Sinopec FY2023 Annual Results

Sinopec Achieved Solid 2023 Operating Results

Focus on Shareholders' Returns, Dividend Payout Exceeded 70%

BEIJING, CHINA) / ACCESSWIRE / March 24, 2024 / China Petroleum & Chemical Corporation ("Sinopec Corp." or the "Company") (HKEX:386)(SSE: 600028) today announced its annual results for the twelve months ended 31 December 2023.

Financial Highlights

• In accordance with IFRS, the Company's revenue reached RMB 3.21 trillion; Operating profit was RMB 86.828 billion, up by 14.5% year on year; Profit attributable to shareholders of the Company was RMB 58.310 billion. Basic earnings per share were RMB 0.487. In accordance with CASs, the Company's profit attributable to shareholders of the Company was RMB 60.463 billion. Basic earnings per share were RMB 0.505. Net cash flow from operating activities was RMB 161.475 billion, increased 38.9% year on year.
• The Company carried out in-depth high quality development actions, fully leveraged its integration advantages, optimised production and operation on all fronts, and pressed ahead to generate profit; Production of oil and gas, refinery throughput and domestic sales volume of refined oil products hit a record high. Production of oil and gas in 2023 was 504.09 million barrels of oil equivalent, up by 3.1%. Natural gas production reached 1,337.8 billion cubic feet, up by 7.1%. Refining segment processed 258 million tonnes of crude oil, up by 6.3%. Total domestic sales volume accounted for 188 million tonnes, up by 15.8%. Annual ethylene output was 14.31 million tonnes, up by 6.5%.
• Taking into account the Company's profitability, shareholders' returns and sustainable development, the board of directors proposed a final cash dividend of RMB0.2 per share (tax inclusive). Together with the interim cash dividend of RMB0.145 per share (tax inclusive) already paid, the total dividend for the year amounted to RMB0.345 per share (tax inclusive), and the total distribution ratio for 2023 reaches 75% including share repurchase.

Business Highlights

In 2023, global economy recorded slow growth. China's economy picked up, registering a GDP growth of 5.2% year on year. International oil prices fluctuated widely. Domestic demand for refined oil products rapidly rebounded. Demand for natural gas kept growing and that for chemical products was improving. However, chemical products market was oversupply due to newly-released production capacity. The Company carried out in-depth high quality development actions, fully leveraged its integration advantages, optimised production and operation on all fronts, and pressed ahead to generate profit, which helped achieve favorable operating results.

• Exploration and Production segment: in terms of exploration, we spared no efforts in seeking new discoveries and reserves and obtaining more exploration rights. We strengthened risk exploration, trap pre-exploration and integrated evaluation exploration, and achieved a number of oil and gas discoveries, including breakthroughs in Tarim Basin, deep coal-bed methane in Ordos Basin, continental tight oil and gas in Sichuan Basin and deep shale gas of Permian marine facies in Puguang. We continued to efficiently promote the "Deep Earth Project" and construction of the Shengli Jiyang Shale Oil National Demonstration Zone. Domestic oil and gas reserve replacement ratio amounted to 131%. In natural gas development, we actively promoted the capacity building of key blocks in Shunbei Zone Two and marine facies gas in West Sichuan, scaled up mid and long term LNG contracts, and further optimised integrated gas system covering production, supply, storage and sales, with profitability greatly enhanced for the whole natural gas business chain. Natural gas production reached 1,337.8 billion cubic feet, up by 7.1%.
• Refining segment: persisted on optimisation and integration of production and marketing, annual crude throughput hit new high. Closely following the market demand, we flexibly adjusted the utilisation rate and product slate. We optimised the rhythm of carrying forward the "oil to chemicals" and "oil to specialties" projects, and increased production of market-oriented products such as refined oil products and lubricating grease. We scaled up export volume and optimised arrangement for exports. In 2023, the Company processed 258 million tonnes of crude, up by 6.3% and produced 156 million tonnes of refined oil products, up by 11.3% with kerosene output up by 60.7% year on year.
• Marketing and Distribution segment: by seizing the opportunity of rebounded market demand, the Company brought the advantages in integrated business into full play to expand the market and improve profit. Domestic refined oil products sales volume realized a record high. The sales volume of gasoline rose by 15.9% and the retail volume of vehicle LNG was up by 85%. We fully leveraged our strength in existing end-market network, stepped up efforts in developing EV battery charging and swapping business and demonstrating application scenarios of hydrogen mobility, and transforming to an integrated energy service provider of fuel, gas, hydrogen, electricity and nonfuel services. We continued to enrich the Easy Joy service ecosystem with the quality and profitability both boosted for the non-fuel business.
• Chemicals segment: responding to market demand, optimised the structure of feedstock, facilities and products. Reinforced cost control to bring down cost throughout the chemical value chain. Integration of production, marketing, research and application was further cemented to increase stable production of high value-added products. Annual ethylene production was 14.31 million tonnes, up by 6.5% year on year. We actively explored domestic and global market, international business volume grew rapidly. Total chemical sales volume reached 83 million tonnes, up by 1.7%.

