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Sinopec (SNP) Q1 Earnings Decline Y/Y, Revenues Increase

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China Petroleum and Chemical Corporation SNP or Sinopec reported first-quarter 2019 earnings per share of $1.76, lower than the year-ago quarter’s $2.50 owing to rising operating costs and lower reefing yield.

However, the company’s top line increased 11.7% year over year to $106,337 million, thanks to higher oil equivalent production.

Operational Performance

Exploration and Production: During the three-month period ending Mar 31, 2019, Sinopec’s crude oil production dropped a marginal 0.8% year over year to 70.81 million barrels. However, natural gas volumes rose 6.7% year over year to 255.79billion cubic feet.  Domestic crude oil production increased 0.2% year over year to 61.55million barrels. Overseas volumes were down 6.7% year over year to 9.26 million barrels. Total oil and gas production increased almost 2% year over year to 113.46 million barrels of oil equivalent.

Realized oil price during the first quarter was $57.66 per barrel, down 3.6% year over year. However, realized natural gas price rose 12.6% year over year to $7.07 per thousand cubic feet.

Higher oil equivalent productions helped the segment report profit of 2.1 billion yuan against a loss of 318 million yuan in the year-ago quarter.

Refining: The Refining business saw a 2.7% year-over-year improvement in refinery throughput to 61.78 million tons. Production of petroleum products increased 3.8% from the prior-year quarter to approximately 39.44 million tons. Despite these improvements, the business reports a profit of almost 12 billion yuan, down from 19 billion yuan in the March quarter of 2018, owing to lower refining yield.    

Marketing and distribution: The segment recorded a profit of roughly 8 billion yuan, down from almost 9 billion yuan in the year-ago quarter.

Notably, the company reported total quarterly sales volume of refined oil products at 49.74 million tons, up 5.4% year over year.

Chemicals: The segment’s operating profit declined to almost 7 billion yuan from 8.5 billion yuan in the year-ago quarter. 

In the March quarter of 2019, production of ethylene increased 1.8% year over year to 3,049 thousand tons from 2,995 thousand tons. Also, production of Synthetic resin was 4,178 thousand tons compared with 4,117 thousand tons a year ago.  

Operating Expenses Rise

In the first quarter of 2019, Sinopec reported total operating expenses at 692.7 billion yuan, reflecting an increase of 17% year over year. In details, rising exploration expenses – including dry holes – and higher costs related to the purchased crude oil, products and operating supplies drove total costs.

Capital Expenditure

Capital expenditures for the January-March quarter of 2019 totaled 11.914 billion yuan. Out of this, 5.562 billion yuan was spent on exploration and production. 


Zacks Rank & Key Picks

Sinopec currently carries a Zacks Rank #3 (Hold). Meanwhile, better-ranked players in the energy space are Enterprise Products Partners LP EPD, Hess Corporation (HES - Free Report) and Anadarko Petroleum Corporation APC. All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.       

Enterprise Products has average positive earnings surprise of 17% for the past four quarters.

Hess is likely to witness earnings growth of 116.2% through 2019.

Anadarko Petroleum has average positive earnings surprise of 6.6% for the past four quarters.

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