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1 March 31, 2003 Hong Kong China Petroleum & Chemical Corporation Results for the Year Ended December 31, 2002.

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Presentation on theme: "1 March 31, 2003 Hong Kong China Petroleum & Chemical Corporation Results for the Year Ended December 31, 2002."— Presentation transcript:

1 1 March 31, 2003 Hong Kong China Petroleum & Chemical Corporation Results for the Year Ended December 31, 2002

2 2 This presentation and the presentation materials distributed herewith include 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, 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 price fluctuations, actual demand, exchange rate fluctuations, exploration and development outcomes, estimates of proved reserves, market shares, competition, environmental risks, changes in legal, financial and regulatory frameworks, international economic and financial market conditions, political risks, project delay, project approval, cost estimates and other risks and factors beyond our control. In addition, Sinopec Corp. makes the forward-looking statements referred to herein as of today and undertakes no obligation to update these statements. Forward Looking Statement

3 3 Agenda 2002 Performance Highlights 2002 Review of Operations 2003 Plans and Objectives

4 4 2002 Performance Highlights

5 5 Market Overview  Robust economic growth in China, GDP growth of 8.0% Domestic consumption of refined products increased by 5.1% Domestic consumption of chemicals increased by 11.1%  Government continues to rationalize market environment, significant improvement in refined oil market environment  WTO 1 st year: reduced tariff, open market and increased competition; development in related industries provide new opportunities for Sinopec  Price of crude oil, refined oil products and chemicals bottomed in Jan. and Feb. 2002; gradually recovery since March, 2002

6 6 DPS (RMB) EPS (RMB) Net Profit EBIT EBITDA Revenue 00.08 00.19 0.27 0.316.0816.0319.58 3.628. 2827.3035.51 5.752.5649.7356.29 6.8340.04318.47331.58 2002/2001 yoy (%) 2002 2001 2000 RMB Bn Continue to Deliver Good Operating Results Segmental EBIT Performance RMB Bn

7 7 -15.817.721.019.6Cash & Cash Equivalents - Ending Balance -5.4-14.6-15.433.0Cash from Financing Activities 10.9-42.7-38.5-64.3Cash from Investing Activities -2.553.955.329.2Cash from Operating Activities 4.6154.5147.7133.2Shareholders’ Equity 12.275.267.071.0Long-term Debt -27.635.649.259.1 Short-term Debt 2002/2001 yoy (%) 2002 20012000 RMB Bn 2002 Balance Sheet and Cash Flow Summary

8 8 ROCE Change Debt / Total Capital and EBITDA Interest Coverage ROCE % Debt / Total Capital % EBITDA Interest Coverage Stable Returns, Optimal Leverage

9 9 Corporate Governance  Strictly comply with the regulatory requirements in the 4 listing locations; conduct comprehensive and systematic review and revision on corporate governance documents, including Article of Associations to maintain the highest standard of corporate governance and integrity  Strengthen decision making process and fully leverage the function of 3 committees (Strategic Com., Auditing Com., Compensation Com.,) under the Board of Directors  Ensure timely, accurate, complete disclosure and enhance transparency 2 nd in Emerging Market Corporate Governance (“Euro-money”) Top ten Best Corporate Governance in China (“Assets” ) Best Annual Report in China for 2 consecutive years (“CFO Asia”) Showcase for the establishment of modern corporate governance by CSRC

10 10 Continued Reform and Restructuring  Improved business structure, more efficient management E&P — establish Southern E&P Sub., Shanghai Offshore Oil and Gas Sub. Refining — establish lubricants subsidiary, implement specialized sales management Refining, chemical and marketing — flatten management hierarchy and improve efficiency  Continued restructuring Swapped assets with parent company - focused on core assets and businesses Commenced consolidation of A-share listed subsidiaries

