Sinopec Announces 2014 First Quarter Results

Stable production and operations in the first quarter

Efficient construction of Fuling shale gas production capacity

Successful progress in marketing business restructuring

BEIJING, April 28, 2014 /PRNewswire/ -- China Petroleum & Chemical Corporation ("Sinopec" or "the Company") (HKEX: 386; CH: 600028; NYSE: SNP) today announced its unaudited first quarter results for the three months ended 31 March 2014.

Key Financials:

• In accordance with the International Financial Reporting Standards (IFRS), the Company's turnover, other operating revenues and other income was RMB 641.065 billion, a decrease of 7.8% year-on-year, while operating profit was RMB 24.817 billion in the first quarter, down 9.98% year-on-year but increasing 34.17% quarter-on-quarter. Net profit attributable to equity shareholders of the Company was RMB 14.121 billion, down 15.33% year-on-year. Basic earnings per share were RMB 0.121.
• In accordance with the PRC Accounting Standards for Business Enterprises (ASBE), the Company earned operating income of RMB 641.065 billion and a total profit of RMB 19.3 billion in the first quarter, a decrease of 16.11% year-on-year. Net profit attributable to equity shareholders of the Company was RMB 13.477 billion, a decrease of 14.88% over the same period last year. Basic earnings per share were RMB 0.116.

Business Performance Summary:

• The Company achieved a steady increase in oil and gas output. In terms of exploration, major progress was made in marine facies natural gas in western Sichuan and central Yuanba exploration in northeastern Sichuan. While in production, construction of Fuling shale gas production capacity progressed smoothly, and the construction of key crude oil production capacity also made further progress.
• The Company continued to optimize refined oil product slate, increasing the production of high value-added gasoline and jet fuel products; the profitability of refining segment continued to grow;
• The Company stabilized the retail operations and expanded retail sales volume; restructuring of marketing segment made successful progress, with the ownership and management of the assets under the marketing and distribution segment of the Company transferred to Sinopec Sales Co., Ltd, a wholly-owned subsidiary of the Company; to accelerate the development of non-fuel business, Sinopec Easy Joy Sales Co. Ltd was established.
• Faced with high and volatile feedstock prices, declining chemical product prices and other challenges, the Company improved the synergy between production and selling, and pushed forward the adjustment of feedstock mix and the utilization of capacity to optimize its operations; adjusted product grade and increased the proportion of high value-added chemical products.

In the first quarter of 2014, China's economy maintained steady growth at a GDP growth rate of 7.4% over the same period last year. According to estimates, domestic apparent consumption of refined oil products rose 2.5% year-on-year. The Company endeavored to optimize its operations and expand market share through deepening reforms, while ensuring safety in production.

Business Review

Exploration and production

The Company strengthened its oil and gas exploration and production activities, achieving steady increase in oil and gas output. In exploration, major progress was made in marine facies natural gas in western Sichuan and in central Yuanba in northeastern Sichuan. While in production, construction of key crude oil development projects progressed smoothly. Construction of shale gas production capacity in Fuling also achieved significant progress. As of March 31, 22 wells have been put into operation in the pilot project. Crude oil production for the first quarter was 89.37 million barrels, increasing 8.76% over the same period last year; natural gas production was 177.37 billion cubic feet, up 8.68% over the same period last year. However, due to the downward trend of international crude oil price and cost increase in upstream production, in the first quarter, the exploration and production segment's operating profit was RMB 13.206 billion, 18.63% lower than the same period last year but nevertheless an increase of 64.07% over the previous quarter. 

Refining

The Company maintained safe and stable operation at its refining units, adjusted utilization according to changing demands, optimized product slate and increased production of gasoline and jet fuel. In the first quarter, the Company processed 57.22 million tonnes of crude oil, down 2.5% over the same period last year; produced 11.97 million tonnes of gasoline, 5.46% higher on a year on year basis; produced 18.27 million tonnes of diesel, down 7.54% year on year; produced 4.86 million tonnes of kerosene, 15.99% higher year on year. In the first quarter, the refining segment realized an operating profit of RMB 3.739 billion, increasing 69.65% over the same period last year and up 92.43% over the previous quarter.

