q2 & 1h/08 results analyst presentationq2 & 1h/08 results analyst presentation august 14,...

Q2 & 1H/08 ResultsAnalyst Presentation

August 14, 2008

Thai Oil Public Company Limited

2

Disclaimer

The information contained in this presentation

is intended solely for your personal reference.

Please do not circulate this material. If you

are not an intended recipient, you must not

read, disclose, copy, retain, distribute or take

any action in reliance upon it.

3

Corporate Vision, Mission & Value

TOP seeks to be one of the leading fully integrated

refining and petrochemical companies in the region

recognized for our sustainable growth, optimum

stakeholder value, and commitment to

environmental and social well-being.

VISION• To be PTT’s flagship refinery through optimized

management of the group’s refining portfolio

• To expand facilities to better meet domestic demand growth

• To enhance the competitive advantage of our power generation operations to further solidify the core refining business

• To create a high-performance organization that promotes teamwork, innovation and trust

MISSION

P = ProfessionalismO = Ownership & CommitmentS = Social ResponsibilityI = IntegrityT = Teamwork and CollaborationI = InitiativeV = Vision FocusE = Excellent Striving

CORPORATE VALUE

4

Presentation Outline

Business Outlook

Performance Analysis

Q2/08 & 1H/08 Highlights

5

Q2/08 Key Highlights

• In Q2/08, TOP operated at an optimal 105% utilization with refinery intake of 288 kbd, bringing the integrated intake to 301 kbd.

• Following the successful completion of TPX expansion, aromatic capacity increases from 420 KMTA to 900 KMTA , with full benefits to be captured as from Q3/08.

• TOP continues to enhance integration amongst group to maximize margins & reduce costs. This was reaffirmed by ASEAN Energy Award 2008 we received for Best Practice in Energy Management.

• TOP group reported a record net profit for Q2/08 of Bt 10,546 million, allowing 1H/08 net profit to achieve Bt 14,420 million.

• Expansion benefit, inventory gain and strong middle distillate spreads were key attributing factors to the foregoing favorable performance.

• Group’s integrated margins were US$ 12/bbl (Bt 2.5/litre) and US$ 8.9/bbl (Bt 1.9/litre) for Q2/08 and 1H/08, respectively.

• Notwithstanding volatile financial market, TOP successfully launched a 5-years THB Bond worth Bt 3 billion at an attractive pricing. A cross currency swap was entered to convert into $ 93.5 million, USD exposure.

Overall

Operation& Business

Finance

6

Thaioil ReceivesThe Best ASEAN Energy Awards 2008

• This achievement is a result of the Company’s vision and commitment to energy saving gained through corporate culture, campaigns, and training.

• Energy saving measures have been continuously and strictly implemented to achieve the highest energy efficiency

• Initiative “Online Cleaning” which resulted in energy consumption reduced significantly and saving cost of Baht 238.5 million in the period of 2005 – 2007.

256 301255 294

Q2/07 Q2/08 1H/07 1H/08

7

Financial Highlights

Q2/08 1H/08

6,61910,546

12,56214,420

Q2/07 Q2/08 1H/07 1H/08Q2/08 1H/08

*Percentage was before deducting inter-company transaction.

(Unit: MB)

Integrated Margins

Consolidated Net Profit Net Profit Breakdown*

70%

20%7%3%

87%

6%4%3%

1H/07

12,562 MB 14,420 MB

1H/08

Integrated Intakes

Q2/08 1H/08

7.076.16EPS

(THB/Share)

(Unit: KBD) (Unit: $/bbl)

18% 15% 15%8%

59%

15%

5.173.24

8


Business Outlook



9

40

80

120

160

03-Jan-07 14-Feb-07 28-Mar-07 10-May-07 21-Jun-07 02-Aug-07 13-Sep-07 25-Oct-07 06-Dec-07 23-Jan-08 07-Mar-08 21-Apr-08 4 Jun 08 16 Jul 08

Oil Price Movement

Q1/07 Q2 Q3 Q4

Tapis

Dubai

(US$/bbl)

