Q2 & 1H/08 ResultsAnalyst Presentation
August 14, 2008
Thai Oil Public Company Limited
2
Disclaimer
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Please do not circulate this material. If you
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3
Corporate Vision, Mission & Value
TOP seeks to be one of the leading fully integrated
refining and petrochemical companies in the region
recognized for our sustainable growth, optimum
stakeholder value, and commitment to
environmental and social well-being.
VISION• To be PTT’s flagship refinery through optimized
management of the group’s refining portfolio
• To expand facilities to better meet domestic demand growth
• To enhance the competitive advantage of our power generation operations to further solidify the core refining business
• To create a high-performance organization that promotes teamwork, innovation and trust
MISSION
P = ProfessionalismO = Ownership & CommitmentS = Social ResponsibilityI = IntegrityT = Teamwork and CollaborationI = InitiativeV = Vision FocusE = Excellent Striving
CORPORATE VALUE
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Presentation Outline
Business Outlook
Performance Analysis
Q2/08 & 1H/08 Highlights
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Q2/08 Key Highlights
• In Q2/08, TOP operated at an optimal 105% utilization with refinery intake of 288 kbd, bringing the integrated intake to 301 kbd.
• Following the successful completion of TPX expansion, aromatic capacity increases from 420 KMTA to 900 KMTA , with full benefits to be captured as from Q3/08.
• TOP continues to enhance integration amongst group to maximize margins & reduce costs. This was reaffirmed by ASEAN Energy Award 2008 we received for Best Practice in Energy Management.
• TOP group reported a record net profit for Q2/08 of Bt 10,546 million, allowing 1H/08 net profit to achieve Bt 14,420 million.
• Expansion benefit, inventory gain and strong middle distillate spreads were key attributing factors to the foregoing favorable performance.
• Group’s integrated margins were US$ 12/bbl (Bt 2.5/litre) and US$ 8.9/bbl (Bt 1.9/litre) for Q2/08 and 1H/08, respectively.
• Notwithstanding volatile financial market, TOP successfully launched a 5-years THB Bond worth Bt 3 billion at an attractive pricing. A cross currency swap was entered to convert into $ 93.5 million, USD exposure.
Overall
Operation& Business
Finance
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Thaioil ReceivesThe Best ASEAN Energy Awards 2008
• This achievement is a result of the Company’s vision and commitment to energy saving gained through corporate culture, campaigns, and training.
• Energy saving measures have been continuously and strictly implemented to achieve the highest energy efficiency
• Initiative “Online Cleaning” which resulted in energy consumption reduced significantly and saving cost of Baht 238.5 million in the period of 2005 – 2007.
256 301255 294
Q2/07 Q2/08 1H/07 1H/08
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Financial Highlights
Q2/08 1H/08
6,61910,546
12,56214,420
Q2/07 Q2/08 1H/07 1H/08Q2/08 1H/08
*Percentage was before deducting inter-company transaction.