Marketing and Distribution

The Company made further progress in the restructuring of the marketing segment and introduction of social and private capital. Taking a market-oriented approach and focusing on operational quality and efficiency, the Company expanded its retail operation and stabilized sales volumes. The Company accelerated the development of non-fuel business through the establishment of Sinopec Easy Joy Sales Co., Ltd. In the first quarter, total sales volume of oil products was 42.15 million tonnes, generally flat year on year, of which, retail volume was 27.29 million tonnes, up 2.44% over the same period last year; non-fuel product turnover approximated RMB 3.6 billion, representing an increase of 11% over the same period last year. In the first quarter, the marketing and distribution segment realized an operating profit of RMB 8.832 billion, 3.22% lower than the same period last year but 8.92% increase on a quarter on quarter basis.

Chemical

Faced with high and volatile feedstock prices, declining chemical product prices and other challenges, the Company improved the synergy between production and selling, and pushed forward the adjustment of feedstock mix and the utilization of capacity to optimize its operations. In the first quarter, production of ethylene, synthetic resin, synthetic rubber and synthetic fiber was 2.579 million tonnes, 3.519 million tonnes, 254 thousand tonnes and 326 thousand tonnes respectively, representing year on year growths of 5.61%, 3.65%, 2.42% and decrease of 7.39%, respectively. The proportion of high value-added rubber products reached 15.6%, 360 basis points higher than the same period last year; the proportion of special purpose polyester and differential fiber products was 75.01%, 790 basis points higher than the same period last year. The operating loss for chemicals segment for the first quarter was RMB 1.342 billion.

Capital Expenditure

The capital expenditure of the Company in the first quarter of 2014 was approximately RMB 13,067 million.

Capital expenditure for exploration and production segment was RMB 4,178 million, mainly for the construction of oil and gas production capacity in Shengli oilfield, Tahe oilfield, Yuanba marine facies gas field in southwest China, and Daniudi gas field in northern China, etc.; development of shale gas in Chongqing Fuling Jiaoshiba block and coal-bed methane in southern Yanchuan; LNG projects and natural gas pipeline construction in Shandong and Guangxi provinces, etc.; overseas projects as Angola block 18 and Russia UDM, etc..

Capital expenditure for refining segment was RMB 2,115 million, mainly for refinery revamping projects in Shijiazhuang, Yangzi and Jiujiang, and quality upgrading of refined oil products.

Capital expenditure for the chemicals segment was RMB 3,810 million, mainly for projects like the acquisition of equity interest in the Ningdong coal chemical project, investment in Zhongan coal chemical project, product mix adjustment in Qilu acrylonitrile and Maoming polypropylene and the construction of other basic chemical projects.

Capital expenditure for the marketing and distribution segment was RMB 2,590 million, mainly for the revamping of service (gas) stations and the construction of facilities like refined oil product pipeline, oil depots and non-fuel business. 125 service (gas) stations have been developed in the first quarter.

Capital expenditure for corporate and others was RMB 374 million, mainly on the construction of scientific research facilities and IT projects.

Progress in the restructuring of marketing segment

The Company held the fourteenth meeting of the Company's Fifth Session of the Board of Directors on 19 February 2014, and approved the proposal to start the restructuring of the Company's marketing segment and to introduce social and private capital to realize diversified ownership of this segment. The Company has since started the audit and valuation process of the relevant assets. As of 1 April 2014, the ownership and management of the assets under the marketing and distribution segment of the Company have been transferred to Sinopec Sales Co. Ltd., a wholly-owned subsidiary of the Company. Sinopec has selected China International Capital Corporation Limited, Deutsche Bank AG, CITIC Securities Company Limited and Bank of America as the financial advisors to the restructuring of the marketing segment.
Operating data for the first quarter

Appendix

Principal financial data and indicators

Principal financial data and indicators prepared in accordance with the China Accounting Standards for Business Enterprises ("ASBE")

Principal financial data and indicators prepared in accordance with International Financial Reporting standards ("IFRS")