Sinopec 2010 Q1 net jumps on steady margins
Wednesday, 28 April 2010 09:47
Blaze Fabry refinery April 28, 2010 (Chinavestor) China Petroleum & Chemical Corp. (NYSE:SNP), know as Sinopec, reported 2010 first quarter results a day after Petrochina Co. (NYSE:PTR). Sinopec is the largest refinery in Asia by volume while Petrochina Co. Ltd. (NYSE:PTR) is the largest Chinese oil producer.
Sinopec reported a significant improvement in top and bottom lines in the first quarter of 2010 compared to same period last year. Total revenues jumped to RMB438.209 million ($64.4 billion), up 92.62% from 2009 Q1. First quarter net income amounted to RMB15.768 million ($2.318 billion), an improvement of 40.14% from 2009 Q1.
SNP_2010Q1_revearnings
Part of the significant improvement is due to a relatively low basis. First quarter of 2009 was the time when price of the crude went as low as $34/barrel compared to $80/barrel in the spring of 2010. So this explains the significant jump in revenues.
The fact that net income improved significantly is very important. Sinopec (NYSE:SNP) has been adversely effected by oil price: the higher the price of the crude the less margin for oil refiners like Sinopec (NYSE:SP). High oil price favored Petrochina (NYSE:PTR) and CNOOC Ltd. (NYSE:CEO) in the past. The fact that Sinopec improved operational results despite rising crude prices is remarkable!
Let's take a look at operational results. The company produced the same amount of oil as last year, ~10.380 million tonnes while natural gas production jumped +40.97%. These dynamics are similar to that of Petrochina (NYSE:PTR), a company that reported oil production increase of 2.1% and natural gas increase of 16.5%. Petrochina net profit, oil production up in 2010 Q1.
But the real change took place within the refining and chemicals unit. Sinopec (NYSE:SNP) processed 49.504 million tonnes of crude, up +20.42%. With a new formula, aimed at providing fair profit for refineries, introduced at the end of 2008 Sinopec (NYSE:SNP) was able to stay in the black despite a sharp rise in the price of the crude.
The chemical unit got its fire back as well. " In the first quarter, the production of ethylene and synthetic resin hit 2.028 million tonnes and 2.9167 million tones respectively, a year-on-year growth of 36.29% and 20.72% respectively" said Sinopec (NYSE:SNP) in the quarterly statement.
Summary of Principal Operational Results for the 2010 First Quarter
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Source: Sinopec (NYSE:SNP) 2010 First Quarter Report
Looking forward, it is going to be difficult to deliver another blockbuster quarter like this simply because the basis for the next quarter is significantly higher. Nevertheless it is important to keep in mind that Sinopec (NYSE:SNP) delivered a strong quarter despite high oil prices, a sign that the company will do well in the next quarter as well.