(Unit: MB)
Integrated Margins
Consolidated Net Profit Net Profit Breakdown*
70%
20%7%3%
87%
6%4%3%
1H/07
12,562 MB 14,420 MB
1H/08
Integrated Intakes
Q2/08 1H/08
7.076.16EPS
(THB/Share)
(Unit: KBD) (Unit: $/bbl)
18% 15% 15%8%
59%
15%
5.173.24
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Presentation Outline
Business Outlook
Performance Analysis
Q2/08 & 1H/08 Highlights
9
40
80
120
160
03-Jan-07 14-Feb-07 28-Mar-07 10-May-07 21-Jun-07 02-Aug-07 13-Sep-07 25-Oct-07 06-Dec-07 23-Jan-08 07-Mar-08 21-Apr-08 4 Jun 08 16 Jul 08
Oil Price Movement
Q1/07 Q2 Q3 Q4
Tapis
Dubai
(US$/bbl)
Q1/08
Crude Prices
Q2
68.4 104.1
86
128
97
Dubai83 117
Extraordinary rise in oil prices (DB +50% in 6 months, peaking at $141/BBL)
• Continued strong demand from emerging economies• Lower supply from non-OPEC producers• Geopolitical disturbances• Booming commodity trades as hedges against USD depreciation & inflation• Speculation
55 65 70 91
6.3
7.9
3.94.7 4.5
9.6
7.1 7.1
Q1/07 Q2 Q3 Q4 Q1/08 Q2 1H/07 1H/08
-35
-25
-15
-5
5
15
25
35
45
10
1H/08
Gross Refinery MarginsTOP’s Crude Mix & Product Yield
F/E
Local
M/E
Thailand’sOil Demand
TOP’s Market GRM* (US$/bbl)
-29.2
30.2
30.3
-21.2
13.4
(US$/bbl)Product-DB Spreads
Spreads vs. Dubai Spreads (US$/bbl)
* which excluded stock gain and loss
Spreads vs. Dubai (US$/bbl)
14.6 16.5 16.4 19.4 23.0
Jet-DB
GO-DB
HSFO-DB
GO-DB
Q1/07 Q2 Q3 Q4 Q1/08
16.7
Q2
37.6
30.3
1H/07 1H/08
TP-DB 8.8 11.9
ULG 95-DB 16.9 13.4
Jet-DB 16.7 30.2
GO-DB 15.6 30.3
FO-DB -10.5 -21.2
ULG95-DB81%
15%
4%
11% 10%
41% 45%
24% 12%
20%
17%
4%16% LPG
ULG
Jet
Diesel
FO
Q2
*
* LPG Market Price
82% 88% 82%
18% 12% 18%
FY/06 FY/07 1H/08
Export
Domestic
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Oil Demand for Q2/2008Domestic Oil Demand / Refinery Intake Domestic Oil Demand
Source: DOEB, Ministry of Energy.
(KBD) (KBD)
TOP’s Domestic & Export Sales
LPG Jet/Kero Diesel FOGasoline
45%
13%
11%
9%
13%
DomesticJobbers
1H/2008Sales
Breakdown
5%
Export = 18%
4%
1H/08
(KBD)
738 724 704 726 743 718 731 738
110 120 104 140 160 155 115 158
86%91% 91%
77%
91% 90% 88% 91%
0%
20%
40%
60%
80%
100%
0
200
400
600
800
1,000
1,200
1,400
Q1/07 Q2 Q3 Q4 Q1/08 Q2 1H/071H/08
Net Export Domestic Demand/SalesUtilization Rate
111 127
86
333
74
125129
82
313
72
131123
86
326
65
1H/072H/071H/08
18%3%
12%
Refinery Intake 234 216 282
88 81 82 6813
78
12 145 102
47
2813
Q1/07 Q2 Q3 Q4 Q1/08 Q2
TL
BZ
MX
PX
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Aromatics BusinessAromatic Spot Prices & Margins (US$/Ton)
400
600
800
1,000
1,200
1,400
1,600 PX
MX
ULG95
PX-ULG 95542 473 395 268 257
Q1/07 Q2 Q3 Q4 Q1/08
BZTL
Q2
317
Product to Feed133 123 121 107 50 93
TPX’s Product Sales & P2F
• In Q2/08, spread of PX&MX over ULG 95 were widen due to unplanned outage from TPPI plant in Indonesia.
• However, downstream demand was reduced significantly as PTA could not pass on historical high PX price to customers.
• TPX’s P2F improved QoQ following expansion completed in May.
Q2
(US$/Ton)
(US$/bbl)17.4 16.0 15.9 14.3 6.6 12.1
(Kton/Quarter)
0
200
400
600
800
1,000
1,200
1,400
13
Lube Base BusinessBase Oil & Bitumen Spot Prices & Margins (US$/Ton)
(US$/Ton) 500SN-HSFO637 538 466 380 434
Q1/07 Q2 Q3 Q4 Q1/08 Q2
535
TLB’s Product Sales & P2F
500SN
HSFO
• P2F improve QoQ ($88/ton to $153/ton) & YoY ($94/ton to $153/ton).
