Bangchak Petroleum

Bangchak Petroleum (BCP)

2Q12 faces net loss of B384m as expected due mainly to stock loss
BCP announced 2Q12’s earnings with a net loss of B384m compared
with a net profit of B2.4bn in 1Q12, close to our projection, due to
following reasons. 1) The company has booked a massive stock loss
(including inventory and FX hedging) of US$8.26/bbl comparing to a
stock gain of US$5.36/bbl in 1Q12. 2) Base GRM has dropped to
US$4.85/bbl. 3) Refinery utilization rate has decreased by 29.7%qoq to
71,000 bbls/day from a planned shutdown during May 2012. However,
the loss in 2Q12 was not so severe because the company still had
supporting factors, which were 1) US$0.63/bbl of gain from high crack
spread hedging (gas oil - Dubai) of US$19.7/bbl compared with the
market price of US$15/bbl according to the company’s policy of making
hedge in every quarter at 30% of its total product; 2) Market GRM in
2Q12 which has increased by 51%qoq to US$4.15/bbl (around
B0.82/liter); and 3) insurance claims of B74m in total for property
damage and business interruption as a result of the flood in late 2011.
Overall, net profit in 1H12 stood at B2.05bn, or 67.3% of our previous
forecast for FY2012.

3Q12 will be pressured by refinery maintenance shutdown, to recover in 4Q12

We maintain our net profit forecast for 2012-2013 although earnings in
3Q12 would be depressed by the fire accident at the kerosene cracking
unit in the 3rd crude-distillation until with a production capacity of
80,000 barrels/day (66.67% of the total production capacity of BCP at
120,000 barrels/day). According to the company’s preliminary damage
evaluation, the refining unit would be shut down for 3 months (3Q12).
However, it is projected that the insurance company would pay the
insurance claims for BCP since 4Q12 onward for both property damage
and business interruption (under the conditions of paying revenue
compensation since the 61st day of the business halt, which means
BCP’s revenue will disappear for 60 days or around 2 months without
compensation). A resumption of the 3rd crude-distillation unit in 4Q12
would make the company’s earnings revert to a net profit again.

Reiterate to hold…share price likely partially reflects negative factors

Fair value at end-2012, using DCF, is B24.01/share. We believe the
decline of the share price in the past has partially reflected the negative
factors, but the current share price still has limited upside. Reiterate to
hold to receive dividend.