SPC   

SPC

Sorry, I meant 'way below lower.....'.

 

allantanhc,

My take is FY 06 net profit will be around $285 - 310 mil....wat below lower end of analyst range.

 

It posted a 78.3% fall in third-quarter net profit due to a sharp drop in refining margins at its sole refinery. It had achieved an average refining margin of approximately US$4 per barrel for the third quarter, compared to more than US$8 per barrel in the previous quarter.


Asian complex refining profit margins during the July-September quarter averaged at US$4.75 a barrel, compared with an average of US$8.9 in the previous quarter, according to Reuters calculations.



SPC's major asset is its 285,000 bpd refinery, SRC, which mainly exports products to China and Southeast Asia.SPC said that a scheduled maintenance turnaround of the Residue Catalytic Cracker at SRC also adversely affected the overall refining margin.



The company in July had said that the residue cracker complex would be shut down for maintenance for more than 30 days from September to October.



"As a result of the turnaround, crude volume processed also fell by about 6% with a consequential accumulation in inventories. This turnaround that commenced on 9 Sep was completed by 16 Oct," it said.



The company said it expected refining margins to improve as the recent fall in crude oil prices was likely to boost demand for refined products.



SPC shares trade at 6x their 2007 forecast earnings. Among its Asian peers, Thai Oil PCL trades at about 7x and Shell Refining, the Malaysian refining unit of Royal Dutch Shell, trades at 8x.

 

According to a median of Reuters Estimates' poll of three analysts, SPC is expected to make a net profit of S$373 million in the full year. The analysts' forecasts ranged from S$342 million to S$414.6 million. SPC earned S$403.6 million in 2005.


With this weak 3Q results, 9 month earning is about S$227 million. It is likely that SPC will just meet the low end of expectation assuming 4Q is back to 2Q level. None the less, a knee jerk reaction can be anticipated tomorrow. Keppel Corp may also be affected. Just my view. 

 

Think it was prudent of them to writedown the high inventory they committed when crude was high ($71 mil). From this writeoff, they managed a gain of $39mil ...so net hit on the drop in crude price from USD78 to current of USD60 is $32mil (71-39=32). This translates to 6.22cts per sh.



What this means is that stripping away the impact of high cost crude writedown, they would actually have made 6.22 + 4.47(3Q eps) = 10.69 cts per sh.



I suspect they also took a $4-5mil hit on their upstream (exploration and production) business due to dry wells. This translates to 0.8 to 1.0 cts per sh..



So, baring any unforeseen circumstance, I think FY06 eps should come in about 55 to 60 cts. Going by past practice, I think divident will be about 20cts / sh.....just my personnal opinion.

 

It may all have been factored in the share price. Well there was a one month plant shut down and crude oil price decline certainly did not help in profit margins.

 

SPC's results are out. See BT's report. Looks bad. I think its share price will take a hit tomorrow. 



SINGAPORE Petroleum Co's (SPC's) third-quarter net profit plunged 78 per cent to $23.2 million after the group took a hit from steep falls in refining margins and crude oil prices.



Revenue for the quarter stayed flat at $2.24 billion, while cost of sales grew 3.3 per cent to $2.17 billion, eating into the group's profit margins. SPC said it was forced to make a $71 million provision for a write-down in its inventory after crude oil prices fell by around US$20 per barrel during the quarter.

Refining margins were also weaker. The group said it achieved an average refining margin of approximately US$4.00 per barrel for the quarter compared to above US$8.00 per barrel in the previous quarter, but added that margins were likely to improve in the fourth quarter. -- BT

 

SPC will probably be relatively stagnant for a while. The signals are mixed.

But note that trend may change upwards in future.

 

It was lower on expectations that it will report Wednesday weaker earnings for the third quarter because crude oil refining margins softened and production volumes eased following a plant shutdown last month, dealers said. 



DBSV said it expected SPC to report a third-quarter net profit of $90m, less than the $106.87m it made a year before and less than the $135.69m it made in the second quarter.



