Management's Discussion and Analysis (MD&A)

Thai Oil Public Company Limited

For The Third Quarter and

The First Nine Month of 2019

Table of Contents

Page

1. Company and its Subsidiaries' Operating Results

2-4

2. Summary of Financial Result by Business

5

2.1

Market Condition and Financial Result of Refinery Business

6-8

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

12-13

2.5

Financial Result of Power Generation Business

14-15

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

17-18

2.8

Financial Result of Ethanol Business

18

3. Analysis of Consolidated Financial Statement

3.1

Statement of Financial Position

19-20

3.2

Statement of Cash Flows

21

3.3

Financial Ratios

22

3.4

Industry Outlook for the Forth Quarter of 2019 and for the Year 2020

23-25

4. Appendix

5.1

Summary of Investment Plan

26

5.2

Summary of Key Project Investment: Clean Fuel Project (CFP)

27

1

Management's Discussion and Analysis (MD&A)

Thai Oil Public Company Limited and Subsidiaries

For the Third Quarter and the First Nine Month of 2019

1. Company and its Subsidiaries' Operating Results

Table 1: Summary of Consolidated Financial Results

(Million Baht)

Q3/19

Q2/19

+/(-)

Q3/18

+/(-)

9M/19

9M/18

+/(-)

Integrated Intake (kbd)

270

288

(18)

320

(50)

294

310

(16)

Gross Integrated Margin (GIM)(1)

(US$/bbl)

: excludingStock Gain/(Loss)

5.1

4.2

0.9

7.2

(2.1)

4.9

7.1

(2.2)

: includingStock Gain/(Loss)

3.3

4.0

(0.7)

8.7

(5.4)

5.2

9.3

(4.1)

(Million Baht)

Q3/19

Q2/19

+/(-)

Q3/18

+/(-)

9M/19

9M/18

+/(-)

Sales Revenue(2)

82,329

91,962

(9,633)

100,720

(18,391)

265,916

288,893

(22,977)

Net Derivative Gain/(Loss) on Hedging

Instruments

147

90

57

(140)

287

71

32

39

EBITDA

945

2,072

(1,127)

7,124

(6,179)

9,906

23,820

(13,914)

Net Foreign Exchange Gain/(Loss)(3)

303

594

(291)

548

(245)

1,549

860

689

Finance Costs

(1,041)

(1,196)

155

(844)

(197)

(3,452)

(2,864)

(588)

Income Tax Expense

222

(116)

338

(1,008)

1,230

(895)

(3,298)

2,403

Net Profit/(Loss)

(683)

567

(1,250)

4,558

(5,241)

4,293

14,961

(10,668)

Basic Earnings/(Loss) per Share (Baht)

(0.33)

0.28

(0.61)

2.23

(2.56)

2.10

7.33

(5.23)

Stock Gain/(Loss)

(1,373)

(138)

(1,235)

1,169

(2,542)

963

5,896

(4,933)

(Write-Down to)/a Reversal of NRV on Crude

Inventory (4)

(14)

(72)

58

-

(14)

682

-

682

Exchange Rate (Baht: 1 US$)

Q3/19

Q2/19

+/(-)

Q3/18

+/(-)

9M/19

9M/18

+/(-)

Average FX

30.88

31.76

(0.88)

33.15

(2.27)

31.47

32.33

(0.86)

Ending FX

30.77

30.92

(0.15)

32.58

(1.81)

30.77

32.58

(1.81)

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.

  1. The comparative figures have been adjusted due to reclassification.
  2. Including net foreign exchange gain on foreign currency assets and liabilities in Q3/19, Q2/19, Q3/18, 9M/19 and 9M/18 of Baht 287 million, Baht 339 million, Baht 305 million, Baht 960 million, and Baht 487 million, respectively
  3. Excluding (Write-Down to)/a Reversal of NRV on product inventory in Q3/19, Q2/19, and 9M/19 of Baht 677 million, Baht (677) million and Baht 545 million which were included in cost of sales of goods and services in the financial statements.

2

Compared Q3/19 with Q2/19, Thaioil and Subsidiaries had a planned major turnaround at Crude Distillation Unit - 3: CDU-3 and other production units as well as aromatic production units. At the same time, tie-in activities to connect the units to Clean Fuel Project (CFP) were conducted from mid June to late July 2019. Therefore, the integrated intakes and product sales volume declined from the previous quarter. We posted GIM excludingstock gain/ (loss) of 5.1 US$/bbl, increased by 0.9 US$/bbl because of higher product spreads, especially that of gasoline which was supported by higher demand from driving season in the US, and gas oil and jet/kero spreads which were supported by tigher supply follower lower regional production and the attack on Saudi Arabia's oil processing facilities. For aromatics market, PX spread over ULG95 decreased following the additional supply from a new aromatic plant in China while BZ spread recovered after a depressed BZ market in Q2/19. Meanwhile, LAB market, the demand was boosted by 1) lower supply as a Chinese LAB plant was shutdown for maintenance 2) a permanent closure of a Japanese LAB plant 3) an Indian LAB plant production disruption from lack of feedstock. For lube base oil and bitumen market, the demand was under pressure from economic slowdown following the trade war situation between China and the US. However, bitumen spread widened because of lower fuel oil price ahead of the adoption of International Maritime Organization (IMO) measure to control fuel used in marine transportation in 2020. However, Dubai crude oil price declined from the previous quarter especially in August which was the period that Thaioil and Subsidiaries had fully resumed the operations after major turnarounds. As such, Thaioil and Subsidiaries reported a stock loss of 1.8 US$/bbl (Baht 1,373 million) and GIM includingstock gain/ (loss) of 3.3 US$/bbl, decreased by 0.7 US$/bbl. Including net derivative gain on hedging instruments of Baht 147 million and planned major turnaround expenses of CDU-3, and other subunits as well as Aromatics Complex of Baht 444 million in this quarter, Thaioil and Subsidiaries posted EBITDA of Baht 945 million, decreased by Baht 1,127 million. In addition, Thaioil and Subsidiaries had net foreign exchange gain of Baht 303 million (which included net foreign exchange gain on foreign currency assets and liabilities of Baht 287 million), decreased by Baht 291 million as a result of an appreciation in Thai Baht against US Dollar, compared with the end of past quarter. During the period, finance costs of Baht 1,041 million were booked, a decrease of Baht 155 million from Q2/19 as a portion of finance cost was capitalized as a part of asset under construction and stronger Thai Baht. Offsetting with depreciation and income tax expense, Thaioil and Subsidiaries recorded net loss of Baht 683 million or Baht 0.33 per share in Q3/19, compared with net profit of Baht 567 milion in Q2/19.

Compared Q3/19 with Q3/18, Thaioil and Subsidiaries had sales revenue decreased by Baht 18,391 million due to planned major turnarounds since mid-June 2019 to late-July 2019 and decreases in product selling prices. GIM excludingstock gain/ (loss) declined by 2.1 US$/bbl from lower aromatics spreads because of surplus supply in the market following a start-up of a new Chinese aromatic plant in Q2/19 as well as lower GRM because of higher Cude Premium. Altogether with stock loss from lower crude oil price, Thaioil and Subsidiaries posted a drop in GIM includingstock gain/ (loss) of 5.4 US$/bbl. Altogether with net derivative gain on hedging instruments and major turnaround costs, Thaioil and Subsidiaries reported declines in EBITDA and net profit by Baht 6,179 million and Baht 5,241 million from Q3/18 respecitvely.

Compared 9M/19 with 9M/18, Thaioil and Subsidiaries reported sales revenue of Baht 265,916 million, lower by Baht 22,977 million following lower sales volume from major turnarounds and lower average product selling prices tracking lower crude oil price. Petroluem product spreads also declined especially that of gasoline and gas oil because of excess supply in the market at the beginning of the year and lower oil demands for heating purposes from an unusual warm winter. Moreover, aromatics spreads especially BZ spread over ULG95 and lube base oil spreads over fuel oil plummeted because of excess supply in the market. Therefore, Thaioil and Subsidiaries posted GIM excludingstock gain/ (loss) declined by 2.2 US$/bbl to 4.9 US$/bbl. In 9M/19, Thaioil and Subsidiaries also reported a stock gain of Baht 963 million due to rising crude oil price from 9M/18. Thaioil and Subsidiaries posted EBITDA of Baht 9,906 million, plunged by Baht 13,914 million which included major turnaround expenses of Baht 878 million and net derivative gain on

3

hedging instruments of Baht 71 million. However, Thaioil and Subsidiaries had net foreign exchange gain of Baht 1,549 million, increased by Baht 689 million owing to Thai Baht appreciation while it reported finance cost of Baht 3,452 million, increased by Baht 588 million because of new US$ denominated bonds of USD 1,000 million from late Q4/18. Furthermore, in Q2/19 Thaioil and Subsidiaries recorded severance expense of Baht 384 million due to the recognition of provision for employee benefits in accordance with the new Labour Protection Act, which stipulated additional compensation rates for employees who have worked for 20 years or more to have the right to receive compensation not less than the final 400-day wages from the original of 300 days. Hence, Thaioil and Subsidiaries recorded net profit of Baht 4,293 million in 9M/19, fallen by Baht 10,668 million.