• Base oil price improved due to tight supply as a result of lower run of base oil plants due to insufficient feedstock and switch to produce more gasoil rather than base oil.
• High by-product price (extracts), but dragged by low bitumen price.
Bitumen
70 71 65 68 67 68
124 117 102 96 92 89
75 6772 53 55 52
Q1/07 Q2 Q3 Q4 Q1/08 Q2
TDAE/Extract/Slack Wax
Bitumen
Base Oil
Product to Feed105 94 79 69 88 153 (US$/Ton)
(US$/bbl)15.9 14.2 12.1 10.5 13.4 23.2
Q2
(Kton/Quarter)
15.9 14.2 12.1 10.5 13.423.2
15.1 18.3
Q1/07 Q2 Q3 Q4 Q1/08 Q2 1H/07 1H/08
17.4 16.0 15.9 14.36.6
12.1 16.79.5
Q1/07 Q2 Q3 Q4 Q1/08 Q2 1H/07 1H/08
6.37.9
3.9 4.7 4.5
9.67.1 7.1
Q1/07 Q2 Q3 Q4 Q1/08 Q2 1H/07 1H/08
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TOP Group’s Integrated Margins
Crude
Product toFeed
Market GRM*
Product toFeed
(US$/bbl)
(US$/bbl)
(US$/bbl)
Integrated Margin * (US$/bbl)
• TOP Group’s integrated margin increased to
12.0 US$/bbl (+15% YoY or +65% QoQ),
due mainly to historical high middle distillate
spread and lube base oil price.
* Calculated from integrated intake and reflected market GRM which excluded stock gain / loss
* which excluded stock gain and loss
5.97.6
3.6 4.3 4.3
9.26.7 6.8
2.0
2.0
1.4 0.1 0.9
1.8
2.0 1.41.1
0.9
0.70.6
0.5
1.0
1.00.8
9.110.4
5.75.0
5.7
12.0
9.78.9
Q1/07 Q2 Q3 Q4 Q1/08 Q2 1H/071H/08
RefineryUtilization
Aromatic Production
Lube Base Production
Plant Availability
Plant Utilization
Ship Utilization
15
Q2/07
Q2/08
7.93
9.58
P2F (US$/ton)
GRM(US$/bbl)
P2F (US$/ton)
Q2/2008 Net Profit Breakdown
Net Profit 9,528 475 493 (24) 60 23
Δ YoY +87% -60% +45% +85% -31% +92%
Δ QoQ +197% +51% +252% -107% +13% +264%
123
93
94
153
Performance Breakdown by Company - Q2/08
Q2/07
Q2/08244 288
1.122.13 0.71
0.78
(KBD) (Kton/Day) (Kton/Day)
109%105%
97%87% 89%
104%
51%
91% 94%80%
92%99%
(Unit: MB)
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(MB)
Sales Revenue 72,070 126,953 54,883 +76%
EBITDA 9,608 17,252 7,644 +80%
Financial Charges (452) (517) 65 +14%
FX G/L & CCS 446 (1,431) (1,877) -421%
Tax Expense (1,893) (3,415) 1,522 +80%
Net Profit 6,619 10,546 3,927 +59%
TOP 5,107 9,528 4,412 +87%
Subsidiaries 1,512 1,018 (494) -33%
EPS (THB/Share) 3.24 5.17 1.93 +60%
THB/US$ - ending 34.67 33.66 (1.01) -3%
Effective Tax Rate (%) 22% 24% 2% +9%
1) Restated P&L regarding to the change of accounting policy
1H/07 1H/08 +/(-) %
7.1 7.1 0.0 0%
9.7 8.9 -0.8 -8%
136,498 223,266 86,768 +64%
17,980 23,058 5,078 +28%
(924) (907) (17) +2%
1,300 (309) (1,609) -124%
(3,423) (4,568) 1,145 +33%
12,562 14,420 1,858 +15%
8,933 12,738 3,805 +43%
3,629 1,682 (1,947) -54%
6.16 7.07 0.91 +15%
34.67 33.66 (1.01) -3%
21% 23% 2.5% +12%
Consolidated Financial Performance(US$/bbl) Q2/07 Q2/08 +/(-) %
TOP’s GRM 7.9 9.6 1.7 +22%
Integrated Margin 10.4 12.0 1.6 +15%
2)
2) Included stock gain and crack spread hedging activity1) Restated P&L regarding to the change of accounting policy2) Included stock gain and crack spread hedging activity
1)
17
Solid Financial Position
(Unit: MB)
Other Liabilities
LT Debt136,570110,324
180,194
FY/06 FY/07
Equities
Net Debt / EBITDA
Net Debt / Equity
TreasuryPolicy
Bt. 42,333 mn.(US$ 1,305 mn.)