11 11 2002 Review of Operations

12 12 E&P — Expand Resources Shengli Oilfield Jungar Basin Tarim Basin East China Sea Oil & Gas Field Zhongyuan Oilfield South China Sea Sichuan Basin Ordos Basin East – significant exploration achievements in burial hills, new and subtle layers in Shengli Oil blocks etc. West – Significant discoveries: industrial oil & gas flow at Zhuang # 1 in Jungar basins, good indications of oil & gas at Ku # 1 and Zhong # 1 in Tarim South – Explore for new oil reserves

13 13 E&P — Continued Production Growth in Oil & Gas Note : Data for 2001 and later Includes that of National Star Co. 2.13,8753,7963,118 Year End Recoverable Oil & Gas Reserves (MM boe) -0.56.126.156.63Lifting Cost (USD/bbl) -93.520.2309297 Newly Added Recoverable Reserves of Natural Gas (bcf) 18.7375316318 Newly Added Recoverable Reserves of Crude Oil (MM bbls) 9.8178.8162.880.3Natural Gas Production (bcf) 0.2269.8269.2247.4Crude Oil Production (MM bbls) 2002/2001 yoy (%) 200220012000

14 14 E&P — Segment Performance Crude Oil and Natural Gas Realized Price Crude Oil US$/bbl Natural Gas US$/cf. E&P Segment EBIT RMB MM International Crude Oil Price USD/bbl WTIBrentCinta Source: Platt's

15 15 Refining - Productions Adjustments in Line with Market. Improved Product Structure 27bps92.5092.2392.25 Refining Yield (%) 89bps73.2272.3371.57 Light Yield (%) 13.25.064.474.90 Kerosene Production (MM tonnes) 21.715.0412.3611.98 Chemical Feedstock Production (MM tonnes) -0.537.7437.9337.53 Diesel Production (MM tonnes) 4.719.6218.7420.15 Gasoline Production (MM tonnes) 140bps79.377.981.0 Refining Utilization Rate (%) 3.5105.01101.42105.48 Crude Oil Processed (MM tonnes) 2002/2001 yoy (%) 200220012000 3.920.0119.2513.82 Sour Crude Oil Processed (MM tonnes)

16 16 Refining — Segment Performance Refining Margin / Cash Operating Cost (USD/bbl) Refining Segment EBIT RMB MM

17 17 Marketing — Optimizing Marketing Network and Expanding Retail and Distribution Volume 5.91,5601,4731,402 Throughput Per Station (tonne / station) -1.44,1274,1845,234 Franchised Gas Stations -0.2624,00024,06220,259 Owned and Operated Gas Stations -0.428,12728,24625,493 Total Gas Stations 300bps6561 Share in Principal Retail Markets (%) 8.512.6311.64NA Distribution (MM tonnes) 14.134.7330.4323.94 Retail (MM tonnes) 3.570.0967.7467.69 Domestic Sales Volume of Refined Products (MM tonnes) 2002/2001 yoy (%) 200220012000 6868 -11.522.7325.6743.75 Wholesale (MM tonnes)

18 18 Marketing — Segment Performance RON 90# Gasoline Guidance Price RMB/Tonne 0# Diesel Guidance Price RMB/Tonne Marketing Segment EBIT Analysis RMB MM RMB/Tonne200020012002 Marketing Cash Operating Cost 181163166

19 19 Chemicals — Full-load Production in Line with Market 6.316.915.97.9B2B Sales (RMB Bn) 23.3402326283 Incl. Differential Fiber 38.71,8471,332 1,280 Incl. Performance Compound 12.21,1531,0281,068 Synthetic Fiber 6.53,8343,5983,795Monomers & Polymers for Synthetic Fiber 15.0458398317Synthetic Rubber 25.04,0053,2043,183Synthetic Resin 26.22,7162,1532,165Ethylene 2002/2001 yoy (%) 200220012000 ('000 tonnes )

20 20 Chemicals — Segment Performance Ethylene Capacity vs Cash Operating Cost Chemicals Price Spread (From 1993 to Jan 2003) Chemicals Segment EBIT (RMB MM) ’000 Tonnes USD/Tonne