Q1/08

Crude Prices

Q2

68.4 104.1

86

128

97

Dubai83 117

Extraordinary rise in oil prices (DB +50% in 6 months, peaking at $141/BBL)

• Continued strong demand from emerging economies• Lower supply from non-OPEC producers• Geopolitical disturbances• Booming commodity trades as hedges against USD depreciation & inflation• Speculation

55 65 70 91

6.3

7.9

3.94.7 4.5

9.6

7.1 7.1

Q1/07 Q2 Q3 Q4 Q1/08 Q2 1H/07 1H/08

-35

-25

-15

-5

5

15

25

35

45

10

1H/08

Gross Refinery MarginsTOP’s Crude Mix & Product Yield

F/E

Local

M/E

Thailand’sOil Demand

TOP’s Market GRM* (US$/bbl)

-29.2

30.2

30.3

-21.2

13.4

(US$/bbl)Product-DB Spreads

Spreads vs. Dubai Spreads (US$/bbl)

* which excluded stock gain and loss

Spreads vs. Dubai (US$/bbl)

14.6 16.5 16.4 19.4 23.0

Jet-DB

GO-DB

HSFO-DB

GO-DB

Q1/07 Q2 Q3 Q4 Q1/08

16.7

Q2

37.6

30.3

1H/07 1H/08

TP-DB 8.8 11.9

ULG 95-DB 16.9 13.4

Jet-DB 16.7 30.2

GO-DB 15.6 30.3

FO-DB -10.5 -21.2

ULG95-DB81%

15%

4%

11% 10%

41% 45%

24% 12%

20%

17%

4%16% LPG

ULG

Jet

Diesel

FO

Q2

*

* LPG Market Price

82% 88% 82%

18% 12% 18%

FY/06 FY/07 1H/08

Export

Domestic

11

Oil Demand for Q2/2008Domestic Oil Demand / Refinery Intake Domestic Oil Demand

Source: DOEB, Ministry of Energy.

(KBD) (KBD)

TOP’s Domestic & Export Sales

LPG Jet/Kero Diesel FOGasoline

45%

13%

11%

9%

13%

DomesticJobbers

1H/2008Sales

Breakdown

5%

Export = 18%

4%

1H/08

(KBD)

738 724 704 726 743 718 731 738

110 120 104 140 160 155 115 158

86%91% 91%

77%

91% 90% 88% 91%

0%

20%

40%

60%

80%

100%

0

200

400

600

800

1,000

1,200

1,400

Q1/07 Q2 Q3 Q4 Q1/08 Q2 1H/071H/08

Net Export Domestic Demand/SalesUtilization Rate

111 127

86

333

74

125129

82

313

72

131123

86

326

65

1H/072H/071H/08

18%3%

12%

Refinery Intake 234 216 282

88 81 82 6813

78

12 145 102

47

2813

Q1/07 Q2 Q3 Q4 Q1/08 Q2

TL

BZ

MX

PX

12

Aromatics BusinessAromatic Spot Prices & Margins (US$/Ton)

400

600

800

1,000

1,200

1,400

1,600 PX

MX

ULG95

PX-ULG 95542 473 395 268 257

Q1/07 Q2 Q3 Q4 Q1/08

BZTL

Q2

317

Product to Feed133 123 121 107 50 93

TPX’s Product Sales & P2F

• In Q2/08, spread of PX&MX over ULG 95 were widen due to unplanned outage from TPPI plant in Indonesia.

• However, downstream demand was reduced significantly as PTA could not pass on historical high PX price to customers.

• TPX’s P2F improved QoQ following expansion completed in May.

Q2

(US$/Ton)

(US$/bbl)17.4 16.0 15.9 14.3 6.6 12.1

(Kton/Quarter)

0

200

400

600

800

1,000

1,200

1,400

13

Lube Base BusinessBase Oil & Bitumen Spot Prices & Margins (US$/Ton)

(US$/Ton) 500SN-HSFO637 538 466 380 434

Q1/07 Q2 Q3 Q4 Q1/08 Q2

535

TLB’s Product Sales & P2F

500SN

HSFO

• P2F improve QoQ ($88/ton to $153/ton) & YoY ($94/ton to $153/ton).

