China's Sinopec Corp, the world's No 2 oil refiner, plans to keep investing at a brisk pace through 2011 though margin pressure may mean quarterly profits fall back from record levels. Sinopec will spend 120 billion yuan ($17.57 billion) in each of the next two years to hit refining and production targets, Vice President Lei Dianwu told a media briefing on Monday.
That level is up from an expected 111.8 billion yuan this year. Several other oil majors, including Royal Dutch Shell Plc, are scaling back capital spending as oil prices show no signs of returning to recent highs. Sinopec, China's second-largest oil producer after PetroChina, will also seek acquisition opportunities in exploration and production, said Chairman Su Shulin, without giving details.
"We will further increase our exploration and production endeavours," Su said. Earlier on Monday, Sinopec, behind only Exxon Mobil in terms of capacity, said it aims to refine 202 million metric tonnes of crude per year by 2011, up nearly 10 percent from its 2009 target of 184 million.
Su said there was no timetable for the listed company to incorporate assets of Swiss oil explorer Addax Petroleum Corp its state-run parent purchased for $7.24 billion in August in China's largest-ever overseas buyout deal. Sinopec announced the new refining and spending targets a day after posting record quarterly profits that widely exceeded expectations, which sent its shares up as much as 4.9 percent to an 11-month high on Monday.
The stock later pared gains to close up 0.72 percent, lagging a 1.67 percent gain for the broader market. With crude oil prices rising, analysts questioned whether Sinopec's strong performance was sustainable amid much uncertainty about the timing of Beijing's next fuel price hikes.
Beijing's fuel price reform grants refiners a guaranteed profit margin only if crude stays below $80 per barrel. The price of benchmark US crude rose above $74 a barrel on Monday, trading near a 10-month high. "We are forecasting that refining and marketing margins trend down in the second half of 2009 compared to the first half," Nomura analysts Cheng Khoo and Gordon Wai wrote in a note.
"Unless Sinopec's E&P sector turns around and the petrochemical margins continue to surprise on the upside, we think that margins have already peaked in the second quarter." Sinopec achieved a margin of $8.60 per barrel in the second quarter, said chief financial officer Wang Xinhua. Sinopec's second-quarter earnings marked a huge turnaround for the state-owned refiner, which was forced to book losses at its refining operations for most of last year as it was squeezed between low state-capped fuel prices and soaring crude prices.
Comments
Comments are closed.