Thai Oil : Management Discussion and Analysis Yearly Ending 31 Dec 2020

Management's Discussion and Analysis (MD&A)

Thai Oil Public Company Limited

For the Fourth Quarter and the Year 2020

Table of Contents

Page
2-4
2. Summary of Financial Result by Business	5
2.1 Market Condition and Financial Result of Refinery Business	6-9
2.2 Market Condition and Financial Result of Aromatics Business	9-11
2.3 Market Condition and Financial Result of an Intermediate for the Production
of Surfactants Business	11-12
2.4 Market Condition and Financial Result of Lube Base Oil Business	13-14
2.5 Financial Result of Power Generation Business	15-16
2.6 Financial Result of Solvent Manufacturing and Distribution Business	16-17
2.7 Financial Result of Crude, Petroleum and Petrochemical Marine Transportation
and Storage, Ship Management Service and Crew & Utility Boat Service Business	18-19
2.8 Financial Result of Ethanol Business	19
3. Analysis of Consolidated Financial Statement
3.1 Statement of Financial Position	20-22
3.2 Statement of Cash Flows	22-23
3.3 Financial Ratios	24
4. Industry Outlook for the First Quarter of 2021 and for the First Half of 2021	25-27
5. Appendix
5.1 Summary of Approved Investment Plan	28
5.2 Summary of Key Project Investment: Clean Fuel Project (CFP)	29
5.3 Plan of Scheduled Turnaround Maintenance in 2020	29
1

1. Company and its Subsidiaries' Operating Results

Management's Discussion and Analysis (MD&A)

Thai Oil Public Company Limited and Subsidiaries

For the Fourth Quarter and the Year 2020

1. Company and its Subsidiaries' Operating Results

Table 1: Summary of Consolidated Financial

(Million Baht)

Integrated Intake (kbd)

Gross Integrated Margin (GIM)(1) (US$/bbl)

: excluding Stock Gain/(Loss)

: including Stock Gain/(Loss)

(Million Baht)

Q4/20	Q3/20	+/(-)	Q4/19	+/(-)	2020	2019	+/(-)
281	261	20	316	(35)	281	300	(19)
3.6	1.0	2.6	4.4	(0.8)	2.4	4.7	(2.3)
5.8	4.9	0.9	5.1	0.7	0.1	5.2	(5.1)
Q4/20	Q3/20	+/(-)	Q4/19(2)	+/(-)	2020	2019(2)	+/(-)
Re-presented	Re-presented
Sales Revenue	59,592	57,225	2,367	95,852	(36,260)	242,840	361,768	(118,928)
Net Derivative Gain/(Loss) on Hedging
Instruments	(254)	144	(398)	288	(542)	(174)	359	(533)
EBITDA	3,493	3,819	(326)	4,243	(750)	(2,055)	14,149	(16,204)
Net Gain/(Loss) on Fair Value Measurement of
Financial Instruments(3)	(50)	33	(83)	-	(50)	(5)	-	(5)
Net Foreign Exchange Gain/(Loss) (4)	2,531	(453)	2,984	229	2,302	1,784	1,778	6
Gain from sale of investment in assosiated	5,801	-	5,801	-	5,801	5,801	-	5,801
Finance Costs	(986)	(1,172)	186	228	(1,214)	(4,292)	(3,224)	(1,068)
Reversal of Income Tax (Expense)	(2,384)	(33)	(2,351)	(346)	(2,038)	647	(1,240)	1,887
Net Profit/(Loss)	7,257	715	6,542	1,984	5,273	(3,301)	6,277	(9,578)
Basic Earnings/(Loss) per Share (Baht)	3.56	0.35	3.21	0.97	2.58	(1.62)	3.08	(4.70)
Stock Gain/(Loss)	1,791	2,986	(1,195)	619	1,172	(7,399)	1,581	(8,980)
Reversal/ (Write-Down) on Crude and
Petroleum Product Inventory(5)	83	378	(295)	315	(232)	(549)	659	(1,208)
Exchange Rate (Baht: 1 US$)	Q4/20	Q3/20	+/(-)	2020	2019	+/(-)
Average FX	30.79	31.49	(0.71)	30.46	0.33	31.46	31.22	0.25
Ending FX	30.21	31.83	(1.62)	30.33	(0.12)	30.21	30.33	(0.12)

Q4/19

+/(-)

Remark

• (1) Gross integrated margin is the integrated gross margin among Thaioil refinery, Thai Paraxylene Co., Ltd., LABIX Co., Ltd. and Thai Lube Base Plc.

• (2) Re-presented the impact on the financial statements in accordance with TFRS 5 - Non-Current Assets Held for Sale and Discontinued Operations.

• (3) Fair value measurement of financial instruments in accordance with TFRS 9 - Financial Instruments, which is effective from 1 January 2020.

