China Petroleum & Chemical Corporation Announces 2012 Interim Results

BEIJING, Aug. 26, 2012 /PRNewswire-Asia-FirstCall/ -- China Petroleum & Chemical Corporation ("Sinopec" or "the Company") (CH：600028；HKEX：386；NYSE: SNP；LSE: SNP) today announced its interim results for the six months ended 30 June 2012.

Financial Highlights:

• In accordance with the PRC Accounting Standards for Business Enterprises ("ASBE"), in the first half of 2012, the Company's turnover and other operating revenues was RMB1,348.1 billion, up 9.3% over the first half of 2011. Net profit attributable to shareholders of the Company was RMB23.7 billion. Basic and diluted earnings per share were RMB0.273 and RMB0.263 respectively.
• In accordance with the International Financial Reporting Standards (IFRS), in the first half of 2012, the Company's turnover and other operating revenues was RMB1,348.1 billion, up 9.3% over the first half of 2011. Operating profit decreased by 31.4% to RMB40.1 billion. Net profit attributable to shareholders of the Company was RMB24.5 billion, basic and diluted earnings per share were RMB0.282 and RMB0.272 respectively.
• The Board of Directors declared an interim dividend of RMB0.1 per share (tax inclusive).

Business Highlights:

• Exploration and production segment: Sinopec achieved satisfactory operation performance due to the increased prices and sales volume of crude oil and natural gas. Crude oil production increased year-on-year by 4.3% to 163.09 million barrels. Natural gas output grew 14.1% to 289.78 billion cubic feet. The segment's operating revenue increased year-on-year by 12.0% to RMB126 billion, and operating profit, by 16.8% year-on-year to RMB40.5 billion. .
• Refining segment: Refinery throughput was 110 million tonnes in the first half of the year, representing a year-on-year increase of 1.1%. The segment's operating revenue rose 7.2% year-on-year to RMB638.6 billion. Nevertheless, the crude oil price increased significantly while domestic refined oil product prices were strictly regulated; hence the segment suffered an operating loss of RMB18.5 billion.
• Marketing and distribution segment: Sinopec adjusted operation strategies to actively respond to the changing market demand. In the first half, the total sales volume of oil products increased to 82.67 million tonnes, up by 2.8% year-on-year. The marketing and distribution segment's operating revenue increased 8.4% year-on-year to RMB710 billion and its operating profit was up 3.3% from the same period of 2011 to RMB20.3 billion.
• Chemicals segment: Production of ethylene was 4.81 million tonnes in the first half of 2012, down by 4.1% year on year. The total sales of chemical products were 26.15 million tonnes, up by 4.2% year on year. Due to the depressed chemical market and drastic fall in prices of major chemical products, the chemicals segment recorded operating revenues of RMB200.8 billion and suffered an operating loss of RMB1.3 billion.
• Total capital expenditure was RMB51.504 billion for the first six months of 2012.

The first half of 2012 witnessed an economic slow-down in the United States, the debt crisis and consequent recession in Europe, and slower growth in China and other emerging markets. The international price of crude oil rose and then dropped in the first half of 2012. The domestic market for refined oil products was well supplied; however the price regulation on domestic refined oil products is tight and is misaligned with the international crude price. The chemicals market saw intense competition, leading to a drastic drop in products prices. In the second half of the year, the Chinese government is expected to implement a number of fiscal and monetary policies in pursuit of steady economic growth, driving infrastructure investment and domestic consumer spending. Given these macro-control policies to be in place in the second half of 2012, Sinopec expects the domestic demand for refined oil products and chemicals will steadily increase, which provides favorable conditions for the Company to scale up business operations.

Mr. Fu Chengyu, Chairman of Sinopec commented, "In the first half of 2012, the volatile economic environment, both internationally and domestically, brought challenging operating conditions. That Sinopec managed to maintain our overall growth momentum is thanks to our vertically integrated business model and fast response. Looking ahead, Sinopec will monitor closely the macro-economic situation, improve the efficiency of our production operations, reinforce production safety, and ensure effective cost control, in order to maintain a solid foundation for the sustainable development of our business."

