The mainland's oil and gas companies have reported largely weakened first-half earnings results amid soaring crude oil costs and significant refining losses.
'Earnings results are weaker than last year, but they are nonetheless better than expectations because the market was overly bearish,' said Timothy Fung, a China equity strategist at Credit Suisse - Private Banking.
Integrated energy and petrochemical player China Petroleum and Chemical Corporation (Sinopec) led the poor set of results, reporting a 77 per cent net-profit plunge in the first six months of the year to 8.25 billion yuan (HK$9.4 billion).
Gains from its upstream exploration and production segment, which reached 27 billion yuan, were unable to offset its refining losses totalling 46 billion yuan. The company attributed the loss to soaring crude oil costs, price controls on oil products in the domestic market and rising prices of chemical products driven by the increased cost of raw materials.
Though Sinopec plans to actively tap the potential of its existing oil fields and accelerate the pace of exploration in key regions to meet the country's soaring energy demand, its domestic refining business is expected to remain under pressure in the second half of the year with demand growth for chemical products likely to slow.
PetroChina's earnings were also hit by the tight domestic oil price controls and high chemical products prices. Net profit fell 35 per cent to 53.6 billion yuan in January to June despite the company's adoption of new methods in oilfield exploration, such as slowing the production decline in mature fields, and accelerating the construction of production facilities to ensure balanced and effective output.