Mr. Ma Yongsheng, Chairman of Sinopec Corp. said, "In 2023, the global economy recovered slowly, geopolitical tensions intensified, macro environment became increasingly unstable and uncertain, and international oil prices fluctuated widely. In domestic China, the economy regained steam, refined oil products demand gradually picked up, new energy developed rapidly, chemical industry faced supply glut and the petroleum and chemical industry changed profoundly. In the face of complicated operating environment and fierce market competition, the Company stepped up efforts to promote high-quality development, drove all-round improvement in production and operations management, and proceeded with the customer centric strategy. As a result, we achieved promising operating results with new progress and new developments made in various aspects of work. Remarkable enhancement of corporate governance. The board of directors insisted on scientific decision-making, dynamically optimized the development plan, and strengthened the strategic management of ESG. While exercising performing their responsibilities diligently and with due care, the independent directors thoroughly conducted in-depth research on the enterprises and communicated extensively with shareholders. They played an effective role in decision-making, supervision and independence and the provision of professional consultancy. With an aim to enhance the quality, the Company beefed up efforts to deepen corporate reform. Our internal control and risk management mechanisms were constantly improved. Meanwhile, we continued to implement the share repurchase with a view to safeguarding the Company's market value and shareholders' interests. In recognition of our strict adherence to high quality information disclosure practice and investor relations management, the Company has been rated grade-A for information disclosure by the SSE for ten consecutive years. In 2024, Sinopec Corp. will continue to act on the principle of seeking progress while maintaining stability, promoting stability through progress. We will improve the operation and profitability, transformation and upgrading, reform and innovation, and risk management. In addition, greater emphasis will be put on the value creation and persistent efforts will be carried out to effectively enhance our development quality and ensure the reasonable growth of business volume. By cultivating new quality productivity, we will lay a decisive foundation for the Company to fully complete the goals and tasks for the "14th Five-Year Plan" period."

Business Review

Exploration and Production

In 2023, the Company made breakthroughs in increasing reserve, production and profit as well as cutting cost. In terms of exploration, we spared no efforts in seeking new discoveries and reserves and obtaining more exploration rights. We strengthened risk exploration, trap pre-exploration and integrated evaluation exploration, and achieved a number of oil and gas discoveries, including breakthroughs in Tarim Basin, deep coal-bed methane in Ordos Basin, continental tight oil and gas in Sichuan Basin and deep shale gas of Permian marine facies in Puguang. We continued to efficiently promote the "Deep Earth Project" and construction of the Shengli Jiyang Shale Oil National Demonstration Zone. Domestic oil and gas reserve replacement ratio amounted to 131%. In terms of oil development, we accelerated the capacity building of major oilfields, such as Jiyang, Tahe and West Junggar, and strengthened fine-tuned development of mature oil fields. In natural gas development, we actively promoted the capacity building of key blocks in Shunbei Zone Two and marine facies gas in West Sichuan, scaled up mid and long term LNG contracts, and further optimised integrated gas system covering production, supply, storage and sales, with profitability greatly enhanced for the whole natural gas business chain. The Company's production of oil and gas in 2023 was 504.09 million barrels of oil equivalent, up by 3.1%, among which, domestic crude production totaled 251.63 million barrels, and natural gas production reached 1,337.8 billion cubic feet, up by 7.1%.

In 2023, the operating revenue of this segment was RMB300.0 billion, representing a decrease of 6.1% over 2022. This was mainly attributable to the decrease in prices of crude oil and natural gas. In 2023, the oil and gas lifting cost was RMB755.2 per tonne, representing a decrease of 2.3% year on year. That was mainly attributable to the increase in the Company's oil and gas production year-on-year, as well as a decrease of outsourced material and fuel costs, resulting from the enhanced efforts in cost control. In 2023, the exploration and production segment seized the opportunity of relative high crude oil prices, spared no efforts to increase reserves, boost production, cut cost, and achieved good performance, but impact by decrease in crude oil price year on year and provision for levy for mineral rights concessions of RMB7.4 billion. The operating profit of the segment was RMB45.0 billion, representing a decrease of RMB8.8 billion and 16.3% over the same period of 2022.