• Base oil price improved due to tight supply as a result of lower run of base oil plants due to insufficient feedstock and switch to produce more gasoil rather than base oil.

• High by-product price (extracts), but dragged by low bitumen price.

Bitumen

70 71 65 68 67 68

124 117 102 96 92 89

75 6772 53 55 52

Q1/07 Q2 Q3 Q4 Q1/08 Q2

TDAE/Extract/Slack Wax

Bitumen

Base Oil

Product to Feed105 94 79 69 88 153 (US$/Ton)

(US$/bbl)15.9 14.2 12.1 10.5 13.4 23.2

Q2

(Kton/Quarter)

15.9 14.2 12.1 10.5 13.423.2

15.1 18.3

Q1/07 Q2 Q3 Q4 Q1/08 Q2 1H/07 1H/08

17.4 16.0 15.9 14.36.6

12.1 16.79.5

Q1/07 Q2 Q3 Q4 Q1/08 Q2 1H/07 1H/08

6.37.9

3.9 4.7 4.5

9.67.1 7.1

Q1/07 Q2 Q3 Q4 Q1/08 Q2 1H/07 1H/08

14

TOP Group’s Integrated Margins

Crude

Product toFeed

Market GRM*

Product toFeed

(US$/bbl)

(US$/bbl)

(US$/bbl)

Integrated Margin * (US$/bbl)

• TOP Group’s integrated margin increased to

12.0 US$/bbl (+15% YoY or +65% QoQ),

due mainly to historical high middle distillate

spread and lube base oil price.

* Calculated from integrated intake and reflected market GRM which excluded stock gain / loss

* which excluded stock gain and loss

5.97.6

3.6 4.3 4.3

9.26.7 6.8

2.0

2.0

1.4 0.1 0.9

1.8

2.0 1.41.1

0.9

0.70.6

0.5

1.0

1.00.8

9.110.4

5.75.0

5.7

12.0

9.78.9

Q1/07 Q2 Q3 Q4 Q1/08 Q2 1H/071H/08

RefineryUtilization

Aromatic Production

Lube Base Production

Plant Availability

Plant Utilization

Ship Utilization

15

Q2/07

Q2/08

7.93

9.58

P2F (US$/ton)

GRM(US$/bbl)

P2F (US$/ton)

Q2/2008 Net Profit Breakdown

Net Profit 9,528 475 493 (24) 60 23

Δ YoY +87% -60% +45% +85% -31% +92%

Δ QoQ +197% +51% +252% -107% +13% +264%

123

93

94

153

Performance Breakdown by Company - Q2/08

Q2/07

Q2/08244 288

1.122.13 0.71

0.78

(KBD) (Kton/Day) (Kton/Day)

109%105%

97%87% 89%

104%

51%

91% 94%80%

92%99%

(Unit: MB)

16

(MB)

Sales Revenue 72,070 126,953 54,883 +76%

EBITDA 9,608 17,252 7,644 +80%

Financial Charges (452) (517) 65 +14%

FX G/L & CCS 446 (1,431) (1,877) -421%

Tax Expense (1,893) (3,415) 1,522 +80%

Net Profit 6,619 10,546 3,927 +59%

TOP 5,107 9,528 4,412 +87%

Subsidiaries 1,512 1,018 (494) -33%

EPS (THB/Share) 3.24 5.17 1.93 +60%

THB/US$ - ending 34.67 33.66 (1.01) -3%

Effective Tax Rate (%) 22% 24% 2% +9%

1) Restated P&L regarding to the change of accounting policy

1H/07 1H/08 +/(-) %

7.1 7.1 0.0 0%

9.7 8.9 -0.8 -8%

136,498 223,266 86,768 +64%

17,980 23,058 5,078 +28%

(924) (907) (17) +2%

1,300 (309) (1,609) -124%

(3,423) (4,568) 1,145 +33%

12,562 14,420 1,858 +15%

8,933 12,738 3,805 +43%

3,629 1,682 (1,947) -54%

6.16 7.07 0.91 +15%

34.67 33.66 (1.01) -3%

21% 23% 2.5% +12%

Consolidated Financial Performance(US$/bbl) Q2/07 Q2/08 +/(-) %

TOP’s GRM 7.9 9.6 1.7 +22%

Integrated Margin 10.4 12.0 1.6 +15%

2)