BUSINESS REVIEW

Exploration and Production Business

Given the geo-political uncertainty and the weakening demand due to the global economic slow-down, the international price of crude oil rose and then dropped in the first half of 2012. Brent spot price soared to US$128 per barrel in the first quarter and dropped below US$100 per barrel in the second quarter, averaging at US$113.34 per barrel in the first half, a year-on-year increase of 1.96%.

Sinopec made discoveries in a number of territories, including the Tahe oil field in the Tarim Basin, the southern Ordos Basin, the western and northern rims of the Junngar Basin, and the Jiyang depression of the Shengli oil field. In gas exploration, the Company made new discoveries in the middle and shallow strata of the western Sichuan Basin, the deep strata of the Yuanba area in northeastern Sichuan, and the northern Ordos Basin. In oil field development and production, the Company achieved sustained oil production growth as a result of the advances in tapping mature oil fields' potential, ramping up in key tight oil reservoirs and improving oil recovery rate. In gas field development, the key projects were well under way. Sinopec put into operation the Dawan block of the Puguang Gas Field, achieved good progress in the Yuanba Gas Field, and progressed smoothly in the middle and shallow strata of the western Sichuan Basin and the Ordos Basin, as momentum continued well on track.

Sinopec produced 163.09 million barrels of crude oil in the first half of 2012, a year-on-year increase of 4.3%. Domestic oil production increased by 1.2% year-on-year and overseas production increased significantly by 82.5% compared to the same period last year due to the overhaul of offshore production facilities in 2011. Natural gas output grew to 289.78 billion cubic feet, representing an increase of 14.1%.

During the period under review, operating revenues of the segment were RMB126.1 billion, representing an increase of 12.0% over the same period of 2011. This was mainly attributable to the increased prices and sales volume of crude oil and natural gas. The exploration and production business realized an operating profit of RMB40.5 billion, up 16.8% over the same period of last year.

Exploration and Production: Summary of Operations

Note 1: For domestic production of crude oil, 1 tonne = 7.1 barrels; for production of crude oil abroad, 1 tonne = 7.27 barrels.
Note 2: For production of natural gas, 1 cubic meter = 35.31 cubic feet.

Refining Business

In spite of the tight price regulation on domestic refined oil products and the misalignment with the international crude price in the first half of 2012, we optimized the procurement, transportation and allocation of crude oil to reduce costs, and maintained steady and safe operations of refining facilities. We adjusted the refining throughput and utilization rate in accordance with market changes. We optimized product slate and increased the output of high-spec gasoline. We implemented plans to revamp and expand our refineries in an effort to upgrade the quality of oil products and supply cleaner products.

Refinery throughput was 110 million tonnes in the first half of 2012, representing a year-on-year increase of 1.1%. Light yield increased by 0.94 percentage point compared with the same period of 2011.

In the first half of 2012, operating revenue of the segment increased 7.2% to RMB638.6 billion and this was mainly attributable to the increased sales volume and prices of its refined products. During the period under review, the crude oil price increased significantly while domestic refined oil product prices were strictly controlled, and prices of refining products other than oil products increased slightly, hence, this segment suffered an operating loss of RMB18.5 billion, which was RMB6.3 billion more than the same period of 2011.

Refining: Summary of Operations

Note: 1. Refinery throughput is converted at 1 tonne = 7.35 barrels.2. 100% production of joint ventures was included.

Marketing and Distribution Business

In the first half of 2012, Sinopec adjusted operation strategies to actively respond to the changes in the market demand. In the first quarter, the Company increased the proportion of retail volume to achieve higher profitability. In the second quarter, in spite of a continued drop in international oil price and weakening market demand, the Company intensified marketing activities and controlled the inventory level. The Company strengthened quality management for outsourced oil products. The Company provided value-added services including e-commerce and promoted non-fuel businesses. In the first half, the total sales volume of oil products increased to 82.67 million tonnes, up by 2.8% year-on-year.