Exploration and Production: Summary of Operations

Refining

In 2023, the Company actively addressed the challenges brought by the wide fluctuation of oil prices and the significant narrowing of margins for some refining products, and insisted on optimisation and integration of production and marketing. Annual crude throughput hit new high. We enhanced coordination among procurement, storage and transportation as well as production to reduce procurement cost. Closely following the market demand, we flexibly adjusted the utilisation rate and product slate. We optimised the rhythm of carrying forward the "oil to chemicals" and "oil to specialties" projects, and increased production of market-oriented products such as refined oil products and lubricating grease. We scaled up export volume and optimised arrangement for exports. Structural adjustment projects were proceeding in an orderly manner. In 2023, the Company processed 258 million tonnes of crude, up by 6.3% and produced 156 million tonnes of refined oil products, up by 11.3% with kerosene output up by 60.7% year on year.

In 2023, the operating revenue of this segment was RMB1,529.8 billion, representing a decrease of 2.9% over 2022. This was mainly attributable to the decreases in prices of products including refined oil products. In 2023, the refining unit cash operating cost (defined as operating expenses less the processing cost of crude oil and refining feedstock, depreciation and amortisation, taxes other than income tax and other operating expenses, then divided by the throughput of crude oil and refining feedstock) was RMB212.3 per tonne, representing a decrease of 4.8% over 2022, which was mainly attributable to the increase of processing volume as well as the decrease in costs of fuels and power resulting from enhanced efforts to reduce cost. In 2023, the segment brought advantages in integrated business chain optimization into full play, flexibly adjusted the utilisation rate and product structure following the market demand, increased exports of refined oil products at the right time, and realised an operating profit of RMB20.6 billion, increased by RMB8.4 billion or 68.8% year-on-year.

Refining: Summary of Operations

Note: Includes 100% of the production of domestic joint ventures.

Marketing and Distribution

In 2023, by seizing the opportunity of rebounded market demand, the Company brought the advantages in integrated business into full play to expand the market and improve profit. Domestic refined oil products sales volume realized a record high. We focused on client demand and carried forward targeted and differentiated marketing tactics. The sales volume of gasoline rose by 15.9% and the retail volume of vehicle LNG was up by 85%. We fully leveraged our strength in existing end-market network, stepped up efforts in developing EV battery charging and swapping business and demonstrating application scenarios of hydrogen mobility, and transforming to an integrated energy service provider of fuel, gas, hydrogen, electricity and nonfuel services. We vigorously expanded our global business, explored the low sulfur bunker fuel market both home and abroad and became the world's second largest bunker fuel supplier. We continued to enrich the Easy Joy service ecosystem with the quality and profitability both boosted for the non-fuel business. Total sales volume of refined oil products for the year was 239 million tonnes, up by 15.6%, of which total domestic sales volume accounted for 188 million tonnes, up by 15.8%.

In 2023, the operating revenues of this segment was RMB1,818.4 billion, up by 6.1% year-on-year. This was mainly attributable to an increased demand for refined oil products and an increase in the Company's sales volume of refined oil products year-on-year. In 2023, the segment seized opportunities of rebounded refined oil products demand, actively expanded total sales volume, accurately carried out various marketing activities, enhanced efforts in expanding market and promoting profitability, and realized an operating profit of RMB25.9 billion, representing an increase of RMB1.4 billion year-on-year, up by 5.7% year-on-year. In 2023, the operating revenues of nonfuel business was RMB42.0 billion, up by RMB3.9 billion year-on-year and the profit of non-fuel business was RMB4.6 billion, up by RMB0.3 billion. This was mainly because the Company actively explored new retail marketing models, proactively promoted the sales volume of Sinopec branded products, continuously expanded new business models and marketing activities, and promoted quality of nonfuel business.

Marketing and Distribution: Summary of Operations

Note: The total sales volume of refined oil products includes the amount of refined oil marketing and trading sales volume.

Chemicals

In 2023, in the face of the tough external environment of the significantly increased domestic chemicals supply and narrowed chemical margins, the Company optimised the structure of feedstock, facilities and products, maintained high utilisation rate in profitable facilities such as aromatics and EVA, and reduced production or shut down units of products with no marginal contribution, thus responding to market demand. We reinforced cost control to bring down cost throughout the chemical value chain. Integration of production, marketing, research and application was further cemented to increase stable production of high value-added products. Annual ethylene production was 14.31 million tonnes. We actively explored domestic and global market, international business volume grew rapidly. Total chemical sales volume reached 83 million tonnes, up by 1.7%.