2) Included stock gain and crack spread hedging activity1) Restated P&L regarding to the change of accounting policy2) Included stock gain and crack spread hedging activity

1)

17

Solid Financial Position

(Unit: MB)

Other Liabilities

LT Debt136,570110,324

180,194

FY/06 FY/07

Equities

Net Debt / EBITDA

Net Debt / Equity

TreasuryPolicy

Bt. 42,333 mn.(US$ 1,305 mn.)

76%

15%8%

1%

Currencies

As of 30 June 2008 (33.66 THB/US$)

Interest Rate

*Figures shown are unauditted from the company’s Certified Public Accountants

Net Debt / EBITDA ≤ 2.0x

Net Debt / Equity ≤ 1.0x

Balance Sheet

Financial Ratios

1H/08

THB Loan 25%

US$ Loan27%

THB Bond 13%

US$ Bond 35%

1H/08

Consolidated Long-Term Debt

CurrentAssets

Non-CurrentAssets 60,166 71,837 81,207

19,70632,891

56,65430,452

31,842

42,333

38%62% 44%56%1.0 0.9 0.9 1.0

0.4 0.4 0.3 0.4

FY/06 FY/07 Q1/08 1H/081H/08

US$ THB Float Fixed

18


Business Outlook



• Global oil demand growth is forecast to decrease to 890 and 860 kbd in 2008 and 2009 respectively.

• Lower demand in OECD due to high prices and economic slow down, offsetting by robust growth in developing countries with price subsidy.

Source: IEA, July 2008

Global Oil Demand Growth

19

Global Oil Demand Growth

2007

20082009

• High price subsidy in developing countries has limited impact on end-user’s consumption during high price period.

• Robust demand growth continues in China and India.

Source: IEA and PVM, July 2008

Price Subsidy in the Region

India and China Oil Demand

20

Strong Demand in Subsidized Countries

21

Reduced Non-OPEC Supply High OPEC Utilization

Projected Crude Supply Depletion

Limited Crude Supply

• Non-OPEC supply declined, in particularly, major oil fields in North Sea, Mexico and Russia.

• Even with higher OPEC production rate, it would tighten spare capacity in the years to come.

• Assuming global oil demand growth of 1% and depletion of current oil reserve of 3%, tightening of crude supply equation could be envisaged.

Source: IEA July 2008 / OPEC, EIA Morgan Stanley Research d.d. August 2008

22

Crude Reserve OutlookUS Crude Stock OECD Europe Stock

Japan Crude Stock China Crude Stock

Capacity 19 mbbl

Capacity 19 mbbl

Capacity 73 mbbl

Capacity 15 mbbl

Capacity 31 mbbl

Capacity 33 mbbl

Capacity 73 mbbl

Capacity 44 mbbl

Phase I: 2006-2007

Phase II: 2008-2010

Source: PIRA, 07/08/08 Source: Norwegian Energy (Morgan Stanley), Eurostock, 09/07/08

• High correlation between USD depreciation and crude price in 2007 up to Q1-08.

• Due to concern on too high oil prices & slow oil demand, capital funds switched out from oil commodities.