On July 26, 2019, the Board of Directors meeting of Thai Oil Public Company Limited has passed resolution on the provision of support to Global Power Synergy Public Company Limited ("GPSC") (the Company has both direct and indirect ownership of 24.29%) in the plan to increase its registered capital. The Company and Thaioil Power Company Limited ("TP") (a subsidiary - 73.99% owned by the Company), are holding in GPSC 8.91% and 20.79% respectively, will subscribe such shares in proportion of their shareholding under the rules and conditions of GPSC on the subscription of the capital increase. The board approved financing arrangement for Thaioil Power Company Limited ("TP") (73.99% owned by the Company), by lending through Thaioil Treasury Center Company Limited ("TTC") (a wholly-owned subsidiary of the Company) and lending limit not exceed THB 11,385 million, to purchase the newly issued shares in GPSC.

4

2. Summary of Financial Result by Business

Table 2: Financial Result by Business

(Million Baht)

Sales Revenue

Q3/19

Q2/19

+/(-)

Q3/18

+/(-)

9M/19

9M/18

+/(-)

Consolidated(1)

82,329

91,962

(9,633)

100,720

(18,391)

265,916

288,893

(22,977)

Refinery(1)

85,185

94,544

(9,359)

107,125

(21,940)

274,814

302,245

(27,431)

Aromatics and LAB(2)

10,384

13,498

(3,114)

17,997

(7,613)

38,331

49,412

(11,081)

Lube Base Oil

4,288

4,827

(539)

5,007

(719)

13,819

15,018

(1,199)

Power Generation(3)

2,851

2,969

(118)

3,063

(212)

8,791

8,643

148

Solvent(4)

2,508

2,175

333

2,583

(75)

6,942

7,375

(433)

Marine Transportation(5)

168

156

12

157

11

494

470

24

Ethanol(6)

356

362

(6)

362

(6)

1,095

1,106

(11)

Others(7)

946

1,002

(56)

454

492

2,869

1,070

1,799

EBITDA

Q3/19

Q2/19

+/(-)

Q3/18

+/(-)

9M/19

9M/18

+/(-)

Consolidated

945

2,072

(1,127)

7,124

(6,179)

9,906

23,820

(13,914)

Refinery

(307)

252

(559)

4,444

(4,751)

4,398

16,058

(11,660)

Aromatics and LAB

331

612

(281)

1,622

(1,291)

2,509

3,942

(1,433)

Lube Base Oil

258

436

(178)

222

36

791

1,239

(448)

Power Generation

559

637

(78)

683

(124)

1,772

2,025

(253)

Solvent

83

87

(4)

101

(18)

320

379

(59)

Marine Transportation

15

10

5

32

(17)

61

84

(23)

Ethanol

48

39

9

32

16

125

115

10

Others

25

40

(15)

17

8

97

38

59

Net Profit / (Loss)

Q3/19

Q2/19

+/(-)

Q3/18

+/(-)

9M/19

9M/18

+/(-)

Consolidated(8)

(683)

567

(1,250)

4,558

(5,241)

4,293

14,961

(10,668)

Refinery

(1,108)

(441)

(667)

2,948

(4,056)

1,419

10,070

(8,651)

Aromatics and LAB

(181)

40

(221)

837

(1,018)

634

1,784

(1,150)

Lube Base Oil

187

322

(135)

158

29

565

935

(370)

Power Generation (9)

467

572

(105)

566

(99)

1,521

1,767

(246)

Solvent

(60)

(4)

(56)

16

(76)

(19)

137

(156)

Marine Transportation

(19)

(70)

51

(2)

(17)

(91)

21

(112)

Ethanol

(2)

(17)

15

(10)

8

(3)

(3)

-

Others (10)

40

53

(13)

38

2

148

73

75

Remark(1) The comparative figures have been adjusted due to reclassification.

(2)Thai Paraxylene Co., Ltd. invested 75% of total investment in LABIX Co., Ltd. which produces an intermediate for the production of surfactants (LAB).

  1. Thaioil Plc. shares 73.99% in Thaioil Power Co., Ltd., and shares 99.99% in TOP SPP Co., Ltd. for small power plants (SPPs) business.
  2. Including Thaioil Solvent Co., Ltd., having respective interests in TOP Solvent Co., Ltd., Sak Chaisidhi Co., Ltd. and TOP Solvent (Vietnam) LLC.
  3. Including Thaioil Marine Co., Ltd., having respective interests in Thaioil Marine International Pte. Ltd., TOP Maritime Service Co., Ltd., TOP-NTL Pte. Ltd., TOP- NTL Shipping Trust, TOP Nautical Star Co., Ltd., TOP-NYK MarineOne Pte. Ltd., and T.I.M. Ship Management Co., Ltd.
  4. Including Thaioil Ethanol Co., Ltd., having respective interests in Sapthip Co., Ltd., Ubon Bio Ethanol Co., Ltd. and Maesod Clean Energy Co., Ltd. in which investment was disposed in February 2017.
  5. Including Thaioil Energy Services Co., Ltd. (TOP holds 99.99% shares) which provides human resources management service and Thaioil Treasury Center Co., Ltd (TOP holds 99.99% shares) which conducts the business in the area of International Business Center (IBC) and Treasury Center (TC) for Thaioil and Subsidiaries.
  6. Including dividends received from Thai Petroleum Pipeline Co., Ltd. of Baht 160 million for Q2/18 and 9M/18 and Baht 154 million for Q3/19 and 9M/19
  7. Including Thaioil and Subsidiaries' share of profits from the investments in Global Power Synergy Public Company Limited (GPSC).
  8. Including net profit / (loss) from Thaioil Energy Services Co., Ltd. and Thaioil Treasury Center Co., Ltd. and shares of profits from the investments in PTT Digital Solutions Co., Ltd. and PTT Energy Solutions Co., Ltd.

5

2.1 Market Condition and Financial Result of Refinery Business

Table 3: Average Crude Oil Price, Petroleum Product Prices and Crack Spreads

Average Prices (US$/bbl)

Q3/19

Q2/19

+/(-)

Q3/18

+/(-)

9M/19

9M/18

+/(-)

Dubai Crude Oil

61.1

67.4

(6.3)

74.3

(13.2)

64.0

70.1

(6.1)

Unleaded Gasoline (ULG95)

72.8

74.9

(2.1)

85.8

(13.0)

71.6

82.6

(11.0)

Jet/Kero

76.9

79.6

(2.7)

88.8

(11.9)

77.7

85.4

(7.7)

Gas Oil (GO)

76.5

79.7

(3.2)

88.7

(12.2)

77.5

84.7

(7.2)

Fuel Oil (HSFO)

62.1

65.1

(3.0)

71.7

(9.6)

63.7

66.1

(2.4)

Spreads over Dubai (US$/bbl)

Q3/19

Q2/19

+/(-)

Q3/18

+/(-)

9M/19

9M/18

+/(-)

Unleaded Gasoline (ULG95)

11.7

7.5

4.2

11.6

0.1

7.6

12.5

(4.9)

Jet/Kero

15.7

12.2

3.5

14.5

1.2

13.6

15.3

(1.7)

Gas Oil (GO)

15.3

12.4

2.9

14.4

0.9

13.5

14.6

(1.1)

Fuel Oil (HSFO)

(2.3)

3.2

(2.5)

3.4

(4.0)

3.7

0.9

(0.3)

Remark

Closing Dubai crude oil at the end of Q3/19, Q2/19, and Q3/18 were calculated from average Dubai price of September 2019, June 2019, and September 2018,

respectively. The prices were 61.1 US$/bbl, 61.8 US$/bbl, and 77.3 US$/bbl, respectively.

Graph 1: Prices of Crude Oil and Petroleum Product

Crude oil price in Q3/19 declined compared with that of Q2/19 and Q3/18 following lower global oil demand as the world economy was slowing down from the ongoing trade war between the US and China. Furthermore, in October 2019, International Energy Agency (IEA) revised down world oil demand for year 2019 to 1.0 million barrels per day from its September 2019 forecast at 1.1 million barrels per day. However, crude oil price was supported by 1) the cooperation on the extension of the production cut of approximately 1.2 million barrels per day between both OPEC and non-

OPEC producers for another 9 months ending in March 2020, 2) lower US crude production in July 2019 following the supply cut by approximately 1.1 million barrel per day after there was the Tropical Storm Barry in the Gulf of Mexico, and 3) concern over the incident in the Middle East after Saudi Arabia's oil processing facilities were attacked on 14 September 2019 which resulted in a decline of 5.7 million barrels per day production or 5% of the world oil production.

