Sinopec Corp. Announces 2007 Interim Results

China Petroleum & Chemical Corporation ("Sinopec Corp.” or "the Company”) (HKEX: 386; NYSE: SNP; LSE: SNP; CH: 600028) today announced its interim results for the six months ended 30 June, 2007. Under PRC accounting rules and regulations, the Company’s income from principal operations was RMB 566.83 billion in the first half of 2007, an increase of 15.4% over the same period of 2006. Net profit attributable to the equity shareholders of the parent company was RMB 34.93 billion, up 65.30% compared with the same period of 2006. Under International Financial Reporting Standards (IFRS), the Company’s turnover with other operating revenues and income was RMB 554.3 billion in the first half of 2007, an increase of 15.5% when compared to the same period of 2006. Profit attributable to shareholders of the Company was RMB 36.19 billion, an increase of 65.5% compared to the same period of 2006. The Board of Directors proposed an interim dividend of RMB 0.05 per share. Mr. Wang Tianpu, President of Sinopec Corp., said, "Despite extreme complexity in the domestic and international markets in the first half of this year, the Company has maintained its development momentum, thanks to the combined efforts of our management and staff. Steady growth has been maintained in oil and natural gas production, crude oil processing volume, oil products sales, and output of major chemical products; the Company’s economic performance showed considerable growth over the same period last year. All these developments met our targets.” Operating Highlights Financial Highlights in Accordance with PRC Accounting Rules and Regulations Items   For six months ended 30 June   Changes over the same period of the previous year (%) 2007   2006   RMB millions   Operating profit   53,044   31,641   67.6 Profit before tax   52,464   31,182   68.3 Net profit attributable to equity shareholders of the Company   34,925   21,125   65.3 Net profit before extraordinary gains and losses   34,922   21,222   64.6 Return on net assets (%)   12.32   9.18   3.14 percentage points Return on net assets (%) (before extraordinary items)   12.32   9.23   3.09 percentage points Basic earnings per share (RMB/share)   0.403   0.244   65.3 Net cash flow from operating activities   63,997   24,193   164.5 Net cash flow from operating activities per share   0.738   0.279   164.5     Items As at 30 June 2007   As at 31 December 2006   Changes from the end of last year   RMB millions   RMB millions   (%) Total assets   650,547   596,527   9.1 Shareholders’ funds attributable to equity shareholders of the Company     283,451   257,893   9.9 Net assets per share (RMB/share) (Fully diluted)   3.269   2.975   9.9 Adjusted net assets per share (RMB/share)   3.210   2.901   10.7 Financial Highlights (IFRS) Items   For six months ended 30 June   Changes over the same period of the preceding year (%) 2007   2006   RMB millions   RMB millions   Operating profit   53,346   34,389   55.1 Profit attributable to equity shareholders of the Company   36,190   21,870   65.5 Return on capital employed (%)note   8.27   5.43   2.84 percentage points Basic earnings per share (RMB/share)   0.417   0.252   65.5 Net cash flow from operating activities   61,636   19,069   223.2 Note: Return on capital employed = operating profit x (1 - income tax rate)/capital employed Items   As at 30 June 2007   As at 31 December 2006     Changes from the end of last year RMB millions RMB millions (%) Total assets 662,267 603,077 9.8 Total equity attributable to equity shareholders of the Company 289,614 262,845 10.2 Net assets per share (RMB/share) 3.340 3.032 10.2 Adjusted net assets per share (RMB/share) 3.281 2.958 10.9 Operating Profit by Segment (IFRS)     For six months ended 30 June   Changes 2007   2006     (RMB millions)   (%) Exploration and Production             Operating revenue   62,724   70,267   (10.7) Operating expenses   39,974   35,734   11.9 Operating profit / ( Loss)   22,750   34,533   (34.1) Refining             Operating revenue   297,918   271,313   9.8 Operating expenses   292,426   287,939   1.6 Operating profit / ( Loss)   5,492   (16,626)   Not Applicable Marketing and Distribution             Operating revenue   308,547   275,397   12.0 Operating expenses   291,752   264,636   10.2 Operating profit   16,795   10,761   56.1 Chemicals             Operating revenue   115,720   94,923   21.9 Operating expenses   107,178   88,747   20.8 Operating profit   8,542   6,176   38.3 Corporate and Others             Operating revenue   202,348   94,366   114.4 Operating expenses   202,581   94,821   113.6 Operating profit/(Loss)   (233)   (455)   Not Applicable MARKET ENVIRONMENT AND BUSINESS REVIEW In the first half of 2007, the Chinese economy continued to grow steadily and rapidly, with a GDP growth rate of 11.5%. Demand for petroleum and petrochemical products continued to increase. According to the Company’s statistics, apparent domestic consumption of refined oil products (inclusive of gasoline, diesel and kerosene) and ethylene equivalent consumption increased by 4.2% and 8.4% respectively over the same period last year. During the reporting period, international crude oil prices exhibited an early downward trend and subsequently rose to a high level, while prices of chemical products remained at relatively high levels. The government continued to exert tight