S Oil : 2Q 2020 Earnings Release

2Q 2020 Earnings Release

July 2020

DISCLAIMER

Financial results for 2Q 2020 are provisional and subject to change according to the outside independent auditors' review.

This presentation contains forward-looking statements that are based on our current expectation, assumptions, estimates and projections about S-OIL and the refinery industry. We caution you not to place undue reliance on any forward- looking statement which may involve various risks and uncertainties.

Please also note that although we believe that the assumptions on which our forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and, as a result, the forward-looking statements based on those assumptions could be incorrect. Except as required by law, we do not undertake to release the results of any revisions of these forward-looking statements to reflect future events or circumstances.

2

2Q 2020 Performance

2Q 2020 Financial Result ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ 4 Financial Status ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ 5 Performance by Business Segment∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ 6 CAPEX & Operation ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ 7

Market Environment & Outlook

Refining ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙

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Contents

Petrochemical - Aromatics ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙

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Petrochemical

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Olefins

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Lube Base Oil ∙

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Appendices

Summarized Income Statement ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ 12 Quarterly Trend of Sales by Region ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ 13 Efforts and Activities in ESG ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ 14 S-OIL'sPetrochemical Product & Value Chain ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ 15 Long-termMargin Trend ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ ∙ 16

2Q 2020 Financial Result

Revenue

(Unit: bil. Won)

6,257.3 6,234.5 6,476.2

	Operating Income
			(Unit: bil. Won)
	230.7
-1.4%	3.7%	9.5	-164.3

Income before Tax

(Unit: bil. Won)

74.1 74.8

5,198.4

	3,451.8
70.1	69.1

-90.5	0.1%
-4.8%

-19.4%

-195.8

-156.5

66.5		67.0			65.0
2Q '19	3Q '19	4Q '19	1Q '20	2Q '20
		Revenue		Sales Volume (mil. bbl)

Decreased 33.6% QoQ due to oil price drop

• Quarterly average selling price: 37.6%↓, QoQ
• Sales volume: 6.4%↑, QoQ

				-1,007.3
2Q '19	3Q '19	4Q '19	1Q '20	2Q '20
		Operating Income		OP Margin

Increased 843.0 bil. Won QoQ

due to the decrease of inventory-

related loss

• Inventory-relatedloss: 169 bil. Won

(Inventory-related loss in 1Q '20: 721 bil. Won)

• Singapore complex margin($/bbl): 2Q -1.7 (2.3↓, QoQ)

			-1,209.3
2Q '19	3Q '19	4Q '19	1Q '20	2Q '20

Increased 1,052.8 bil. Won on the reduction of operating loss

• F/X gain: 34 bil. Won
  (1Q '20 F/X loss: 141 bil. Won)
• /$ rate: 2Q-end 1,200.7 (21.9↓, QoQ)

4

Financial Status

						Assets									Liabilities & Equities
(Unit: bil. Won)	15,955	16,333	16,318	16,835		(Unit: bil. Won)	15,955	16,333	16,318		16,835
15,087		15,087
1,131		1,430
723	1,216							2,352		3,239
598						3,150	3,457
	4,781	4,508	3,457	2,833		3,401
4,330				3,401	3,555	4,147		3,771
											3,475
														2,935	2,825
7,969	9,741	10,139	10,093	10,060		1,370	4,234		4,299
2,191								1,552	2,513		6,843	6,469	6,497	5,584		5,526
711		555
2017-end	2018-end	2019-end	1Q'20-end		1H'20-end		2017-end		2018-end	2019-end	1Q'20-end	1H'20-end
		Cash			Tangible asset			A/R & inventory		Others				Equity		S-T borrowing			L-T borrowing		Other liabilities

18.8%
14.5%	3.9%	1.0%
	3.1%	2.2%		-19.4%
			-34.8%	-31.5%
			-58.3%
2017	2018	2019	1Q'20	1H'20

Return on equity

Return on capital employed

Financial Highlights

7,150

5,625 6,137 5,854

128.0%

105.9%

2,653 86.9% 94.5%

38.8%

'17-end'18-end'19-end1Q'20-end1H'20-end

Net debt (bil. Won) Net debt to equity

• Net debt: Short-term borrowing + Long-term borrowing
• • Lease obligation - Cash

219 220

-60	-19

-1,065

2Q'19 3Q'19 4Q'19 1Q'20 2Q'20

EBITDA (bil. Won)

