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2022-09-03 16:36 | Report Abuse
the article was posted to explain this as i understand from a person with background in acc & finance (i am not)
ADDITIONAL EXPLANATION BY PROBABILITY:
The reason why HY shows large unrealized loss on Cost of hedging reserve (COHR) is because it has around 18 million barrels of refined products, e.g Gasoline crack spread that is hedged for next 24 months at 12.7 USD/brl margin.
This is the Refining Margin Swap Contract (RMSC) shown as USD 227 million (USD 12.7 crack x 18 million barrels hedged).
As per accounting rules, this hedged contract (RMSC) has to show the opportunity lost / gained presuming the current crack spread of these refined products at the end of reporting Q2 22' (30 June) persist indefinitely till all hedging contract matures (more than 24 months).
Unrealized Cost of Hedging Reserve (COHR) , loss / gain: (A-M) x V
A = hedged crack spread value, 12.7 USD/brl
V = barrels volume of refined products hedged, 18 million
M = Market pricing of the hedged refined product at end of reporting period (mark to market)
Since at the end of June 22', the avg crack spread of the refined products, e.g gasoline at 31.6 USD/brl, the opportunity lost for the period of hedging is
Unrealized Cost of Hedging Reserve (COHR):
= (12.7 - 31.6) USD/brl x 18 million barrels
= - 338 million USD or MYR 1,490,267,000
The above is what reported as (Asset 261,065,000 - Liabilities 1,751,332,000)
Out of the above a portion (which matures in 12 months) will go into 'Other comprehensive
(expense)/income' reported as Cost of hedging reserve.
2022-09-03 16:34 | Report Abuse
thanks for the below comment
Posted by PSAi3alert > Sep 3, 2022 4:32 PM | Report Abuse
probability,
I have to admit that I'm least confident in putting HY in the "Fat 'Kap Nar' running in the street" list.
2022-09-03 16:14 | Report Abuse
COHR gain of 390 million from loss of 1.1 billion will cause the NTA to jump by RM5 and if you add that to EPS of RM2, you get RM 7
that means by end of Q3, NTA is above RM12...WTF!
2022-09-03 16:13 | Report Abuse
COHR gain of 390 million from loss of 1.1 billion will cause the NTA to jump by RM5 and if you add that to EPS of RM2, you get RM 7
that means by end of Q3, NTA is above RM12...WTF!
2022-09-03 15:58 | Report Abuse
@PSAi3alert, i had some respect on you earlier when you tried to expose Serba. But unfortunately, over confidence can make one blind to rationality...
suggest you spend some time going through the derivations, annual report on their refining margin swap, and understand how cost of hedging reserve works before commenting
HY is not the only refinery in the world that reported huge earnings.
2022-09-03 15:52 | Report Abuse
Now lets see what happens, when Gasoline crack drops to ZERO (currently its about 7.8 USD/brl)
Unrealized Cost of Hedging Reserve (COHR):
= (12.7 - 0) USD/brl x 18 million barrels
= 228 million USD or gain of MYR 1,000,005,000
GAIN of 1 BILLION on Cost of hedging reserve in Q2
But those who understand the above, they know it does not matter and that for gasoline their earnings is always going to be at 12.7 USD/brl.....
2022-09-03 15:52 | Report Abuse
Now lets see what happens, when Gasoline crack drops to ZERO (currently its about 7.8 USD/brl)
Unrealized Cost of Hedging Reserve (COHR):
= (12.7 - 0) USD/brl x 18 million barrels
= 228 million USD or gain of MYR 1,000,005,000
GAIN of 1 BILLION on Cost of hedging reserve in Q2
But those who understand the above, they know it does not matter and that for gasoline their earnings is always going to be at 12.7 USD/brl.....
2022-09-03 14:03 | Report Abuse
Now lets see what happens, when Gasoline crack drops to its usual average of 5.7 USD/brl (currently its about 7.8 USD/brl)
Unrealized Cost of Hedging Reserve (COHR):
= (12.7 - 5.7) USD/brl x 18 million barrels
= 90 million USD or gain of MYR 395,000,000
When its a loss, COHR only shows the 'greater opportunity lost' compared to smaller opportunity gained by hedging - by locking down the margin.
