THURSDAY, March 28, 2024
nationthailand

The Bangchak Petroleum

The Bangchak Petroleum

March forward with refining capacity expansion For short-term,recommend "hold" as upside is limited

The Bangchak Petroleum Plc (BCP) 

Grabbing opportunity from fire accident, expand capacity by 16.7%
According to the analyst’s meeting yesterday, BCP’s management has
revealed a new investment plan, grabbing an opportunity from a repair of the
kerosene cracking unit after the fire accident to increase the production
capacity to 140,000 bbls/day from currently 120,000 bbls/day (but the
utilization rate is 110,000 bbls/day which is the most effective rate). The
capacity expansion will need around B1bn in investment and will take 3 years
to complete. At the same time, the company will also undertake a 3E project
(Efficiency, Energy, and Environment improvement project) in order to
enhance efficiency in the production system which is friendly to the
environment. The 3E project will need an investment of around B4bn.
However, the repair of the cracking unit will be completed and the unit will be
able to resume its operation by October 2012 as previously estimated, so
utilization rate in 2012 would drop to 80,000 bbls/day from the projection of
91,600 bbls/day. Meanwhile, the company will gradually book the insurance
claims for the property damage and business interruption since 4Q12 onward
(BCP has made insurance with Tippaya Insurance company for a damage of
refinery, raw material, machines and business interruption totaling B22bn as
well as comprehensive general liability of B1.5bn).

3Q12 will still be pressured, 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
(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), which means utilization rate of
BCP in 3Q12 will stand at 40,000/day. However, this would be compensated
by GRM that has increased from 2Q12 from selective refining of high margin
oil. Moreover, there is a high chance for BCP to return to book stock gain in
3Q12 from the oil price in 2H12 which is foreseen to rise after hitting a low in
2Q12, reflected by Dubai crude oil price which has increased 14% from end-
2Q12 to stand at US$105.63/bbl. Furthermore, earnings would revert to
normal again in 4Q12 after BCP could resume its normal utilization rate of
90,000 bbls/day.

Reiterate only “hold”. Current share price has only 5% upside left
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.

 

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