Esso Thailand Public : Management Discussion and Analysis Quarter 2/2021

Esso (Thailand) Public Company Limited

Management Discussion

and Analysis

Second Quarter 2021

Esso (Thailand) Public Company Limited

Management Discussion and Analysis- Second Quarter 2021

Management's Discussion and Analysis (MD&A)

for the Second Quarter of 2021 and the Six-Month Period Ended June 30, 2021

1. Financial and Operating Highlights
			2Q 2021	2Q 2020		1H 2021	1H 2020
	Crude intake (Kbpd)		124	111		127	117
	Paraxylene production (Ktons)		13	39		53	92
	Average forex rate (Baht/US$)		31.4	31.9		30.8	31.6
	Gross refining margin (US$/Bbl)		7.0	(5.5)		9.4	(12.7)
	Revenue from sales (million Baht)		41,070	24,413		80,328	63,799
	Gross profit (million Baht)		2,289	(1,944)		7,007	(8,388)
	EBITDA (million Baht)		1,779	(2,528)		5,938	(9,841)
	Profit (loss) for the period (million Baht)		859	(2,503)		3,647	(8,810)
	Earnings (loss) per share (Baht) (1)		0.25	(0.72)		1.05	(2.55)

1. Based on current number of shares: 3,461 million shares

1

Esso (Thailand) Public Company Limited

Management Discussion and Analysis- Second Quarter 2021

2. Benchmark Prices for Crude Oil and Refined Petroleum Products

Average Platts Singapore quoted prices for crude oil and refined products
Unit: US$/Bbl		2Q 2021	2Q 2020	1Q 2021		1H 2021	1H 2020
Dubai	66.9	30.5	60.0	63.5	40.6
Gasoline (95 Ron)	76.8	33.1	67.1	72.0	45.2
Jet fuel / kerosene	71.4	30.4	63.3	67.4	44.8
Diesel (50 ppmS)	73.6	37.6	65.7	69.7	50.0
Fuel oil (180 cs)	59.7	28.3	55.3	57.5	35.3
LPG	45.4	26.8	50.8	48.1	36.6
Paraxylene - US$/Ton	859	495	766	812	601
Gasoline (95 Ron) - US$/Ton (1)	653	281	570	612	385

Source: Mean of Platts Singapore and PCI

1. Converted to US$/Ton using 1 Ton = 8.5 Barrels

Dubai prices in the second quarter of 2021 averaged $66.9/Bbl, an increase of $36.4/Bbl from the same period last year, and $6.9/Bbl compared to the first quarter of 2021. Crude prices continued to recover as a result of COVID-19 vaccine rollout in many countries, with support from OPEC and its allies' production cut extension. The average monthly price for Dubai in June 2021 was $71.6/Bbl, improved from March 2021 average price of $64.4/Bbl by $7.2/Bbl and from December 2020 average price of $49.8/Bbl by $21.8/Bbl.

In tandem with crude oil prices, all product prices significantly increased in the second quarter of 2021 when compared with the same period last year and the previous quarter as a result of demand recovery, except for LPG that colder-than-usual winter in North Asia contributing to higher LPG price in the first quarter of 2021.

The Paraxylene Asian Contract Price (ACP) in the second quarter of 2021 was $859/Ton, higher than the same period last year by $364/Ton, and higher than the first quarter of 2021 by $93/Ton. The increasing price trend was a result of supply-demand imbalance in the region. Average Paraxylene over Gasoline (95 Ron) spread in the second quarter of 2021 was $206/Ton, slightly lower than the same period last year.

