China Petroleum & Chemical Corp. posted a better-than-expected 7.5 percent increase in first-half profit as Asia’s biggest refiner widened the margin it earns from processing crude oil into fuels.
Net income rose to 32.5 billion yuan ($5.3 billion), or 0.28 yuan a share, 30.3 billion yuan, or 0.25 yuan, a year earlier, the Beijing-based company, known as Sinopec, said yesterday in a filing to the Shanghai stock exchange. The average of six analyst estimates, compiled by Bloomberg, was a profit of 30 billion yuan.
Sinopec is at the forefront of a China government push to restructure state-controlled companies and allow markets a bigger role in the allocation of resources. The company is seeking to raise 100 billion yuan selling about a third of its retail unit.
“Cost efficiency has kicked in for refining and the turnaround should be very sustainable,” said Gordon Kwan, head of oil and gas research at Nomura International Hong Kong Ltd. “The second half could be better as they are fine-tuning their product mix as well as deploying their capital more wisely.”
Refining margin, defined as sales minus crude oil and feedstock costs plus taxes, other than income tax, divided by crude oil throughput and feedstock, rose by 90.8 yuan a metric ton to 300.3 yuan, according to the company’s interim report. Operating profit for refining operations climbed almost 46 times to 9.76 billion yuan in the period from a year earlier, according to the filing.
The company’s shares advanced 1.6 percent to close at HK$7.71 in Hong Kong yesterday, before the earnings statement .
Oil and gas output rose 8 percent to 237 million barrels of oil equivalent, while total sales declined 4.2 percent to 1.36 trillion yuan. Capital expenditure was 39.2 billion yuan in the first half, with 20.7 billion yuan spent on exploration and production.
Shale gas production reached an average of 3.2 million cubic meters a day at Fuling, China’s biggest shale-producing project, in Southwest China’s Chongqing.
The average price for Brent, the benchmark for half of the world’s crude, rose to $108.82 a barrel in the period from $107.88 a year ago, according to data compiled by Bloomberg.
The refiner is the first among China’s three biggest oil companies to report semi-annual results. PetroChina Co., the country’s biggest oil and gas producer, and Cnooc Ltd., China’s biggest offshore oil and gas explorer, are both scheduled to publish first-half earnings on Aug. 28.