control on domestic prices of refined oil products. The Company adopted market-oriented mechanism which placed economic benefits at its core and adhered to its policy of "reform, adjustment, management, innovation and development,” to elaborately organize production and operation, accelerate structural adjustments, strengthen the linkage between production and sales, steadily advance construction of key projects and emphasize energy and water conservation and emissions reduction. As a result, the overall production volume of the Company has been growing steadily, economic return has been significantly enhanced and the Company has achieved its expected targets. BUSINESS REVIEW 1 PRODUCTION AND OPERATIONS (1) Exploration and Production Segment In the first half of 2007, international crude oil prices registered a decrease first but subsequently rose to a high level. The average Brent crude spot price was USD 63.26 per barrel, representing a decrease of 3.70% as compared to the first half of 2006. The average crude price realized by the Company during the first half of 2007 was RMB 2,792 per tonne. In exploration, the Company achieved new breakthroughs in exploration at the Aiding blocks of Tahe Oilfield in the West China and hidden mountain of Mesozoic Era of Dongpu in Zhongyuan Oilfield, and had several new discoveries in the Puguang Gas Field in northeastern Sichuan Province and its peripherals and other areas. At the same time, new progress was made in deep level exploration of Shengli Oilfield. In oil and gas development and production, the Company strengthened the development foundation of oil and gas fields, optimized development schemes, accelerated production capacity build-up, carried out measures to increase production, enhanced operation management and tapped potential for increased production. In the first half of 2007, the Company achieved a new record in both oil and gas production, with 143.88 million barrels of crude oil and 139.55 billion cubic feet of natural gas produced, representing a year on year increase of 2.12% and 10.58% respectively. Summary of Operations of Exploration and Production     For six months ended 30 June   Changes (%)   2007   2006   Crude oil production (mmbbls) Note   143.88   140.89   2.12 Natural gas production (bcf)   139.55   126.2   10.58 Newly added proved reserve of crude oil (mmbbls)   147.88   143.89   2.77 Newly added proved reserve of natural gas (bcf)   158.63   175.5   (9.61)         At 30 June 2007   At 31 December 2006   Changes from the end of last year (%) Proved reserve of crude oil at the end of the reporting period (mmbbls)   3,299   3,295   0.12 Proved reserve of natural gas at the end of the reporting period (bcf)   2,875.8   2,856.7   0.67 Note: Crude oil production is converted at 1 tonne = 7.1 barrels, and natural gas production is converted at 1 cubic meter = 35.31 cubic feet. (2) Refining Segment In the first half of 2007, the Company timely optimized and adjusted its production operation scheme and continued to run its refining facilities with a high-load in order to guarantee the supply of refined oil products and satisfy the demand for chemical raw materials; enhanced its resource purchase structure, tapped the potential of pipeline transmission and achieved cost savings in both crude oil purchase and transportation and storage; strengthened structural adjustments to increase the production volume of high value-added products such as high standard gasoline and lubricating oil. The crude oil processing volume reached 76.25 million tonnes in the first half of 2007, which increased by 6.38% over the same period of 2006. Summary of Refining Operations     For six months ended 30 June   Changes (%)   2007   2006   Refinery throughput (million tonnes)*   76.25   71.68   6.38 Gasoline, diesel and kerosene production (million tonnes)   45.18   42.73   5.73 Of which: Gasoline (million tonnes)   12.16   11.23   8.28 Diesel (million tonnes)   28.92   28.32   2.12 Kerosene including jet fuel (million tonnes)   4.10   3.18   28.93 Light chemical feedstock (million tonnes)   12.09   11.47   5.41 Light products yield (%)   74.49   74.81   (0.32) percentage points Refinery yield (%)   93.70   93.73   (0.03) percentage points * Refinery throughput is converted at 1 tonne = 7.35 barrels. (3) Marketing and Distribution In the first half of year 2007, the Company proactively adapted to market changes, flexibly adopted measures such as external purchasing, adjusted the pace of operation and strived to improve economic returns; actively organized resources, adjusted production structure, ensured key clients and principal markets, fully leveraged new transportation and storage facilities to ensure market supply, thus further increasing the total operation volume of refined oil products; reinforced awareness of service to continuously improve service quality and level. The total sales volume of refined oil products in the domestic market in the first half of 2007 reached 57.92 million tonnes, representing an increase of 6.63% over the same period of 2006. Summary of Operations of Marketing and Distribution     For six months ended 30 June   Changes (%)   2007   2006   Total domestic sales volume of refined oil products (million tonnes)   57.92   54.32   6.63 Of which: Retail volume (million tonnes)   36.01   34.74   3.66 Direct sales volume (million tonnes)   10.15   9.69   4.75 