In the first half of 2012, the operating revenues of the marketing and distribution segment increased 8.4% year-on-year to RMB710.0 billion. It was mainly attributed to the improved sales mix (sales of high-spec gasoline accounted for 99.5% of the total gasoline sales, up by 1.9 percentage points) and increased sales volume of oil products through retail and direct channels, (up by 4 percentage points to 89.7% of the total oil products sales volume). The segment's operating profit up 3.3% from the same period of 2011 to RMB20.3 billion.

Marketing and Distribution: Summary of Operations

Chemicals Business

In the first half of 2012, the Company lowered the plant loads for ethylene and synthetic resin according to supply and demand. We took advantage of production synergies and optimized supply-chain management, leveraging lighter hydrocarbon feedstock and increasing resource efficiency. We produced marketable and high value-added products, accelerated research and development on new products and performance compounds for synthetic resin. As a result, synthetic resin new products and performance compounds reached 52.0%, differentiated fiber reached 67.5% of total produced. We developed a strong customer base by improving service quality. Production of ethylene was 4.81 million tonnes in the first half of 2012, down by 4.1% year on year, and the total sales of chemical products were 26.15 million tonnes, up by 4.2% year on year.

In the first half of 2012, operating revenues of the chemicals segment dropped by 4.1% year-on-year to RMB200.8 billion, which was mainly due to the depressed chemical market and drastic fall in prices of major chemical products. The segment suffered an operating loss of RMB1.3 billion.

Summary of Production of Major Chemical Products                               

Note: 100% production of joint ventures was included

HSE, Energy conservation and Emission Reduction
Sinopec implemented the accountability system and strengthened assessment and supervision on HSE management to ensure safe and stable operation of the facilities in the first half of 2012. The Company has taken green and low-carbon initiatives, advanced technology innovation and energy performance contracts, and focusing on energy-saving and environmental protection in the course of energy development, processing and utilization. As part of the implementation of our corporate social responsibility (CSR) efforts, the Board of Directors set up the CSR Management Committee to monitor the Company's CSR performance in HSE, green and low-carbon development. In the first half of 2012, the Company's energy intensity dropped by 2%, COD in waste water discharge shrank by 4.1% and sulfur dioxide discharge fell by 3.3%.

Capital Expenditure

Sinopec's capital expenditures in the first half reached RMB51.504 billion, of which RMB21.839 billion were used in the exploration and production segment, mainly for the Shengli shallow water oilfield, the Tahe oil field in the northwest, the Ordos oil and gas fields, the Sichuan Basin and the Shandong LNG project. RMB10.427 billion were used in the refining segment, mainly for upgrading the quality of diesel products and revamping and expansion of refining projects in Shanghai Petrochemical and Jinling. RMB6.341 billion were used in the chemicals segment for the construction of projects such as the Wuhan 800 thousand tpa ethylene project, the Yanshan butyl rubber project and the Yizheng BDO project. RMB12.39 billion were used in the marketing and distribution segment, mainly for construction of service stations, oil depots and oil product pipelines in highways, major cities and urban development areas, and non-fuel business and IC card value-added service with 704 new service station added. RMB507 million were used for the corporate and others, mainly for R&D facilities and IT projects construction.

BUSINESS PROSPECTS

In the second half of the year, the Chinese government is expected to implement a number of fiscal and monetary policies in pursuit of steady economic growth, driving infrastructure investment and domestic consumer spending. Given these macro-control policies to be in place in the second half of 2012, the Company expects the domestic demand for refined oil products and chemicals will steadily increase, which provides favorable conditions for the Company to scale up business operations. 

In line with the macro economic forecast in the second half of 2012, we will step-up the market development effort, vigorously optimize operations, and strengthen HSE, so as to deliver sustained growth.