• EBITDA: Income before tax + Net interest expense
• • Depreciation(Excluding catalyst amortization cost)

5

Performance by Business Segment

Segment	(Unit: bil. Won)	2Q '20	1Q '20	QoQ	2Q '19	YoY
	Revenue	2,591.5	3,956.4	34.5%↓	5,001.8	48.2%↓
Refining	Operating Income	-358.7	-1,190.0		-136.1
	(Margin)	(-13.8%)	(-30.1%)		(-2.7%)
	Revenue	589.1	808.1	27.1%↓	911.2	35.3%↓
Petrochemical	Operating Income	91.1	66.5	37.1%↑	4.2	2,069.0%↑
	(Margin)	(15.5%)	(8.2%)		(0.5%)
	Revenue	271.3	433.9	37.5%↓	344.3	21.2%↓
Lube Base Oil	Operating Income	103.3	116.2	11.1%↓	41.4	149.5%↑
	(Margin)	(38.1%)	(26.8%)		(12.0%)
	Revenue	3,451.8	5,198.4	33.6%↓	6,257.3	44.8%↓
Total
Operating Income	-164.3	-1,007.3		-90.5
	(Margin)	(-4.8%)	(-19.4%)		(-1.4%)

Operating Income Trend

	305	81	170102 43	151 47						Refining			Petrochemical			Lube Base Oil
300	91151 28		41	100 79 52		21 96				91 103
	17	4		66 116
0
-300							-136					-107							-359
-600					-532
-900
-1,200																-1,190
		2018.2Q	2018.3Q	2018.4Q	2019.1Q	2019.2Q	2019.3Q	2019.4Q	2020.1Q		2020.2Q	6

CAPEX & Operation

CAPEX & Depreciation

(Unit: bil. Won)	2019	2020 Plan		1H '20	(Unit: bil. Won)	604
569

Land acquisition*	79.1	5.5		-											350
							287	294
Upgrade & Maintenance	383.7	424.2		122.9
Others	185.3	60.1		16.8					2,505			1,965
							1,079
Total CAPEX	648.1	489.8		139.8												648	490
Depreciation	569.1	604.3		284.7				2016		2017			2018				2019		2020(P)
												CAPEX				Depreciation
* For future project

	Maintenances			Utilization Rate
	2018	2019	1H '20	3Q '20		2018	2019	1Q'20	2Q'20
	#2 CDU	#3 CDU	-	#1 CDU	CDU	99.1%	95.4%	93.4%	99.8%
	CFU
Refining
	#1,2 RFCC	#2 RFCC	RFCC/HYC	94.2%	86.8%	96.2%	89.6%
	HYC FH
	HYC FH	(Jun.~Jul.)
		PX Plants	81.2%	75.6%	98.5%	95.7%
				PP/PO
Petrochemical	#1 PX	#2 PX
(Jun.~Jul.)	PP/PO Plants	65.6%	75.4%	94.1%	75.7%
Lube Base Oil	-	HYC SH	-	#1 HDT	Lube Plants	92.3%	88.7%	93.5%	80.1%
									7

Market Environment & Outlook - Refining

2Q '20 Market Environment		Singapore Margin
• Refining margins tumbled into negative territory due to the		3.9		GRM-Variable Cost	(Unit:$/bbl)
massive product inventories built up in 1Q.
However, demand is recovering thanks to the easing of	0.9	0.6
lockdowns and stimulus measures in major countries.
	-0.2

World Product Demand Compared with Dec-19(Unit: mmb/d)

0 -5-10-15-20-25

Jan-20Feb-20Mar-20Apr-20May-20Jun-20

-1.7

2Q '19

3Q '19

4Q '19

1Q '20

2Q '20

Global Net Capacity Increase vs. Demand Growth

3Q '20 Outlook

1.59 1.35

1.04

0.46

	(Unit: mmb/d)
1.35	6.29 ~ 6.81
0.87
0.69
0.13

• Refining margins will continuously recover amid easing of

COVID-19 related restrictions.							-10.04 ~ -6.79
2017	2018	2019			2020(E)	2021(E)
				Capacity Addition				Capacity Closure
				Demand Growth				Net Capacity Increase

Source: IEA, OPEC, EIA, FACTS Global Energy, Wood Mackenzie, The Company

8

Market Environment & Outlook - Aromatics

2Q '20 Market Environment

• Para Xylene spread narrowed due to oversupply from new plants while operating rates were reduced in the region.
• Benzene spread plummeted due to sluggish downstream demand and high inventory in China.