Source: JPMorgan Energy Strategy, CFTC July 08

USD Depreciation & Speculation

23

1 Position = 1,000 bblUSDCrude Price

USD vs. Crude Oil Price Non-Commercial WTI Net Length

24

Current Crude Oil Forward Price

As of 12 Aug, 2008

2008

20072006

2005

(Unit: US$/bbl)

Forward

Product Reserve OutlookUS Gasoline Stock Singapore Light Distillate Stock

US Distillate Stock Singapore Middle Distillate Stock

25Source: PIRA, 07/08/08 Source: Platts, 07/08/08

26

Distillate Stock

Gasoline Stock

Product Reserve Outlook - Europe

Residual Stock

• Low distillate stock and high residue stock will further support strong distillate margin and weak residue margin.

Source: Norwegian Energy (Morgan Stanley), Eurostock, 09/07/08

27

Reuters Singapore GRM

1

(US$/bbl)

28

TOTAL CDU: 7.8 MBD

TOTAL CDU: 4.5 MBD

TOTAL CDU: 2.6 MBD

TOTAL CDU: 1.3 MBD

TOTAL CDU: 1.3 MBD

Refinery Utilization RateUS Refinery Utilization

TOTAL CDU: 17.2 MBD

Source: FACTS

MBD EU Refinery Utilization

Source: FACTS, AP Petroleum Monthly , Jul-08

KBD

KBD

• Impact of additional refining capacity in China and India of >1 mbd in 2008 is likely to be less severe than anticipated earlier due to price control and poor margin forcing inefficient refineries to cut runs.

29

Refinery Utilization - China & India

30

ConclusionsEven at high crude price, distillate demand growth continues in subsidized countries. Together with low distillate stock in EU, high distillate margin is likely to sustain.

Inflexibility of refining system to match structural shifts in demand growth has increased demand for certain crude types, creating conditions for higher crude price and distillate crack.

Low GRM from poor gasoline/fuel oil margins and price control has forced inefficient refineries to cut run. Impact of new refining capacity addition is likely to be less severe than anticipated earlier.

TOP realizes benefit from high GO/Jet production (~65%), achieving higher GRM than Sing. Cracking Margin even at controlled LPG price.

TOP group is focusing on increasing Aromatics and Lube Base oil production to maximize integrated margin.

Impact of lower domestic demand is less severe for TOP due to capability to produce high quality products (Euro IV) and export surplus at attractive prices.

31

Q & A

32

Thank You

Should you have any queries, please contact:Investor Relations

at email: [email protected]: 662-617-8300Fax: 662-299-0128

33

APPENDICES

34

Domestic LPG DemandThailand LPG Demand

LPG Demand by Sector

LPG Demand Highlight

• LPG demand continues rising momentum on the capped price structure.

• Transportation fuel switching causing local demand 6M up almost 20%

Outlook 2008

• The delay of government action on increase of local LPG price will support LPG demand growth further.

Source : Department of Energy Business, Ministry of Energy

2005 2006 2007 2008

35

Domestic Gasoline DemandThailand Gasoline Demand

Gasoline Demand by Type


Gasoline Demand Highlight

• Total gasoline demand continues dropping heavily causing by high price, NGV promotion and non-promoted LPG switching.

Outlook 2008

• Relatively high gasoline price will continue depress gasoline demand and support fuel switching to NGV/LPG.

36

Domestic JET DemandThailand JET Demand

JET demand and # of flights


JET Demand Highlight

• Despite some growth compared with last year, higher fuel surcharge slowdown travel and growth started to taper off.

Outlook 2008

• Relatively high fuel price will continue to depress travel growth and demand in 2H.

37

Domestic Gasoil DemandThailand Gasoil Demand

B5 Sales


Gasoil Demand Highlight

• Exceptional high gasoil price has depressed demand, causing overall growth 1H down 2.0%.

Outlook 2008

• Negative impact from high price will depress demand further, where growth for 2H 2008 is projected to decline ~4%.

38

Thailand Fuel Oil Demand


Domestic Fuel Oil Demand

Fuel Oil Demand Highlight

• After a surge in FO demand in April as NG disruption, FO demand returned to normal trend of negative growth due to more NG supply.

Outlook 2008

• Expect fuel oil demand drop ~ 10%.

q2 & 1h/08 results analyst presentationq2 & 1h/08 results analyst presentation august 14,...

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