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Sinopec (SNP) 2020 Earnings Decline as Coronavirus Hurts

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China Petroleum & Chemical Corporation (SNP - Free Report) , also known as Sinopec, reported 2020 earnings of RMB 32,924 million or RMB 0.272 per share compared with RMB 57,619 million or RMB 0.476 in the year-earlier period.

Moreover, China’s dominant energy firm’s total revenues during the year declined 28.8% from the 2019 level to RMB 2,105,984 million.

The weak results were due to lower fuel demand amid the coronavirus pandemic. A decline in petroleum and petrochemical product prices also hurt the company’s 2020 results.

Reserves

Proved reserves of oil reached 1,542 million barrels as of Dec 31, 2020, representing a decline from 1,741 as of Dec 31, 2019. However, the company reported 8,191 billion cubic feet of proved reserves of natural gas as of 2020 end, reflecting an increase from 7,225 billion cubic feet as of Dec 31, 2019.

Operational Performance

Exploration and Production: In 2020, Sinopec’s total crude oil production dipped 1.4% year over year to 280.22 million barrels. Although oil production in the domestic market was almost flat at 249.52 million barrels, overseas volume dropped 11.8% year over year to 30.7 million barrels.

Natural gas volume grew 2.3% year over year to 1,072.33 billion cubic feet in 2020. Also, total oil and gas production rose 0.02% year over year to 459.02 million barrels of oil equivalent.

Operating loss from this segment in 2020 was recorded at RMB 16,476 million against a profit of RMB 9,284 million in 2019. This underperformance was mainly attributable to lower international oil prices.

Refining: The company’s Refining business recorded refinery throughput of 236.91 million tons (down 4.7% year over year). It also produced 141.50 million tons of petroleum products, accounting for an 11.6% decline from the 2019-level.

Segmental operating loss was recorded at RMB 5,555 million during 2020 versus a profit of RMB 30,632 million in 2019. Lower crude oil throughput and a fall in product prices primarily hurt the segment.

Marketing and Distribution: The Marketing and Distribution segment sold 217.91 million tons of refined oil products, depicting a 14.5% year-over-year decline. Of the total figure, domestic sales volume came in at 167.99 million tons, down8.9% from the 2019-level.

Average throughput was recorded at 3,686 tons per station in 2020 compared with 3,992 tons in 2019. Operating profit from the segment grossed RMB 20,828 million in 2020, down 28.4% from the 2019-level due to lower sales volumes.

Chemicals: During 2020, the production of ethylene fell 3.5% year over year to 12,060 thousand tons from 12,493 thousand tons. Notably, the production of Synthetic resin was 17,370 thousand tons compared with 17,244 thousand tons in the year-ago period.

Operating profit from the segment was recorded at RMB 10,372 million, down 40.1% from the 2019-level, affected by a significant decrease in chemical product prices.

Capital Expenditure

Capital expenditure in 2020 totaled RMB 135,055 million. Of this, RMB 56,416 billion was spent on exploration and production projects. Sinopec spent RMB 24,722 million on the Refining segment while the Chemicals segment was allocated with RMB 26,202 million. The company had set aside RMB 25,403 million for the Marketing and Distribution segment.

Outlook

The integrated energy giant expects that there will be continued growth in demand for natural gas and petrochemical products. The company also expects a gradually recovery in demand for refined oil products.

Zacks Rank & Other Stocks to Consider

Sinopec currently has a Zacks Rank #2 (Buy). Other prospective players in the energy sector include Diamondback Energy, Inc. (FANG - Free Report) , Matador Resources Company (MTDR - Free Report) and Magnolia Oil & Gas Corporation (MGY - Free Report) , all stocks presently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Diamondback is likely to see earnings growth of 112.5% in 2021.

Matador is likely to see earnings growth of 300% in 2021.

Magnolia Oil & Gas has witnessed upward earnings estimate revisions for 2021 earnings in the past 30 days.

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