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Hengyuan - 2 pictures says a thousand word
probability
Publish date: Sat, 07 May 2022, 11:54 AM
The 10 - year agreement to determine the margin:
The crack spread - the margin itself:
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From above, we can see 22 Dec 2021 was the date they would have switched to Russian Oil.
Q1 22'will see the real power of Russian oil...
2022-05-07 12:23
Frequently asked questions on refinery like HRC for investors knowledge:
https://investor.esso.co.th/en/frequently-asked-questions
Why are refined product prices set based on singapore market prices?
.........
Oil is a commodity product in a market which is highly competitive. Pricing policy or production and sale strategies of a market player can impact the overall market as the other players may consequently make price adjustments in order to maintain their competitiveness. Therefore, the to-be reference oil price should be determined by demand and supply capabilities in free markets within a given proximity. This approach which is similar to what is done with agricultural goods such as fruit reference prices at Tai market or rice reference prices at Kumnun Song market.
The three major oil trading regions are North America, Europe and Asia Pacific. The AP trading hub is in Singapore as it is the biggest exporting country in the region. Singapore reference prices are not refined product prices set by Singapore government or refineries. They essentially are the prices of products which are traded in Singapore by oil traders in the region.
Thailand is in the AP region and located near Singapore; therefore, it is logical that Singapore oil prices are used as reference prices. Singapore oil prices not only reflect equilibrium prices of free markets in the region but also globally align with the other regional trading hubs.
2022-05-07 18:41
The 5 years crude sourcing from Shell is over by 22 Dec 2021, I believe Hengyuan being a smart China management would have sourced crude oil from Russia:
https://www.euractiv.com/section/energy-environment/news/the-fossil-fuel-companies-profiting-from-europes-oil-trade-with-russia/
The company’s refining margins jumped to staggering levels in March, according to media reports.
Compared to the previous ten-year record of $9.3 per barrel on refined products, MOL earned $34.9 per barrel of oil refined in March.
This is largely due to the much lower price of the Russian export oil blend (REBCO) used in MOL’s refineries compared to other types of oil.
2022-05-07 18:42
What would you need to justify a TP of RM 12 with PE 5?
.......................................................
(PE 5 is conservative considering its just the beginning of golden age for refinery now)
If you see Q4 21'results which delivered EPS of 60 cents. You only need such performance on average every quarter for TP of RM 12 with PE5.
During this quarter, the Gross Profit added with other Operating Gains was MYR 309m.
This is the gross refining margin you need with a stable oil price (not dropping) in order to deliver EPS of 60 cents per quarter as you have not even subtracted the manufacturing cost.
Lets see what is the average crack spread you would need to deliver the above earnings going forward:
Barrels processed / sold per Qtr average 10.5 m
Gross refining margin per barrel needed:
= ( MYR 309 ) * (1/4.2) / (10.5 m barrels)
= USD 7.0/brl
Hope with the above people will realize its not that hard to hit RM 12 with current refining margin exceeding USD 20 / brl
2022-05-07 18:42
Shandong-based independent refinery buying Russian crude discounted $35 per barrel against Brent crude
MAY 4 2022
https://www.ft.com/content/4f277a24-d681-421a-9c94-29d6fd448b20
China’s independent refiners have been discreetly buying Russian oil at steep discounts as western countries suspend their own purchases and explore potential embargoes because of the war in Ukraine.
An official at a Shandong-based independent refinery said it had not publicly reported deals with Russian oil suppliers since the Ukraine war started in order to avoid attracting scrutiny and being hit by US sanctions.
The official added that the refinery had taken over some of the purchase quota for Russian crude from state-owned commodity trading firms, which are seen to represent Beijing and have mostly declined to sign new supply contracts.
Many western companies are self-sanctioning or struggling to secure the insurance, shipping or financing needed to buy Russia’s commodity exports, raising expectations that energy-hungry China will step in and buy the unsold barrels.
The purchases from China’s independent refineries reveal how some importers are bypassing traditional routes to access cheap Russian oil, helping Beijing maintain a low profile as the west barrages Moscow with sanctions.
Brian Gallagher, head of investor relations at Belgian tanker group Euronav, said the consolidation of Russia oil on to larger ships for transport to Asia was “unusual”. But with Urals discounted $35 per barrel against Brent crude, he added that Chinese refineries were motivated to buy.
............
Shandong Hengyuan Petrochemical Company Limited (SHPC) is a state-owned enterprise based in Linyi County, Shandong Province, China.
http://hrc.com.my/shandong-hengyuan-petrochemical.html
...............
22 Dec 2021 - COSA agreement between HRC & Shell to buy their Brent crude is over
2022-05-08 08:22
Top popular article in i3 now.
Attracted many interest over the weekend. Wish everyone can abstract the key pts for investment decision.
2022-05-08 15:21
SUPERB NEWS! this is truely fantastic for Hengyuan...
They can guzzle all the RUSSIAN CRUDE they want!!
....................
Malaysia does not recognise unilateral sanctions, remains non-aligned to any side
https://www.malaymail.com/news/malaysia/2022/05/08/saifuddin-malaysia-does-not-recognise-unilateral-sanctions-remains-non-alig/2057677
2022-05-08 15:21
Indonesia’s Pertamina eyes cheaper Russian oil
https://www.energyvoice.com/oilandgas/asia/399254/indonesias-pertamina-eyes-cheaper-russian-oil/
“Politically, there’s no problem as long as the company we are dealing with was not sanctioned. We have also discussed the payment arrangement, which may go through India,” she told parliament members.
Indonesia holds the G20 presidency this year and has said it will remain neutral amid the Russia-Ukraine conflict, which has sparked the biggest humanitarian and geopolitical crisis in Europe since World War Two. The Indonesian government has raised concerns about the invasion but stopped short of condemning it.
2022-05-08 15:27
Hengyuan can go through Shandong Hengyuan China for payments if necessary
2022-05-08 15:34
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probability
Good thing is the 5 - year contract for crude sourcing is over and they can freely use Russian oil at easily 20 USD /brl discount against Brent
2022-05-07 11:59