When its a gain, COHR only shows the 'benefit of opportunity locked' compared to if you had not locked the opportunity available earlier.
As such, we can see why the above is not reported in P&L statement. It really does not matter - as what Rabbit2 said it becomes zero on maturity.
2022-09-03 14:03 | Report Abuse
ADDITIONAL EXPLANATION BY PROBABILITY:
The reason why HY shows large unrealized loss on Cost of hedging reserve (COHR) is because it has around 18 million barrels of refined products, e.g Gasoline crack spread that is hedged for next 24 months at 12.7 USD/brl margin.
This is the Refining Margin Swap Contract (RMSC) shown as USD 227 million (USD 12.7 crack x 18 million barrels hedged).
As per accounting rules, this hedged contract (RMSC) has to show the opportunity lost / gained presuming the current crack spread of these refined products at the end of reporting Q2 22' (30 June) persist indefinitely till all hedging contract matures (more than 24 months).
Unrealized Cost of Hedging Reserve (COHR) , loss / gain: (A-M) x V
A = hedged crack spread value, 12.7 USD/brl
V = barrels volume of refined products hedged, 18 million
M = Market pricing of the hedged refined product at end of reporting period (mark to market)
Since at the end of June 22', the avg crack spread of the refined products, e.g gasoline at 31.6 USD/brl, the opportunity lost for the period of hedging is
Unrealized Cost of Hedging Reserve (COHR):
= (12.7 - 31.6) USD/brl x 18 million barrels
= - 338 million USD or MYR 1,490,267,000
The above is what reported as (Asset 261,065,000 - Liabilities 1,751,332,000)
Out of the above a portion (which matures in 12 months) will go into 'Other comprehensive
(expense)/income' reported as Cost of hedging reserve.
2022-09-03 13:55 | Report Abuse
Now lets see what happens, when Gasoline crack drops to ZERO (currently its about 7.8 USD/brl)
Unrealized Cost of Hedging Reserve (COHR):
= (12.7 - 0) USD/brl x 18 million barrels
= 228 million USD or gain of MYR 1,000,005
GAIN of 1 BILLION on Cost of hedging reserve in Q2
But those who understand the above, they know it does not matter and that for gasoline their earnings is always going to be at 12.7 USD/brl.....
2022-09-03 13:45 | Report Abuse
they forward hedge up to 2 years plus of this amount...
2022-09-03 13:44 | Report Abuse
@Bob, they hedge at about 18% of their monthly throughput...
2022-09-03 13:36 | Report Abuse
HY refinery margin update - 2/09/22 (DIESEL CRACK BLASTED ABOVE 50$/brl!)
...........
Diesel: https://www.tradingview.com/symbols/NYMEX-GOC1!/
Jet Fuel: https://www.tradingview.com/symbols/NYMEX-ASD1!/
Gasoline Mogas 92: https://www.tradingview.com/symbols/NYMEX-D1N1%21/
Gasoline Mogas 95 premium: https://www.tradingview.com/symbols/NYMEX-SMU1!/
From above:
1. Diesel at 46% yield, cracks USD 50.36/bbl
2. Jet fuel at 7% yield, cracks USD 38.40/bb
3. Gasoline Mogas 95 at 35% yield, cracks USD (4.07 + 3.71) / bbl
4. Rest of product yield at 12%, using Mogas 95 cracks USD 7.77/bbl
Gross refining margin:
= (0.46 x 50.4 ) + (0.07 x 38.40) + (0.35 x 7.77)+ (0.12 x 7.77)
= 23.18 + 2.70 + 2.72 + 0.93
= US $ 29.5 / brl
.................
Gross Profit at above derived present refining margin
= (10.7 million barrel sales per qtr) x ( US $29.5/brl) x (MYR 4.45/USD)
= 1.404 Billion MYR
...................
