China Petroleum and Chemical Corporation
), also known as
, reported third quarter 2012 net income of 18.25 billion yuan
(US$2.88 billion) and earnings per share of 0.198 yuan ($3.13 per
ADS), down approximately 7.5% and 10.0% year over year,
respectively. Slower domestic economic growth was largely
responsible for the decline.
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However, third quarter revenue improved 5.43% to 676.7 billion
yuan from 641.8 billion in the year-earlier period, mainly
attributable to higher contributions from the upstream
exploration and production segment.
During the nine-month period ending September 30, 2012, Sinopec's
crude oil production expanded 2.3% year over year to 245.0
million barrels, while natural gas volumes spiked 14.7% to 438.4
billion cubic feet. Domestic crude oil production increased
marginally by 1.0% year over year to 228.9 million barrels though
overseas volumes increased considerably by 27.0% year over year.
recorded crude oil processing volumes of 4,390 thousand barrels
per day (up 0.5% year over year) and refinery throughput of 98.39
million tons (up 3.1% year over year).
Marketing and Distribution
segment sold 128.34 million tons of refined oil products,
reflecting a 5.6% year-over-year increase.
The output of ethylene from the
segment was 7.024 million tons, down 4.5% from the year-ago
Capital expenditures for the first three quarters of 2012 totaled
83.448 billion yuan, of which 34.999 billion yuan was spent on
exploration projects in key oilfields, including Shengli shallow
water oilfield, northwest Tahe Oilfield, Ordos oil and gas
fields, natural gas exploration and development in Sichuan and
the Shandong LNG project.
In the Refining segment, Sinopec spent 16.829 billion on product
quality upgrades, refinery projects overhaul at Sinopec Shanghai
Petrochemical and Jinling Petrochemical Corp.
The Marketing and Distribution segment expended 20.334 billion
yuan for the construction and acquisition of gas stations on
highways, in important cities and newly planned regions. Capital
expenditures in the Chemicals segment totaled 10.496 billion
yuan, mainly due to the construction of the Wuhanethylene plant,
the Yanshan butyl rubber project and the Yizheng butylene glycol
We remain apprehensive about the volatile oil and gas
fundamentals and a weak macro environment. We believe that
Sinopec's matured domestic oil fields and the associated rise in
costs will continue to be an overhang on its operations as
natural declines become pricier to counterbalance.
Sinopec remains highly exposed to government directed price
controls owing to its large downstream refining and
petrochemicals operations compared to its arch rival
) − China's largest listed oil company by capacity.
The company expects to face challenges in 2012 due to complex
geopolitical tensions and higher oil prices internationally.
Domestic economic growth is experiencing a downward pressure.
Longer term, we are maintaining our Neutral recommendation on
Sinopec, but it retains a short-term Zacks #2 Rank (Buy rating).