Sinopec Tackled Challenges and Achieved Solid 2022 Results

BEIJING, CHINA / ACCESSWIRE / March 26, 2023 / China Petroleum & Chemical Corporation ("Sinopec Corp." or the "Company") (HKEX:386)(SSE:600028)(NYSE:SNP) today announced its annual results for the twelve months ended 31 December 2022.

Financial Highlights

• In accordance with IFRS, the Company's revenue reached RMB 3.32 trillion, increased by 21.1% year-on-year; Profit attributable to shareholders of the Company was RMB 66.153 billion. Basic earnings per share were RMB 0.547. In accordance with ASBE, the Company's profit attributable to shareholders of the Company was RMB 66.302 billion. Basic earnings per share were RMB 0.548.
• In accordance with IFRS, cash and cash equivalent as at the end of 2022 totaled RMB 93.4 billion; Liability-to-asset ratio was 51.95%, representing a solid financial position. Meanwhile, our debut share buyback program since our listing was well implemented to repurchase our A-shares and H-shares in order to advocate the Company's fair valuation.
• The Company emphasizes on shareholder return. Distribution of profit totaled RMB 46.9 billion, among which cash dividend was RMB 42.8 billion and share repurchase amounted RMB 4.2 billion, resulted in a dividend payout ratio of 71%. Based on the weighted average share price in 2022, dividend yields for A-shares and H-shares reached 9.1% and 12.3%, respectively.
• Achieved high-quality operating results on core businesses. Domestic oil and gas production hit a record high with domestic crude oil production totaled 35.3226 million tonnes. Natural gas production reached 35.365 billion cubic meters, up by 4.1%. Profit reaching the best level in a decade. Refining segment processed 242 million tonnes of crude oil; Total sales volume of refined oil products for the year was 207 million tonnes; Annual ethylene output was 13.44 million tonnes.

Business Highlights

In 2022, global economy recorded slow growth and China registered a GDP growth of 3.0% year-on-year. International oil prices fluctuated widely, with a sharp rise in the first half and a remarkable drop in the second half. Affected by various factors, the domestic demand for natural gas, petrochemical products and oil products was weak. Confronted with the severe and complex operating environment, the Company fully leveraged its integration advantages in coordinating all aspects of work, pressing ahead to stabilize operation, explore the market, develop through innovation, promote reform, strengthen management prevent risks and hold the bottom line, which helped yield high quality operating results.

• Exploration and Production segment: intensified efforts in high quality exploration and expanded the scale of profitable production capacity. Domestic oil and gas reserve replacement ratio amounted to 165% with domestic oil and gas equivalent production registering historical new high and profit reaching the best level in a decade. In terms of exploration, we focused on expanding resources, increasing reserve and obtaining more exploration licenses, launched the "Deep Earth" project, and achieved a number of oil and gas discoveries, including breakthroughs in Shunbei oil and gas in Tarim Basin, shale oil in Bohai Bay Basin and Subei Basin and shale gas in West and Southeast Sichuan. The Shengli Jiyang Shale Oil National Demonstration Zone progressed efficiently. Domestic crude oil production totaled 250.79 million barrels. In natural gas development, we actively promoted the capacity building of key natural gas blocks in Shunbei Zone Two and continental facies gas in West Sichuan, scaled up mid-term and longterm LNG contracts, upgraded resources security and enhanced optimization, the profitability of whole natural gas business chain recorded a continuous growth. Natural gas production reached 1,248.8 billion cubic feet, up by 4.1%.
• Refining segment: strengthened coordination among procurement, storage and transportation as well as production, and focused on optimisation and integration of production and marketing. Efforts were made to carry forward the adjustment to increase the yield of chemical feedstock and refining specialties. We accelerated the construction of world-class refining clusters and advanced with structural adjustment projects in an orderly manner. We continued to increase high-purity hydrogen production capacity and have built up 9 hydrogen supply centers for hydrogen fuel cells. In 2022, the Company processed 242 million tonnes of crude oil and produced 140 million tonnes of refined oil products with diesel output up by 5.4% year on year.
• Marketing and Distribution segment: brought advantages in integrated business and distribution network into full play and expanded the market through high quality service. We reinforced market analysis and forecast, strengthened resources coordination and implemented targeted differentiation strategy. The sales volume of diesel rose by 8.6% and the retail volume of vehicle LNG up by 9.7% year on year. We rapidly developed online business. The quality and profitability for the nonfuel business were further boosted. We optimised the allocation of service stations and stepped up the construction of new energy service network. Our battery swapping stations, carbon-neutral service stations and oil product depots were put into operations, and the number of hydrogen refueling stations ranked No. 1 in the world, making continuous efforts for the transition to an integrated energy service provider of petrol, gas, hydrogen, power and services.
• Chemicals segment: optimised the structure of feedstock, facilities and products with a profit-driven orientation, maintained high utilisation rate in profitable facilities. Integration of production, marketing, research and application was further cemented to develop high-end products and new materials and to increase production of high value-added products. The coal chemical business also witnessed improvement in both quality and efficiency. Annual ethylene production was 13.44 million tonnes. By strengthening strategic customer cooperation and tailor-made product service, the total chemical sales volume reached 81.65 million tonnes with all products sold, up by 0.1%.

