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Why Has Sinopec (SNP) Increased 3.7% Since Q1 Earnings?

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Since the first-quarter results were announced on Apr 28, China Petroleum & Chemical Corporation (SNP - Free Report) , also known as Sinopec, has seen a 3.7% rally in its share price. The outperformance was owing to the integrated energy firm’s turnaround to profit from loss in the first quarter.

Another China energy giant PetroChina Company Limited (PTR - Free Report) recently reported a swing back to profit in the March quarter from the year-ago period of loss.

Strong Q1 Results

Sinopec reported first-quarter 2021 earnings per American Depositary Receipt (ADR) of $2.28, comparing favorably with the year-ago loss of $2.33.

Moreover, revenues increased 12% year over year to $88,988 million.

The strong quarterly results were led by steady recovery in demand for refined oil products, reflecting continuing restorative growth of the China economy amid the coronavirus pandemic.

Operational Performance

Exploration and Production: In the March quarter of 2021, Sinopec’s total crude oil production dropped 3.2% year over year to 68.41 million barrels. Notably, oil production in the domestic market fell 1.4% year over year to 61.23 million barrels and overseas volume decreased 15.9% year over year to 7.18 million barrels.

Natural gas volume increased 16.8% year over year to 291.60 billion cubic feet in the first quarter. Also, total oil and gas production rose 4.2% year over year to 117.03 million barrels of oil equivalent.

Operating profit – earnings before interest and taxes – at this segment in the March quarter was recorded at RMB 3.1 billion, reflecting a 54.1% surge year over year on higher oil and gas production and realized prices.

Refining: The company’s Refining business recorded refinery throughput of 62.52 million tons (up 16.3% year over year). It also produced 35.7 million tons of petroleum products, reflecting an 8.2% improvement from the first-quarter 2020 level.

Segmental operating profit was recorded at RMB 19.9 billion, reflecting a complete turnaround to profit from loss, backed by higher refinery throughput.

Marketing and Distribution: The Marketing and Distribution segment sold 51.93 million tons of refined oil products, depicting a 6.8% year-over-year rise. Of the total figure, domestic sales volume came in at 40.03 million tons, up 23.2% from the first-quarter 2020 level.

Annualized average throughput was recorded at 3,536 tons per station in the quarter, up from 2,844 tons in the year-ago quarter.

Operating profit at the segment grossed RMB 8.6 billion, also depicting a complete turnaround to profit from loss on higher sales volumes of refined oil products.

Chemicals: During the first quarter of 2021, the production of ethylene increased 11.7% year over year to 3,380 thousand tons from 3,026 thousand tons. Moreover, the production of Synthetic resin was 4,787 thousand tons compared with 4,293 thousand tons in the year-ago quarter.

Operating profit at the segment was recorded at RMB 8.9 billion, also depicting a turnaround to profit from loss on higher production of production of ethylene and synthetic resin.

Expenses

The company’s total quarterly operating expenses were RMB 548,281 million, lower than RMB 580,915 million a year ago. However, the energy major’s exploration expenses, including dry holes, were RMB 2,496 million, higher than RMB 2,268 million in the March quarter of 2020.

Capital Expenditure

Capital expenditure in the first quarter totaled RMB 23 billion. Of this, 9 billion yuan was spent on exploration and production projects. Sinopec spent RMB 7.6 billion on the Refining segment, while the Chemical segment was allocated RMB 1.8 billion. Moreover, in the March quarter, the company had set aside RMB 2.9 billion for the Marketing and Distribution segment.

Zacks Rank & Other Stocks to Consider

Sinopec currently carries a Zacks Rank #2 (Buy). Other prospective players in the energy space include Whiting Petroleum Corporation (WLL - Free Report) and Continental Resources, Inc. (CLR - Free Report) . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Whiting Petroleum has witnessed upward earnings estimate revisions for 2021 in the past 30 days.

Continental is expected to see earnings growth of 256% in 2021.

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