Cap to rise only for 'mega-deal' opportunity,says Bangchak

"We don’t need to increase our capital to finance our Bt90-billion investment plan. But only in case a very good opportunity presents itself, a general mandate is being sought" from shareholders to raise capital, president Chaiwat Kovavisarach said.

Bangchak will have sufficient cash flow and additional borrowing capacity to fund its five-year investment plan, he said.

Chaiwat, 49, became the first "outsider" to head the diversified oil-refinery business when he took over at the beginning of this year. He spent most of his business career in investment banking and consulting. He became a director of Bangchak three years ago.

The new president held his first press conference to unveil Bangchak’s "3S" strategy – security, stability and sustainability – to achieve its target of increasing its earnings before interest, tax, depreciation and amortisation (EBITDA) 2.5 times to Bt25 billion by 2020 from Bt10.04 billion expected this year.

Chaiwat faces a very challenging time. The price of Brent crude oil has nose-dived from more than US$115 a barrel last June to about $60 at present, and PTT, the national oil company, is divesting its 27-per-cent interest in Bangchak because of the government’s energy-reform policy.

Because of the slumping oil prices and resulting inventory losses, Bangchak’s net profit caved in 85 per cent to only Bt712 million last year.

After the shareholder restructuring, Bangchak will present itself as "the alternative national oil company with an Asean footprint", Chaiwat said.

"There will be a lot of reforms in the energy business, so we have reserved our money for use when there is an opportunity."

Bangchak will diversify more into the upstream oil and gas business and renewable energy.

The Bt90-billion capital expenditure budget is broken down as follows:

lBt50 billion for oil and gas exploration and production (E&P) projects and "green power" and biofuels projects;

lBt20 billion as "growth capex" for projects for its existing businesses, such as improvement of the efficiency of its refinery and expansion of its retail network;

lBt18 billion as "maintenance capex";

lBt2 billion for "innovation incubator" projects such as a lithium mine in the United States.

Bangchak will take part in the 21st round of petroleum exploration bidding if the government decides to go ahead with it. It is also eyeing acquiring a few oilfields in the Gulf of Thailand and "farming in" some oilfields in the South China Sea.

The company’s upstream target is to secure stakes in oilfields with a combined production capacity of 20,000 barrels per day, or about one-sixth of its refining capacity, up from 4,000bpd at present.

Of the Bt25 billion EBITDA targeted for 2020, the upstream business is expected to contribute Bt5 billion, renewable energy (solar, geothermal, biomass and biogas power plants) Bt5 billion, biofuels Bt1 billion, refining Bt8 billion, refinery-related businesses (logistics, terminals and pipelines) Bt2 billion, marketing Bt3.2 billion, and non-oil businesses (such as convenience stores) Bt800 million.

Bangchak expects to seal some deals this year including a few E&P projects, a solar-farm project in Japan and a lithium-mining project. Refining margins were good during the first two months of 2015 and Bangchak expects to eke out better financial results this year.

"Without the inventory loss, we would have booked a higher profit of Bt9.8 billion last year. Every business beat its goals last year," he said.

Of the Bt90-billion gross capex budget, 42 per cent will be for investing in Thailand.