SK Petrochemicals performance improves in second quarter

25 Jul '08

5 min read

• Cracking margins for the 2nd quarter 2008 were historically high thanks to strong diesel and gasoline prices and relatively weaker HSFO prices.

• 3rd quarter petroleum profits are expected to improve with increased sales of gasoline and diesel product from the new RFCC, which has been running at full capacity since the end of June

Petrochemicals:
• Petrochemical posted better than expected earnings in the 2nd quarter despite a downturn in the market

• 2Q sales and operating profit increased by 57% and 27% YOY to KRW 2,943.2 billion and KRW 167.5 billion, respectively, due to increased sales volume and improved product spreads

• Margins improved from tight regional supply due to unexpected operational trouble and shutdowns in the region by other producers, on top of increased downstream demand from restoration efforts of earthquakes and floods in China

Exploration & Production (E&P):

• 2nd quarter sales rose by 73% YOY to KRW 109.2 billion, as a results of the continuing rise in crude oil prices and additional production from Brazil BMC-8 and Vietnam 15-1 blocks.

• The Company acquired additional equity stakes in Vietnam 123 and finalizing participation in Kazakhstan Zhambyl block.

• Drilling exploration wells in Brazil BMC-30, Kazakhstan 8, Russia West Kamchatka blocks, with additional drillings are planned in U.K. North Sea and Indonesia in the second half of this year.

• E&P is well poised for the second half of 2008, having already achieved 74% of its annual business target of KRW 166.4 billion by the end of second quarter 2008.

Lubricants:
• 2nd quarter lubricants sales increased by 72% YOY reaching KRW 478.9 billion, due to increased sales volume and higher product prices.

• 1st quarter shipping delays and the early start-up of the No. 3 LBO plant contributed to the rise in sales volume, while increased international base oil prices were reflected in product prices.
The No. 3 LBO Plant in Indonesia started commercial production in the 2nd quarter. The facility produces 7,650 B/D of Group III base oil.

1H08 Summary of Performance:
• First half sales amounted to KRW 21.56 trillion as a result of higher product prices reflecting higher crude oil and naphtha prices. Petroleum and Petrochemical sales rose by 75% and 49% YOY, respectively, due in addition to additional sales volume following the merger with SK Incheon Oil

• Operating profit in the first half were up 6% to KRW 931.5 billion, mainly due to increased petroleum profits from bullish cracking margins and higher E&P profits from higher oil prices and increased daily production. Petrochemical's improved second quarter product spreads also contributed to the operating profit increase.

SK Energy

More Textiles News - South Korea...