STAR PETROLEUM REFINING Management's Discussion and Analysis of Financial Condition and Result of Operations
Star Petroleum Refining Public Company Limited
For Quarter 1/2023
Table of Contents | |
Analysis of Financial Position | 7 |
Statement of Cash Flow | 8 |
Financial Ratios | 9 |
Market Outlook | 10 |
Appendix | 11 |
Management's Discussion and Analysis of Financial Condition and Result of Operations
1. Company's Operating Result
(US$ Million) | Q1/23 | Q4/22 | +/(-) | Q1/22 | +/(-) |
Total Revenue | 1,736 | 1,793 | (57) | 1,967 | (231) |
EBITDA | 67 | 15 | 52 | 218 | (151) |
Adjusted EBITDA (1) | 62 | 71 | (9) | 96 | (33) |
(Loss) gain on foreign exchange | (0) | 34 | (34) | 7 | (8) |
Net income | 37 | (6) | 43 | 159 | (122) |
Net income | 0.01 | (0.00) | 0.01 | 0.04 | (0.03) |
(US$ per share) | |||||
Accounting gross refining margin | 6.90 | 1.77 | 5.13 | 20.61 | (13.71) |
(US$/barrel) (2) | |||||
Market gross refining margin | 6.36 | 5.39 | 0.97 | 8.46 | (2.10) |
(US$/barrel) (3) | |||||
Crude intake | 162.2 | 163.2 | (1.0) | 150.2 | 12.0 |
(thousand barrels/day) | |||||
Crude intake Utilization | 93% | 93% | -1% | 86% | 7% |
(Baht Million) | Q1/23 | Q4/22 | +/(-) | Q1/22 | +/(-) |
Total Revenue | 59,130 | 65,706 | (6,577) | 65,404 | (6,275) |
EBITDA | 2,242 | 1,151 | 1,090 | 7,262 | (5,021) |
Adjusted EBITDA (1) | 2,082 | 3,208 | (1,126) | 3,200 | (1,109) |
(Loss) gain on foreign exchange | (18) | 1,225 | (1,242) | 242 | (260) |
Net income | 1,219 | 260 | 959 | 5,284 | (4,065) |
Net income | 0.28 | 0.06 | 0.22 | 1.22 | (0.94) |
(Baht per share) |
- Adjusted EBITDA refers EBITDA excluding Stock gain/loss, net NRV and Extra item
- margin includes inventory gain/loss based on weighted average inventory cost.
- margin is calculated based on current replacement cost.
Exchange rate (Baht/US$) | Q1/23 | Q4/22 | +/(-) | Q1/22 | +/(-) |
Average FX | 34.08 | 36.50 | (2.41) | 33.23 | 0.85 |
Closing FX | 34.26 | 34.73 | (0.47) | 33.46 | 0.81 |
Oil prices fluctuated this quarter due to the World Bank's cut of the global economic growth forecast for 2023, many central banks hiked interest rates to curb inflation and there was additional pressure from the concerns over the banking crisis in the United States and Europe. Moreover, the high inventory in the United States also led to a drop in oil prices. On the other hand, positive market sentiments in anticipation of mainland China's economic recovery after the relaxation of the "zero-COVID" policy, strong travel demand, limited Chinese gasoline exports, and supply tightness following the OPEC+ group and Russia's decision on output production reduction have contributed to rising oil prices. In Q1/23, the utilization rate for the crude intake was 162 thousand barrels per day, or equivalent to 93% of its refining capacity, similar to the prior quarter. In this quarter, SPRC has good margin captured from our Bottom Line Improvement Program (BLIP) from refinery optimization across all the areas (Crude, Process, Product and Synergy).
The net income was US$ 37 million in Q1/23 compared to the net loss of US$ 6 million in the prior quarter. The accounting refining margin in Q1/23 was US$6.90/bbl higher than US$1.77/bbl in Q4/22 owing to oil prices rising from the end of the prior year, leading to small stock gain in this quarter while there was stock loss in Q4/22 from oil price declining. Excluding stock gain (loss), the market refining margin improved from US$5.39/bbl in Q4/22 to US$6.36/bbl in Q1/23, as a result of the decline in crude premium together with the increase in gasoline cracks, which was primarily caused by limited gasoline exports from mainland China, strong domestic demand during the travel season, an outage at an RFCC unit in Vietnam, stockpiling for Ramadan, and an Indonesian fuel terminal fire. Additionally, total operational expenses this quarter were almost the same as in the prior quarter.
2
Management's Discussion and Analysis of Financial Condition and Result of Operations
Compared Q1/23 with Q1/22, sales revenue decreased 12% mainly from a decrease in product prices, partially offset by higher in sales volume due to strong demand from China's reopening, and limited Chinese gasoline exports compared to previous year quarter. EBITDA, EBIT and net profit in Q1/23 show a significant drop due to the lower refining margin in Q1/23 of US$6.36/bbl compared to US$8.46/bbl in Q1/22 and a large stock gain in Q1/22 from a significant increase in oil price from Russian-Ukraine conflict, partly offset by the expenses and provision relating to oil spill incident in previous year quarter.