76%
15%8%
1%
Currencies
As of 30 June 2008 (33.66 THB/US$)
Interest Rate
*Figures shown are unauditted from the company’s Certified Public Accountants
Net Debt / EBITDA ≤ 2.0x
Net Debt / Equity ≤ 1.0x
Balance Sheet
Financial Ratios
1H/08
THB Loan 25%
US$ Loan27%
THB Bond 13%
US$ Bond 35%
1H/08
Consolidated Long-Term Debt
CurrentAssets
Non-CurrentAssets 60,166 71,837 81,207
19,70632,891
56,65430,452
31,842
42,333
38%62% 44%56%1.0 0.9 0.9 1.0
0.4 0.4 0.3 0.4
FY/06 FY/07 Q1/08 1H/081H/08
US$ THB Float Fixed
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Presentation Outline
Business Outlook
Performance Analysis
Q2/08 & 1H/08 Highlights
• Global oil demand growth is forecast to decrease to 890 and 860 kbd in 2008 and 2009 respectively.
• Lower demand in OECD due to high prices and economic slow down, offsetting by robust growth in developing countries with price subsidy.
Source: IEA, July 2008
Global Oil Demand Growth
19
Global Oil Demand Growth
2007
20082009
• High price subsidy in developing countries has limited impact on end-user’s consumption during high price period.
• Robust demand growth continues in China and India.
Source: IEA and PVM, July 2008
Price Subsidy in the Region
India and China Oil Demand
20
Strong Demand in Subsidized Countries
21
Reduced Non-OPEC Supply High OPEC Utilization
Projected Crude Supply Depletion
Limited Crude Supply
• Non-OPEC supply declined, in particularly, major oil fields in North Sea, Mexico and Russia.
• Even with higher OPEC production rate, it would tighten spare capacity in the years to come.
• Assuming global oil demand growth of 1% and depletion of current oil reserve of 3%, tightening of crude supply equation could be envisaged.
Source: IEA July 2008 / OPEC, EIA Morgan Stanley Research d.d. August 2008
22
Crude Reserve OutlookUS Crude Stock OECD Europe Stock
Japan Crude Stock China Crude Stock
Capacity 19 mbbl
Capacity 19 mbbl
Capacity 73 mbbl
Capacity 15 mbbl
Capacity 31 mbbl
Capacity 33 mbbl
Capacity 73 mbbl
Capacity 44 mbbl
Phase I: 2006-2007
Phase II: 2008-2010
Source: PIRA, 07/08/08 Source: Norwegian Energy (Morgan Stanley), Eurostock, 09/07/08
• High correlation between USD depreciation and crude price in 2007 up to Q1-08.
• Due to concern on too high oil prices & slow oil demand, capital funds switched out from oil commodities.
Source: JPMorgan Energy Strategy, CFTC July 08
USD Depreciation & Speculation
23
1 Position = 1,000 bblUSDCrude Price
USD vs. Crude Oil Price Non-Commercial WTI Net Length
24
Current Crude Oil Forward Price
As of 12 Aug, 2008
2008
20072006
2005
(Unit: US$/bbl)
Forward
Product Reserve OutlookUS Gasoline Stock Singapore Light Distillate Stock
US Distillate Stock Singapore Middle Distillate Stock
25Source: PIRA, 07/08/08 Source: Platts, 07/08/08
26
Distillate Stock
Gasoline Stock
Product Reserve Outlook - Europe
Residual Stock
• Low distillate stock and high residue stock will further support strong distillate margin and weak residue margin.