Mr. Ma Yongsheng, Chairman of Sinopec Corp. said, "In 2022, the Company encountered complicated, fickle and severe conditions, including global economic slowdown, geopolitical conflicts and weak domestic market demand. We completely, accurately and comprehensively implemented new development concept, carried out the world's leading development strategy, and made relentless efforts to stabilize operations and to expand market reach. Remarkable results were achieved in all aspects of work through our initiatives to drive innovation, business development and reform in conjunction with enhanced management and risk control. With an aim of strengthening strategic planning, the board of directors reviewed and approved of the Company's medium and long-term development plan. Our ADR were delisted in an orderly manner. Our debut share buyback program since our listing was well implemented to repurchase our A-shares and H-shares in order to advocate the Company's fair valuation. Meanwhile, the board of directors attached great importance to ESG, focused on incorporating ESG into strategic management, strengthened top-level design and the foundation of management, enhanced ESG communication and disclosure. As a result, the Company's ESG performance has been acknowledged by the capital market. We actively responded to global climate change initiative by implementing the plan to achieve carbon peak by 2030, launched the campaign to prevent and control pollution, vigorously developed clean energy, and contributed our efforts to the construction of ecological civilization.

In 2023, we will seize the favorable opportunity arising from steady development of domestic economy and the recovery of demand for petroleum and petrochemical products, insist on driving growth in a stable manner, and strive to achieve effective quality improvement in different businesses and reasonable volume growth. At the same time, we will accelerate the process of building ourselves towards a world-class enterprise, whereby leading the Company to a new stage of high-quality development. We will pay more attention to bringing the benefits of our integrated operation into full play, improving the business operations, and enhancing the synergies and efficiency resulted from our complete industrial chain. We will attach greater importance to business transition and upgrading, the promotion of digital transformation and intelligentization, strive to build green and low-carbon competitiveness, step up efforts to drive science and technology innovation and inspire the creativity from innovation, and accelerate the breakthroughs in core technologies in exploration and development, specialty oil products, chemical materials and new energy and other fields to enhance the driving force of science and technology innovation. In the new year, we will strive for excellence and spare no effort to forge ourselves towards a world class enterprise. Relentless efforts will be made to write a new chapter of Sinopec's high-quality development, whereby creating greater value for shareholders and the society.

Business Review

Exploration and Production

In 2022, the Company seized the favorable opportunity of high oil price, intensified efforts in high quality exploration and expanded the scale of profitable production capacity. Domestic oil and gas reserve replacement ratio amounted to 165% with domestic oil and gas equivalent production registering historical new high and profit reaching the best level in a decade. In terms of exploration, we focused on expanding resources, increasing reserve and obtaining more exploration licenses, launched the "Deep Earth" project, strengthened risk exploration and trap pre-exploration in new regions and areas, and achieved a number of oil and gas discoveries, including breakthroughs in Shunbei oil and gas in Tarim Basin, shale oil in Bohai Bay Basin and Subei Basin and shale gas in West and Southeast Sichuan. The Shengli Jiyang Shale Oil National Demonstration Zone progressed efficiently. In crude oil development, we accelerated the capacity building of major oilfields, such as Shunbei and Tahe, and strengthened fine-tuned development of mature oil fields. In natural gas development, we actively promoted the capacity building of key natural gas blocks in Shunbei Zone Two and continental facies gas in West Sichuan, scaled up mid-term and long-term LNG contracts, upgraded resources security and enhanced optimization, the profitability of whole natural gas business chain recorded a continuous growth. The Company's production of oil and gas equivalent in 2022 was 488.99 million barrels, up by 1.9%, among which, domestic crude oil production totaled 250.79 million barrels, up by 0.5% and natural gas production reached 1,248.8 billion cubic feet, up by 4.1%.