Gasoline spread over Dubai in Q3/19 was close to that of Q3/18 but rose from Q2/19 because of increasing demand from the US for its driving season. Besides, gasoline supply in the market declined from a fire at a refinery in the US whose total capacity was 335,000 barrels per day caused it to be permanently closed. Unfortunately, the gasoline market was pressured by higher export from China than the previous quarter and the previous year due to a start-up of a large refinery in China in mid Q2/19 causing the world gasoline inventory level to be higher than the 5-year-average. For gas oil and jet/kero spreads over Dubai in Q3/19 which increased from Q2/19 and Q3/18 as the market was supported by a decrease in supply as some Asian refineries reduced their production rates following low refining margin. Moreover, the attack on the Saudi Arabian oil processing facilities resulted in a tight supply of gas oil and jet/kero in the Middle East. Additionally, the ongoing trade war between the US and China altogether with monsoon season in Asia also depressed gas oil and jet demand further. Fuel oil spread over Dubai in Q3/19 rose from the previous quarter and the same period last year because of the increasing demand for electricity generation in the Middle East in summer amid tigher supply as a number of refineries began to switch its production to low sulfur fuel oil in anticipation of IMO requirement.

6

Table 4: Financial Result of Refinery Business

Q3/19

Q2/19

+/(-)

Q3/18

+/(-)

9M/19

9M/18

+/(-)

Throughput(1) (%)

97%

103%

(6%)

115%

(18%)

105%

112%

(7%)

Intake (kbd)

267

283

(16)

315

(48)

290

307

(17)

Gross Refining Margin (GRM) (US$/bbl)

: excludingStock Gain/(Loss)

4.1

2.6

1.5

5.0

(0.9)

3.2

4.9

(1.7)

: includingStock Gain/(Loss)

2.3

2.4

(0.1)

6.4

(4.1)

3.6

7.2

(3.6)

Remark(1) Throughput (%) calculated based on 275,000 barrels per day

In Q3/19, the refinery had a considerable drop in throughput due to its planned major turnaround continuing from prior quarter. However, it reported an increase in GRM excludingstock gain/(loss) owing to widenedproduct spreads. Unfortunately, stock loss and major turnaround costs led to loss on EBITDA and net loss in Q3/19.

For 9M/19, the refinery posted dramatically declinedGRM excludingstock gain/(loss). With lower stockgain and higher finance costs, Thaioil refinery reported less EBITDA and

In Q3/19, Thaioil refinery underwent planned major turnarounds of Crude Distillation Unit - 3 (CDU-

  1. and other related production units since mid-June 2019 until mid-July 2019 which led to refinery throughput of 97%, plunged by 6%, and had lower total product sales volume by 4% from Q2/19. The refinery had petroleum product sales mix of 89% for domestic, 8% for Indochina and the rest 3% for export. It reported sales revenue of Baht 85,185 million, dipped by Baht 9,359 million, and posted GRM excludingstock gain/(loss) of 4.1 US$/bbl, rose by 1.5 US$/bbl from the last quarter. This was mainly due higher product spreads especially that of gasoline which was supported by the driving season in the US and that of jet/kero from lower supply after the incident in Saudi Arabia and the reduction in production rates of Asian refineries. However, Dubai crude oil price declined from the previous quarter, especially in August which was when Thaioil refinery resumed its operation from turnaround and had ran at full capacity. This led to a stock loss of 1.8 US$/bbl or Baht 1,373 million, compared with stock loss of Baht 138 million in Q2/19. It also had a reversal of NRV on petroleum inventory of Baht 663 million, which mostly came from the reversal of NRV on petroleum inventory of finished products, compared with a write-down to NRV of Baht 749 million in Q2/19. Combining with net derivative loss on hedging instruments of Baht 130 million and planned major turnaround expenses of Baht 326 million, the refinery then reported loss on EBITDA of Baht 307 million, plunged by Baht 559 million from Q2/19. However, the refinery had net foreign exchange gain of Baht 371 million (which included net foreign exchange gain on foreign currency assets and liabilities of Baht 287 million), decreased by Baht 229 million from prior quarter. Offsetting with depreciation and finance costs and including a reversal of income tax expense, Thaioil refinery reported net loss of Baht 1,108 million (including dividend income, it had net loss of Baht 484 million), compared with net loss of Baht 441 million in Q2/19.

Compared with Q3/18, Thaioil refinery had a 18% decease in throughput with a lower sales revenue of Baht 21,940 million owing to lower total product sales volume by 8% and lower average selling prices. Its GRM excludingstock gain/(loss) dropped by 0.9 US$/bbl mainly because of higher crude premium. Morover, the refinery had stock loss of Baht 1,373 million in Q3/19 while recording stock gain of Baht 1,169 million in Q3/18. This led Thaioil refinery to post EBITDA reduced by Baht 4,751 million, which included higher net derivative loss on hedging instruments by Baht 118 million. Offsetting with depreciation and finance costs and including the reversal of income tax expense, Thaioil refinery booked net loss of Baht 1,108 million while it booked net profit of Baht 2,948 million from Q3/18.

7

Comparing 9M/19 with 9M/18, Thaioil refinery had a 7% decrease in throughput and had sales revenue of Baht 274,814 million, dropped by Baht 27,431 million following lower average selling prices. The refinery reported GRM excludingstock gain/(loss) of 3.2 US$/bbl, significantly dropped by 1.7 US$/bbl, mainly because of the reductions in gasoline and jet/kero spreads due to surplus supply despite a decline in crude premium following increased light crude supply. However, Thaioil refinery had stock gain of 0.4 US$/bbl or Baht 963 million compared with Baht 5,896 million in 9M/18. Moreover, it booked net derivative loss on hedging instruments of Baht 151 million compared with net derivative gain on hedging instruments of Baht 175 million in the same period last year. Including major turnaround costs, the refinery record EBITDA of Baht 4,398 million, decreased by Baht 11,660 million. Besides, Thaioil refinery had net foreign exchange gain of Baht 1,631 million, increased by Baht 922 million, and had finance cost rose by Baht 1,013 million which was because of higher long-term borrowings from TTC in order to prepare financial readiness to support an investment in Clean Fuel Project. Offsetting with depreciation and income tax expense, Thaioil refiney reported net profit of Baht 1,419 million, reduced by Baht 12,909 million from 9M/18 (including dividend income in 9M/19, it had net profit of Baht 3,913 million).

8

2.2 Market Condition and Financial Result of Aromatics Business

Table 5: Average Prices and Spreads of Aromatics Products

Average Prices (US$/Ton)

Q3/19

Q2/19

+/(-)

Q3/18

+/(-)

9M/19

9M/18

+/(-)

Paraxylene (PX)(1)

813

909

(96)

1,180

(367)

934

1,042

(108)

Benzene (BZ)(2)

679

625

54

856

(177)

631

863

(232)

Toluene (TL)(2)

657

649

8

788

(131)

640

753

(113)

Spreads over ULG95 (US$/Ton)

Q3/19

Q2/19

+/(-)

Q3/18

+/(-)

9M/19

9M/18

+/(-)

Paraxylene (PX)

194

273

(79)

451

(257)

325

341

(16)

Benzene (BZ)

60

(12)

72

126

(66)

22

161

(139)

Toluene (TL)

38

13

25

58

(20)

31

51

(20)

Remark(1) Based on CFR Taiwan price

(2) Based on FOB Korea price

Graph 2: Prices of Aromatics Products and ULG95

US$/Ton

ULG95

PX CFR

BZ FOB

TOL FOB

1,400 1,200 1,000 800 600 400 200 0

Q1/18

Q2

Q3

Q4

Q1/19

Q2

Q3

Besides, a rise in ULG95 price from tight supply after refineries in spread over ULG95.

In Q3/19, PX price and its spread over ULG95 weakened from Q2/19 and Q3/18 tracking crude oil price and surplus supply from a start up of a new aromatics plant in China with total PX capacity of 4.5 million tons per annum in Q2/19 which was earlier than expected (it was expected to

start in the second half of 2019). Moreover, the expectation that another new aromatics plant in China with total capacity of 1.0 million tons per annum will start up in Q3/19 pressuring PX market. However, the start up was postponed to Q4/19 amid weakened seasonal demand.

Asia Pacific were under maintenance shutdowns, pressuring PX

In Q3/19, BZ price and its spread over ULG95 recovered from Q2/19 which BZ market was substantially depressed. This was resulted from excess supply from more BZ production than demand after aromatics producers had ramped up their PX production in order to capture gains from a healthy PX price since late 2018. However, BZ supply in Asia was reduced because 1) some higher cost producers had cut their production 2) BZ was exported to the US as the difference in prices between the two regions was higher than freight cost. Meanwhile, BZ price and its spread over ULG95 were weakened from Q3/18 tracking lower crude oil price. Additionally, import demand in China remained weak owing to a start up of new aromatics plant in China since Q2/19 and sluggish downstream demand from the US-China trade war pressuring BZ market.

TL price and its spread over ULG95 in Q3/19 slightly increased from Q2/19 because there was import demand from China and the US for gasoline octane booster during driving season. However, both TL price and its spread over ULG95 in Q3/19 was lower than Q3/18 due to lower crude oil price and sluggish demand for PX and BZ production as some aromatics plants in Asia and the US were temporary shutdowns as they could not achieve break even points.

