Thai Oil Public : Management Discussion and Analysis Quarter 3 Ending 30 Sep 2020

Management's Discussion and Analysis (MD&A)

Thai Oil Public Company Limited

For The Third Quarter and

The First Nine Month of 2020

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	13-14
	2.5	Financial Result of Power Generation Business	15-16
	2.6	Financial Result of Solvent Manufacturing and Distribution Business	17-18
	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	20-21
	3.2	Statement of Cash Flows	22
	3.3	Financial Ratios	23
4.	Industry Outlook for the Fourth Quarter of 2020 and for the Year 2021	24-26
5.	Appendix
	5.1	Summary of Approved Investment Plan	27
	5.2	Summary of Key Project Investment: Clean Fuel Project (CFP)	28
	5.3	Plan of Scheduled Turnaround Maintenance in 2020	28

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Management's Discussion and Analysis (MD&A)

Thai Oil Public Company Limited and Subsidiaries

For the Third Quarter and the First Nine Month of 2020

1. Company and its Subsidiaries' Operating Results

Table 1: Summary of Consolidated Financial Results
(Million Baht)	Q3/20	Q2/20	+/(-)		Q3/19	+/(-)		9M/20	9M/19	+/(-)
Integrated Intake (kbd)	261	271	(10)	270	(9)		280	294	(14)
Gross Integrated Margin (GIM)(1) (US$/bbl)
: excludingStock Gain/(Loss)	1.0	2.9	(1.9)	5.1	(4.1)		2.0	4.9	(2.9)
: includingStock Gain/(Loss)	4.9	1.1	3.8	3.3	1.6		(1.8)	5.2	(7.0)

	(Million Baht)			Q3/20	Q2/20	+/(-)				Q3/19	+/(-)				9M/20	9M/19	+/(-)
	Sales Revenue			57,225	49,372	7,853		82,329	(25,104)				183,248	265,916	(82,668)
	Net Derivative Gain/(Loss) on Hedging
	Instruments			144	(45)	189		147	(3)				80	71	9
	EBITDA			3,819	2,881	938			945	2,874				(5,549)	9,906	(15,455)
	Net Gain/(Loss) on Fair Value Measurement of
	Financial Instruments(2)			33	389	(356)		-	33				45	-	45
	Net Foreign Exchange Gain/(Loss) (3)			(453)	2,045	(2,498)		303	(756)				(746)	1,549	(2,295)
	Finance Costs			(1,172)	(1,029)	(143)		(1,041)	(131)				(3,306)	(3,452)	146
	Reversal of Income Tax (Expense)			(33)	(495)	462		222	(255)				3,031	(895)	3,926
	Net Profit/(Loss)			715	2,480	(1,765)		(683)	1,398				(10,559)	4,293	(14,852)
	Basic Earnings/(Loss) per Share (Baht)			0.35	1.22	(0.87)		(0.33)	0.69				(5.18)	2.10	(7.28)
	Stock Gain/(Loss)			2,986	(1,404)	4,390		(1,373)	4,359				(9,190)	963	(10,153)
	Reversal/ (Write-Down) on Crude and
	Petroleum Product Inventory(4)			378	2,469	(2,091)		(352)	730				(632)	344	(976)
	Exchange Rate (Baht: 1 US$)			Q3/20	Q2/20	+/(-)				Q3/19	+/(-)				9M/20	9M/19	+/(-)
	Average FX			31.49	32.11	(0.62)		30.88	0.61				31.68	31.47	0.21
	Ending FX			31.83	31.07	0.76		30.77	1.06				31.83	30.77	1.06

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. Fair value measurement of financial instruments in accordance with Thai Financial Reporting Standard No.9 - Financial Instruments (TFRS 9), which is effective from 1 January 2020.
2. Including net foreign exchange gain / (loss) on foreign currency assets and liabilities in Q3/20, Q2/20, Q3/19, 9M/20 and 9M/19 of Baht (641) million, Baht 1,538 million, Baht 287 million, Baht (875) million and Baht 960 million, respectively.
3. 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.