In 2022, the operating revenues of this segment was RMB319.4 billion, representing an increase of 27.8% over 2021. This was mainly attributed to the increase of both realised price and the sales volume of crude oil and natural gas. In 2022, the oil and gas lifting cost was RMB773.1 per tonne, representing a year on year decrease of 0.5%. In 2022, the operating profit of the exploration and production segment was RMB53.7 billion, representing an increase of RMB49.0 billion and 1,046.6% over the same period of 2021, which was mainly attributable to the fact that the segment seized the opportunity of high crude oil prices, improved proved reserve and production volume of oil and gas, enhanced cost control, optimized the operation of natural gas value chain, and realised in a significant rise in profitability.

Exploration and Production: Summary of Operations

Refining

In 2022, the Company actively addressed the challenges brought by the volatile fluctuation of crude oil price and slack market demand, strengthened coordination among procurement, storage and transportation as well as production, and focused on optimisation and integration of production and marketing. We enhanced global resources allocation and inventory management to reduce procurement cost. Closely following the market demand, we flexibly adjusted the utilisation rate, product mix and exports of refined oil products. Efforts were made to carry forward the adjustment to increase the yield of chemical feedstock and refining specialties, and to increase production of marketable products such as low-sulfur bunker fuel, base oil and needle coke etc. We accelerated the construction of world-class refining clusters and advanced with structural adjustment projects in an orderly manner. We continued to increase high-purity hydrogen production capacity and have built up 9 hydrogen supply centers for hydrogen fuel cells. In 2022, the Company processed 242 million tonnes of crude oil and produced 140 million tonnes of refined oil products with diesel output up by 5.4% year on year.

In 2022, the operating revenues of this segment was RMB1,575.1 billion, representing an increase of 13.7% over 2021. This was mainly attributed to the increases in prices of gasoline, diesel, kerosene, naphtha, and refining by-products. In 2022, 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 RMB223 per tonne, representing an increase of 4.6% over 2021, which was mainly attributed to the increase of unit fixed cost resulting from significant increase in the prices of fuels, as well as the decrease of processing volume. In 2022, the operating profit of the segment totalled RMB12.2 billion, representing a decrease of RMB53.1 billion and 81.3% compared with that of 2021. This is mainly due to the sharp decrease in refining margin resulting from rising crude procurement cost, weak domestic oil products demand and decreased domestic gross margin of gasoline and diesel under high crude price circumstance.

Refining: Summary of Operations

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

Marketing and Distribution

In 2022, facing the sluggish demand for refined oil products, the Company brought advantages in integrated business and distribution network into full play and expanded the market through high quality service. We reinforced market analysis and forecast, strengthened resources coordination and implemented targeted differentiation strategy. The sales volume of diesel rose by 8.6% and the retail volume of vehicle LNG up by 9.7% year on year. We vigorously expanded the low-sulfur bunker fuel market and further consolidated our market position. We rapidly developed online business and client satisfaction upgraded significantly. The quality and profitability for the nonfuel business were further boosted. We optimised the allocation of service stations and stepped up the construction of new energy service network. Our battery swapping stations, carbon-neutral service stations and oil product depots were put into operations, and the number of hydrogen refueling stations ranked No. 1 in the world, making continuous efforts for the transition to an integrated energy service provider of petrol, gas, hydrogen, power and services. Total sales volume of refined oil products for the year was 207 million tonnes, of which domestic sales volume accounted for 163 million tonnes.

In 2022, the operating revenues of this segment was RMB1,713.9 billion, up by 21.4% year-on-year. This was mainly attributed to the increase in the sales prices of refined oil products. In 2022, facing the challenge of weak domestic demand in the refined oil market, the segment brought integrated and network advantages into full play, coordinated internal and external resources, enhanced the effort in expanding market, and realised an operating profit of RMB24.5 billion, representing an increase of 15.7% year on year. In 2022, the operating revenues of non-fuel business was RMB38.1 billion, up by RMB2.7 billion year-on-year and the profit of non-fuel business was RMB4.3 billion, up by RMB0.2 billion.