9

Table 6: Financial Result of TPX

Q3/19

Q2/19

+/(-)

Q3/18

+/(-)

9M/19

9M/18

+/(-)

Aromatics Production Rate (1) (%)

54%

64%

(10%)

89%

(35%)

70%

88%

(18%)

Aromatics Production (kTon)

113

134

(21)

187

(74)

436

550

(114)

Product-to-feed Margin(2) (US$/Ton)

42

75

(33)

129

(87)

93

110

(17)

Remark(1)

Based on a nameplate capacity of 838,000 Tons/year (527,000 tons of paraxylene per year, 259,000 tons of benzene per year and 52,000 tons of mixed xylene

per year)

(2)

Calculated from gross margin divided by feedstock volume (Ton)

In Q3/19, TPX had continued planned major turnaround of its Aromatics Complex from late Q2/19. Meanwhile, PX spread over ULG95 decreased owing to a surplus supply from the start up of a new aromatics plant in China. Together with larger planned maintenance shutdown expenses, TPX reported reductions in product-to- feed margin and net loss.

In 9M/19, TPX had dropped performance from 9M/18 due to the planned major turnaround while aromatic spreads over ULG95 dropped from excess

supply. This resulted in

product-to-feed margin and

net profit to decrease.

In Q3/19, Thai Paraxylene Co., Ltd. (TPX) had a 54% aromatics production rate owing to the planned major turnaround of its Aromatics Complex from mid-June 2019 to late July 2019. This resulted in sales volume decreased from Q2/19 by 34% and sales revenue of Baht 6,413 million, fallen by Baht 2,750 million from Q2/19. Moreover, an increase in aromatics supply after the new Chinese aromatics plant started up, led to declines in aromatics product prices and its spreads over ULG95, despite a recovered BZ price and its spread over ULG95. This resulted in product-to-feed margin of 42 US$/Ton, decreased by 33 US$/Ton. However, TPX had net derivative gain on hedging instruments which mainly from PX spread over ULG95 of Baht 274 million, increased by Baht 219 million from Q2/19. Furthermore, there were planned major maintenance expenses of Baht 118 million, increased by Baht 46 million. Thus, TPX recorded EBITDA of Baht 114 million, decreased by Baht 328 million. Offsetting with depreciation, finance costs and plus a reversal of income tax expense, TPX posted net loss of Baht 174 million, declined by Baht 253 million from Q2/19.

Compared Q3/19 with Q3/18, TPX had sales revenue dipped by Baht 7,198 million or 53% due to a decrease in sales volume following the planned major turnaround. Moreover, drops in aromatics prices and its spread over ULG95 tracking crude oil price and a rise in supply from the new producer as well as a decrease in BZ demand from the prolonged US-China trade war. This resulted in a decline in product-to-feed margin of 87 US$/Ton. Therefore, in Q3/19, TPX posted EBITDA and net profit decreased by Baht 1,326 million and Baht 993 million, respectively.

Compared 9M/19 with 9M/18, TPX had sales revenue of Baht 25,795 million, decreased by Baht 10,496 million or 29% mainly because of lower sales volume following the planned major turnaround and lower product selling prices. Furthermore, TPX had product-to-feed margin of 93 US$/Ton, decreased by 17 US$/Ton owing to falling aromatics spread over ULG95, especially BZ spread over ULG95 which declined by 139 US$/Ton. However, TPX had net derivative gain on hedging instruments which mainly from PX spread over ULG95 of Baht 219 million, compared with derivative loss on hedging instruments of Baht 127 million in 9M/18. This caused TPX to have EBITDA of Baht 1,978 million, dropped by Baht 1,387 million. Additionally, TPX had net foreign exchange loss of Baht 1 million compared with net foreign exchange gain of Baht 60 million in 9M/18. Offsetting with depreciation, finance costs and income tax expense, TPX reported net profit of Baht 743 million, reduced by Baht 1,069 million from 9M/18.

10

In Q3/19, aromatics group (TPX holds 75% shares of LABIX) had consolidated sales revenue of Baht 10,384 million, consolidated EBITDA of Baht 331 million and consolidated net loss of Baht 181 million. For 9M/19, aromatics group had consolidated sales revenue of Baht 38,331 million, consolidated EBITDA of Baht 2,509 million and consolidated net profit of Baht 634 million.

2.3 Market Condition and Financial Result of an Intermediate for the Production of Surfactants Business

Table 7: Average Price of LAB

Average Price (US$/Ton)

Q3/19

Q2/19

+/(-)

Q3/18

+/(-)

9M/19

9M/18

+/(-)

Linear Alkylbenzene (LAB)(1)

1,281

1,253

28

1,340

(59)

1,249

1,319

(70)

Remark(1) Based on ICIS price

Graph 3: Price of LAB

LAB price in Q3/19 improved from Q2/19 following higher benzene price which was one of the LAB feedstocks and tighter supply in Q3/19 from a Chinese LAB plant maintenance and a permanent closure of a Japanese LAB plant whose total production capacity was 90,000 tons per year in late May 2019. Besides, some Indian LAB plants were experiencing production problem and feedstock problem.

Compared with Q3/18, LAB price declined in Q3/19 following lower feed stock prices tracking crude oil price. However, LAB price did not go down as much as there were higher maintenance activities at some LAB plants in the region compared with the same period

last year.

Table 8: LAB Production

Q3/19

Q2/19

+/(-)

Q3/18

+/(-)

9M/19

9M/18

+/(-)

LAB Production Rate(1) (%)

113%

112%

1%

103%

10%

113%

103%

10%

LAB Production (kTon)

34

34

-

31

3

102

92

10

Remark(1) Based on nameplate capacity of 120,000 Tons/year

In Q3/19, LABIX reported lower net loss from higher gross margin and higher other incomes.

In 9M/19, LABIX had higher net loss from lower LAB prices

In Q3/19, LABIX Co., Ltd. (LABIX) had sales revenue of Baht 4,193 million, decreased by Baht 361 million from Q2/19 from lower LAB sales volume by roughly 9% despite higher LAB price. However, LABIX reported higher gross margin from tigher supply. Altogether with higher other income, LAB reported higher EBITDA of Baht 46 million to Baht 216 million. Offsetting with depreciation and finance costs, LABIX reported net loss of Baht 8 million while it reported net loss of Baht 52 million in Q2/19.

Compared with Q3/18m LABIX reported lower sales revenue of Baht 485 million following lower LAB prices tracking lower feedstock prices despite higher LAB sales volume by roughly 26%. LABIX gross margin increased from tigher supply and other income. Therefore, LABIX reported higher EBITDA of Baht 34 million and FX gain of Baht 3 million, a decline of Baht 73 million last year. Offsetting with

11

depreciation and finance costs, LABIX reported net loss of Baht 8 million while it reported net profit of Baht 24 million in Q3/18.

For 9M/19 compared with 9M/18, LAB reported sales revenue of Baht 13,177 million, lower by Baht 811 million from lower LAB price tracking its feedstock price while it had higher sales volume of 6%. As such, LABIX reported lower EBITDA of Baht 47 million to Baht 530 million. Including net foreign exchange gain of Baht 17 million, lowered than 9M/18 by Baht 47 million, and offsetting with depreciation and finance costs, LABIX recorded net loss of Baht 146 million, compared with net loss of Baht 37 million in the same period of previous year.

2.4 Market Condition and Financial Result of Lube Base Oil Business

Table 9: Average Prices and Spreads of Key Lube Base Oil Products

Average Prices (US$/Ton)

Q3/19

Q2/19

+/(-)

Q3/18

+/(-)

9M/19

9M/18

+/(-)

500SN(1)

677

700

(23)

873

(196)

705

890

(185)

Bitumen(2)

395

409

(14)

415

(20)

390

365

25

Spreads over HSFO (US$/Ton)

Q3/19

Q2/19

+/(-)

Q3/18

+/(-)

9M/19

9M/18

+/(-)

500SN

283

287

(4)

417

(134)

300

470

(170)

Bitumen

1

(4)

5

(41)

42

(14)

(54)

40

Remark(1) Based on Ex-tank Singapore price

(2) Based on FOB Singapore price

Graph 4: Prices of Lube Base Oil (500SN), Bitumen and Fuel Oil

US$/Ton

HSFO

500SN

Bitumen

1,000

800

600

400

200

0

Q2

Q3

Q4

Q1/19

Q2

Q

Q1/18

respectively.

Lube base oil price (500SN) and its spread over fuel oil in Q3/19 dropped from Q2/19 and Q3/18 due to a continuous drop of demand as a result of sluggish world economy from the prolonged US-China trade war. Additionally, there was an additional supply from a new lube base plant producing lube base oil Group II in Singapore and China with total capacity of

0.1 million tons per annum each. However, many lube base oil plants in Asia had annual maintenance shutdowns, such as those in South Korea, Singapore, and China whose total capacities were 1.3, 0.7, and 0.2 million tons per annum,

Bitumen price in Q3/19 was weakened from Q2/19 and Q3/18 since demand was pressured from inclement weather for construction during rainy season and sluggish world economy from trade war. However, bitumen spread over fuel oil in Q3/19 improved from Q2/19 and Q3/18 thanks to lower fuel oil price ahead of the adoption of the new maritime regulation imposed by IMO which limits the amount of sulfur in fuel used by ocean liners to be no more than 0.5%.

