Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

China Petroleum & Chemical Corp (ADR) (SNP), CNOOC Limited (ADR) (CEO): Chinese Oil Majors Create Smörgåsbord for Bond Investors

Sinopec needs cash as it has been purchasing assets from its parent China Petrochemical. Some of the debt will also be used to pay short-term loans. Similarly, CNOOC Limited (ADR) (NYSE:CEO) acquired the Canadian energy firm Nexen in a $15.1 billion deal last year and it will use the debt to fund the takeover.

In the last six months, China Petroleum & Chemical Corp (ADR) (NYSE:SNP)’s ADR has risen 1% while CNOOC is down 10.7%. Sinopec recently posted strong results in its quarter where its profits jumped 25% to $2.7 billion as its refining operation became profitable. On the other hand, CNOOC reported a 9.3% drop in annual profits on March 22 but its pipeline is extremely strong, with a reserve replacement ratio of 188% in 2012, up from 158% in 2011, and that does not include Nexen’s figures. China Petroleum & Chemical Corp (ADR) (NYSE:SNP) is slightly more expensive than CNOOC Limited (ADR) (NYSE:CEO) at the moment, but it offers a strong yield of more than 5% along with a much more profitable refining business with the overhauling of China’s fuel pricing scheme.

Sinopec CNOOC
P/E 9.7 8.2
EPS 11.3 22.6
Yield 5.3% 4.00%
ROA 5.0% 12.8%
ROE 12.7% 22.2%

Sinopec looks to be the stronger of the two firms here with the liberalization of diesel and petrol pricing allowing for increased refining margins and its aggressive foreign investment moves around the region, Sinopec should see return on assets rise significantly in 2014. While China’s economy may be slowing down somewhat, its petroleum usage is still growing at twice the rate as the rest of the world with auto sales up strongly so far in 2013, so refining margins will not only improve for Sinopec because of legislation, but it’s building a portfolio of upstream assets will cut its costs in the long run.

Peter Pham has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Peter is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Chinese Oil Majors Create Smörgåsbord for Bond Investors originally appeared on Fool.com and is written by Peter Pham.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.