MOSCOW (MRC) -- China Petroleum & Chemical Corp.’s third-quarter profit plummeted 92%, as lower oil prices and production dwarfed an increase in refining revenue, as per Hydrocarbonprocessing.
Net income at Asia’s biggest refiner, known as Sinopec, was 1.64 billion yuan (USD258 million), or 0.013 yuan a share, compared with 19.3 billion yuan, or 0.165 yuan, a year earlier, the Beijing-based company said in a statement to the Shanghai Stock Exchange on Thursday. That compares with the 4.27 billion yuan average of three analyst estimates compiled by Bloomberg.
Higher refining revenue was swamped by a drop in oil prices. Brent, the benchmark for more than half of the world’s crude, averaged about USD51/bbl in the third quarter, compared with more than $103 a year ago. Prices have slumped more than 45% in the past year amid a global glut that the International Energy Agency estimates will remain until at least the middle of 2016.
"We thought Sinopec would have better leverage in refining to counter the crude-price drop," said Lawrence Lau, a Hong Kong-based analyst at BOC International Holdings. "Inventory losses could be a reason for the sharp profit decline and it may help Sinopec in the fourth quarter if the crude price rebounds."
Sinopec carries a two-month inventory as it takes that much time to get imported crude into its refinery, said Lau, who had projected a 70% profit decline for the company in the third quarter. Oil prices during the the period were 19% lower than the preceding quarter.
Operating profit during the first nine months of the year dropped 35% to 49.5 billion yuan, according to the statement, which didn’t give quarterly operational figures. Oil and natural gas output fell 1.8% to 350.8 million bbl of oil equivalent, while the company’s realized oil price dropped 48% to USD48.91/bbl from January to September.
We remind that, as MRC wrote before, Sinopec Zhenhai shut its high density polyethylene (HDPE)/linear low density polyethylene (LLDPE) swing plant for maintenance turnaround in April 2015. It remained off-stream for around two months. Located at Ningbo in China, the plant has a production capacity of 450,000 mt/year.
China Petrochemical Corporation (Sinopec Group) is a super-large petroleum and petrochemical enterprise group established in July 1998 on the basis of the former China Petrochemical Corporation. Sinopec Group's key business activities include the exploration and production of oil and natural gas, petrochemicals and other chemical products, oil refining.
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