Bangkok--8 Jan--TRIS Rating
TRIS Rating has affirmed the company rating of Esso (Thailand) PLC (ESSO) at “A+” with “stable” outlook. The rating reflects the company’s long track record in the petroleum business in Thailand, its efficient and integrated refinery and aromatics plant, well-established retail oil marketing and distribution network, and strong support from Exxon Mobil Corporation (ExxonMobil) and its affiliates. The rating also takes into consideration the volatility inherent in the petroleum and petrochemical industries, and the uncertainty of global economy. The “stable” outlook reflects the expectation that ESSO will be able to maintain its operational and market positions in the petroleum business in Thailand. The company is expected to maintain adequate liquidity and continue to receive the support from ExxonMobil to accommodate the fluctuating nature of the petroleum and petrochemical businesses.
ESSO is the Thai affiliate of ExxonMobil. The company operates one of the 29 refineries run by ExxonMobil affiliates around the world. Currently, ESSO’s shareholders comprise ExxonMobil (66%), Vayupak Fund 1 (7.3%), and others (26.7%). ESSO operates a complex refinery with a maximum rated capacity of 174,000 barrels per day (BPD), supplying about 16% of the total amount of refined petroleum products in Thailand. The refined products are sold through ESSO’s network to commercial and retail customers. As of September 2012, there were 517 service stations operated under the “Esso” brand name. The company also operates an aromatics plant with a production capacity of 500 thousand tonnes per annum (KTA) of paraxylene (PX). The PX plant is connected with and receives its feedstock from ESSO’s refinery.
The integration between the refinery and aromatics plant gives the company the flexibility to adjust its product mix between various petroleum and petrochemical products. With ExxonMobil’s technology and operating philosophy, the refinery is regarded as one of the most energy efficient in the Asia-Pacific region, with high operational reliability. ESSO also utilizes the global capabilities of ExxonMobil when purchasing crude and selling finished products. The production volumes of refined petroleum products in 2011 comprised diesel (34.2%), gasoline (19.1%), reformate (12.6%), fuel oil (9.9%), jet fuel (8.9%), and others (15.3%). For the oil marketing segment, ESSO is the second-largest retailer of fuel sold through service stations, behind PTT PLC. Its market share through service stations amounted to approximately 15%-18%, with an annual throughput of 2,500-3,000 million liters per year for the last five years.
ESSO’s refinery was run at a utilization rate of 80.0% during the first nine months of 2012, up from 69.8% for the same period in 2011. The refinery utilization rate improved after refinery shutdown for maintenance and commissioning of EURO IV project during September-November 2011. Despite the increase in refinery uptime, PX production decreased by 5.9% (year-on-year — y-o-y) to 267,000 tonnes in the first nine months of 2012, due to unfavorable margin from PX.
During the first nine months of 2012, the company’s total sales increased by 12.7% y-o-y to Bt184,307 million, due to an increase in both oil prices and sales volume. The majority of sales (89.9%) came from the oil segment and 10.1% from the petrochemical segment. The company’s profitability, however, weakened in the first nine months of 2012. ESSO’s gross refining margin (GRM) decreased from US$5.3 per barrel in the first nine months of 2011 to US$3.4 per barrel in the first nine months of 2012. The drop in GRM reflected the wide fluctuations in oil prices in the first nine months of 2012. The petrochemical segment was also impacted from the uncertainty of the global economy. Prices of many polyester products have slumped. Polyester products use PX as a primary feedstock. The company recorded a net loss of Bt19 million for the first nine months of 2012, partly due to stock loss following a sharp drop in oil prices in the second quarter of 2012.
ESSO’s financial position has slightly weakened during 2011-2012. As of September 2012, the company’s total debt was Bt33,816 million and the debt to capitalization ratio was 58.0%. Looking forward, the ratio is expected to improve as the company does not currently have plans for any huge investments after the Euro IV compliance project. ESSO’s liquidity is ample. The company has a credit facility of Bt54,000 million from ExxonMobil, which will be ESSO’s strong cushion against the cyclicality of petroleum and petrochemical product prices.
Esso (Thailand) PLC (ESSO)
Company Rating: A+
Rating Outlook: Stable