Sinopec’s Net Profit Surged 44% YoY to RMB46.7 Billion in 2016

On March 26, 2017, China Petroleum & Chemical Corporation (Sinopec Corp., HKEX: 386; SSE: 600028; NYSE: SNP) announced the total turnover and other operating revenue was RMB1.93 trillion in accordance with IFRS. Net profit was RMB46.7 billion, up by 43.6% year-on-year. The company benefits from its integrated business model.

Exploration and Production
In 2016, the company’s oil and gas production declined by 8.6% year-on-year to 431.29 million barrels of oil equivalent. Its domestic crude production dropped by 13.2% from the previous year, while natural gas production went up by 4.3% from a year ago.
The operating revenue of this segment was RMB115.9 billion, representing a decrease of 16.4% over 2015. The decrease was mainly attributable to the decline of realised price of crude oil and natural gas as well as the decrease in sales volume of crude oil. Despite a loss of approximately RMB36.6 billion, this segment still generated positive free cash flow.
The company proactively controlled its expenses. The oil and gas lifting cost was US$16.65 per ton, representing a decrease of 5.5% from the previous year amid a 13.2% decrease in crude oil price.

Refining
In 2016, Sinopec Corp. processed 236 million tons of crude and produced 149 million tons of refined oil products, up by 0.53% from the previous year. Gasoline production and kerosene production increased by 4.4% and 4.6% respectively.
The operating revenues of this segment were RMB855.8 billion, representing a decrease of 7.6% from 2015. In 2016, the operating profit of this segment totaled RMB56.3 billion, representing an increase of RMB35.3 billion as compared with 2015.
Refining gross margin was RMB471.9 per ton, representing an increase of RMB153.8 per ton as compared with 2015. The unit refining cash operating cost was RMB165.7 per ton, representing a decrease of RMB1.9 per ton when compared with 2015. The decrease was mainly because the company enforced strict cost control, improved operating efficiency, as well as decreased operational costs in fuel, power and other auxiliaries facilities.

Marketing and Distribution
The company increased the focus on vehicle-used natural gas business and expedited the construction and operation of CNG/LNG stations, achieving 25% growth in sales volume of vehicle-used natural gas. The total sales volume of oil products was 195 million tons, of which domestic sales accounted for 173 million tons. Its non-fuel business maintained rapid growth with business scale increased and margins strengthened. The non-fuel business transaction volume reached RMB35.1 billion, up by 41.4% year on year.
In 2016, the operating profit of this segment was RMB32.2 billion, representing an increase of 11.4% when compared with 2015. The increase was mainly because the segment made full use of the advantages of end user marketing network, actively expanded the gasoline market, increased the sales volume of high octane number gasoline, made efforts to improve total sales volume, coordinate internal and external resources, increased the spread between sales and procurement prices as compared with 2015.

Chemicals
Ethylene output was 11.059 million tons, with the differential ratio of synthetic fiber reaching 86.5% and the specialty and new products as a percentage of synthetic resins reaching 61.4%. By implementing low-inventory and differentiated marketing strategies, its full-year chemical sales volume increased by 11.3% from the previous year to 69.96 million tons, with all produced chemicals sold.
In 2016, the operating revenue of the chemicals segment was RMB335.1 billion, representing an increase of 1.9% year on year. This was mainly due to the increase in sales volume of chemical products as compared with 2015. In 2016, the operating profit of this segment was RMB20.6 billion, representing an increase of RMB1.1 billion from the previous year.

R&D
In 2016, the company filed 5 612 patent applications at home and abroad, of which 3 942 were granted.

Capital Expenditures
Total capital expenditures for the year were RMB76.456 billion. Capital expenditures for the exploration and production segment were RMB32.187 billion, mainly for fuling shale gas and Yuanba gas field development projects and the LNG terminal projects in Guangxi and Tianjin, as well as overseas projects. Capital expenditures for the refining segment were RMB14.347 billion, mainly for gasoline and diesel quality upgrading projects, adjustments in the product mix and refinery revamping projects. Capital expenditures for the marketing and distribution segment were RMB18.493 billion, mainly for constructing and renovating service stations and building refined oil product pipelines, depots and storage facilities, as well as for rectification of safety hazards. Capital expenditures for the chemicals segment were RMB8.849 billion, mainly for adjustment of the feedstock and product structure, the Ningdong coal chemical project and the Zhongtianhechuang coal-to-chemical project. Capital expenditures for the corporate and others segment were RMB2.58 billion, mainly for R&D facilities and information technology application projects.

Health, Safety and the Environment
Compared with the previous year, energy intensity was down by 1.59%, industrial water consumption was down by 1.1%, COD in discharged water was down by 3.86%, sulfur dioxide emissions were down by 4.84%, and all hazardous chemicals, discharged water, gas and solid wastes were properly treated.

Business Prospects
Looking ahead into 2017, Sinopec Corp.  will focus mainly on structural reforms on the supply side. It will advance quality and efficiency of its assets, lower costs, expand markets, make structural adjustments, deepen reforms, and consolidate the basis for further growth.
In 2017, the company plans to produce 294 million barrels of crude oil, of which overseas production will account for 46 million barrels. It plans to produce 879.9 billion cubic feet of natural gas.
The company plans to process 240 million tons of crude and produce 150 million tons of oil products.
The company plans to sell 175 million tons of oil products in domestic market.
The company plans to produce 11.66 million tons of ethylene.