HONG KONG, March 28 (Xinhua) -- China Petroleum & Chemical Corp forecast that net profit for the first quarter of the year was expected to more than double on higher crude prices and stable demand, bolstering plans by the world's biggest oil refiner to raise capital expenditure for the first time in four years.
Q1 net earnings will jump about 150 percent from the same period a year ago, the State-owned company known as Sinopec estimated in a statement on Sunday to the Hong Kong stock exchange. That compares with net profit of 6.19 billion yuan ($900.0 million) for the first three months of 2016.
The company on Sunday also reported that net income for the full year of 2016 leaped 44 percent to 46.7 billion yuan, the first annual profit rise in three years, on the back of improved refining margins and a one-time gain from pipeline asset sales.
Gross refining margins last year rose about 48 percent from the previous year to 471.9 yuan a metric ton. The company also booked a 20.56 billion yuan gain from the December sale of a 50 percent stake in a pipeline unit, Sinopec Sichuan-to-East China Gas Pipeline Co.
Sinopec said on Sunday it also plans to increase its capex substantially in 2017.
Sinopec's Hong Kong-traded shares on Monday morning rose as much as 2.4 percent to HK$6.35 (82 cents), as the city's benchmark Hang Seng Index fell 0.3 percent, while the MSCI AC Asia-Pacific Energy Index was little changed.
Oil prices have stabilized after a two-year crash as the Organization of Petroleum Exporting Countries leads a global effort to trim output. Meanwhile, China's oil demand showed a 4 percent rise in the first two months of 2017, analysts said, as investment, property and industrial drivers in the world's second-biggest economy started the year off on a firm footing.
Analysts said the low crude price last year played a significant role in boosting Sinopec's performance in 2016, while the country's strong fuel demand also helped.
According to Li Li, energy research director at ICIS China, a consulting company that provides analysis of China's energy market, Sinopec's net income jump was partly due to the government's preferential policies and a global low crude price.
The low crude price boosted profit margins and encouraged fuel demand, with global oil refiners having benefited compared with producers, she said. It has "substantially helped" Sinopec realize a profit annually since 2013 against downward oil price and falling crude production.
"The capital expenditure increase underlines Sinopec's confidence in the energy market recovery," said Gordon Kwan, head of Asia-Pacific energy research at Nomura Holdings Inc in Hong Kong.
"We expect most international oil majors will follow suit as oil prices rebound and global energy demand continues to scale new heights."
The company said it aims to boost capital expenditure to 110.2 billion yuan ($16 billion) this year, while flagging that global crude production will fall a third year. Spending in 2017 will include building the second-phase of its Fuling shale-gas project and liquefied natural gas import infrastructure in Tianjin, as well as domestic gas-storage facilities.
Sinopec also issued a final 2016 dividend of 0.17 yuan, compared with an analyst forecast for 0.08 yuan.
China's biggest offshore explorer, CNOCC Ltd, also plans to raise its capital expenditure this year, increasing it by as much as 43 percent to as high as 70 billion yuan.
Global oil refiners have fared better than producers during the energy downturn as cheaper crude boosted profit margins and stimulated fuel demand. Along with slashing spending, that has helped Sinopec outperform those State-owned rivals despite falling oil prices and declining crude production. (chinadaily.com.cn)
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