'We surpassed business targets despite tough conditions' – CEO, SK Energy

22 Jan '09

5 min read

2009 BUSINESS OUTLOOK:
The company is taking more caution in providing detailed business guidance for 2009 amid the growing uncertainties in volatile market conditions. Today the company provided key assumptions that are the major variables for our business.

BUSINESS SECTOR PERFORMANCE:
Petroleum:-
The petroleum division's fourth quarter recorded KRW 7.13 trillion in sales and KRW 281 billion in operating profit, displaying a 29% and 41.2% quarter-on-quarter decrease respectively, due to lower margins resulting from weaker demand.
- Also an inventory valuation loss of 110 billion won was reflected in 4th quarter operating profit. This was booked as a loss due to the Korean accounting standards of the lower of cost or market valuation method. Therefore, when oil prices rebound, inventory valuation losses will be reflected as gains.
-The petroleum division's 2008 sales totaled KRW 32.25 trillion, a 74.5% year-on-year increase and its operating profit also increased by 109.7% to KRW 1.28 trillion, largely due to the higher product prices in line with the increase in crude oil price.

Petrochemicals:
-The quarterly operating loss for the division was KRW 148 billion, a 295% quarter-on- quarter decrease due to the bearish petrochemical market conditions as worsening global market conditions reduced demand and narrowed spreads leading to lower product prices.
-Due to the loss in the fourth quarter, operating profit for the full year showed a 75.4% year-on-year decrease to KRW 125 billion. However, the division recorded an increase in sales for the full year, up by 39.7% to KRW 10.36 trillion.

Exploration and Production (E&P):
-Affected by the declining international oil price, the Company's E&P division posted quarterly sales of KRW 140 billion and operating profit of KRW 59 billion, 23.7% and 53.5% quarter-on-quarter decreases respectively.
-However, sales and operating profits for full year of 2008 increased by 65.4% and 75.3% year-over-year, to KRW 535 billion and KRW 309 billion, respectively thanks to increased production and sales volume.
-In the fourth quarter in 2008, SK Energy acquired two new blocks in Colombia, holding a 100%-stake in CPO-4 block and a 50%-stake in SSJN-5 block as an operator. The company also acquired stakes in the Brazil BM-Bar-3 and Oman 51 exploration blocks, and finalized agreements for the Kazakhstan Zhambyl block in January 2009.

Lubricants:
-The lubricants business showed an operating profit of KRW 81 billion, a 20.1% quarter-on-quarter increase.
-Sales revenue and volume declined 41.2% compared to the previous quarter due to shipment delays and falling demand as a result of the global economic slowdown.
-SK Energy is planning to revamp its LBO (Lubricant Base Oil) facilities in the upcoming second and third quarters of 2009, in order to be prepared for the eventual rebound in demand for high-quality base oil products.

SK Energy

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