2

Esso (Thailand) Public Company Limited

Management Discussion and Analysis- Second Quarter 2021

3. Production and Gross Margin

			2Q 2021	2Q 2020	+ / -		1H 2021	1H 2020	+ / -
Refining capacity (Kbpd)		174	174	0		174	174	0
Crude intake (Kbpd)		124	111	+13		127	117	+10
Paraxylene production (Ktons)		13	39	-26		53	92	-39
Gross Refining Margin (US$/Bbl)		7.0	(5.5)	+12.5		9.4	(12.7)	+22.1
Total Fuel Product Sales (KBbl)		11,752	10,369	+1,383		23,825	22,739	+1,086
-	LPG		669	569	+100		1,375	1,111	+264
-	Gasoline		3,162	2,577	+585		6,192	5,558	+634
-	Naphtha		321	378	-57		817	705	+112
-	Jet Fuel/Kerosene		415	321	+94		879	1,511	-632
-	Diesel		5,578	5,214	+364		11,520	11,217	+303
-	Fuel Oil		1,134	973	+161		2,037	2,079	-42
-	Asphalt		473	337	+136		1,005	558	+447

Refinery crude intake for this period was 124 KBD, higher than the same period last year reflecting country's partial lockdown impact from COVID-19 pandemic this year comparing to more stringent measures during the same period last year. Paraxylene production in the second quarter of 2021 was 13 Ktons, following paraxylene production suspension from April 2021 onwards.

Gross Refining Margin (GRM) in the second quarter of 2021 was $7.0/Bbl, largely contributed from favorable inventory effects. The second quarter GRM of 2021 was $12.5/Bbl higher than the same period of 2020 resulting from favorable inventory effects and higher industry margins.

Refinery production yields in the second quarter of 2021 reflected continued production adjustment in response to demand during COVID-19 pandemic and planned paraxylene production suspension. Comparing to the same period last year, lower feedstock yields reflected paraxylene production suspension from April 2021 onwards resulting in higher gasoline yield.

Following demand increase from COVID-19 pandemic, product sales volume of the second quarter of 2021 were 13% higher than the same period last year. We continued optimizing our sales through higher margin channels, and capturing further growth opportunity in Commercial business, especially in cross- border sales to neighboring countries. In the first half of 2021, Asphalt sales reached its record high in a decade.

	Sales Channel (%)
	54%	53%		Commercial
				Retail
	41%	41%		Export
	5%	6%
	1H2021	1H2020

3

Esso (Thailand) Public Company Limited

Management Discussion and Analysis- Second Quarter 2021

4. Financial Performance
Unit: million Baht			2Q 2021	2Q 2020	+ / -			1H 2021	1H 2020	+ / -
Revenue from sales		41,070	24,413	+16,657		80,328	63,799	+16,529
Cost of sales		(38,781)	(26,357)	-12,424		(73,321)	(72,187)	-1,134
Gross profit		2,289	(1,944)	+4,233		7,007	(8,388)	+15,395
Selling expenses		(1,155)	(1,179)	+24		(2,348)	(2,588)	+240
Administrative expenses		(59)	(60)	+1		(117)	(129)	+12
Profit (loss) from sales		1,075	(3,183)	+4,258		4,542	(11,105)	+15,647
Other income		3	51	-48		12	56	-44
Finance costs, net		(75)	(78)	+3		(157)	(171)	+14
Share of profit from an associate		55	50	+5		125	149	-24
Profit (loss) before income tax		1,058	(3,160)	+4,218		4,522	(11,071)	+15,593
Income tax (expense) credit		(199)	657	-856		(875)	2,261	-3,136
Profit (loss) for the period		859	(2,503)	+3,362		3,647	(8,810)	+12,457
Other comprehensive income		18	158	-140		135	(241)	+376
Total comprehensive income			877	(2,345)	+3,222			3,782	(9,051)	+12,833
for the period

Revenue from sales for the second quarter of 2021 and for the first half of 2021 were higher than the same periods last year, largely due to significant higher market selling prices and higher sales volume for most products.

In the second quarter of 2021, profit from sales was Baht 1,075 million, compared to a loss of Baht 3,183 million last year. The Downstream segment made a profit of Baht 1,540 million, primarily driven by favorable inventory effects. The Petrochemical segment had a loss of Baht 465 million reflecting continued poor paraxylene margins from supply-demand imbalance in the region.

Compared to the same period last year, net finance costs decreased by Baht 3 million for the second quarter of 2021 primarily driven by lower interest rates.

Profit (loss) from sales by segment

(Million THB)

1,540		4,869
(465)	(2,829)	(327)
			(354)		(10,400)
		Downstream
		Petrochemicals		(705)
2Q2021	2Q2020	1H2021	1H2020

4