2022-09-03 13:36 | Report Abuse
HY refinery margin update - 2/09/22 (DIESEL CRACK BLASTED ABOVE 50$/brl!)
...........
Diesel: https://www.tradingview.com/symbols/NYMEX-GOC1!/
Jet Fuel: https://www.tradingview.com/symbols/NYMEX-ASD1!/
Gasoline Mogas 92: https://www.tradingview.com/symbols/NYMEX-D1N1%21/
Gasoline Mogas 95 premium: https://www.tradingview.com/symbols/NYMEX-SMU1!/
From above:
1. Diesel at 46% yield, cracks USD 50.36/bbl
2. Jet fuel at 7% yield, cracks USD 38.40/bb
3. Gasoline Mogas 95 at 35% yield, cracks USD (4.07 + 3.71) / bbl
4. Rest of product yield at 12%, using Mogas 95 cracks USD 7.77/bbl
Gross refining margin:
= (0.46 x 50.4 ) + (0.07 x 38.40) + (0.35 x 7.77)+ (0.12 x 7.77)
= 23.18 + 2.70 + 2.72 + 0.93
= US $ 29.5 / brl
.................
Gross Profit at above derived present refining margin
= (10.7 million barrel sales per qtr) x ( US $29.5/brl) x (MYR 4.45/USD)
= 1.404 Billion MYR
...................
2022-09-03 13:35 | Report Abuse
HY refinery margin update - 2/09/22 (DIESEL CRACK BLASTED ABOVE 50$/brl!)
...........
Diesel: https://www.tradingview.com/symbols/NYMEX-GOC1!/
Jet Fuel: https://www.tradingview.com/symbols/NYMEX-ASD1!/
Gasoline Mogas 92: https://www.tradingview.com/symbols/NYMEX-D1N1%21/
Gasoline Mogas 95 premium: https://www.tradingview.com/symbols/NYMEX-SMU1!/
From above:
1. Diesel at 46% yield, cracks USD 50.36/bbl
2. Jet fuel at 7% yield, cracks USD 38.40/bb
3. Gasoline Mogas 95 at 35% yield, cracks USD (4.07 + 3.71) / bbl
4. Rest of product yield at 12%, using Mogas 95 cracks USD 7.77/bbl
Gross refining margin:
= (0.46 x 50.4 ) + (0.07 x 38.40) + (0.35 x 7.77)+ (0.12 x 7.77)
= 23.18 + 2.70 + 2.72 + 0.93
= US $ 29.5 / brl
.................
Gross Profit at above derived present refining margin
= (10.7 million barrel sales per qtr) x ( US $29.5/brl) x (MYR 4.45/USD)
= 1.404 Billion MYR
...................
2022-09-03 13:22 | Report Abuse
i am afraid not possible Zhuge
Posted by Zhuge_Liang > Sep 3, 2022 1:01 PM | Report Abuse
Posted by Ahahah > 11 minutes ago | Report Abuse
@probabilty my English is not good. That is what I try to explain in this morning but rejected by this 3i members.
Beside that they are using petrol to blend with diesel and selling as diesel at good price.
----------------
@probability,
Can gasoline blend with diesel and sell it as diesel after some rework ?
If it is feasible, then it is a good news to Hengyuan.
Please advise.
2022-09-03 12:57 | Report Abuse
Now lets see what happens, when Gasoline crack drops to its usual average of 5.7 USD/brl (currently its about 4.5 USD/brl)
Unrealized Cost of Hedging Reserve (COHR):
= (12.7 - 5.7) USD/brl x 18 million barrels
= 90 million USD or gain of MYR 395,000,000
When its a loss, COHR only shows the 'greater opportunity lost' compared to smaller opportunity gained by hedging - by locking down the margin.
When its a gain, COHR only shows the 'benefit of opportunity locked' compared to if you had not locked the opportunity available earlier.
As such, we can see why the above is not reported in P&L statement. It really does not matter - as what Rabbit2 said it becomes zero on maturity.
