Refining fuels rise in Sinopec earnings

PetroChina, the nation's largest oil and gas producer, and rival China Petroleum & Chemical (Sinopec) posted divergent first-quarter results, as better state pricing on refined fuel and weaker crude oil prices delivered net benefits to more refining- exposed Sinopec.

PetroChina's net profit for the three months to March 31 was 36 billion yuan (HK$44.8 billion), down 8 per cent from 39.2 billion yuan from a year earlier. It amounted to 26 per cent of the 138.6 billion yuan average estimate for the full year of 30 analysts polled by Thomson Reuters.

This is despite revenue growing 2.8 per cent to 540.3 billion yuan on the back of higher petrol and natural gas sales.

One big weight on profit was a 4.25 billion rise in operating loss on its gas import business to 14.5 billion yuan, as Beijing dragged its feet on raising domestic prices nationwide to protect the poor, while PetroChina had to import a greater amount of costlier gas from overseas to meet demand.

Also weighing on profit was a 3.94 billion yuan cut in operating profit at its fuel distribution business to 2.12 billion yuan, due to weak domestic motor fuel demand, resulting in a 4.3 per cent fall in sales volume and lower profit margin. A third factor was a rise in operating loss at its chemicals division of 2.77 billion yuan to 3.18 billion yuan.

These were largely offset by a marked improvement in oil refining, which saw operating losses narrow by 8.84 billion yuan to 1.56 billion yuan, as Beijing allowed refiners to earn better margins amid lower crude prices and less consumer inflation pressure.

The oil and gas production division, which earns the bulk of profit for the energy giant, recorded a 5.6 per cent drop in operating profit to 57 billion yuan.

A board meeting yesterday passed a resolution to promote deputy chairman Zhou Jiping to the chairman position.

Sinopec, the world's second-largest oil refiner, posted a first-quarter net profit of 16.7 billion yuan, up 24.4 per cent from 13.41 billion yuan a year earlier, partly dragged by a 1.62 billion yuan non-recurring paper loss on an issued convertible bond. It amounted to only 21.5 per cent of analysts' full-year profit estimate of 77.5 billion yuan.

The main driver was its refining operation, which turned in an operating profit of 2.2 billion yuan, an 11.4 billion yuan improvement from a 9.2 billion loss in the year-earlier quarter.

This more than offset a 3.3 billion yuan decline in operating profit of oil and gas production to 16.23 billion yuan, a 1.15 billion profit decline in chemical manufacturing to 164 million yuan, and a 1.15 billion profit fall in fuel marketing to 9.13 billion yuan.

HSBC's analysts said PetroChina's profitability was restrained by delays in Beijing's planned gas pricing reform.