In 2023, the operating revenue of this segment was RMB515.3 billion, down by 4.6% year-on-year. This was mainly due to the decrease in prices of major chemical products year on year. In 2023, facing the tough market situation of oversupply and weak margin in the chemical market, the segment focused on promoting quality and increasing profitability, dynamically adjusted production and operation strategies, continuously promoted structure optimization, and vigorously reduced costs and expenses, with an operating loss of RMB6.0 billion and reduced losses of RMB8.1 billion year-on-year.

Major Chemical Products: Summary of OperationsUnit of production: 1,000 tonne

Note: Includes 100% of the production of domestic joint ventures.

Science and Technology Innovation

In 2023, the Company enhanced investment in science and technology innovation, sought breakthrough in key and core technologies, beefed up frontend basic research and further deepened the reform of the science and technology system and mechanism, all contributing to the progress made in innovation. In upstream, breakthroughs were made in the exploration and development theory and technologies for ultra-deep oil and gas as well as continental facies shale oil and gas. In refining, we successfully started up world's first 3 mtpa catalytic cracking unit for heavy oil RTC. A full range of bio fuel products successfully passed the RSB (Roundtable on Sustainable Biomaterials) certification. In chemicals, the first independently developed epoxy butane unit using CHP process and the industrial unit for high performance liquid rubber were put into operation successfully. In addition, we accelerated research and development of technologies for the whole hydrogen value chain and independently developed key materials for fuel cells. Demonstration projects such as "Industrial Internet+" and "Artificial Intelligence Infrastructure Project" are progressing smoothly. In 2023, the Company filed 9,601 patent applications at home and abroad with 5,483 granted. The Company also won five awards in China's Patent Award competition, with the quality of patents ranked best among the top in domestic market.

HSE

In 2023, the Company continued to improve the HSE management system with professional management further strengthened. We enhanced employee health and safety management, fully implemented grassroots safety responsibility management, carried out health management services for all employees, improved working conditions and enhanced personal protective equipment, thus the occupational, physical and psychological health of employees at home and abroad were safeguarded. We implemented the all-staff work safety responsibility mechanism, launched the scheme of the Safety Management Enhancement Year, made every effort to promote risk control and incident prevention, and continued to reinforce process safety management, so that the operations safety was achieved.

Capital Expenditures

In 2023, focused on the quality and return of investments, the Company continued to optimise the management of invested projects, with a capital expenditure of RMB176.8 billion for the whole year. The capital expenditure of the E&P segment was RMB78.6 billion, mainly for the crude production capacity building in Tahe and Shengli Offshore, natural gas production capacity building in Shunbei, Western Sichuan, Fuling and Weirong, the development of the Shengli Jiyang Shale Oil National Demonstration Zone, as well as the oil and gas storage and transportation facilities. The capital expenditure of the refining segment was RMB22.9 billion, mainly for Zhenhai Expansion, Yangzi Refining Restructuring, etc. The capital expenditure of the marketing and distribution segment of RMB15.7 billion, mainly for the development of the fuel, gas, hydrogen, electricity and non-fuel services integrated energy station network, the revamping of the existing marketing network, non-fuel business and other projects. The capital expenditure of the chemical segment was RMB55.1 billion, mainly for the ethylene units in the second phase of Zhenhai, Tianjin Nangang, Hainan and Maoming, Baling caprolactam unit relocation, coal chemical projects, etc. The capital expenditure of corporate and others was RMB4.5 billion, mainly for R&D and IT, etc.

Business Outlook

Looking forward to 2024, as China's economy maintains the sustainable trend of recovery, domestic demand for natural gas, refined oil products and chemicals is expected to maintain growth. Due to changes in global supply and demand, geopolitics and inventory levels, international oil prices are expected to fluctuate at medium to high levels.

In 2024, the Company will put more focus on value creation with priority given to profit generation, transition, upgrading, reform, innovation, and risk control.