2022-09-03 12:56 | Report Abuse
ADDITIONAL EXPLANATION BY PROBABILITY:
The reason why HY shows large unrealized loss on Cost of hedging reserve (COHR) is because it has around 18 million barrels of refined products, e.g Gasoline crack spread that is hedged for next 24 months at 12.7 USD/brl margin.
This is the Refining Margin Swap Contract (RMSC) shown as USD 227 million (USD 12.7 crack x 18 million barrels hedged).
As per accounting rules, this hedged contract (RMSC) has to show the opportunity lost / gained presuming the current crack spread of these refined products at the end of reporting Q2 22' (30 June) persist for the next 12 months.
Unrealized Cost of Hedging Reserve (COHR) , loss / gain: (A-M) x V
A = hedged crack spread value, 12.7 USD/brl
V = barrels volume of refined products hedged, 18 million
M = Market pricing of the hedged refined product at end of reporting period (mark to market)
Since at the end of June 22', the avg crack spread of the refined products, e.g gasoline at 31.6 USD/brl, the opportunity lost for the period of hedging is
Unrealized Cost of Hedging Reserve (COHR):
= (12.7 - 31.6) USD/brl x 18 million barrels
= - 338 million USD or MYR 1,490,267,000
The above is what reported as (Asset 261,065,000 - Liabilities 1,751,332,000)
Out of the above a portion will go into 'Other comprehensive
(expense)/income' reported as Cost of hedging reserve.
2022-09-03 12:56 | Report Abuse
Now lets see what happens, when Gasoline crack drops to its usual average of 5.7 USD/brl (currently its about 4.5 USD/brl)
Unrealized Cost of Hedging Reserve (COHR):
= (12.7 - 5.7) USD/brl x 18 million barrels
= 90 million USD or gain of MYR 395,000,000
When its a loss, COHR only shows the 'greater opportunity lost' compared to smaller opportunity gained by hedging - by locking down the margin.
When its a gain, COHR only shows the 'benefit of opportunity locked' compared to if you had not locked the opportunity available earlier.
As such, we can see why the above is not reported in P&L statement. It really does not matter - as what Rabbit2 said it becomes zero on maturity.
2022-09-03 12:54 | Report Abuse
Now lets see what happens, when Gasoline crack drops to its usual average of 5.7 USD/brl (currently its about 4.5 USD/brl)
Unrealized Cost of Hedging Reserve (COHR):
= (12.7 - 5.7) USD/brl x 18 million barrels
= 90 million USD or gain of MYR 395,000,000
When its a loss, COHR only shows the 'greater opportunity lost' compared to smaller opportunity gained by hedging - by locking down the margin.
When its a gain, COHR only shows the 'benefit of opportunity locked' compared to if you had not locked the opportunity available earlier.
As such, we can see why the above is not reported in P&L statement. It really does not matter - as what Rabbit2 said it becomes zero on maturity.
2022-09-03 12:54 | Report Abuse
ADDITIONAL EXPLANATION BY PROBABILITY:
The reason why HY shows large unrealized loss on Cost of hedging reserve (COHR) is because it has around 18 million barrels of refined products, e.g Gasoline crack spread that is hedged for next 24 months at 12.7 USD/brl margin.
This is the Refining Margin Swap Contract (RMSC) shown as USD 227 million (USD 12.7 crack x 18 million barrels hedged).
As per accounting rules, this hedged contract (RMSC) has to show the opportunity lost / gained presuming the current crack spread of these refined products at the end of reporting Q2 22' (30 June) persist for the next 12 months.
Unrealized Cost of Hedging Reserve (COHR) , loss / gain: (A-M) x V
A = hedged crack spread value, 12.7 USD/brl
V = barrels volume of refined products hedged, 18 million
M = Market pricing of the hedged refined product at end of reporting period (mark to market)
Since at the end of June 22', the avg crack spread of the refined products, e.g gasoline at 31.6 USD/brl, the opportunity lost for the period of hedging is
Unrealized Cost of Hedging Reserve (COHR):
= (12.7 - 31.6) USD/brl x 18 million barrels
= - 338 million USD or MYR 1,490,267,000
The above is what reported as (Asset 261,065,000 - Liabilities 1,751,332,000)
Out of the above a portion will go into 'Other comprehensive
(expense)/income' reported as Cost of hedging reserve.