Marketing and Distribution: Summary of Operations

Chemicals

In 2022, in the face of the downward business cycle and high costs for feedstock, the Company closely followed the market demand, optimised the structure of feedstock, facilities and products with a profit-driven orientation, maintained high utilisation rate in profitable facilities, and reduced products with no marginal contribution. We sped up construction of advantageous and advanced production capacities and shutting down of none competitive capacities. Integration of production, marketing, research and application was further cemented to develop high-end products and new materials and to increase production of high value-added products such as PV-grade EVA, metallocene polyolefin and polybutadiene rubber. The coal chemical business also witnessed improvement in both quality and efficiency. Annual ethylene production was 13.44 million tonnes. By strengthening strategic customer cooperation and tailor-made product service, the total chemical sales volume reached 81.65 million tonnes with all products sold, up by 0.1%.

In 2022, the operating revenues of this segment was RMB540.2 billion, up by 6.9% year-on-year. This was mainly due to the increase in prices of basic organic chemicals, synthetic fibers, synthetic rubber year on year. In 2022, impacted by weak demand in chemical products and increased feedstock prices, chemical margin slumped. The operating loss of this segment was RMB14.1 billion, representing a decrease of profit of RMB25.2 billion over 2021.

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 2022, the Company continued increasing input in science and technology innovation, sought breakthroughs in key and core technologies, beefed up frontend basic research and further deepened the reform of the science and technology system and mechanism to enhance innovation in supporting and leading the business growth. In upstream, breakthroughs were made in the exploration and development theory for deep and ultra-deep oil and gas as well as shale oil and gas. In refining, we realized scaled-up test production and application for bio-jet fuel. In chemicals, the scaled-up production of large tow carbon fibre was achieved, and POE and polybutene-1 pilot units were commissioned in one shot with on-spec products. In addition, the wet oxidation process for sulfur-containing waste alkali fluid for mega ethylene crackers was industrialized. The complete set of software for online real-time optimization (RTO) of S-Zorb unit was put into operation successfully. In 2022, the Company filed 8,687 patent applications at home and abroad with 6,289 granted. The Company also won one gold award, one silver award and four excellent awards in China for patents.

Health and Safety

In 2022, the Company spared no effort to promote the HSE management system with professional management further strengthened. The Company enhanced the employee health and public safety and security management, improved operation conditions and enhanced the safety equipment allocation, thus the occupational, physical and psychological health of employees were safeguarded both at home and abroad. We implemented the all-staff safety production responsibility mechanism and further advanced the three-year safety production harnessing campaign. Specific measures were taken to tackle safety risk especially for hazardous chemicals, outdated production units and oil & gas storage facilities.

Capital Expenditures

In 2022, focusing on quality and return of investment, the Company continuously optimised its investment projects, with total capital expenditures of RMB189.1 billion. Capital expenditure for the exploration and production segment was RMB83.3 billion, mainly for crude oil production capacity construction of Shunbei, Tahe and Shengli offshore, natural gas capacity build-up of West Sichuan, Fuling and Weirong, the development and test of Shengli Jiyang National Demonstration Zone and the construction of oil and gas storage and transportation facilities. Capital expenditure for the refining segment was RMB22.9 billion, mainly for expansion of Zhenhai Refining and Chemical project, refining structural adjustment projects in Anqing and Yangzi and the construction of hydrogen supply centers. RMB19.1 billion was spent in the marketing and distribution segment, mainly for the development of integrated energy station network covering petrol, gas, hydrogen, power and service, renovation of the existing stations and non-fuel business. The chemical segment saw a capital expenditure of RMB58.6 billion, mainly for ethylene projects in Zhenhai, Sinopec-SK, Hainan, and Tianjin Nangang, aromatics projects in Jiujiang and Zhenhai, large tow carbon fibre project in Shanghai, PTA project in Yizheng, and caprolactam relocation project in Baling, etc. Capital expenditure for the corporate and others segment was RMB5.2 billion, mainly for R&D facilities and information technology application projects.

Business Outlook

Looking ahead to 2023, China is expected to achieve an overall upturn in economic performance. Domestic demand for natural gas, refined products and chemicals is expected to grow rapidly. International crude oil price is expected to fluctuate at medium and high price level due to the impacts of changes in global supply and demand, geopolitics and inventory.

In 2023, guided by the strategy of building a world-class enterprise, the Company will proactively lead the industry transition and development, enhance science and technology innovation, improve production and operation, deepen reform, polish the governance and corporate image, consolidate the foundation of safety, and put focuses on the following work.

