemical Corp., the refining giant known as Sinopec, outshined its domestic state-run rivals in the first half of the year as its fuel-making business helped it weather the worst crude crash in a generation.
The world’s biggest refiner reported 19.9 billion yuan (USD3 billion) in profit for the first half of the year, according to a filing this week with the Hong Kong stock exchange. While that’s down 22 percent from the same period in 2015, it’s more than double its net income in the second half of last year, when it posted its weakest earnings since 2002. Shares yesterday closed 0.2 percent lower at HKD5.61, compared with a 0.4 percent decline in the city’s benchmark Hang Seng Index.
“Sinopec continues to be a defensive play among China’s Big Three oil companies as its huge refining exposure puts it in a good position to benefit from a low crude price environment,” Gordon Kwan, head of Asia oil and gas research at Nomura Holdings Inc. in Hong Kong, said by phone. “Sinopec’s management deserves a lot of credit for maximizing refining incomes while containing crude losses.”
The company’s rival PetroChina Co., the country’s biggest oil and gas producer, saw net income drop to 531 million yuan in the first half of the year, a 98 percent plunge even after booking a 24.5 billion yuan gain from selling a Central Asian gas pipeline network. Cnooc Ltd., China’s largest offshore explorer, reported a 7.74 billion yuan loss, mainly from a charge on the value of its Canadian oil sands assets.
A slump in crude prices benefits fuel makers like Sinopec as their supply costs fall, though the company is still vulnerable to the collapse as it’s the country’s third-biggest oil and gas producer. Brent crude, the global benchmark, averaged about USD41 a barrel during the first half of the year, down roughly 30 percent from the same period in 2015.
The company’s refining margin, or the profit from turning crude into fuels, rose nearly 48 percent from same period last year to 514.4 yuan a ton, it said in a separate statement on Sunday.
Sinopec processed 115.9 million tons of crude into fuels during the first half of the year. That’s roughly equal to almost 4.67 million barrels a day, according to Bloomberg calculations. PetroChina refined the equivalent of nearly 2.66 million barrels a day, the company said in its release last week.
Sinopec will raise refining throughput in the second half of the year to 120 million tons, up 3.5 percent from the first six months, the company said. Bloomberg
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