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Compared Q3/20 with Q2/20, Thaioil and Subsidiaries had a reduction in integrated intake from plant optimization to capture the highest profit of Thaioil group following COVID-19 pandemic suppressing jet/kero demand. Additionally, there was planned major turnaround of LAB plant, resulting in lower total product sales volume from the previous quarter. However, sales revenue of Baht 57,225 million was reported, an increase of Baht 7,853 million due to higher product selling prices. Meanwhile, GIM excludingstock gain / (loss) of 1.0 US$/bbl was recorded during the period, a decrease of 1.9 US$/bbl owing to 1) significant rises in crude premiums and 2) plummeting jet/kero and gas oil spreads following depressed demand despite an improved gasoline spread after lockdown easing in many countries. For aromatics market, aromatics spreads over ULG95 decreased due to the demand for downstream products used in textile production, including automobile and construction industry affected by economic slowdown from the outbreak of COVID-19. LAB market, on the other hand, was supported by tight supply owing to an unexpected LAB plant maintenances in China and LAB plant in India which faced production problems. For lube base oil and bitumen markets, lube base oil spread over fuel oil decreased owing to higher crude oil and fuel oil prices, but bitumen spread over fuel oil received positive impact from higher demand of road repairment in the region. Moreover, byproduct, from lube base oil and bitumen business, spreads over fuel oil rose tracking gas oil and fuel oil prices. However, the easing of COVID-19 pandemic in some countries resulted in business activities resumption and increasing in global oil demand. In addition, oil supply reduced after OPEC+ agreed to cut aggregated crude oil production in response to a decline in global demand, resulting in the average of Dubai price in Q3/20 increased from that of Q2/20 by 12.4 US$/bbl. Therefore, Thaioil and Subsidiaries booked stock gain of 4.0 US$/bbl or Baht 2,986 million, compared with stock loss of 1.8 US$/bbl or Baht 1,404 million in Q2/20, and had GIM includingstock gain / (loss) of Baht 4.9 US$/bbl, an increase of 3.8 US$/bbl. Moreover, there was the reversal on crude and petroleum product inventory of Baht 378 million. Altogether with net realized gain on financial instruments of Baht 144 million, Thaioil and Subsidiaries reported EBITDA of Baht 3,819 million, increased by Baht 938 million. In addition, Thaioil and Subsidiaries had net gain from fair value measurements of financial instruments in accordance with Thai Financial Reporting Standard No.9 - Financial Instruments (TFRS 9), which is effective from 1 January 2020, of Baht 33 million and booked net foreign exchange loss of Baht 453 million (which included net foreign exchange loss on foreign currency assets and liabilities of Baht 641 million) due to Thai baht depreciation from the end of the previous quarter. Besides, there was finance costs of Baht 1,172 miilion. Offsetting with depreciation and income tax expense, Thaioil and Subsidiaries reported net profit of Baht 715 million or 0.35 Baht per share, decreased by 1,765 million from the previous quarter.

Compared Q3/20 with Q3/19, Thaioil and Subsidiaries reported lower sales revenue by Baht 25,104 million mainly from lower product selling prices and total product sales volume, together with lower GIM excludingstock gain/ (loss) by 4.1 US$/bbl. This mainly came from 1) 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 byproduct spreads over ULG95 inspite of declines in aromatic spreads over ULG95. Besides, lube base oil and bitumen spreads over fuel oil improved from the same period of the previous year. With stock gain of Baht 2,986 million, compare with stock loss of Baht 1,373 million in Q3/19. Additionally, there was the reversal on crude and petroleum product inventory of Baht 378 million, compared with a write-down on crude and petroleum product inventory of Baht 352 million during the same period last year. Furthermore, operating costs in Q3/20 substantially reduced from Q3/19 due to planned major turnaround expenses in the same period of the previous year and the implementation of cost management strategy to control costs as one of the management measures of Thaioil and Subsidiaries during the COVID-19 situation. Therefore, Thaioil and Subsidiaries reported an increase in EBITDA of Baht 2,874 million and net profit of Baht 715 million, compared with net loss of Baht 683 million.

Compared 9M/20 with 9M/19, Thaioil and Subsidiaries had a decrease in sales revenue of Baht 82,668 million due to drops in average product selling price and total product sales volume as a result of oil price war and COVID-19 outbreak. However, the declines in

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