China Sinopec Beats Profit Estimates

NEW YORK (TheStreet) -- China Petroleum & Chemical (Sinopec) (SNP), Asia's largest refiner by capacity, reported a net profit of 35.5 billion yuan for the first half of 2010, up 6.7% from 33.2 billion yuan in 2009. Profits came in ahead of the 32.4 billion yuan consensus estimates of analysts polled by Bloomberg.

The company's turnover including other operating revenue and income reached 936.5 billion yuan during the first half, up 75.4% from the year-ago period. During the first half, oil production stood at 149 million barrels, similar to the year-earlier period. Natural gas production jumped 40.7% to 200.6 billion cubic feet.

Sinopec has benefited from the government's mandated fuel price hikes. However, this increase is below the rise in prices for crude imports. This has prevented the company from passing on the entire cost increase to customers, thereby leading to a 6.7% growth in profits in comparison with the 75.4% surge in sales.

"The Chinese government raised the ex-factory base price of domestic onshore natural gas and piloted the oil and gas resources tax reform in Xinjiang Autonomous Region. Domestic demand for oil products and chemical products has grown steadily," the company said in a press release.

Robust sales underscore growing oil demand from the world's leading energy consumer. China has surpassed the U.S. as the largest oil consumer, according to an International Energy Agency report last month. A decade earlier, China accounted for around half of the U.S.'s energy consumption.

On Thursday, China Offshore Oil (Cnooc) (CEO) reported an earnings growth rate of 110% for the first half, surpassing international oil majors. For the first half of 2010, Exxon Mobil(XOM), ConocoPhillips(COP), Total(TOT), and Royal Dutch Shell(RDS.A) reported net earnings growth of 60%, 105%, 23% and 41%, respectively.

Unlike Cnooc, Sinopec and PetroChina(PTR) are constrained by government fuel pricing. Guidance on China's resource tax reform and revision in oil prices will likely impact domestic oil majors.

PetroChina is scheduled to release its first half earnings on Aug. 26. The company is estimated to report a 79% increase in sales to 74.4 billion yuan. Net profits are estimated up 34% to 67.8 billion yuan from 50.5 billion yuan.

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