Wholesale volume (million tonnes)   11.76   9.89   18.91 Total No. of service stations   28,898   29,198   (1.03) Of which: No. of company-operated service stations   28,153   27,628   1.90 No. of franchised service stations   745   1,570   (52.55) Annualized throughput per station (tonne)   2,558   2,515   1.71 (4) Chemicals In the first half of 2007, the Company strengthened management and technical development, enhanced internal supply of raw materials, strived to improve the operation rate, utilization rate and operation reliability of facilities to fully exploit production capacity. The production of ethylene reached 3.27 million tonne, representing an increase of 7.98% over the same period of 2006, while production of major petrochemical products experienced different levels of growth. The Company strengthened the link between production and sales. The initial stage of coordination between production, sales and research was established. Production structure, raw material structure and product structure were optimized and the proportion of high performance and high value-added products was further increased. The advantages of centralized sales were brought into play and operation quality was further improved. Summary of Major Production of Chemical Operations Unit: thousand tonnes   For six months ended 30 June   Changes (%)   2007   2006   Ethylene*   3,273   3,031   7.98 Synthetic resins*   4,767   4,184   13.93 Synthetic fibre monomers and polymers   3,938   3,577   10.09 Synthetic fibre   718   770   (6.75) Synthetic rubbers   360   318   13.21 Urea   813   906   (10.26) *: 100% production of two ethylene joint ventures, namely BASF-YPC and Shanghai Secco was included. 2 COST SAVING AND EFFICIENCY IMPROVEMENT In the first half of 2007, the Company took various measures to reduce costs, such as optimizing resource allocation and fully leveraging its modern logistics system to reduce transportation costs, taping the potential of refining and chemical facilities in line with the progress of upgrading the facilities, increasing the throughput of inferior crude oil in a moderate manner to reduce procurement costs, optimizing the operation of facilities to reduce material and energy consumption, improving utilization of oil and water wells and intensifying the treatment of heavy viscous crude oil. In the first half of 2007, the Company effectively saved RMB 1.484 billion in cost. Of the total cost saved, the Exploration and Production Segment, the Refining Segment, the Marketing and Distribution Segment and the Chemicals Segment achieved cost savings of RMB 387 million, RMB 310 million, RMB 389 million and RMB 398 million respectively. 3 ENERGY SAVING AND EMISSION REDUCTION The Company always takes conservation of resources as an important task for achieving sustainable development and adopts the guideline of "focus on both development and conservation, put conservation in the first place.” The Company strengthened management, rolled-out advanced technology and achieved relatively good results in energy saving and emission reduction. In the first half of 2007, the Company’s total energy consumption per unit output value decreased by 3.95% over the same period of 2006 and the comprehensive energy consumption of oil and gas production decreased by 4.72%. Due to an increase of processing volume of inferior crude oil, the comprehensive energy consumption of oil refining increased by 0.28% over the same period of 2006; fuel and utilities consumption of ethylene facility decreased by 1.02% over the same period of 2006. Fresh water consumption, waste water discharge and COD in discharged waste water decreased by 5%, 7% and 15% respectively. 4 CAPITAL EXPENDITURES In the first half of 2007, the Company’s total capital expenditure was RMB 33.746 billion. Among which, the capital expenditure for Exploration and Production Segment was RMB 18.277 billion. A number of major oil and gas production capacity projects were completed and put into operation, and the "Sichuan-East China Gas Project” was carried out smoothly. The newly built production capacity of crude oil and natural gas was 2.27 million tonnes per year and 719 million cubic meters per year respectively. The capital expenditure for Refining Segment was RMB 6.18 billion. During the period, upgrading of the Yanshan Refinery utility system was completed, key projects including Qingdao Refinery Project made smooth progress, and the Tianjin-Yanshan crude oil pipeline was successfully completed. The capital expenditure in the Chemicals Segment was RMB 3.296 billion. During the period, Tianjin Ethylene Project, Zhenhai Ethylene Project and Fujian Refinery and Ethylene Project made smooth progress. The capital expenditure in Marketing and Distribution Segment was RMB 4.922 billion. During the period, refined oil pipelines such as the refined oil pipeline around Beijing City was completed smoothly, and 307 gas stations were newly added. The capital expenditure for Corporate and Others amounted to RMB 1.071 billion. A series of energy conservation or emission reduction projects is under continuous progress. BUSINESS PROSPECTS Looking into the second half of 2007, China’s economy is expected to continue to grow rapidly, which will provide good external conditions for expansion of the Company’s total operation volume, but unfavorable factors influencing production, operation and economic