Thai Oil predicts record margin

Thai Oil predicts record margin

SET-listed Thai Oil Plc (TOP), Thailand's largest oil refiner in terms of
capacity, expects gross margin to hit a new high this year.

President and chief executive Atikom Termsiri said the bullish view is
largely due to rising gross margin for oil refining and full operations of
the linear alkylbenzene (LAB) project.

Other positive factors that would help boost profit are rising feedstock for
detergent production unit and its power plant project that has started
commercial operations.

Mr Atikom said gross refinery margin (GRM) last week averaged at $8-$9 per
barrel, up from an average of $6-$7 a barrel in the second quarter. The
company would also benefit from the improving global economy pushing demand
for oil and the oil refinery sector.

Thai Oil expects a double-digit GRM growth in the third quarter.

Thai Oil's LAB project is expected to operate at full capacity this year at
100,000 tonnes from below 50,000 tonnes last year. Meanwhile, the TOP Small
Power Producer programme (TOPSPP) could also run at full capacity this year,
at around 240 megawatts and another 500 tonnes of steam an hour. Last year,
the TOPSPP ran at almost half of capacity.

Net profit of Thai Oil last year came in at 21.2 billion baht, including oil
stock gains. This year, for the first time in a decade, it expects
performance to hit a new high without any support from oil stock gains.

Thai Oil estimates its oil refiner unit capacity utilisation this year to
average at 112%, or 12% above its full capacity of 275,000 barrels per day.
Some 89% of refined oil output would be sold to local oil traders and the
rest exported to Cambodia, Laos, Myanmar and Vietnam.

The company is considering investing some $4 billion in Clean Fuel Project
(CFP), making a final decision in the second quarter next year. The project
is expected to start in 2023.

CFP comprises expanding oil refinery capacity to 400,000 barrels per day
from the current 275,000 bpd, and raising the production of higher-margin
products such as jet fuel, petrol and diesel while cutting down on
lower-margin products such as bunker oil.

CFP will also help enhance its refining efficiency, enabling it to accept
crude oil from various resources such as South America, which have lower
refining costs than crude oil from the Middle East.

Tentatively, the source of capital expenditure would be cash on hand of
$1.9-$2 billion and the rest from loan of around $1 billion.

TOP shares closed yesterday on the SET at 91.25 baht, down 25 satang, in
trade worth 241 million baht.

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Link to Original Article:
http://www.bangkokpost.com/business/news/1323255/thai-oil-predicts-record-ma
rgin

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com




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