E&P: The Company will strengthen risk exploration, intensify efforts in the "Deep Earth Project", shale oil and gas, and other fields to increase high-quality and large-scale reserves; enhance profitable development and stabilize oil production while increasing gas production and reducing costs. In crude development, we will accelerate the production capacity building in Jiyang, Tahe and Junggar, strengthen the fine-tuned development of mature fields, continue to improve the reserve development ratio and recovery rate, and stabilize conventional oil production and increase the profitable production of shale oil. In natural gas development, the Company will accelerate the capacity building in western Sichuan and Shunbei and drive up the natural gas profitable output; diversify and expand the channels of natural gas resources, focus on reducing resource costs, and continue to improve the natural gas production, supply, storage and marketing system. The planned annual production of crude is 279.06 million barrels, of which 26.65 million barrels from overseas. The planned annual natural gas production is 1,379.7 billion cubic feet.

Refining: Efficiency and profitability oriented, the Company will coordinate production and marketing, and improve the operating efficiency of the value chain. We will optimise crude procurement to reduce costs; adjust crude throughput, facility utilization and product slate to improve profitability; optimise the structure and pace of export products; carry forward the adjustment to increase the yield of chemical feedstock in an orderly, low cost and effective manner, and enhance the efforts on shifting from refined products to chemical feedstock and refining specialties such as lubricating grease and needle coke. The annual plan is to process 260 million tonnes of crude and produce 159 million tonnes of refined oil products.

Marketing and Distribution: The Company will give full play to its advantages in integration, strengthen digital intelligence empowerment, and expand its market share. We will improve our market monitoring system, dynamically optimise maketing strategy, and consolidate the retail market share; develop high-quality outlets and continuously optimise the network layout; strengthen the development of Sinopec brand products, diversify services, and build a high-value ecosystem of "customers-vehicles-life", so as to improve the quality and profitability of our nonfuel business; strengthen international operations and expand the overseas retail market; enhance advantages in the low sulphur bunker fuel market, and improve the quality of operations; promote the development of charging network and the demonstration application of hydrogen powered mobility, and build the Company into an integrated energy provider covering fuel, gas, hydrogen, electricity and non-fuel service. The planned annual domestic sales volume of refined oil

products is 191 million tonnes.

Chemicals: The Company will closely track changes in the chemical market, improve production and marketing synergies and scheduling, adhere to "basic + high-end" strategy, and cultivate new advantages in "low-cost + value-added + green and low-carbon". We will continue to diversify feedstock and reduce costs; dynamically optimize product slates and facility utilization, keep profitable facilities running at high loads, and improve profit from high quality assets; continue to intensify the development of new materials and high value-added products, seize the market demand, and create more value; and promote the construction of new capacity with high-quality. At the same time, we will enhance the efforts in meeting differentiated and customised needs, continuously increase the proportion of sales to strategic customers, intensify the export of market-favoured products, and improve international operations. For the whole year, we plan to produce 14.35 million tonnes of ethylene.

R&D: The Company will firmly implement the innovation-driven strategy, promote the deep integration of the innovation chain, value chain, capital chain and talent chain, make every effort to develop key technologies, and give full play to the supporting and leading role of science and technology innovation to development. Focusing on stabilising oil production, increasing gas output, reducing costs and improving profitability, the Company will promote oil and gas exploration and development technology research to increase reserves and production; optimise the structure of products in refining and enhance the clean, efficient and low-carbon utilization of resources; carry out research and application of key technologies relating to "oil to chemicals" and "oil to specialties", hydrogen energy and CCUS. Based on the upgrading needs of chemicals and materials, we will focus on diversified and green basic chemical production technologies and accelerate the breakthrough of key technologies for the production of high value-added synthetic materials. We will promote the transformation and upgrading of digital intelligence, give full play to the role of data, and strengthen the research of new technologies, digital intelligence application scenarios and the commercialisation of pilot projects.

Capital Expenditure: In 2024, the planned capital expenditure for the Company is RMB173 billion, of which RMB77.8 billion will be spent in E&P, mainly for the crude capacity building in Jiyang and Tahe, natural gas production capacity build-up in western Sichuan, and the construction of oil and gas storage and transportation facilities; RMB24.8 billion will be spent in refining, mainly for the Zhenhai refining expansion, the technological upgrading of Guangzhou and Maoming companies; RMB18.4 billion will be spent in marketing and distribution, mainly for the development of the integrated energy station network, the revamping of the existing marketing network, and the non-fuel business; RMB45.8 billion will be spent in chemicals, mainly for the construction of the Zhenhai Phase II ethylene, Maoming ethylene, and Jiujiang aromatics projects; and RMB6.2 billion will be spent in corporate and others, mainly for R&D and IT.

Appendix: Key financial data and indicators

FINANCIAL DATA AND INDICATORS PREPARED IN ACCORDANCE WITH CASS

Principal accounting data

Principal financial indicators