2022-09-03 12:43 | Report Abuse
The reason why HY shows large unrealized loss on Cost of hedging reserve (COHR) is because it has around 18 million barrels of refined products, e.g Gasoline crack spread that is hedged for next 12 months at 12.7 USD/brl margin.
This is the Refining Margin Swap Contract (RMSC) shown as USD 227 million (USD 12.7 crack x 18 million barrels hedged).
As per accounting rules, this hedged contract (RMSC) has to show the opportunity lost / gained presuming the current crack spread of these refined products at the end of reporting Q2 22' (30 June) persist for the next 12 months.
Unrealized Cost of Hedging Reserve (COHR) , loss / gain: (A-M) x V
A = hedged crack spread value, 12.7 USD/brl
V = barrels volume of refined products hedged, 18 million
M = Market pricing of the hedged refined product at end of reporting period (mark to market)
Since at the end of June 22', the avg crack spread of the refined products, e.g gasoline at 31.6 USD/brl, the opportunity lost for the period of hedging is
Unrealized Cost of Hedging Reserve (COHR):
= (12.7 - 31.6) USD/brl x 18 million barrels
= - 338 million USD or MYR 1,490,267,000
The above is what reported as (Asset 261,065,000 - Liabilities 1,751,332,000)
Out of the above a portion will go into 'Other comprehensive
(expense)/income' reported as Cost of hedging reserve.
...
Now lets see what happens, when Gasoline crack drops to its usual average of 5.7 USD/brl (currently its about 4.5 USD/brl)
Unrealized Cost of Hedging Reserve (COHR):
= (12.7 - 5.7) USD/brl x 18 million barrels
= 90 million USD or gain of MYR 395,000,000
When its a loss, COHR only shows the 'greater opportunity lost' compared to smaller opportunity gained by hedging - by locking down the margin.
When its a gain, COHR only shows the 'benefit of opportunity locked' compared to if you had not locked the opportunity available earlier.
As such, we can see why the above is not reported in P&L statement. It really does not matter - as what Rabbit2 said it becomes zero on maturity.
2022-09-03 11:14 | Report Abuse
Charlest, Stockraider, spent some time to understand what the articles shows. No one is trying to plug figures from the air...
2022-09-03 00:27 | Report Abuse
LOL!
Posted by Zhuge_Liang > Sep 3, 2022 12:22 AM | Report Abuse
qqq3 fxxk you.
Another shameless liar.
Continue to tell lies after lies.
No wonder you are beaten by a gang in Bangsar because of your bad mouth.
You are cursed and the gang should beat you to death.
You are an useless dead wood in this world.
No value at all.
2022-09-03 00:26 | Report Abuse
well said Zhuge..
this people like raider is the root cause many valuable people like Rabbit2 dont come to i3 often
Posted by Zhuge_Liang > Sep 3, 2022 12:13 AM | Report Abuse
Rabbit2 is a qualified accountant.
He has the experience to audit a refinery company.
He knows hedging rules well.
Unlike an office boy, continue to tell lies here.
This office boy lost a lot of money on Hengyuan in 2017 until he hid himself at Pudu market.
Bullshit and twist the story to suit him.
Real shameless.
2022-09-02 23:46 | Report Abuse
Just saw your reply Rabbit2, you are the man..amazing!
THANK YOU SO MUCH...
Posted by Rabbit2 > Sep 2, 2022 10:47 PM | Report Abuse
@Probability, I could be wrong as I'm still learning
2022-09-02 23:05 | Report Abuse
no need cheap oil, as long refinery shortage, operating refinery can hike up margin..
2022-09-02 22:26 | Report Abuse
no worries, we share our opinions...thats the purpose of i3...keep learning and have an open mind
2022-09-02 21:46 | Report Abuse
yes tehka, and at current zero gasoline crack spread assuming the others Diesel & Jet Fuel crack is maintained, Q4 EPS will be 2.84....
