Chinese oil and gas giant China Petroleum & Chemical (Sinopec) reported its first-ever first-half loss as the coronavirus pandemic reduced global oil prices to all-time lows. The oil price crash and the reduced oil consumption amid the global shelter-at-home orders and lockdowns greatly affected the company's earnings during the first two quarters of 2020.
For the first half of the year, Sinopec reported a total net loss of around 21.7 billion yuan, or roughly $3.2 billion. This was a massive departure from the 32.2 billion yuan profit it generated over the same period last year. Sinopec has never posted a half-year loss since it listed its shares in Hong Kong at the turn of the century.
Over the first six months of 2020, Sinopec reported an operating loss of 31.69 billion yuan for its core refining business. This was yet another significant departure from the 19 billion yuan profit it reported last year. Overall oil and gas shipments ground to a halt during the first two quarters as international travel was forced to shut down to mitigate the spread of the disease. Due to the low demand, Sinopec had to reduce its refining activity by over 10.5 percent.
The oil price crash also weighed heavily on the company's drilling business, which it had to reduce due to the low demand. Sinopec's drilling unit reported a 6 billion yuan loss for the six month period, a stark contrast to its reported 6.24 billion profit a year earlier.
Capital expenditure for the first half of the year increased from 42.9 billion yuan last year to 45 billion yuan this year. Given the uncertainty of the wider industry's prospects for the rest of the year, Sinopec has decided to reduce its full-year capital expenditure outlook. The company clarified that its investment decisions may change depending on the market situation in the coming quarters.
Looking forward, Sinopec is planning to gradually increase its refining output throughout the rest of the year. The company is forecasting a moderate but continued recovery of consumption and economic activity from the pandemic throughout the second half of the year. For this reason, Sinopec has decided to ramp up its refining output from 111 million tons of crude last year to 130 tons of crude this year.
