Back to top

Image: Bigstock

Why Has Sinopec (SNP) Declined 4.5% Since Q1 Earnings?

Read MoreHide Full Article

Since the first-quarter results were announced on Apr 30, China Petroleum & Chemical Corporation , also known as Sinopec, has seen a 4.5% decline in share price. The integrated energy firm’s weak results, hit by the COVID-19 outbreak, were primarily responsible for the price fall.

Another China energy giant PetroChina Company Limited recently slipped into losses in the first quarter, hurt by dented energy demand due to coronavirus.

Weak Q1 Earnings

Sinopecreported first-quarter 2020 loss per American Depositary Receipt (ADR) of $2.33, comparing unfavorably with year-ago earnings of $1.76.

Moreover, revenues declined 25.2% year over year to $79,575 million.

The weak quarterly results were led by lower demand for petroleum and petrochemical products, caused by the coronavirus outbreak. Lower contributions from upstream operations owing to the virus-induced weak oil prices also led to the underperformance.

Operational Performance

Exploration and Production: In the March quarter of 2020, Sinopec’s total crude oil production dropped 0.2% year over year to 70.65 million barrels. Although oil production in the domestic market rose 0.9% year over year to 62.11 million barrels, overseas volume fell 7.8% year over year to 8.54 million barrels.

Natural gas volume declined 2.4% year over year to 249.68 billion cubic feet in the first quarter. Also, total oil and gas production fell 1% year over year to 112.28 million barrels of oil equivalent.

Operating profit at this segment in the March quarter was recorded at RMB 1.5billion, reflecting a plunge from RMB 2.1 billion in the year-ago quarter. The downside can be primarily attributed to lower oil and gas production and realized prices.

Refining: The company’s Refining business recorded refinery throughput of 53.74 million tons (down 13% year over year). It also produced 33 million tons of petroleum products, reflecting a 16.3% deterioration from the first-quarter 2019 level.

Segmental operating loss was recorded at RMB 25.8 billion, compared unfavorably with a profit of RMB 11.9 billion in the year-ago quarter due to lower refinery throughput.

Marketing and Distribution: The Marketing and Distribution segment sold 48.61 million tons of refined oil products, depicting a 22.1% year-over-year decline. Of the total figure, domestic sales volume came in at 32.48 million tons, down 28.8% from the first-quarter 2019 level.

Annualized average throughput was recorded at 2,844 tons per station in the quarter, down from 3,939 tons in the year-ago quarter.

Operating loss at the segment grossed RMB 1.5 billion against a profit of RMB 7.9 billion in the March quarter of 2019. A decline in sales volume of refined oil products owing to dented demand and lower throughput was responsible for the segment’s underperformance.

Chemicals: During the first quarter of 2020, the production of ethylene fell 0.8% year over year to 3,026 thousand tons from 3,049 thousand tons. However, the production of Synthetic resin was 4,293 thousand tons compared with 4,178 thousand tons in the year-ago quarter.  

Operating profit at the segment was recorded at RMB 1.6 billion, compared unfavorably with RMB 6.9 billion in the year-ago quarter. Lower demand and price of chemical products hurt the business segment.

Expenses

The company’s total quarterly operating expenses were RMB 581,807 million, lower than RMB 692,738million a year ago. The energy major’s exploration expenses, including dry holes, were RMB 2,268 million, lower than RMB 2,543 million in the March quarter of 2019.

Capital Expenditure

Capital expenditure in the first quarter totaled RMB 13.2 billion. Of this, 6.1 billion yuan was spent on exploration and production projects. Sinopec spent RMB 2.4 billion on the Refining segment, while the Chemical segment was allocated RMB 2.1 billion. Moreover, in the March quarter, the company had set aside RMB 2.6 billion for the Marketing and Distribution segment.

Zacks Rank & Stocks to Consider

Sinopec currently carries a Zacks Rank #3 (Hold). Meanwhile, a few better-ranked stocks in the energy sector are Key Energy Services, Inc. (KEGX - Free Report) and Murphy USA Inc (MUSA - Free Report) . While Key Energy sports a Zacks Rank #1 (Strong Buy), Murphy USA carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Key Energy is expected to see bottom-line growth of 97.2% in 2020.

Murphy USA is likely to see earnings growth of 7% in the next five years.

Just Released: Zacks’ 7 Best Stocks for Today

Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.1% per year.

These 7 were selected because of their superior potential for immediate breakout.

See these time-sensitive tickers now >>


Unique Zacks Analysis of Your Chosen Ticker


Pick one free report - opportunity may be withdrawn at any time


Murphy USA Inc. (MUSA) - $25 value - yours FREE >>

Key Energy Services, Inc. (KEGX) - $25 value - yours FREE >>

Published in