3Q '20 Outlook

• Para Xylene & Benzene spread will remain weak due to slower-than-expecteddownstream demand recovery and high inventory levels.

Product Spread (Vs. Naphtha)

	Para Xylene	Benzene	(Unit:$/ton)
349
	300
		242	249	204
	185
84		132
		174
				98
2Q '19	3Q '19	4Q '19	1Q '20	2Q '20

PX & PTA Net Capacity Expansion

			(Unit: k tpa)
	6,300	6,700	6,590
		4,601
			3,377
1,785	2,000		1,500
1,538			800

2018	2019	2020(E)	2021(E)	2022(E)
		PX Net Capacity		PTA Net Capacity	9
Source: Wood Mackenzie, IHS, The Company

Market Environment & Outlook - Olefins

2Q '20 Market Environment

• Polypropylene(PP) spread widened as Chinese PP market remained relatively stable on robust demand from personal protective equipment amid plunge of feedstock naphtha price.
• Propylene Oxide(PO) spread slightly increased on concentrated maintenances in the region despite bearish downstream demand due to ongoing pandemic.

3Q '20 Outlook

• PP spread is expected to stay at a decent level on demand from fiber and packaging sector amid reduced supply due to heavy maintenance schedule in China.
• PO spread would continue moving around a current healthy level as regional plants begin to resume operation from regular maintenances amid gradual downstream Polyol-PU demand recovery from COVID-19.

Product Spread (Vs. Naphtha)

	PP		PO	(Unit:$/ton)
635	642	576	632	639
531	518			526
		408	401
2Q '19	3Q '19	4Q '19	1Q '20	2Q '20

Increase of PP Capacity and Demand (Asia & ME)

(Unit: k tpa)

	5,645		6,145
		2,527	2,896	3,279	3,053
2,211 2,371

2019 2020(E) 2021(E) 2022(E)

		PP Capacity		PP Demand
Source: ICIS, IHS, The Company	10

Market Environment & Outlook - Lube Base Oil

2Q '20 Market Environment	Product Spread (Asia)

• Overall LBO spreads maintained a healthy level on low feedstock prices, despite global lockdowns.

LBO-HSFO(Unit:$/bbl)

51.3 50.6

41.5

26.3 23.9

2Q '19 3Q '19 4Q '19 1Q '20 2Q '20

3Q '20 Outlook	LBO Capacity Addition	(Unit: kbd)
	65.8

53.3

• LBO spreads are expected to be supported by a gradual demand recovery amid stable crude oil prices.

	16.0	14.8
5.9

2018	2019	2020(E)	2021(E)	2022(E)
			Group II		Group III

Source: ICIS, Argus, The Company	11

Appendix 1

Summarized Income Statement

(Unit: bil. Won)	2Q '20	1Q '20	QoQ	2Q '19	YoY
Revenue	3,451.8	5,198.4	33.6%↓	6,257.3	44.8%↓
Operating Income	-164.3	-1,007.3	-	-90.5	-
(Margin)	(-4.8%)	(-19.4%)	-	(-1.4%)	-
Finance & Other Income	7.3	-202.2	-	-106.5	-
- Net Interest Gain	-37.7	-42.9	-	-42.4	-
- Net F/X Gain*	34.4	-141.5	-	-66.5	-
- Others	10.6	-17.8	-	2.4	-
Equity Method Gain	0.5	0.2	128.6%↑	1.3	59.9%↓
Income before Tax	-156.5	-1,209.3	-	-195.8	-
Net Income	-66.9	-880.6	-	-147.4	-

* Including gain/loss from F/X derivatives for hedging

12

Appendix 2

Quarterly Trend of Sales by Region

(Unit: k bpd, %)	2Q '19	3Q '19	4Q '19	1Q '20	2Q '20
Sales Total	731	728	762	714	760
Domestic	338	349	371	340	358
Export	393	379	391	374	401
(% in Total)	(53.8%)	(52.0%)	(51.2%)	(52.3%)	(52.9%)
		China	22.5%	16.4%	16.9%	15.3%	31.5%
		Japan	18.9%	18.0%	17.2%	22.9%	16.0%
		Australia	8.3%	10.7%	8.2%	8.8%	14.1%
		South East Asia	12.9%	16.1%	19.1%	10.5%	9.9%
		Singapore	10.6%	11.3%	2.9%	14.5%	6.1%
		Taiwan	2.2%	1.9%	8.0%	0.6%	4.8%
		USA	5.8%	7.8%	7.8%	10.8%	2.1%