2022-09-02 21:32 | Report Abuse
Estimation of Q2 gross profit earlier:
https://klse1.i3investor.com/blogs/2017/2022-06-11-story-h1624320379-HENGYUAN_derivatives_loss_on_Q1_22_completely_clarification.jsp
2022-09-02 21:14 | Report Abuse
@goh, not really promoting...studying only.... at this cheap share price and dividend given by management - you still think 'promotion'...sad :(
2022-09-02 21:09 | Report Abuse
The above shows even with zero crack spread of gasoline, HY will deliver EPS above RM for Q3 and Q4 with current margin of Diesel & Jet Fuel....
2022-09-02 21:04 | Report Abuse
Hope i3 investors Crack their head on the above over the weekend! Enjoy....
2022-09-02 21:03 | Report Abuse
HENGYUAN - How to calculate its refinery margin? & Why share price hesitating to move up despite Q2 EPS of RM 2.2?
https://klse1.i3investor.com/blogs/2017/2022-09-02-story-h1627801128-HENGYUAN_How_to_calculate_its_refinery_margin_Why_share_price_hesitatin.jsp
2022-09-02 21:02 | Report Abuse
HENGYUAN - How to calculate its refinery margin? & Why share price hesitating to move up despite Q2 EPS of RM 2.2?
https://klse1.i3investor.com/blogs/2017/2022-09-02-story-h1627801128-HENGYUAN_How_to_calculate_its_refinery_margin_Why_share_price_hesitatin.jsp
@Rabbit2 & @Sslee, hope you dont me quoting your salient comments here in HY forum earlier.
The more investor learn about hedging the better their appreciation of HY & PetronM.
2022-09-02 19:58 | Report Abuse
Remember however that the above is assuming ZERO crack of gasoline for July & Aug which had passed, with only another month left for Q3 results to be secured. So it can't be far out from above.
It would be reflective of Q4 you can say at current margin.
2022-09-02 19:57 | Report Abuse
HY Complex refinery margin update - 1/09/22 (with gasoline at almost zero crack)
.................
Diesel: https://www.tradingview.com/symbols/NYMEX-GOC1!/
Jet Fuel: https://www.tradingview.com/symbols/NYMEX-ASD1!/
Gasoline Mogas 92: https://www.tradingview.com/symbols/NYMEX-D1N1%21/
Gasoline Mogas 95 premium: https://www.tradingview.com/symbols/NYMEX-SMU1!/
From above:
1. Diesel at 46% yield, cracks USD 46.5/bbl
2. Jet fuel at 7% yield, cracks USD 36.0/bb
3. Gasoline Mogas 95 at 35% yield, cracks USD (0.79 + 3.71) / bbl
4. Rest of product yield at 12%, using Mogas 95 cracks USD 4.50/bbl
Gross refining margin:
= (0.46 x 46.5 ) + (0.07 x 36.0) + (0.35 x 4.5)+ (0.12 x 4.5)
= 21.39 + 2.52 + 1.57 + 0.54
= US $ 26.02 / brl
.................
Gross Profit at above derived present refining margin
= (10.7 million barrel sales per qtr) x ( US $26.0/brl) x (MYR 4.45/USD)
= 1.238 Billion MYR
...................
If there is still derivative loss for Diesel above, we can expect derivative gain for Gasoline. It would be certainly fair to assume that it can only be gain (as HY hedged at USD 12/brl for gasoline) and at the minimum it would be fair to assume zero hedging loss/gain.
Using worst scenario,
the PBT would be:
= 1.138 Billion MYR
PAT would be: = 853 Million MYR, EPS = 2.84 for Q3
..................
accounting cash flow hedge loss of Q2 at 244 million
the PBT would be:
= 894 Billion MYR
PAT would be: = 670 Million MYR, EPS = 2.23 for Q3 ( still exceeding Q2)
...................
