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Sinopec to pay record dividend as refining pushes up profit

Hong Kong

CHINA Petroleum & Chemical Corp, the world's biggest refiner, will pay a record-high dividend as its massive fuels and chemical segments helped it post a nearly 10 per cent increase in full-year profit.

Net income climbed to 51.2 billion yuan (S$10.7 billion), the company known as Sinopec said in a statement to the Shanghai Stock Exchange on Sunday. The company proposed a 0.5 yuan per share total dividend payout for 2017, the most since its Hong Kong listing in 2000 and above a forecast for 0.17 yuan in data compiled by Bloomberg. The company also flagged 22 billion yuan in impairments, mostly in its upstream assets.

While oil's rally has helped Sinopec cut losses in its production and exploration segment, its refining and chemicals units have helped it ride out the volatility of oil's earlier crash as margins from making fuels and petrochemicals improve.

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"It just shows how difficult it was for Sinopec to make a profit in oil and gas production, even as oil prices were edging towards US$60 a barrel," said Anna Yu, a Hong Kong-based analyst at ICBC International Research Ltd. "Refining and chemicals are the backbone of Sinopec's assets and those sectors will continue to benefit from China's growing fuel demand."

The company has also shifted its upstream focus towards producing more natural gas, seeking to support President Xi Jinping's drive of using more of the fuel instead of coal.

The company's total output gained 3.4 per cent to 446 million barrels of oil equivalent last year, it said in January, with gas rising 19 per cent while crude slid 3.3 per cent. It forecasts that crude production will drop for a fourth year in 2018 and gas will rise further.

Sinopec's profit missed a 53.6 billion yuan median estimate from 18 analysts surveyed by Bloomberg. Revenue rose 22 per cent to 2.36 trillion yuan. Its shares on Friday fell 2.2 per cent to HK$6.59 (S$1.11) compared with the benchmark Hang Seng Index's 2.5 per cent drop.

The company flagged writedowns in its exploration and production segment of 12.6 billion yuan, citing a reduction in oil and gas reserves and high production costs at some fields. Impairment losses in chemicals and refining were 4.78 billion yuan and 1.84 billion yuan, respectively, according to the Shanghai statement.

Sinopec also reported on Sunday that capital expenditure will rise almost 18 per cent to 117 billion yuan, with about 41 per cent of that going to exploration and production. The company aims to produce 290 million barrels of crude oil, with 41 million coming from overseas, and 974.1 billion cubic feet of natural gas.

There are plans to process 239 million tonnes of crude oil, with total oil product sales in China reaching 179 million tonnes.

State-owned peer PetroChina Co, the country's biggest oil and gas producer, said on Thursday that full-year profit tripled to 22.8 billion yuan. CNOOC Ltd, China's top offshore oil and gas explorer, will probably report that earnings jumped about 50-fold last year when it announces results on March 29, according to estimates in a Bloomberg survey. BLOOMBERG