13

Appendix 3

Efforts & Activities in ESG

						Environment Management																Social Contribution
				Air Pollutant Emissions		Waste Recycling	Performance in				Green	Participants in
					Volume & Intensity		Social Activities		Purchasing	Sharing Campaign
										(Unit: KT)
(Unit: KT)							(Unit: ppm)								(Unit: billion won)					(Unit: billion won)					(Unit: Persons)
		Legal							40.1
7.6																									32.5
				Standard	84.8							6.1	6.9	7.0							1,889	1,871	1,845
5.3					24.1
			3.5				72.3	16.6				15.7				15.5
									SOx 82.0		52.7
									NOx	29.6	4.5
2017	2018	2019			2017	2018	2019										2017	2018	2019
			2017	2018	2019	2017	2018	2019	2017	2018	2019
				Certification ISO 14001		Operating ISO 14301 -					The social contribution activity called 'Sunshine Sharing' to
				- Environmental			Environmental performance					create a bright and warm society with topics including hero,
				management system		evaluation system								isolated neighbor, environment, and Local community
										Governance											Assessment by external bodies in 2019

• Establish transparent and sound corporate governance through organizing BOD and sub-committees with Diversity, Independence, and rich Expertise and ensuring Checks and Cooperation
• Well organized Compliance system & Ethics management

Acquired A + grade	The first local manufacturing
of governance for 4	Company to acquire ISO
consecutive years	19600 - Compliance
since 2016	management system

Listed in Dow Jones	2019 Best	Winner of 2019
Sustainability	Governance	Korea Accounting
Indices (DJSI)	Company from	Grand Prize
World for 10	KCGS
consecutive years

14

Appendix 4

S-OIL's Petrochemical Product & Value Chain

The Company's

end product

PX

(1.85 Mil. ton/y)

PTA / DMT

SM

Applications

Polyester

Polyester fiber, Polyester film, PET Resin for bottles

PS, ABS, SBR Electronics packing, Building materials, Automobile, Tires

Benzene

(672,000 ton/y)

Propylene

(910,000 ton/y)

Cyclohexane

Alkyl Benzene

Phenol,

Acetone

AN

Octanol,

Butanol

Acrylic Acid

PP

(300,000 ton/y)

PO

(405,000 ton/y)

Caprolactam

PC,

BPA Epoxy

Resin

Polyol PU

PG,

Glycol Ether

Nylon fiber, Carpet, Engineering Plastics

Powder, Detergent

Flooring material, Electronic applications, Paint

Acrylic fiber, Synthetic resin (ABS, SAN)

Adhesive, Plasticizer

Adhesive, Paint

Film for packaging, Tape, Clothing, Home appliances, Automobile

Insulation material for buildings, Home appliances, Automobile

Cosmetics, Additives for beverage, Textile, Solvent, Detergent

15

Appendix 5

Long-term Margin Trend

Refining	Petrochemical	Lube base Oil
Singapore Complex Margin	Product spread (Vs. Naphtha)	Product spread

$/ton		GRM-Variable Cost(R)		Para Xylene(L)			Propylene(L)			ICIS150N-HSFO380(L)	$/bbl
800																16.0
					604
600		550				554	552									12.0
					517
				454			420	420				434			409
	405
				469	369		378	383		360
400	386	359	359	351					352		8.0
		416	332		421	312
			308	316
	372		341			363		296	339		357	298
					338		255
			312				228
		296					281	257		251		204
200		246										249	4.0
6.4	7.3
								5.3		4.6
					3.4				3.9
					3.1				3.3
					2.4	2.0
			0.5	1.5				1.5	0.6
0										0.0
														-1.7
-200																-4.0
	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	1Q20	2Q20
																16

Thank You

S-OIL IR Team

Contact : [e-mail]

Winner of 2019 Korea Accounting Grand Prize

S-OIL was awarded 2019 Korea Accounting Grand Prize for enhancing accounting transparency.

S-OIL, the only company named to DJSI World for the 10th consecutive year among Asia Pacific refiners and won 2019 Best Governance Companies from KCGS.