The brokerage said SPC's refining margins might have halved to US$4 a barrel in the third quarter from US$8 in the second, and that output this year would likely fall 7% after SPC shut down a plant for one month.



DBS has a "hold" rating for SPC, with a target price of $5.28.

 

Is on a downtrend now

 

hey shplayer, thx for the in-deep review of SPC.
is a damn good revision for this counter again =)

 

chew8888,

Yes, your observation is correct....but if you think about it, it does not make sense.



SPC is certainly not an Exxon/Mobil, BP or SHELL. These big oil companies have huge reserves of oilfield production which they invested in long ago when oil prices was much lower. At the lower oil prices of yesteryears (<USD20), it was still commercially viable to extract the crude from theses wells. So, now, with prices at USD60/bbl, their production cost in these fields remains at the historical levels.....which means the USD40 increment (USD60 -20) is pure profit.



For SPC, they've currently only got the Kakap field producing about 2,600 bbl/day......this upstream business, whilst profitable (50-60% margins), contributes only a small protion ot SPC's overall business. 



SPC's revenue spinner and margins is derived from their refining margins and other activities such as oil trading and retail (SPC stations).....the bulk of its profits in the past two years is in the improved refining margins.



Due to the excess refining capacity in the past 20 years, refining margins were very squeezed and refineries were struggling to make a buck. Because of the high capital investment to build a refinery, and poor returns on  on investments, there were hardly and new refining capacity added. If you recall, as recent as begining 2004, Keppel was trying to divest SPC....considering it a burden. At the end of 2003, they sold about 20% of SPC to an Indo group for $1.20. Shortly after that, oil prices and refining margins shot up. The Indos laughed all the way to the bank........earlier this year, they divested part of their holdings for $5.35.



So, my take is that SPC's performance is more dependant on supply and demand of refining capacity and less on oil prices.....the market's contrary view of it still confounds me. 

 

Highly correlated with oil price... That's what I observed so far...

 

this counter very difficult to predict movement, should not go in until got some trends. one day go up , one day go down... only for people with GUTS or GUT feeling!

 

Oil prices just crash.... SPC will fall tommorow?

 

yongjiu, may not sustain, be cautious!

 

SPC might stand a change to strike back!

 

Apprec opinions on latest TA trends for SPC.



Boll bands squeezed but Acc/Dis, Chaikin and RSI either flat or down......so my view is probably trending down?

 

The rebound in basic Singapore refining margins to positive territory will hearten refiners, but is unlikely to prompt many to quickly reverse curbs that have taken at least 200,000 bpd of fuel production off the Asian market in an effort to stop product prices falling faster than crude.



Nippon Oil said it had lowered its refining plan for October by another 300,000 kilolitres (60,000 bpd), taking throughput to 730,000 bpd of crude oil this month -- 25% less than a year ago -- due to weak kerosene sales, maintenance and pre-winter stocks so high that it is exporting some fuel.



South Korean leader SK Corp., however, opted to maintain runs at about 750,000 bpd this month, in line with its initial plan but still about 10%below full capacity.



"We considered raising the run rates but decided to maintain it as the margins have not recovered enough," an industry source familiar with the plan told Reuters.



Exxon Mobil Corp and Royal Dutch Shell have cut output at their Singapore refineries -- largely dependent on export markets and most susceptible to a downturn in margins -- by about 10%, or more than 100,000 bpd between them.



Margins for units topping Dubai crude in Singapore rose to 83 US cents a barrel on Tuesday, their first time in the black since June 22, Reuters data show. Upgrading units have been making more than US$3 consistently and now stand at US$5.



Margins tend to be volatile, however, and most refiners will wait days or weeks before deciding on revising runs.



"There are no plans to change the current run rates at the Singapore refineries," said a source familiar with operations.

 

A Reuters survey found that South Korean refiners will run at about 88% of capacity this month -- some 300,000 bpd below full throttle -- while data last week showed Japanese refiners had put about 12 % of capacity, or 500,0000 bpd, on ice.

 

thanks SingaporeGal..



I'll note that...  :)