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Table 10: Financial Result of TLB

Q3/19

Q2/19

+/(-)

Q3/18

+/(-)

9M/19

9M/18

+/(-)

Base Oil Production Rate(1) (%)

81%

85%

(4%)

72%

9%

85%

83%

2%

Base Oil Production (kTon)

54

57

(3)

49

5

170

167

3

Product-to-feed Margin(2) (US$/Ton)

83

94

(11)

66

17

79

89

(10)

Remark(1) Based on nameplate capacity of 267,015 Tons/year

(2) Calculated from gross margin divided by feedstock volume (Ton)

In Q3/19, TLB had decreases in sales revenue and product-to-feed margin mainly from lube base oil spread over fuel oil pressured from higher supply. This resulted in lower EBITDA and net profit than last quarter.

Compared 9M/19 with 9M/18, TLB had lowered performance owing to both lower average selling price per unit and lube base oil spread over fuel oil.

Compared Q3/19 with Q2/19, Thai Lube Base Plc. (TLB) had base oil production rate of 81%. There was sales revenue of Baht 4,288 million, decreased by Baht 539 million mainly because of worsened average product selling prices tracking with lower demands of lube base oil and bitumen from trade war and inclement weather during rainy season. Moreover, lube base oil spreads over fuel oil dropped as a consequence of sluggish world economy from the prolonged trade war and the coming of new supply from lube base plant producing lube base oil Group II in Asia. However, lower fuel oil price ahead of the new maritime regulations from International Maritime Organization (IMO) next year led to an increase in bitumen spread over fuel oil. These led TLB to report product-to-feed margin of 83 US$/Ton, reduced by 11 US$/Ton from the previous quarter and to record EBITDA of Baht 258 million, decreased by Baht 178 million. Offsetting with depreciation and income tax expense, TLB posted net profit of Baht 187 million, decreased by Baht 135 million from last quarter.

Compared with Q3/18, TLB had higher base oil production rate by 9%, since in Q3/18, quality of feedstock imported was below the required specification. Nevertheless, sales revenue dropped by Baht 719 million due to lower average product selling price. Furthermore, lube base oil spreads over fuel oil decreased by 134 US$/Ton as it was pressured by higher lube base oil supply from Group II and III while bitumen spread over fuel oil was better by 42 US$/Ton. Therefore, TLB posted higher product-to-feed margin of 17 US$/Ton and had improved EBITDA and net profit by Baht 36 million and Baht 29 million, respectively from the same period of previous year.

Compared 9M/19 with 9M/18, TLB had sales revenue of Baht 13,819 million, dropped by Baht 1,199 million mainly because of both lower average product selling prices and total product sales volume. In addition, TLB had product-to-feed margin of 79 US$/Ton, dropped by 10 US$/Ton mainly due to weakened lube base oil spreads over fuel oil as there was an additional supply from new lube base oil Group II and III plants. However, bitumen spread over fuel oil was higher as a result of higher road paving demand from Indonesia general election in Q2/19, lower supply from the maintenance shutdowns of several refineries in Asia, and the drop in fuel oil price from ahead of IMO next year. Therefore, TLB had EBITDA of Baht 791 million, dropped by Baht 448 million. Offsetting with depreciation and income tax expense, TLB posted net profit of Baht 565 million, reduced by Baht 370 million from the same period of previous year.

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2.5 Financial Result of Power Generation Business

Table 11: Sales Volume from Power Generation Business

TP + TOP SPP (1)

Q3/19

Q2/19

+/(-)

Q3/18

+/(-)

9M/19

9M/18

+/(-)

Electricity Dispatched (GWh)

617

634

(17)

647

(30)

1,856

1,912

(56)

Steam Exported (kton)

1,007

1,012

(5)

1,129(2)

(122)

3,062

3,254

(192)

Remark(1) 100% of electricity dispatched and steam exported

(2) Retrospective adjustment of steam exported

In Q3/19, TP had lower sales revenue following a decrease in sales volume from the major turnarounds of Thaioil and Subsidiaries and TP planned maintenance shutdown. Thus, TP reported lower net profit. For TOP SPP posted dip in sales revenue due to the major turnarounds of Thaioil and Subsidiaries and lower average selling prices following a drop in natural gas price. Therefore, TOP SPP recorded decreased net profit.

Comparing 9M/19 with 9M/18, TP and TOP SPP reported increased sales revenue from higher average electricity and steam selling prices. However, a drop in sales volume due to the major turnarounds of Thaioil and Subsidiaries and a hike in natural gas price (main feedstock) resulted in TP and TOP SPP to have lower net profit.

In Q3/19, compared with Q2/19, Thaioil Power Co., Ltd. (TP) had sales revenue of Baht 1,024 million, lower by Baht 64 million following drop in electricity dispatched due to the major turnarounds of Thaioil and Subsidiaries and TP planned maintenance shutdown. As a result, TP had EBITDA of Baht 131 million, a Baht 29 million decrease. Offsetting with depreciation and income tax expense, TP recorded net profit, excluding share of profit from the investment in Global Power Synergy Public Co., Ltd. (GPSC), of Baht 49 million declined by Baht 13 million from the last quarter. TOP SPP Co., Ltd. (TOP SPP) earned Baht 1,827 million in sales revenue, decreased from previous quarter by Baht 54 million because of the decline in volume of steam exported due to the major turnarounds of Thaioil and Subsidiaries and the lower average selling prices of electricity and steam following a drop in natural gas price. As a result, TOP SPP reported EBITDA of Baht 429 million, decreased by Baht 49 million. Offsetting with depreciation, finance costs and income tax expense, TOP SPP recorded net profit of Baht 214 million, diminished by Baht 49 million. Besides, Thaioil and Subsidiaries recognized, without non-controlling interest, share of profit from the investment in GPSC of Baht 217 million, which declined by 46 million from prior quarter.

Compared Q3/19 with Q3/18, TP reported lower sales revenue by Baht 134 million because of drops in electricity dispatched and steam exported following the major turnarounds of Thaioil and Subsidiaries and TP planned maintenance shutdown. Thus, TP reported lower EBITDA by Baht 72 million. Offsetting with depreciation and income tax expense, TP posted lower net profit, excluding share of profit from the investment in GPSC, of Baht 59 million from the same period of previous year. For TOP SPP, sales revenue reduced by Baht 77 million because of a drop in volume of steam exported due to the major turnarounds of Thaioil and Subsidiaries. As a result, TOP SPP had lower EBITDA by Baht 51 million. Offsetting with depreciation, finance costs and income tax expense, TOP SPP recorded decreased net profit by Baht 54 million than the same period of last year.

Comparing 9M/19 with 9M/18, TP reported sales revenue of Baht 3,282 million, an increase of Baht 61 million. This was because of the rise in average selling prices following the higher natural gas price. However, a decline of sales volume from the major turnarounds of Thaioil and Subsidiaries combined with the increase in natural gas price (main feedstock) led TP to report EBITDA of Baht 489 million or a dip of Baht 83 million. Offsetting with depreciation and income tax expense, TP reported net profit, excluding share of profit from the investment in GPSC, of Baht 232 million, which dipped by Baht 60 million from the same period of previous year. TOP SPP had sales revenue of

14

Baht 5,509 million, surged by Baht 87 million thanks to higher average selling prices of electricity and steam following a higher natural gas price although sales volume decline from the major turnarounds of Thaioil and Subsidiaries and TOP SPP's planned maintenance shutdown. Moreover, hikes in natural gas price (main feedstock) and maintenance cost caused TOP SPP to report EBITDA of Baht 1,283 million, a decrease of Baht 170 million. Offsetting with depreciation, finance costs and income tax expense, TOP SPP posted net profit of Baht 641 million, a Baht 212 million decreased from the same period of previous year.

15

2.6 Financial Result of Solvent Manufacturing and Distribution Business

Table 12: Financial Result of Thaioil Solvent

Q3/19

Q2/19

+/(-)

Q3/19

+/(-)

9M/19

9M/19

+/(-)

Solvent Utilization Rate (1) (%)

130%

110%

20%

114%

16%

121%

115%

6%

Solvent Production(1) (kTon)

46

39

7

40

6

128

122

6

Solvent Sales Volume (kTon)

109

85

24

86

23

284

255

29

Remark(1) Produced solvent by Sak Chaisidhi Co., Ltd. (TOP Solvent Co., Ltd. holds 80.52% shares)

In Q3/19, Thaioil Solvent had an increase in solvent production volume following improved demand. However, higher competition led to squeezed gross profit margin. In addition, it booked more FX loss than Q2/19. Thaioil Solvent thenhad greater net loss than previous quarter.

In 9M/19, Thaioil Solvent had increases in sales volume. However, its grossprofit margin was lowered owing to softened crude oilprice and an increase in supply. This led to reducedsales revenue, EBITDA and net profit. In addition, Thaioil Solvent had FX lossof Baht 106 million and recorded net loss.

In Q3/19, compared with Q2/19, Thaioil Solvent (Solvent Manufacturing and Distribution Business) had a 130% solvent utilization rate, increased by 20% and solvent sales volume increased by approximately 24,000 tons mainly because of improved demand from the previous quarter. This led Thaioil Solvent to record sales revenue of Baht 2,508 million, increased by Baht 333 million. However, higher competition led to squeezed gross profit margin. Thus, Thaioil Solvent recorded EBITDA of Baht 83 million, dropped by Baht 4 million. In addition, Thaioil Solvent had net foreign exchange loss of Baht 79 million in Q3/19 mainly because of an adjustment in other components of equity related to loans to an overseas subsidiary company. Offsetting with depreciation of Baht 41 million, finance costs of Baht 21 million, income tax expense of Baht 8 million, and non-controlling interests of Baht 5 million, Thaioil Solvent posted net loss of Baht 60 million in Q3/19, compared with net loss of Baht 4 million in prior quarter.

