TRIS Rating Co., Ltd. has affirmed the company rating of Esso (Thailand) PLC (ESSO) at “A+” with “stable” outlook. The rating reflects ESSO’s proven record in the petroleum business in Thailand, its efficient refinery and aromatic integration, well-established retail oil marketing and distribution network, and strong support from Exxon Mobil Corporation and/or its affiliates (ExxonMobil). The rating also takes into consideration the volatility inherent in the petroleum and petrochemical industries, highly fluctuating oil prices and gross refining margins, and declining demand for petroleum and petrochemical products.
The “stable” outlook reflects the expectation that ESSO will be able to maintain its strong operational and market position in the petroleum business in Thailand. The company is expected to maintain adequate liquidity and a healthy balance sheet to accommodate with the fluctuating nature of the petroleum and petrochemical businesses.
TRIS Rating reported that ESSO is a Thai affiliate of ExxonMobil and operates one of the 38 refineries run by ExxonMobil affiliates around the world. Currently, ESSO’s shareholders comprise ExxonMobil (66%), the Ministry of Finance (7.3%) and others (26.7%). ESSO operates a complex refinery with a maximum rated capacity of 177,000 barrels per day (BPD), supplying about 16% of the total of refined petroleum products in Thailand. The company’s throughput of 2,500-3,000 million liters per year via ESSO’s branded network of service stations constituted 15%-18% of annual domestic retail oil sales during the past five years.
As an ExxonMobil affiliate, ESSO employs ExxonMobil best practices in running the refinery and employs most of the operational programs and management systems utilized by the group. With ExxonMobil’s technology and philosophy, the refinery is regarded as one of the most energy efficient plant, with high operational reliability, in the Asia-Pacific region. ESSO also utilizes the global capabilities of ExxonMobil in purchasing crude and selling finished products. The integrated refinery and aromatic plant gives the company flexibility to adjust its product mix between various petroleum and petrochemical products. For the first half of 2009, ESSO’s crude intake was 140.6 thousand barrels per day (KBD), down by 3% from the same period in 2008, mainly due to weaker demand for refined oil products. The gross refining margin (GRM) for the first half of 2009 was US$10.20 per barrel, compared with US$15.30 per barrel for the same period in 2008. The refinery was run at a utilization rate of 79.4%. Paraxylene production increased to 199 thousand tonnes, up by 13.7% from the same period in 2008, due mainly to improved margins. As of June 2009, there were 542 service stations operating under the ESSO brand name, providing flexibility and diversity in the distribution channels. Refined products are distributed through ESSO’s branded network of service stations (36%), other local channels (45%) and overseas exports (19%).
During the first half of 2009, ESSO’s sales stood at Bt75,790 million, a decrease of 37.8% from the same period in 2008, due to lower oil prices. Ninety percent of total sales came from the oil business and 10% from the petrochemical business. As the Dubai crude price gradually improved from US$40 in December 2008 to an average of US$51.70 for the first half of 2009, ESSO reported a GRM of US$10.20 per barrel for the first half of 2009, up from a negative margin of US$2.30 per barrel in 2008. ESSO’s financial position remains satisfactory. Total debt decreased from Bt27,971 million in 2008 to Bt23,724 million as of June 2009.
TRIS Rating said, ESSO’s debt to capitalization ratio improved from 57.8% in 2008 to 47.87% as of June 2009. With an average earnings before interest, tax, depreciation, and amortization (EBITDA) of Bt8,000-Bt10,000 million a year, capital expenditure for the Euro IV compliance project, and annual long-term debt repayment, the company’s need for external financing is moderate. An additional credit facility of Bt54,000 million from ExxonMobil provides a strong cushion during downward cycles in commodity prices for petroleum and petrochemical products. -- End
Company Rating: Affirmed at A+ Rating Outlook: Stable
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