• (4) Including net foreign exchange gain / (loss) on foreign currency assets and liabilities in Q4/20, Q3/20, Q4/19, 2020 and 2019 of Baht 2,866 million, Baht (641) million, Baht 647 million, Baht 1,991 million and Baht 1,607 million, respectively.

• (5) Including reversal / (write-down) of allowance for decline in value of crude and petroleum product inventories adjusted to net realizable value and reversal / (write-down) of petroleum product at cost.

Compared Q4/20 with Q3/20, Thaioil and Subsidiaries had an increase in integrated intake following recovered market condition from COVID-19 pandemic. As a result, total product sales volume increased from the previous quarter, together with higher product selling price, sales revenue of Baht 59,592 million was reported, an increase of Baht 2,367 million. Meanwhile, GIM excluding stock gain / (loss) of 3.6 US$/bbl was recorded during the period, an increase of 2.6 US$/bbl owing to 1) decline in crude premiums and 2) improved jet/kero spread following healthy demand for heating during winter despite a slight plummeting gasoline spread after ending driving season and entering to winter. Besides, gas oil spread over Dubai still pressured by weak demand from COVID-19 pandemic. For aromatics market, aromatics spreads over ULG95 increased thanks to better PX demand from economic recovery and a start up of a new PTA plant. In addition, downstream demand of BZ such as food packaging and packaging accompanying with online purchase increased during the city lockdown. LAB market, additionally, was supported by tight supply and firm LAB demand. Lube base oil market was also supported by tight supply after regional refineries had cut their production. Moreover, Asian demand recovery from lockdown easing and end of monsoon period helped push lube base oil spread. The positive expectation of COVID-19 situation after the effectiveness of vaccine trial had been reported that it was ready to use for limited group by year-end. Meanwhile, global oil demand rose after many Asian countries had resumed their economic activities, especially China and India. In addition, crude oil supply from OPEC+ alliances had not increased significantly. These resulted in an increased average Dubai price in Q4/63 from Q3/63 by 1.7US$/bbl. Therefore, Thaioil and Subsidiaries booked stock gain of 2.3 US$/bbl or Baht 1,791 million, a decrease of Baht 1,195 million from Q3/20, and had GIM including stock gain / (loss) of Baht 5.8 US$/bbl, an increase of 0.9 US$/bbl. Moreover, there was a reversal on crude and petroleum product inventory of Baht 83 million, decreased by Baht 295 million from the previous quarter. Altogether with net realized loss on financial instruments of Baht 254 million, Thaioil and Subsidiaries reported EBITDA of Baht 3,493 million, decreased by Baht 326 million. In addition, Thaioil and Subsidiaries had net loss on fair value measurements of financial instruments of Baht 50 million. However, net foreign exchange gain of Baht 2,531 million (which included net foreign exchange gain on foreign currency assets and liabilities of Baht 2,866 million) was booked due to Thai baht appreciation from the end of the previous quarter. Besides, there was a gain from sale of investment in Global Power Synergy Public Company Limited (GPSC) of Baht 5,801 million. Offsetting with depreciation, finance cost and income tax expense, Thaioil and Subsidiaries reported net profit of Baht 7,257 million or 3.56 Baht per share, increased by 6,542 million from the previous quarter.

Compared Q4/20 with Q4/19, Thaioil and Subsidiaries reported lower sales revenue by Baht 36,260 million mainly from drops in product selling price and total product sales volume, together with lower GIM excluding stock gain/ (loss) by 0.8 US$/bbl. This mainly came from a significant plunge in gross refining margin tracking declines in gasoline, jet/kero and gas oil spreads following weakened demand from COVID-19 pandemic. However, aromatics margin improved due to better BZ spread over ULG95. Besides, lube base oil improved inspite of a decline in bitumen spread over fuel oil, compared with the same period of the previous year. Combining stock gain of Baht 1,791 million which increased by Baht 1,172 million from Q4/19, the reversal on crude and petroleum product inventory of Baht 83 million and net derivative loss on hedging instruments of Baht 254 million, Thaioil and Subsidiaries, therefore, reported a decrease in EBITDA of Baht 750 million. Together with increased net foreign gain of Baht 2,302 million and gain from sale of investment in GPSC of baht 5,801 million, Thaioil and Subsidiaries recorded improved net profit by Baht 5,273 million.

Compared 2020 with 2019, Thaioil and Subsidiaries had sales revenue of Baht 242,840 million, a decrease of Baht 118,928 milion due to drops in average product selling price and total product sales volume as a result of oil price war and COVID-19 outbreak. Despite an improvement in LAB margin, Thaioil and Subsidiaries reported GIM excluding stock gain/ (loss) dropped by 2.3 US$/bbl to 2.4 US$/bbl. This was because of the declines in petroleum product spreads over Dubai, especially jet/kero and gas oil spreads despite of considerably lower crude premiums. Additionally, PX spread over ULG95 and byproduct, of lube base oil and bitumen business,