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Sinopec (SNP) Q3 Earnings Miss Estimates, Revenues Fall Y/Y

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China Petroleum & Chemical Corporation , also known as Sinopec, reported third-quarter 2019 earnings per American Depositary Receipt (ADR) of $1.41, missing the Zacks Consensus Estimate of $1.51. The bottom line was also lower than $2.11 reported a year ago.  

Revenues decreased 8% year over year to $104,682 million.

The weak quarterly results primarily resulted from the decline in realized oil prices and narrowed refining margins. The third-quarter results were released late last month. Since then the stock has declined 3.5%.

Operational Performance

Exploration and Production: During the nine months ending Sep 30, 2019, Sinopec’s crude oil production decreased roughly 2% year over year to 212.78 million barrels. Although oil production in the domestic market increased a marginal 0.1% year over year to 186.69 million barrels, overseas volume slipped 12.5% year over year to 26.09 million barrels.

Natural gas volume increased 8.4% year over year to 773.41 billion cubic feet in the same period. Also, total oil and gas production rose 2% year over year to 341.74 million barrels of oil equivalent.

For the nine months ending Sep 30, the company’s average realized oil price declined to $58.82 per barrel from $65.12 reported a year ago. However, realized natural gas price improved almost 5% to $6.19 from $5.91 per thousand cubic feet.

Refining: The company’s Refining business recorded refinery throughput of 186.26 million tons (up 2% year over year). It also produced 119.54 million tons of petroleum products, which represents 3% rise from the first nine months of 2018.

Importantly, since new projects were initiated and key refining plants were expanded, the company could successfully increase throughput and output of petroleum products. However, since the domestic market was already oversupplied with fuel, the segment’s profit margin was narrowed.

Marketing and Distribution: The Marketing and Distribution segment sold 192.42 million tons of refined oil products, which reflect an 8.5% year-over-year improvement.

Chemical: During the nine months ending Sep 30, 2019, the production of ethylene increased almost 6% year over year to 9,295 thousand tons from 8,784 thousand tons.

Also, the production of Synthetic resin was 12,749 thousand tons as compared with 12,171 thousand tons in the year-ago period.

Operating Expenses

The company’s total third-quarter 2019 operating expenses were 715,107 million yuan, lower than 748,429 million yuan a year ago.

Capital Expenditure

Capital expenditure in the first nine months of 2019 totaled 78 billion yuan. Of this, 34.751 billion yuan was spent on exploration and production projects. Sinopec spent 19.276 billion yuan on the Refining segment, while the Chemical segment was allocated 8.648 billion yuan. The company had set aside 14.818 billion yuan for the Marketing and Distribution segment.

Zacks Rank & Stocks to Consider

Sinopeccurrently carries a Zacks Rank #4 (Sell). Some better-ranked players in the energy space are CNX Resources Corporation (CNX - Free Report) , Contango Oil & Gas Company and Noble Midstream Partners LP . All the stocks currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CNX Resources beat the Zacks Consensus Estimate in two of the prior four quarters, the average positive earnings surprise being 34.8%.

Contango Oil & Gas is likely to see bottom-line growth of 87% in 2019.

Noble Midstream has witnessed upward revisions in its 2019 earnings estimates over the past 30 days.

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