In exploration, the Company will focus on reserve and volume growth, advancing exploration in key areas, tracking the evaluation on risk well drilling, ramping up production in key areas and significant natural gas projects, strengthening the development, management and enhanced oil recovery in mature oil fields. The Company will step-up efforts in exploration and development of unconventional resources, building production capacity in the Fuling continental shale gas project, preparing for the coal-bed-methane production in the southern part of Yanchuan through various pilot well development programs. In the second half of 2012, the Company plans to produce 163.75 million barrels of crude oil (including 154.61 million barrels of domestic production and 9.14 million barrels of overseas production), and 293.07 billion cubic feet of natural gas.

In refining, Sinopec will optimize crude sourcing and allocation, increase resource efficiency, and rationalize refinery utilization. The Company will take into consideration a balanced production and sales of light chemical feedstock, the regional oil products consumption and profitability, and optimize product slate to produce high-spec gasoline. The oil products inventory will be controlled at a rational level to reduce operating cost. The Company will leverage the synergy of centralized sales of lubricant, asphalt and petroleum coke to maximize profitability. For the second half of 2012, the Company plans to process 112 million tonnes of crude oil.

In marketing and distribution, Sinopec will leverage our distribution network and the value of our brand awareness, making appropriate adjustments to marketing strategies, expanding marketing activities, extending the sales network, and sharpening competitiveness. In the meantime, the Company will continuously  develop its non-fuel business, expanding CNG market and developing e-commerce business to tap new sources of growth. In the second half of 2012, the Company plans to sell 80 million tonnes of oil products.

In chemicals, Sinopec will respond rapidly to home and overseas market dynamics and adjust the utilization rate of chemical facilities. The Company will strengthen plant-site management to continuously increase its techno-economic index, optimizing feedstock and product mix, maximizing the output of marketable and high value-added products. Sinopec will balance marketing with production in line with the market volatility, taking product inventory under control to sell all that is produced. The Company will improve its services mechanism for better customer satisfaction. In the second half of 2012, the Company expects to produce 4.63 million tonnes of ethylene.

APPENDIX

FINANCIAL DATA AND INDICATORS PREPARED IN ACCORDANCE WITH CHINA ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES ("ASBE")

FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS")

The following table sets forth the operating revenues, operating expenses and operating profit/(loss) by each segment before elimination of the inter-segment transactions for the periods indicated, and the changes between the first half of 2012 and the first half of 2011.

About Sinopec Corp.

Sinopec is one of the largest integrated energy and chemical companies with upstream, midstream and downstream operations in China. Its principal operations include: the exploration and production, pipeline transportation and sales of petroleum and natural gas; the sales, storage and transportation of petroleum products, petrochemical products, synthetic fiber, fertilizer and other chemical products; import & export, as well as import and export agency business of oil, natural gas, petroleum products, petrochemical and chemical products, and other commodities and technologies; and research, development and application of technologies and information.

Adhering to its corporate mission of "Enterprise development, Contribution to the Country, Shareholder value creation, Social responsibility and Employee wellbeing", Sinopec Corp. implements strategies of resources, markets, integration, internationalization, differentiation and green low-carbon development with a view to realize its vision of building a world first class energy and chemical company.

Disclaimer

This press release includes "forward-looking statements". All statements, other than statements of historical facts that address activities, events or developments that Sinopec Corp. expects or anticipates will or may occur in the future (including but not limited to projections, targets, reserve volume, other estimates and business plans) are forward-looking statements. Sinopec Corp.'s actual results or developments may differ materially from those indicated by these forward-looking statements as a result of various factors and uncertainties, including but not limited to the price fluctuation, possible changes in actual demand, foreign exchange rate, results of oil exploration, estimates of oil and gas reserves, market shares, competition, environmental risks, possible changes to laws, finance and regulations, conditions of the global economy and financial markets, political risks, possible delay of projects, government approval of projects, cost estimates and other factors beyond Sinopec Corp.'s control. In addition, Sinopec Corp. makes the forward-looking statements referred to herein as of today and undertakes no obligation to update these statements.

SOURCE China Petroleum & Chemical Corporation

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