2022-09-02 19:21 | Report Abuse
good candidate for privatization, with NTA hitting above 10 by Q3, even if they takeover - MTO offer price will be high if they do that!
Posted by tehka > Sep 2, 2022 7:18 PM | Report Abuse
Omg q3 eps = 2.23 + q2 eps = 2++ wow.. pe 15 = ?? wow..mind is blown .. cannot imagine
2022-09-02 19:13 | Report Abuse
@Bob, FYI below on how crack from futures affect refinery margin:
www.cmegroup.com/education/articles-and-reports/introduction-to-crack-spreads.html
In January, Refiner sells the 1:1 Gasoline Crack Spread Futures contract at $17.20:
Sells 1 May RBOB gasoline futures contract at $1.60 per gallon ($67.20 per barrel) Buys 1 April CL futures contract at $50.00 per barrel
Locks in the crack spread at $17.20 per barrel
In the Cash Market in March, Refiner sells the Gasoline Crack Spread at $13.50:
Sells 1000 barrels of physical gasoline at $1.75 per gallon ($73.50 per barrel) Buys 1000 barrels of physical crude oil at $60.00 per barrel
Receives a positive cracking margin of $13.50 per barrel
In March, Refiner buys back (liquidates) the 1:1 Gasoline Crack Spread Futures contract at $13.50 per barrel:
Buys 1 May RBOB gasoline futures contract at $1.75 per gallon ($73.50 per barrel) Sells 1 April CL futures contract at $60.00 per barrel
Futures gain of $3.70 per barrel (which can be applied to the cash market cracking margin)
Profit/Loss calculation:
Hedged crack spread = $17.20 per barrel
Un-hedged cash market cracking margin = $13.50
2022-09-02 19:11 | Report Abuse
yes, we assume almost zero only for gasoline . check the details of derivation above
Posted by BobAxelrod > Sep 2, 2022 7:05 PM | Report Abuse
ZERO crack?,....isn't the crack spread where Refineries derived their margins from???
2022-09-02 19:04 | Report Abuse
The 244 million losses from Cash flow hedge in Q2 is expected to be recognized somehow as per Rabbit2, as such i am recognizing it in Q3 to reflect worst scenario.
Posted by BobAxelrod > Sep 2, 2022 7:02 PM | Report Abuse
Really blow my mind...on one hand you're saying the hedging would have assumed zero losses.
On the other you are have input of millions in hedging cash losses???
2022-09-02 19:02 | Report Abuse
Remember however that the above is assuming ZERO crack of gasoline for July & Aug which had passed, with only another month left for Q3 results to be secured. So it can't be far out from above.
It would be reflective of Q4 you can say at current margin.
2022-09-02 18:57 | Report Abuse
HY Complex refinery margin update - 1/09/22 (with gasoline at almost zero crack)
.................
Diesel: https://www.tradingview.com/symbols/NYMEX-GOC1!/
Jet Fuel: https://www.tradingview.com/symbols/NYMEX-ASD1!/
Gasoline Mogas 92: https://www.tradingview.com/symbols/NYMEX-D1N1%21/
Gasoline Mogas 95 premium: https://www.tradingview.com/symbols/NYMEX-SMU1!/
From above:
1. Diesel at 46% yield, cracks USD 46.5/bbl
2. Jet fuel at 7% yield, cracks USD 36.0/bb
3. Gasoline Mogas 95 at 35% yield, cracks USD (0.79 + 3.71) / bbl
4. Rest of product yield at 12%, using Mogas 95 cracks USD 4.50/bbl
Gross refining margin:
= (0.46 x 46.5 ) + (0.07 x 36.0) + (0.35 x 4.5)+ (0.12 x 4.5)
= 21.39 + 2.52 + 1.57 + 0.54
= US $ 26.02 / brl
.................
Gross Profit at above derived present refining margin
= (10.7 million barrel sales per qtr) x ( US $26.0/brl) x (MYR 4.45/USD)
= 1.238 Billion MYR
...................