21 21 Cost Reduction  Reduce procurement cost in large quantity purchase of raw materials  Reduce energy and materials consumption  Control expenses  Head count reduction of some 25 thousands. 2002 Cost Reduction Result RMB MM Total RMB 2.525Bn

22 22 Prudent Investment to Enhance Return E & P –Rmb20.2b to increase in reserves and production Refining – Rmb6.5b to increase clean fuel production capacity Marketing – Rmb 7.0b to acquire, build and upgrade retail stations, storage and transport facilities Chemicals – Rmb7.3b to increase production capacity, e.g. ethylene Others – Rmb 545m to improve IT and other general construction Capex in the Past 3 Years (RMB Bn) 2002 Total Capex of Rmb41.6b. Breakdown as Follows:

23 23 900 ktpa ethylene project JV in Shanghai commenced construction, expected completion in 2005 Smooth Progress on JV Projects Nanjing 600 ktpa ethylene project JV commenced construction, expected completion in 2004 Dongting coal gasification JV commenced construction, expected completion in 2005 Feasibility study for Fujian integrated petrochemical project approved Retail JV Programs on Track Fujian Shanghai Dongting

24 24 2003 Plans and Objectives

25 25 2003 Market Outlook Opportunities The Chinese economy will continue to be robust with GDP growth forecasted at a minimum 7.0%, growth in refined oil products and chemical products at a minimum rates of 4.0% and 10.0% respectively. International crude oil price remains at a relatively high level Refining margin maintains relatively good level Chemical prices rebound as the industry has bottomed out in the chemical cycle The Chinese government continues to promote healthy competition in refined products market, leading to a better operating environment Challenges Sluggish International GDP growth Increasing volatility of crude oil, refined petroleum and chemicals Reduced tariffs and increasing competition due to continued effects of China's entry into the WTO

26 26 2003 Production Plan 20022003E 2003E/2002 Change Crude Oil Production (mm bbl)269.8270.50.3 Natural Gas Production (bcf)178.8187.14.6 Refining Throughput (MM tonnes) 105.01110.925.6 Domestic Sales of Refined Oil Products (MM tonnes) 70.0973.04.2 Retail (MM tonnes)34.7337.58.0 Ethylene Production (’000 tonnes)2,7163,05012.3

27 27 2003 Capex Plan Increase new oil and gas replacement resources Further enhance quality of refined oil products Improve marketing network Construct crude oil pipeline and start to construct refined oil products pipeline Expand and revamp chemicals capacity Develop information system Total RMB 37.6Bn RMB Bn Goals:

28 28 2000200120022003E E&P Lifting Cost (USD/bbl) (Note) 6.636.156.126.04 Refining Cash Operating Cost (USD/bbl) 2.142.072.032.00 Ethylene Cash Operating Cost (USD/tonne) 184160150148 Marketing Cash Operating Cost (RMB/tonne) 181163166160 2003 Cost Reduction Plan RMB MM Note : Data for 2000 does not include that of National Star Co. Total RMB2.5Bn

29 29 Conclusion  Healthy and stable growth of China’s economy provides a favorable environment for Sinopec’s development  Integrated business structure provides strong anti-risk capability for industrial cycles  Recovering refinery margins, an upturn in the petrochemical cycle and an improvement in the refined oil products market provide a positive environment for Sinopec's midstream and downstream activities  Active and practical development strategies and flexible operating tactics  Healthy financial structure; sovereign-capped credit rating of BBB by Standard and Poor's  Good corporate governance and stable dividends payout Generate Attractive Investment Return

30 30 For Further Information http://www.Sinopec.com Investor Relations Tel: (8610) 64990066 Fax: (8610) 64990067 Email: ir@Sinopec.com Media Inquiries Tel: (8610) 64990064 Fax: (8610) 64990093 Email: media@Sinopec.com


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