returns remain outstanding, in particular the increasing pressure for guarantee of domestic market supply under circumstances where oil prices remain high. It is expected that international oil prices will fluctuate at high level in the second half of 2007, so the Company’s Refining and Marketing segments will continue to face considerable operational pressure. Due to the effects of high raw materials prices and other factors, prices of chemical products are expected to remain high. Confronted with the complicated market situation, the Company will adopt active and effective measures to overcome difficulties and properly arrange various production and operation activities to ensure production on a safe basis. In Exploration and Production, the Company will continue to focus on exploration of key projects, strengthen production and operation management, and properly manage the basis of stable production of mature oil fields; speed up development of the production capacity in new blocks such as Puguang and Tahe in the West China and strive to increase reserves and production volume. In the second half of 2007, the Company plans to produce 20.74 million tonnes of crude oil and 4.05 billion cubic meters of natural gas. In Refining, the Company will continue to operate the facilities at high load to guarantee the supply of refined oil products; properly organize production optimization, rationally allocate crude oil processing volume and the proportion of inferior crude oil processing; and increase the production volume of high quality cracking raw materials to meet the demand for chemical production. The Company will also properly manage the sales of lubricating oil, asphalt, LPG, and petroleum coke. In the second half of 2007, the Company plans to process 78.25 million tonnes of crude oil. In Marketing and Distribution, the Company will closely monitor the market trend, collect resources from various channels while making appropriate resource deployment. The modern logistics system will be brought into full play by optimizing resource allocation. Operational management and sales structure will also be strengthened and optimized so as to improve economic returns. In the second half of 2007, the Company will target its total domestic sales volume of refined oil products at 59.08 million tonnes. In Chemicals, the Company will maintain safe and stable operation of the existing facilities. The product mix will also be optimized, and the linkage between production and sales will be strengthened to increase the production of high-end products of good quality, high technical content and excellent market competitiveness. In addition, the Company will fully leverage the specialized operation of the chemical sales company to improve its overall competitiveness. In the second half of 2007, the Company plans to produce 3.27 million tonnes of ethylene. In the second half of 2007, the Company will continue to adhere to the operation guidelines featuring "reform, adjustment, management, innovation and development,” work hard and aggressively, endeavoring to maintain sound production and operation, fulfill the annual production and operation targets and continue to perform well. Notice: Sinopec Corp. will announce its 2007 interim results at www.sinopec.com and in major newspapers on 27 August, 2007. An archived webcast to discuss Sinopec Corp.’s results will be posted on the same day on the Company’s website at www.sinopec.com. About Sinopec Corp. Sinopec Corp. is the first Chinese company that has been listed in Hong Kong, New York, London and Shanghai. The Company is an integrated energy and chemical company with upstream, midstream and downstream operations. The principal operations of Sinopec Corp. and its subsidiaries include: exploring, developing, producing and trading crude oil and natural gas; processing crude oil into refined oil products; producing, trading, transporting, distributing and marketing refined oil products; and producing and distributing chemical products. Based on 2006 turnover, Sinopec Corp. is the largest listed company in China. The Company is one of the largest crude oil and petrochemical companies in China and Asia. It is also one of the largest gasoline, diesel and jet fuel and other major chemical products producers and distributors in China and Asia. For additional information about Sinopec Corp., please visit the Company’s website at www.sinopec.com. Disclaimer This press release includes "forward-looking statements". All statements, other than statements of historical facts that address activities, events or developments that Sinopec Corp. expects or anticipates will or may occur in the future (including but not limited to projections, targets, reserve volume, other estimates and business plans) are forward-looking statements. Sinopec Corp.'s actual results or developments may differ materially from those indicated by these forward-looking statements as a result of various factors and uncertainties, including but not limited to the level of demand for telecommunications services; competitive forces in more liberalized markets; the effects of tariff reduction initiatives; changes in the regulatory policies and other risks and factors beyond Sinopec Corp.'s control. In addition, Sinopec Corp. makes the forward-looking statements referred to herein as of today and undertakes no obligation to update these statements.