2. Market Condition
Pricing | Q1/23 | Q4/22 | +/(-) | Q1/22 | +/(-) |
Dubai crude oil | 80.23 | 84.77 | -4.54 | 96.21 | -15.98 |
Light Naphtha (MOPJ) | 76.48 | 74.78 | 1.70 | 98.05 | -21.57 |
Gasoline (premium) | 98.94 | 94.30 | 4.64 | 114.03 | -15.09 |
Jet Fuel | 106.26 | 118.28 | -12.02 | 112.74 | -6.48 |
Diesel | 105.04 | 124.06 | -19.02 | 116.08 | -11.04 |
Fuel Oil | 64.22 | 62.44 | 1.78 | 87.96 | -23.73 |
Spread over Dubai | Q1/23 | Q4/22 | +/(-) | Q1/22 | +/(-) |
Light Naphtha (MOPJ) | -3.75 | -9.99 | 6.24 | 1.83 | -5.58 |
Gasoline (premium) | 18.71 | 9.53 | 9.18 | 17.82 | 0.89 |
Jet Fuel | 26.03 | 33.51 | -7.48 | 16.53 | 9.50 |
Diesel | 24.81 | -39.29 | 64.10 | 19.87 | 4.94 |
Fuel Oil | -16.01 | -22.33 | 6.32 | -8.26 | -7.75 |
Average Dubai price for Q1/23 was US$80.23/bbl decreased from US$84.77/bbl in Q4/22. Event Chinese crude purchases and a pick-up in road traffic fueled confidence in a demand recovery in the world's second-largest economy following the reopening of its borders and easing of COVID-19 curbs after protests last year. But banking crisis adds a new risk to world oil demand gains. Repercussions from the March 10, 2023, failure of the Silicon Valley Bank (the largest US failure since 2008) has injected greater uncertainty about the future path of inflation, interest rates, and economic activity. The banking failure has not suddenly altered oil demand and supply fundamentals, but an ongoing crisis could ultimately impact consumption and investment.
Naphtha spread over Dubai in Q1/23 increased to US$-3.75/bbl owing to positive market sentiments in anticipation of mainland China's economic recovery after the market lifted its "zero-COVID" policy and stiff competition for non-Russian naphtha cargos while crude prices remained below the $90/bbl level. Demand improvement is gradual; olefins margins improved but remain below break-even levels amid positive market sentiments in anticipation of mainland China's economic recovery.
Gasoline spread over Dubai in Q1/23 increased to US$18.71/bbl due to strong domestic demand in mainland China owing to festive travels resulting in lower gasoline exports from mainland China. Additionally, a RFCC unit outage in Vietnam, a reliability issue at the RFCC unit in the Pengerang refinery in Malaysia, stockpiling for Ramadan, fuel terminal fire in Indonesia, and lower US refinery utilization owing to the December winter storm amid low inventory have further boosted the cracks.
Jet and diesel crack spreads over Dubai decreased from the previous quarter to be US$26.03/bbl and US$24.81/bbl respectively. The warmer-than-usual temperatures toward the end of winter season have reduced the need for kerosene heating oil, counter seasonal diesel stock builds in the United States, high diesel inventory in Europe, and higher exports from the Middle East to Asia have weighed on the jet/kerosene cracks. In addition, weak PMI™ readings in major manufacturing hubs indicate lackluster manufacturing activities in several key Asian markets have curbed demand.
Fuel oil spread over Dubai in Q1/23 increased from previous quarter to be US$-16.01/bbl. Higher import requirements from the utility sector in the Middle East, lower flows from the Middle East to Asia, strong demand for heavy feedstocks due to tighter heavy crudes supply, and the commencement of stockpiling for Ramadan for Saudi Arabia have pushed up HSFO cracks.
3
Management's Discussion and Analysis of Financial Condition and Result of Operations
SPRC's average market refining margin in Q1/23 was US$6.36/bbl, which is higher than US$5.39/bbl in Q4/22. In Q1/23, SPRC has slightly increased domestic supply volume vs. Q4/22 particularly in gasoline and asphalt. SPRC also continued to optimize feedstocks by processing new crudes and Atmospheric residue.
3. Financial Performance
Financial Results
US$ Million | US$ Million | ||||
Q1/23 | Q4/22 | +/(-) | Q1/22 | +/(-) | |
Total Revenue | 1,736 | 1,793 | (57) | 1,967 | (231) |
Cost of sales | (1,676) | (1,819) | 143 | (1,725) | 49 |
Gross profit /(Loss) | 60 | (25) | 86 | 242 | (182) |
Other income | 1 | 0 | 1 | 0 | 1 |
(Loss)/gain on exchange rate | (0) | 17 | (18) | 14 | (15) |
Administrative expenses | (12) | (13) | 0 | (51) | 38 |
Finance costs | (3) | (4) | 1 | (1) | (2) |
Fair value gain/(loss) on | 0 | 17 | (17) | (7) | 7 |
derivatives | |||||
Income tax | (9) | 1 | (10) | (40) | 30 |
Net income /(loss) | 37 | (6) | 43 | 159 | (122) |
Baht Million | Baht Million | ||||
Q1/23 | Q4/22 | +/(-) | Q1/22 | +/(-) | |
Total Revenue | 59,130 | 65,706 | (6,577) | 65,404 | (6,275) |
Cost of sales | (57,108) | (66,015) | 8,907 | (57,333) | 225 |
Gross profit /(Loss) | 2,022 | (309) | 2,331 | 8,071 | (6,049) |
Other income | 47 | 17 | 30 | 16 | 32 |
(Loss) gain on exchange rate | (19) | 642 | (661) | 470 | (489) |
Administrative expenses | (425) | (457) | 32 | (1,683) | 1,257 |
Finance costs | (94) | (141) | 48 | (41) | (53) |
Fair value gain/(loss) on | 1 | 583 | (581) | (228) | 229 |
derivatives | |||||
Income tax | (305) | (75) | (230) | (1,321) | 1,016 |
Net income /(loss) | 1,219 | 260 | 959 | 5,284 | (4,065) |
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Management's Discussion and Analysis of Financial Condition and Result of Operations
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Star Petroleum Refining pcl published this content on 10 May 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 May 2023 12:30:09 UTC.
