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, efficient and integrated refinery and aromatics plant, well-established retail marketing and distribution network, and the strong support from Exxon Mobil Corporation and affiliates (ExxonMobil). The rating is partially constrained by the volatility inherent in the petroleum and petrochemical industries, and the uncertainties of geopolitics and global economy. The “stable” outlook reflects the expectation that ESSO will be able to maintain its operation and market positions in the petroleum business in Thailand. The company is expected to maintain adequate liquidity and continue to receive support from ExxonMobil, to accommodate the fluctuating nature of the petroleum and petrochemical industries.
ESSO is the Thai affiliate of ExxonMobil. The company operates one of the 28 refineries run by ExxonMobil affiliates around the world. ESSO began the oil business in Thailand in 1894 and started refinery operation in 1971. As of May 2013, ESSO’s major shareholders comprised ExxonMobil (66%) and Vayupak Fund 1 (7%). ESSO’s business profile is very strong. The company operates a complex refinery with a maximum rated capacity of 174 thousand barrels per day (KBD), accounting for approximately 16% of the total refinery capacity in Thailand. The refined products are sold through ESSO’s network to commercial and retail customers. As of September 2013, there were 513 service stations operated under the “Esso” brand name. The company also operates an aromatics plant, which is connected with its refinery. The aromatics plant has a production capacity of 500 thousand tonnes per annum (KTA) of paraxylene (PX).
ESSO’s business profile reflects the integration of the refinery and the aromatics plant, which gives the company the flexibility to adjust product mix between various petroleum and petrochemical products. With ExxonMobil’s technology and operating philosophy, ESSO’s refinery is regarded as one of the most energy efficient plant in the Asia-Pacific region, with high operational reliability. ESSO is also able to leverage ExxonMobil’s global network in crude oil procurement and finished products distribution. In 2012, ESSO’s refinery product mix was diesel (34.9%), gasoline (17.3%), reformate (12.5%), fuel oil (11.3%), jet fuel (8.7%), and others (15.3%). During the past five years, ESSO’s network of service stations is the second-largest retailer in terms of fuel sold through service stations, behind PTT PLC, with market share of approximately 15%-17% and an annual throughput of 2,500-3,000 million liters per year.
ESSO’s financial profile is sound. However, during the first nine months of 2013, the company’s total revenue decreased by 1.6% y-o-y to Bt181,293 million, mainly due to a drop in oil prices. The majority of sales (90%) came from the oil segment and the rest (10%) was from the petrochemical segment. The company’s profitability improved in the first nine months of 2013. ESSO’s gross refining margin (GRM) increased from US$3.4 per barrel in the first nine months of 2012 to US$4.2 per barrel in the first nine months of 2013. The oil refining and marketing segments recorded a combined operating profit of Bt2,739 million in the first nine months of 2013. The profitability of the petrochemical segment was negatively impacted by an oversupply of PX, resulting in a thin spread between the finished product prices and the feedstock price. The petrochemical segment recorded an operating loss of Bt593 million for the first nine months of 2013.
As of September 2013, the company’s total debt was Bt30,697 million. The debt to capitalization ratio was 55.8%, down from 58.0% at the end of 2012, but slightly higher than TRIS Rating’s expectation. The less-than-expected drop in the debt to capitalization ratio was mainly due to a lower-than-expected margin in the petrochemical segment. Over the next three years, the ratio is expected to improve as the company does not have plan for huge investments. The company’s EBITDA (earnings before interest, tax, depreciation and amortization) is expected at Bt5,000-Bt5,500 million per annum on average for the next three years, while the capital expenditures (CAPEX) are expected at Bt600-Bt1,100 million per annum. ESSO’s liquidity is ample due to the financial support from ExxonMobil. ESSO has a credit facility of Bt59,000 million from ExxonMobil.
Company Rating: A+ Rating Outlook: Stable
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