Source: Norwegian Energy (Morgan Stanley), Eurostock, 09/07/08
27
Reuters Singapore GRM
1
(US$/bbl)
28
TOTAL CDU: 7.8 MBD
TOTAL CDU: 4.5 MBD
TOTAL CDU: 2.6 MBD
TOTAL CDU: 1.3 MBD
TOTAL CDU: 1.3 MBD
Refinery Utilization RateUS Refinery Utilization
TOTAL CDU: 17.2 MBD
Source: FACTS
MBD EU Refinery Utilization
Source: FACTS, AP Petroleum Monthly , Jul-08
KBD
KBD
• Impact of additional refining capacity in China and India of >1 mbd in 2008 is likely to be less severe than anticipated earlier due to price control and poor margin forcing inefficient refineries to cut runs.
29
Refinery Utilization - China & India
30
ConclusionsEven at high crude price, distillate demand growth continues in subsidized countries. Together with low distillate stock in EU, high distillate margin is likely to sustain.
Inflexibility of refining system to match structural shifts in demand growth has increased demand for certain crude types, creating conditions for higher crude price and distillate crack.
Low GRM from poor gasoline/fuel oil margins and price control has forced inefficient refineries to cut run. Impact of new refining capacity addition is likely to be less severe than anticipated earlier.
TOP realizes benefit from high GO/Jet production (~65%), achieving higher GRM than Sing. Cracking Margin even at controlled LPG price.
TOP group is focusing on increasing Aromatics and Lube Base oil production to maximize integrated margin.
Impact of lower domestic demand is less severe for TOP due to capability to produce high quality products (Euro IV) and export surplus at attractive prices.
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Q & A
32
Thank You
Should you have any queries, please contact:Investor Relations
at email: [email protected]: 662-617-8300Fax: 662-299-0128
33
APPENDICES
34
Domestic LPG DemandThailand LPG Demand
LPG Demand by Sector
LPG Demand Highlight
• LPG demand continues rising momentum on the capped price structure.
• Transportation fuel switching causing local demand 6M up almost 20%
Outlook 2008
• The delay of government action on increase of local LPG price will support LPG demand growth further.
Source : Department of Energy Business, Ministry of Energy
2005 2006 2007 2008
35
Domestic Gasoline DemandThailand Gasoline Demand
Gasoline Demand by Type
Source : Department of Energy Business, Ministry of Energy
Gasoline Demand Highlight
• Total gasoline demand continues dropping heavily causing by high price, NGV promotion and non-promoted LPG switching.
Outlook 2008
• Relatively high gasoline price will continue depress gasoline demand and support fuel switching to NGV/LPG.
36
Domestic JET DemandThailand JET Demand
JET demand and # of flights
Source : Department of Energy Business, Ministry of Energy
JET Demand Highlight
• Despite some growth compared with last year, higher fuel surcharge slowdown travel and growth started to taper off.
Outlook 2008
• Relatively high fuel price will continue to depress travel growth and demand in 2H.
37
Domestic Gasoil DemandThailand Gasoil Demand
B5 Sales
Source : Department of Energy Business, Ministry of Energy
Gasoil Demand Highlight
• Exceptional high gasoil price has depressed demand, causing overall growth 1H down 2.0%.
Outlook 2008
• Negative impact from high price will depress demand further, where growth for 2H 2008 is projected to decline ~4%.
38
Thailand Fuel Oil Demand
Source : Department of Energy Business, Ministry of Energy
Domestic Fuel Oil Demand
Fuel Oil Demand Highlight
• After a surge in FO demand in April as NG disruption, FO demand returned to normal trend of negative growth due to more NG supply.
Outlook 2008
• Expect fuel oil demand drop ~ 10%.