Compared Q3/19 with Q3/18, Thaioil Solvent had solvent utilization rate increased by 16% and solvent sales volume increased by approximately 23,000 tons. However, lower average solvent selling price per unit tracking crude oil price led Thaioil Solvent to record lower sales revenue by Baht 75 million. In addition, higher competition led to squeezed gross profit margin. Thus, Thaioil solvent recorded a drop in EBITDA of Baht 18 million. Besides, Thaioil Solvent had net foreign exchange loss of Baht 79 million, increased by Baht 72 million from Q3/18. Offsetting with depreciation, finance costs, income tax expense, and non-controlling interests, Thaioil Solvent, in Q3/19, then recorded net loss of Baht 60 million compared with net profit of Baht 16 million from the same period of last year.

In 9M/19, compared with 9M/18, Thaioil Solvent had a 121% solvent utilization rate and solvent sales volume increased by approximately 29,000 tons. However, lower average solvent selling price per unit tracking crude oil price led Thaioil Solvent to record sales revenue of Baht 6,942 million, decreased by Baht 433 million. Besides, Thaoil solvent had lower gross profit margin in 9M/19 owing to an increase in supply of some product groups compared with 9M/18. Therefore, Thaioil Solvent had EBITDA of Baht 320 million, reduced by Baht 59 million. However, Thaioil Solvent had net foreign exchange loss of Baht 106 million compared with net foreign exchange gain of Baht 7 million in 9M/18. Offsetting with depreciation, finance costs and income tax expense, Thaioil Solvent posted net loss of Baht 19 million compared with net profit of Baht 137 million from the same period of last year.

Additionally, from 13 September, Thaioil Solvent recognizes performance of PT.Tirta Surya Raya (TSR), an indirect subsidiary in which TOP Solvent Company Limited (TS) holds 67%. TSR is a

16

company that supplied and distributed chemicals and solvents in Indonesia which were consistent with TS's business.

2.7 Financial Result of Crude, Petroleum and Petrochemical Marine Transportation and Storage, Ship Management Service and Crew & Utility Boat Service Business

Table 13: Utilization Rate of TM

Utilization Rate (%)

Q3/19

Q2/19

+/(-)

Q3/18

+/(-)

9M/19

9M/18

+/(-)

Petroleum & Petrochemical Product Vessel

: TM (1)

95%

79%(2)

16%

95%

-

90%

96%

(6%)

Crude Vessel: TOP-NYK

100%

100%

-

100%

-

100%

100%

-

Crew and Utility Boat: TMS

69%

60%

9%

52%

17%

60%

57%

3%

Remark(1) In 2019, TM has 5 vessels, including Phubai Nadda 1 which has provided transportation service since January 2019.

(2) Retrospective adjustment of utilization rate (%)

In Q3/19, TM had services revenue rose by Q2/19 mainly because of an increase in utilization rate. As a result, TM reported higher EBITDA while booked a total decline shares of profit from the investments. So TM posted a decrease of consolidated net loss from prior quarter.

In 9M/19, TM booked larger services revenue. However,increases in services cost and vessel operating expenses resulted in TM to record consolidated net loss.

In Q3/19, compared with Q2/19, Thaioil Marine Co., Ltd. (TM) reported services revenue, including revenues from TMS (TM holds 100% shares) (3), of Baht 168 million, increased by Baht 12 million from the last quarter because of an increase in utilization rate of TM fleets. As a result, TM reported EBITDA of Baht 15 million, a hike of Baht 5 million from prior period. In Q3/19, TM had share of profit from the investment in TOP-NYK MarineOne Pte. Ltd. (TOP-NYK) of Baht 13 million, an increase of Baht 1 million while TM had shares of profit totaling Baht 13 million from the investments in TOP-NTL Pte. Ltd. (TOP-NTL),TOP-NTL Shipping Trust, TOP Nautical Star Co., Ltd. (TOP Nautical Star), and T.I.M. Ship Management (TIM), dropped by Baht 8 million which mainly came from a decrease in utilization rate of an Aframax. Offsetting with depreciation, finance costs, and income tax expense, TM posted consolidated net loss of Baht 19 million compared with consolidated net loss of Baht 70 million in Q2/19.

Compared Q3/19 with Q3/18, TM reported higher services revenue by Baht 11 million mainly owing to Phubai Nadda 1 joining the fleet this year. However, higher services cost and vessel operating expenses partly due to dry-docking of some TM fleets led TM to book lower EBITDA by Baht 17 million from Q3/18. Furthermore, TM had share of profit from the investment in TOP-NYK dipped by Baht 2 million and had shares of profit from the investments in TOP-NTL,TOP-NTL Shipping Trust, TOP Nautical Star, and TIM total decreased by Baht 10 million. Offsetting with depreciation, finance costs, and income tax expense, TM recorded consolidated net loss of Baht 19 million, compared with consolidated net loss of Baht 2 million in the same period of previous year.

In 9M/19, compared with 9M/18, TM booked services revenue of Baht 494 million, a rise of Baht 24 million came from TM had the acquisition of 1 additional vessel which started operating since January 2019. However, higher services cost and vessel operating expenses partly due to dry- docking of some TM fleets in Q3/19, therefore, TM reported lower EBITDA of Baht 23 million to Baht 61 million. TM booked lower share of profit by Baht 13 million from TOP-NYK while reported larger shares of profits from the investments in TOP-NTL,TOP-NTL Shipping Trust, TOP Nautical Star, and TIM total by Baht 2 million. Offsetting with depreciation, finance costs, and income tax

17

expense, TM recorded consolidated net loss of Baht 91 million compared with consolidated net profit of Baht 21 million in the same period of previous year.

Remark(3) Thaioil Marine Co., Ltd. acquired shares in TOP Maritime Service Co., Ltd (TMS). The transaction consisted of purchasing 45% registered shares at Baht 1 and loan repayment of Baht 81 million which TMS borrowed from the seller. The transaction was completed on 21 June 2018.

2.8 Financial Result of Ethanol Business

Table 14: Utilization Rate of TET

Q3/19

Q2/19

+/(-)

Q3/18

+/(-)

9M/19

9M/18

+/(-)

Ethanol Utilization Rate (%)

84%

18%

- Sapthip

102%

105%

(3%)

91%

11%

102%

- Ubon Bio Ethanol

114%

56%

58%

98%

16%

89%

91%

(2%)

In Q3/19, TET reported a decrease in sales revenue Sapthip Co., Ltd from Q2/19 due to a decrease in ethanol selling price. However, TET reported higher EBITDA from lower ethanol production cost. As a result, TET had net loss of Baht 2 million, compared with net loss of Baht 17 million in Q2/19.

For 9M/19, TET reported net loss of Baht 3 million similarly to the same period of previous years.

In Q3/19, TET had consolidated sales revenue from Sapthip Co., Ltd. (TET holds 50% shares) of Baht 356 million, dropped by Baht 6 million from Q2/19, owing to a reduction in average ethanol selling price from high ethanol supply due to low feedstock cost from molasses-based ethanol producer. However, in Q3/19, TET had EBITDA of Baht 48 million, increased by Baht 9 million because of lower ethanol production cost. Moreover, in Q3/19, TET had share of loss of Baht 6 million from the investment in Ubon Bio Ethanol PCL., compared with the share of loss of Baht 15 million from the previous quarter. As a result, TET posted net loss of Baht 2 million in Q3/19, compared with net loss of Baht 17 million from previous quarter.

In comparison with Q3/18, TET had consolidated sales revenue from Sapthip Co., Ltd., fell by Baht 6 million due to lower ethanol selling price. However. TET had an increase in EBITDA by Baht 16 million by the reason of company's cost saving from the circumstance of challenged ethanol market. Furthermore, in Q3/19, TET had share of loss from the investment in Ubon Bio Ethanol PCL., of Baht 6 million, as the same level of Q3/18. Therefore, TET reported net loss of Baht 2 million in Q3/19, compared with net loss of Baht 10 million from the same period of previous year.

For 9M/19, TET had consolidated sales revenue of Baht 1,095 million, reduced by Baht 11 million from the reason of lower ethanol selling price since the beginning of 2019 from the pressure of molasses-based ethanol producer. However, TET reported EBITDA of Baht 125 million, rose by Baht 10 million from lower ethanol production cost and other expense. Additionally, TET had share of loss of by Baht 4 million from the investment in Ubon Bio Ethanol PCL., compared with share of profit of Baht 1 million in 9M/18. Therefore, TET posted net loss of Baht 3 million similarly to the same period of previous year.