E&P: The Company will strengthen exploration in strategic areas, and increase high-quality reserves; strengthen efficient development and stabilize oil production while increasing gas production and reducing costs. In crude development, we will focus on production capacity increase, depletion control, recoverable reserves addition and costs reduction, accelerate the building of production capacity in Jiyang and Tahe, and strengthen the fine-tuned development of mature fields. In natural gas development, we will accelerate the building of production capacity of marine-face gas fields in west Sichuan and the northern part of Hubei, and improve natural gas production efficiency and profitability; diversify natural gas sourcing channels, cultivate high-loyalty customers, and continue to upgrade the natural gas production, supply, storage and marketing system. The planned annual production of crude oil is 280.23 million barrels, of which 29.03 million barrels from overseas. Planned natural gas production is 1,291.8 billion cubic feet.

Refining: Oriented by efficiency and profitability, the Company will coordinate production and marketing, and accelerate the optimization and upgrading of the business. We will deepen the implementation of differentiated procurement strategies, dynamically optimize the allocation of crude oil resources and reduce procurement costs; improve facility utilization, flexibly adjust the yield of refined oil products and the diesel-to-gasoline ratio; carry forward the adjustment to increase the yield of chemical feedstock in an orderly and cost effective manner, promote the shifting from refined products to specialty products, such as lube oil and grease, needle coke and other special products, and enhance overall profitability; optimize the structure and volume of export products. For the whole year, the Company plans to process 250 million tonnes of crude oil and produce 146 million tonnes of refined oil products.

Marketing: The Company will give full play to its advantages in integrated business, strengthen digital empowerment and expand market share. We will improve the market monitoring system, dynamically optimize the pricing strategy, and continuously improve the retail volume and profits; accurately make plans for incremental network layout, enhance the network integrity and stability; consolidate and enhance the marketing advantages of the low-sulphur bunker fuel, and accelerate the expansion of overseas markets and end-user retail; strengthen the development of Sinopec-brand products, improve the non-fuel business in both operation and profitability; innovate the business model, accelerate the development of new energy stations, and strive to make greater breakthroughs in building the company into an integrated energy service provider with business covering "petrol, gas, hydrogen, power and non-fuel services". The annual domestic sales volume of refined oil products is planned to be 175 million tonnes.

Chemicals: The Company will take active response to the trough of the chemical business cycle, press ahead with the "basic + high-end" strategy and cultivate new advantages of "cost + value-added + green and low-carbon". We will continue to diversify feedstocks and enhance cost advantages; adjust the facility utilization and product slate in a timely manner with market demand as our guide; continue to increase efforts in developing new materials and high value-added products to enhance profitability; accelerate the layout and development of large ethylene projects and the upgrading of the aromatics chain to continuously enhance market competitiveness. At the same time, the Company will optimize its marketing strategy based on demand, vigorously promote market development

and enhance product value by providing customers with integrated solutions. The annual ethylene production plan is 14 million tonnes.

Science and Technology Development: The Company will firmly implement the innovation-driven strategy, make every effort to make breakthroughs in core technologies and promote the reform of the science and technology system to accelerate its progress towards becoming a world-leading clean energy and chemical company. Specific focuses include technology breakthroughs in oil and gas exploration and production with the emphases on oil and gas reserves increase, oil production stabilization, gas production increase, cost reduction, and efficiency improvement; coordinated development of integration of refining and chemical technologies, refined oil products structure optimization, clean, efficient and low-carbon utilization of resources; key technology development and application for the adjustment to increase the yield of chemical feedstock and refining specialties and hydrogen energy. We will accelerate the core technological breakthroughs for chemical and material upgrading, as well as those for diverse and clean-process basic chemicals and high value-added synthetic materials production.

Capex: The capital expenditure plan for 2023 is RMB165.8 billion, of which RMB74.4 billion will be spent in the E&P segment, mainly on the crude production capacity building in Jiyang and Tahe, natural gas production capacity building in west Sichuan and oil and gas storage and transportation facilities; RMB22.7 billion will be spent in the refining segment, mainly on the Yangzi refining restructuring and the Zhenhai expansion project; RMB16.6 billion will be spent in the marketing and distribution segment, mainly for the development of the integrated energy station network, the renovation of the existing stations and non-fuel business; RMB46.6 billion will be spent in the chemical segment, mainly for the ethylene projects in Zhenhai, Hainan, Tianjin Nangang and Maoming, PTA project in Yizheng and the relocation of CPL project in Baling; RMB5.5 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 ASBE

Principal accounting data