If there is still derivative loss for Diesel above, we can expect derivative gain for Gasoline. It would be certainly fair to assume that it can only be gain (as HY hedged at USD 12/brl for gasoline) and at the minimum it would be fair to assume zero hedging loss/gain.
Using worst scenario,
the PBT would be:
= 1.138 Billion MYR
PAT would be: = 853 Million MYR, EPS = 2.84 for Q3
..................
accounting cash flow hedge loss of Q2 at 244 million
the PBT would be:
= 894 Billion MYR
PAT would be: = 670 Million MYR, EPS = 2.23 for Q3 ( still exceeding Q2)
...................
2022-09-02 15:09 | Report Abuse
even at 80% they wont increase further coz who is going to buy their gasoline? unless they got do hedging like HY
Posted by MoneyMakers > Sep 2, 2022 3:07 PM | Report Abuse
Aiyoyo probability/sslee ofcos refineries can increase diesel output (subsequently crack spread collapse)
Think global refinery utilisation/run rate @ 100% meh aiyoyo
2022-09-02 14:42 | Report Abuse
@MM, basically what sslee is saying is you cannot increase diesel output more than current level without increasing gasoline output which explains why the margin-crack has gone low for gasoline
EU refiners - simple type, who mainly produce gasoline & fuel oil at low margin will lose incentive to refine further
basically there is no solution to the Diesel shortage unless Russian diesel is allowed to export
2022-09-02 14:24 | Report Abuse
based on below hedging figures itself - using the lowest margin for gasoline of 12.665 USD/brl
Gross profit after all hedging losses, minimum possible:
= 10.7 million sales/qtr x 12.67 USD/brl x 4.48 MYR/USD
= 607 million
PBT minimum = 500 million
PAT = 375 million
EPS = RM 1.25 for Q3
Posted by Sslee > Sep 2, 2022 8:59 AM | Report Abuse
Dear probability,
The outstanding Refining margin swap contract as on 30/06/2022
Notional amount: USD 226,945,000
Assets: RM 261,065,000
Liabilities: RM 1,751,332,000
Hence unrealized loss RM (1,751,332,000-261,065,000) = RM 1,490,267,000
On 30/06/2022:
Mogas92 crack spread: USD 31.578
Diesel crack spread: USD 56.125
Average of the two USD (31.578+56.125)/2= USD43.85
USD to MYR: 4.397
V: Volume of outstanding refining margin swap contract (Barrels)
A: Average outstanding margin per barrel hedged (USD)
Equation:
from notional amount: V x A=226,945,000 or V=226,945,000/A
from unrealized loss: V x (43.85 – A) = 1,490,267,000/4.397
226,945,000 x (43.85 – A) = 338,928,133 x A
9,951,538,250= (338,928,113 + 226,945,000) x A
A= 9,951,538,250/565,873,133
A= 17.586
V=226,945,000/17.586
V=12,904,746
If you use only Mogas92 crack spread: USD 31.58
Equation:
V x A=226,945,000 or V=226,945,000/A
V x (31.58 – A) = 1,490,267,000/4.397
226,945,000 x (31.58 – A) = 338,928,133 x A
7,166,923,100= (338,928,113 + 226,945,000) x A
A= 7,166,923,100/565,873,133
A= 12.665
V=226,945,000/12.665
V= 17,918,718
Stock: [HENGYUAN]: HENGYUAN REFINING COMPANY BERHAD
2022-09-03 16:37 | Report Abuse
Now lets see what happens, when Gasoline crack drops to its usual average of 5.7 USD/brl (currently its about 7.8 USD/brl)
Unrealized Cost of Hedging Reserve (COHR):
= (12.7 - 5.7) USD/brl x 18 million barrels
= 90 million USD or gain of MYR 395,000,000
When its a loss, COHR only shows the 'greater opportunity lost' compared to smaller opportunity gained by hedging - by locking down the margin.
When its a gain, COHR only shows the 'benefit of opportunity locked' compared to if you had not locked the opportunity available earlier.
As such, we can see why the above is not reported in P&L statement. It really does not matter - as what Rabbit2 said it becomes zero on maturity.