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3. Analysis of Consolidated Financial Statement

3.1 Statement of Financial Position

The financial position of Thaioil and Subsidiaries as of 30 September 2019 compared with 31 December 2018 was summarized as follows:

Table 15: Condensed Consolidated Statements of Financial Position

(Million Baht)

30 September

31 December

+/(-)

+/(-) %

2019

2018

Assets

Cash, cash equivalents and short-term investments(1)

79,768

107,262

(27,494)

(25.6%)

Other current assets

58,778

57,481

1,297

2.3%

Non-current assets

103,869

13,448

12.9%

117,317

Total assets

255,863

268,613

(12,750)

(4.7%)

Liabilities

Current liabilities

30,937

33,471

(2,534)

(7.6%)

Long-term borrowings and debentures (including current portion)

97,389

104,668

(7,279)

(7.0%)

Other non-current liabilities

5,049

4,001

1,048

26.2%

Total liabilities

133,375

142,141

(8,766)

(6.2%)

Equity

Equity attributable to owners of the company

118,487

121,712

(3,225)

(2.6%)

Non-controlling interests

4,001

4,760

(759)

(15.9%)

Total equity

122,488

126,472

(3,984)

(3.2%)

Total liabilities and equity

255,863

268,613

(12,750)

(4.7%)

Remark(1) Including deposits at a financial institution used as collateral as of 30 September 2019 and 31 December 2018 of Baht 324 million and Baht 300 million, respectively.

Total Assets

As of 30 September 2019, Thaioil and Subsidiaries had total assets of Baht 255,863 million, decreased by Baht 12,750 million or 4.7% from 31 December 2018 due to the following main reasons:

  • Cash, cash equivalents and short-term investments dipped by Baht 27,494 million mainly because of redemption of due Baht-denominated debenture, finance costs paid, dividends paid, and investments in projects as planned.
  • Other current assets increased by Baht 1,297 million primarily due to an increase in inventory by Baht 2,937 million following higher crude oil price. Meanwhile, trade receivables reduced from lower sales volume from the major turnarounds since mid-June 2019.
  • Non-currentassets climbed by Baht 13,448 million because property, plant, and equipment had a net increase of Baht 16,834 million mainly from project investments executed as planned while investments in associates dipped by Baht 3,534 million mainly due to deficit from the change in the net assets in an associate.

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Total Liabilities

As of 30 September 2019, Thaioil and Subsidiaries had total liabilities of Baht 133,375 million, went down by Baht 8,766 million or 6.2% from 31 December 2018 due to

  • Current liabilities reduced by Baht 2,534 million primarily due to a dip in trade accounts payable of Baht 2,706 million from high level of trade payables outstanding at the end of year 2018.
  • Long-termborrowings and debentures (including current portions) decreased by Baht 7,279 million mainly because:
    • Thaioil refinery repaid its due Baht-denominated debenture of Baht 3,000 million in March 2019. Moreover, Thaioil refinery's US$-denominated debentures dropped by Baht 703 million owing to Thai Baht appreciation from the end of 2018.
    • TTC's US$-denominated debentures reduced by Baht 2,935 million due to Thai Baht appreciation from the end of 2018.
    • LABIX (shares indirectly held by TPX) repaid its due Baht-denominated borrowings of Baht 267 million.
    • TOP SPP repaid its due Baht-denominated borrowings of Baht 137 million.

Table 16: Consolidated Long-term Borrowings

(Million Baht)

Thaioil

LABIX

TOP SPP

TS

TM

TET

TTC

Total

Debentures : US$-denominated(1)

11,806

49,122

60,928

: Baht-denominated

20,500

20,500

Borrowings : Baht-denominated

5,323

8,072

696

1,459

87

15,637

: Other currencies-

324

324

denominated(1)

As of 30 September 2019

32,306

5,323

8,072

1,020

1,459

87

49,122

97,389

As of 31 December 2018

36,009

5,590

8,209

1,123

1,609

72

52,057

104,668

+ / (-)

(3,703)

(267)

(137)

(103)

(150)

15

(2,935)

(7,279)

Remark(1) Including foreign exchange gain/loss from foreign currency-denominated liabilities revaluation

Total Equity

As of 30 September 2019, Thaioil and Subsidiaries had total equity of Baht 122,488 million, decreased by Baht 3,984 million or 3.2% from 31 December 2018. This resulted from total comprehensive income for 9M/19 of Baht 4,451 million, additional non-controlling interests from an M&A activity of Baht 13 million, deducted by dividends paid from Thaioil and Subsidiaries of Baht 4,626 million and deficit from the change in the net assets in an associate of Baht 3,823 million.

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3.2 Statement of Cash Flows

Table 17: Condensed Statement of Cash Flows

(Million Baht)

Consolidated

Separated

Net cash provided by operating activities

6,838

2,358

Net cash provided by investing activities

35,896

38,995

Net cash used in financing activities

(12,565)

(10,611)

Net increase in cash and cash equivalents

30,168

30,742

Effect of exchange rate changes

(2,080)

(2,133)

Cash and cash equivalents at the beginning of period

33,741(1)

29,868

Cash and cash equivalents at the end of period

61,830(1)

58,477

Remark(1) Excluding deposits at a financial institution used as collateral as of 30 June 2019 and 31 December 2018 of Baht 324 million and Baht 300 million, respectively.

Thaioil and Subsidiaries had cash flows provided by operating activities of Baht 6,838 million from net profit for 9M/19. In addition, Thaioil and Subsidiaries had cash flows provided by investing activities of Baht 35,896 million as a consequence of net disposal of short-term investments of Baht 55,177 million. However, there were purchases of property, plant and equipment of Baht 19,879 million which Thaioil refinery spent Baht 18,394 million in main projects such as Thaioil Sriracha Building project, Crude Oil Tank project, Jetty Expansion project, and the Clean Fuel Project. The rest of Baht 1,484 million was used by subsidiaries for various purposes such as the purchase of absorbent for aromatics production units which was scheduled for a maintenance shutdown from mid-June to end of July 2019.

However, cash flows used in financing activities were Baht 12,565 million. These were mainly attributable to the redemption of debenture of Baht 3,000 million, dividends paid of Baht 4,626 million, and finance costs paid of Baht 3,526 million.

According to the mentioned cash flows activities, Thaioil and Subsidiaries reported cash and cash equivalents increased by Baht 30,168 million from 31 December 2018. Furthermore, Thaioil and Subsidiaries recorded loss on effect of exchange rate changes of Baht 2,080 million. Hence, Thaioil and Subsidiaries had cash and cash equivalents of Baht 61,830 million as of 30 September 2019. Including deposits at a financial institution used as collateral and short-term investments of Baht 324 million and Baht 17,614 million, respectively, Thaioil and Subsidiaries had cash, cash equivalents, and short-term investments of Baht 79,768 million.

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3.3 Financial Ratios

Table 18: Financial Ratios (Consolidated) for Q3/19

Profitability Ratios

Q3/19

Q2/19

+/(-)

Quality of earnings ratio (%)

1%

2%

(1%)

Gross profit margin ratio (%)

1%

2%

(1%)

Net profit margin ratio (%)

1%

1%

-

Liquidity Ratios

Q3/19

Q2/19

+/(-)

Current ratio (times)

4.3

4.9

(0.6)

Quick ratio (times)

3.2

3.8

(0.6)

Financial Policy Ratios

Q3/19

Q2/19

+/(-)

Total liability/ Total equity (times)

1.1

1.0

0.1

Net debt/ Equity (times)

0.2

-

0.2

Long-term loan/ Total equity (times)

0.8

0.8

-

Interest coverage ratio (times)

0.9

1.7

(0.8)

Long-term loan/ Total capitalization (%)

44%

44%

-

Financial Ratios Calculation

Q3/18

+/(-)

7%

(6%)

7%

(6%)

5%

(4%)

Q3/18

+/(-)

3.7

0.6

2.5

0.7

Q3/18

+/(-)

0.8

0.3

-

0.2

0.6

0.2

8.4

(7.5)

36%

8%

Quality of Earnings ratio (%)

=

EBITDA / Sales Revenue

Gross Profit Margin ratio (%)

=

Gross Profit / Sales Revenue

Net Profit Margin ratio (%)

=

Net Profit for the period / Total Revenue

Current ratio (times)

=

Current Assets / Current Liabilities

Quick ratio (times)

=

(Cash and Cash equivalent + Current investments + Accounts Receivable) / Current Liabilities

Total Liabilities / Total Equity (times)

=

Total Liabilities / Total Equity

Net Debt/ Equity (times)

=

Net Debt / Total Equity

Long term loan/ Total Equity (times)

=

Long Term Loan / Total Equity

Long term loan

=

Long-term borrowings from financial institutions + Debentures (includes current portion)

Interest Coverage ratio (times)

=

EBITDA/ Interest Expenses (Finance costs)(1)

Long term loan/ Total Capitalization (%)

=

Long Term Loan / Total Capitalization

Total Capitalization

=

Long Term Loan + Total Equity

Net Debt

=

Interest bearing debt - Cash and cash equivalent - Current investments

Remark(1) Including finance costs that Thaioil Treasury Center Co., Ltd. paid to bondholders.

