Bloomberg reported that the China Petroleum & Chemical Corp., also known as Sinopec, would be paying out record breaking dividends to its shareholders after the company’s huge fuels and chemicals divisions contributed to the 10% boost in profits.
Sinopec is the world’s largest refiner, and on Sunday, it released a statement to the Hong Kong Stock Exchange with regard to its earnings. The company stated that net income has gone up to 51.1 billion yuan (US$8.1 billion). Bloomberg had forecast a dividend payout of 0.17 per share for 2017. However, the company has proposed a 0.5 yuan a share payout for last year. This figure is the highest dividend the company has paid out since it was listed in 2000.
Sinopec also declared 22 billion yuan (US$3.5 billion) in impairments, of which most were related to the company’s upstream assets.
The company’s refining and chemicals divisions led the way for its earnings. Margins from converting crude oil into fuels went up by 7% and higher volumes of the more value-added products were also sold.
According to Goldman Sachs’ analyst, Mark Wiseman, better profitability in the refining and chemicals divisions is what drove profitability for the company last year.
Shares for Sinopec went up by as much as 3.6% and the company’s stocks are currently trading at HK$6.93 right now.
The company has been focusing on moving its upstream focus to natural gas, in line with President Xi Jinping’s drive to use less coal. The company’s total output went up by 3.4% to 446 million barrels of oil-equivalent in 2017. Gas went up by 19% and crude oil production dropped by 3.3%. Sinopec said that the company would continue to reduce crude oil production for the fourth year in a row this year, while natural gas production would continue to rise.
Revenue for 2017 rose by 22% to 2.3 trillion yuan (US$375.92 billion). However, the company’s profit missed the market consensus target of 53.6 billion yuan (US$8.53).
Write-downs worth almost 13.6 billion yuan (US$2.17 billion) were identified in the company’s exploration and production segment, because of a reduction in oil and gas reserves as well as high operating as well as development costs at some of the fields. The company also declared impairments costs of 4.92 billion yuan (US$780 million) in chemicals and 1.9 billion yuan (US$300 million) in refining.
E&P losses were higher by international accounting standards, which were impacted by increased natural gas procurement costs as well as expenses related to restructuring efforts of the Sichuan-to-East China Natural Gas Pipeline Co.
Sinopec also reported that capital expenditure is expected to increase by almost 18% to 117 billion yuan (US$18.3 billion), of which about 40% would be spent on production and exploration.
The company is targeting a production of 290 million barrels of crude oil, of which 41 million will be brought in from abroad. Sinopec is also targeting a production of 974.1 billion cubic feet of natural gas this year. The refiner is also planning to process 239 million tons of crude oil. In 2018, total oil product sales are expected to reach 179 million tons.
Sinopec wasn’t the only company to do well. PetroChina Co., the government own company that is also the country’s biggest producer of oil and gas, announced that its full-year profits increased threefold to 22.8 billion yuan (US$3.63 billion).
China’s number one offshore gas and oil explorer, Cnooc Ltd. is also expected to report earnings that have gained by 50 times in 2017 in its earnings report on March 29.