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4. Industry Outlook for the Forth Quarter of 2019 and for the Year 2020

4.1 Crude oil and refinery market outlook

In Q4/19, crude oil market is expected to be weaker than Q3/19 as Saudi Arabia's oil processing facility has already resumed operation after it was attacked by drones. Additionally, rising US crude supply; which US's Energy Information Administration (EIA) forecasted that its crude oil production will be at 12.8 million barrels per day in Q4/19 increased from 12.3 million barrels per day in Q3/19, and commercial operation of Permian pipelines in the US with capacity of approximately 1.3 million barrels per day could pressure the oil market. However, improved oil demand in the winter and continually reducing OPEC supply to maintain global crude oil supply balance will cap downside risk of crude oil market.

In 2020, crude oil market is expected to remain stable. Although, crude oil supply from the US and non-OPEC is likely to increase; which EIA forecasted that non-OPEC supply growth in 2020 will be at 2.2 million barrels per day higher than the global oil demand growth at 1.2 million barrels per day, OPEC and its allies agreed to prolong the oil output cut of 1.2 million barrels per day to March, 2020 to control the oil price. In addition, expected low crude oil production from Iran and Venezuela due to the US sanction could also supported the oil price. (Source: IEA Oil Monthly Report and EIA Short-term Energy Outlook, October 2019)

Gross Refinery Margin (GRM) in Q4/19 is expected to improve from Q3/19 due to higher diesel and jet product spread over Dubai supported by seasonal demand and tight supply during annual refineries maintenance in October. For gasoline product spread over Dubai, it is likely to remain stable compared to Q3/19. Despite weak gasoline demand after the US driving season end, the supply is expected to be reduced from gasoline producing unit shutdowns of many refineries (especially in Asia Pacific and North America). However, fuel oil product spread over Dubai is likely to be soften from lower power demand in Middle East after summer end. Moreover, higher supply of finished oil products from two new refineries additions in China and Malaysia, of which combined capacity is approximately 0.7 million barrels per day, might cap the upside of finished oil products spread.

In 2020, Gross Refining Margin (GRM) is expected to be supported by rising diesel product demand from International Maritime Organization's (IMO's) regulations to control sulfur emission from bunkers by reducing sulfur content in marine fuel oil to 0.5% starting 1 January 2020 (IMO 2020). Moreover, gasoline product spread over Dubai is likely to recover from reducing supply as refineries will adjust their production to maximize proportion of diesel and very low sulfur fuel oil (VLSFO) products to meet the rising products demand. However, high sulfur fuel oil product spread over Dubai is likely to significantly decrease due to lower bunker oil demand from the new IMO's regulation impact. (Source: FGE-Asia Pacific Petroleum Monthly, September 2019, Energy Aspects Oil Fundamentals and S&P Global Platts Asia-Pacific Oil Market Forecast, October 2019)

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Aromatics Market Outlook

In Q4/19, paraxylene (PX) market is expected to remain stable from Q3/19 as new supply additions in China and Brunei with PX production capacity of 3 million tons per annum and 1.5 million ton per annum respectively continuously pressure the market. However, improved PX demand from seasonal polyester production in winter and a PTA plant addition in China with the production capacity of 2.3 million tons per annum will support the market.

In 2020, PX market is likely to be pressured by abundant supply in the market from both new aromatics plants addition in 2019 and two new aromatics plants scheduled to be commercial operated in 2020 in China and Saudi Arabia with PX production capacity of 2 million tons per annum and 0.8 million tons per annum respectively. Thus, total PX supply growth in Asia Pacific and Middle East in 2020 will be over 8 million tons per annum compared to the demand growth of 1.7 million tons per annum from new PTA; PX's downstream product, plants addition.

For benzene (BZ) market in Q4/19, it is likely to remain stable to soft compared to Q3/19 pressured by new supply additions in China, Brunei and Malaysia with benzene production capacity of 0.95 million tons per annum, 0.55 million tons per annum and 0.24 million tons per annum respectively. Moreover, BZ arbitrage to the US is uneconomical resulting in high inventory in our region. However, the market will be supported by seasonal demand of styrene monomer production in early Q4/19 including additional BZ demand from new styrene monomer plant addition in China with the production capacity of 1.2 million tons per annum scheduled to be operated in late Q4/19.

In 2020, BZ market is likely to remain pressured from rising supply in 2019 and additional supply in 2020 of two new aromatics plants in China and Saudi Arabia with the benzene production capacity of 0.79 million tons per annum and 0.17 million tons per annum respectively. Accordingly, total BZ supply growth in Asia Pacific and Middle East in 2020 will be over 3 million tons per annum compared to the demand growth of 1.3 million tons per annum.

For toluene (TL) market in Q4/19, it is likely to remain stable to softer from Q3/19 as lower TL demand for gasoline blending from slowing down gasoline market in the end of the US driving season. Meanwhile, TL demand for xylene and BZ production is weak due to uneconomical production of some aromatics plants since Q3/19.

In 2020, TL market is expected to remain stable driven by rising TL demand for gasoline blending due to expected better gasoline product spread over Dubai. Meanwhile, TL demand for xylene and BZ production is likely to remain weak as PX and BZ market will remain under pressure from increasing supply as above mentioned. (Source: WM Chemicals, June 2019, IHS Spring 2019 and PRISM, October 2019)

LAB Market Outlook

In Q4/19, LAB market is expected to be stable compared to Q3/19 from recovered demand of washing products after monsoon season especially in India and in South East Asia Pacific. Moreover, the market is likely to be supported by reducing LAB supplies from permanent closure of one Japanese LAB plant with production capacity of 90,000 tons per annum since May 2019 and rising maintenance shutdowns of LAB plants in Asia Pacific especially in Saudi Arabia and South Korea.

In 2020, LAB market is expected to be better than 2019 supported by improved LAB demand tracking with global economy growth and population growth. However, LAB supply in the region is likely to be increased from a new LAB plant in Saudi Arabia with the

24

production capacity of 0.12 million tons per annum scheduled to be operated in the second half of the year.

(Source: ICIS

LAB Weekly Report, October 2019)

Lube Base Oil market outlook

In Q4/19, lube base oil market is expected to be better than Q3/19 supported by improved lube base oil demand after rainy season. However, the market will remain under pressure from sluggish global economy as well as lower maintenance shutdowns of lube base oil plants. In addition, continuously rising supply since Q3/19 especially in China with the total capacity addition of 1 million tons per annum could pressure the market as well.

In 2020, lube base oil market is expected to be weaker than 2019 from rapidly rising supply compared to gradually growing demand. However, downside will be capped from less price competition between group I and group II as IMO impact leading to higher lube base oil group II price in comparison which will help support the demand of lube base oil group I. (Source: ICIS Base Oil Weekly Report October 2019 and Argus Base Oil Weekly Report, October 2019)

Bitumen market outlook

In Q4/19, bitumen market is forecasted to be improved compared to Q3/19 due to recovered regional demand from better weather condition after passing rainy season leading to more activities of road construction as well as rising bitumen demand in Indonesia during construction period until the yearend. However, the market remain pressured by sluggish global economic growth including rising bitumen supply from many producers switching back their production to bitumen yield instead of fuel oil yield when the fuel oil market is likely to be weak from IMO 2020 impact.

In 2020, bitumen market is likely to be weak compared to 2019 due to stable regional demand. Moreover, rising supply from some fuel oil producers switching to produce bitumen when the fuel oil market is likely to be weak from IMO 2020 impact could pressure bitumen product spread over fuel oil. (Source: Argus Bitumen Weekly Report, October 2019)

25

5. Appendix

5.1 Summary of Approved Investment Plan

Thaioil and Subsidiaries has a 5-year investment plan (2019-2023) with total expenditure of US$ 4,914 million which mostly consists of CFP project expenditure of US$ 4,015 million. An estimated budgeting for the 5-year investment plan (2019-2023) is summarized in a table below;

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5.2 Summary of Key Project Investment: Clean Fuel Project (CFP)

The purpose of CFP project is to enhance the competitiveness of the Company by improving its production efficiency to increase the product value by making it more environmentally-friendly, and to increase its oil refining capacity to allow the refineries to handle more types and greater quantities of crude oils, which create an economies of scale and a reduction of raw material costs. Moreover, the project also enhance the country's long-term energy stability and economic development, with the investment project value of approximately US$ 4,825 million. The CFP has been approved by the Company's Extraordinary General Meeting of Shareholders on

27 August 2018. The CFP construction is expected to be completed in Q1/23 according to the CFP timeline as summarized below:

However, on 10 April 2019, the 2019 Annual General Meeting of Shareholders resolved to approve the disposal of assets to transfer ownership in the Energy Recovery Unit (ERU) which is a part of the CFP and the execution of the Relevant Agreements including the asset sale and purchase agreement, fuel and utilities supply agreement, power purchase agreement, operation and maintenance services agreement and land sub-lease agreement as well as the novation agreement with Global Power Synergy Public Company Limited (GPSC) or wholly owned subsidiary of GPSC (ERU Project). The ERU Project has significant aims to reduce investment costs of the CFP, enhance liquidity and efficiently support future investment; furthermore, the transaction will boost the return on investment of the CFP while the Company can continue to manage and oversee the implementation of the CFP and ERU during the construction phase and the operation phase in respect of the safety, reliability and plant optimization of the projects as originally planned.

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Thai Oil pcl published this content on 08 November 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 November 2019 05:59:00 UTC