BCP IR Newsletter

Q2/2017


Bangchak Corporation PLC. set corporate culture goals to develop businesses side by side with the environment and society for corporate sustainability. Run CSR/CSV businesses complementary to business growth and extend from them. This social enterprise is aimed at creating jobs, generating income, and promoting community members’ joint stewardship of their habitats.

Performance Summary

Performance Result Q2/2017
The consolidated financial statement recorded revenue from sale of goods and rendering of services of Baht 42,828 million and Net Gain of Baht 1,145 million which was the Net Profit attributable to owners of the Company of Baht 993 million, or earning per share of 0.72 Baht.

Total EBITDA (2,514 MB.)

Unit: THB Million

Key Financial

Business Unit Performance

Bangchak boasts a complex refinery with a capacity of 120,000 barrel per day based on sophisticated hydrocracking technology. The Company took assorted measures to raise its outputs and manage its refining margins.

Stock Snapshot

Bangchak Corporation Public Company Limited

is a Thailand based company engaged in the operation of oil refinery and marketing the finished products through its service stations. The Company’s oil market includes consumers in various sectors, such as transportation, aviation, shipping, construction, industrial and agriculture. Other businesses are renewables and Exploration & Production.


Fundamentals

Executive Talk

BCP invested in the lithium mining in order to expand into natural resource and power innovation businesses, adding value to the corporation and further capitalizing future business opportunities.

Within this IR News Letter we are graced by Mr.Kanet Visarutpong, Vice President of Resource Business Development of the Bangchak Corporation PCL, here to talk to us about the overview of the lithium business; Bangchak invested in Lithium Americas Corp.; a listed company in the Toronto Stock Exchange of Canada, which operates lithium mining projects in Argentina and the United States.


Q: First of all, let us get to know the Lithium business. Mr. Kanet, please give us an introduction to the lithium business. What they can be used to produce? Where large Lithium mines are situated? Who is the biggest supplier? And who is the biggest buyer?

A: When talking about lithium, we usually think of Lithium-Ion batteries used in EV cars (Electric Vehicle) and small electronic goods such as a mobile phone or a calculator. From the amount of lithium used in comparison to Lithium Carbonate Equivalent (LCE), in 2016, one-third of lithium produced was used in battery-related industries, the rest was used in ceramic industries, or glassware as reinforcement, as well as grease. However, EVs and Energy Storage Systems (ESS) growth trends is estimated to see that the portion of Lithium used in batteries would grow to two-thirds of production in the next 15 to 20 years.


Countries that are main producers of lithium includes Chile, Australia, the United States, and China. Lithium from Chile is made from brine with low production cost as only sunlight and wind power are needed for production. At the same time in Australia, they are produced from Spodumene or hard rock, which takes energy to extract the mineral from rocks, which cost more than brine production, however, their production period is far shorter.


Major producers include SQM from Chile; they are the biggest brine-lithium producer in the world, and the Albermarle Corporation in the United States; they have invested both in brine and Spodumene. Also, there is Tianqi Lithium in China, they have mainly invested in Spodumene lithium. As for major buyers; countries with demand for lithium used in battery manufacturing include China, Japan, South Korea, and the United States to name a few.

Q: Why did BCP decide to invest in lithium? How did it come about? And why invest in Lithium Americas (LAC)?

A: Roughly 2 years ago, while BCP was continuously focusing on Green Energy businesses and investing in renewable energy to produce electricity, including Bio-based business. As a way to further our business through innovation, we considered different Mega Trends for our strategic plan and found one that had high potential; it was EV cars. It could potentially affect our current business, instead of looking at its adverse effect on us, we saw it as a new business opportunity. EV car industry growth nurtured growth in the battery industry and the main mineral used in battery production is lithium, which is the lightest metal, and as a battery; it has high electrical capacity, clean, and is environmentally friendly.


The company invested in Western Lithium Corp. (WLC) 2 years ago. Afterwards, Western Lithium Corp merged with Lithium Americas Corp. and later changed their name to Lithium Americas Corp. or LAC, they are in the middle of developing a lithium mine in Argentina and the United States. The Argentinian location is a brine mine, developed by their partner company, SQM of Chile, which specializes in producing brine lithium and is its biggest producer globally.

Q: How is the Cauchari Olaroz Lithium mine project in Argentina, which LAC has invested with SQM, doing? What is the production rate? And how much capital investment is needed?

A: As of right now the project has begun construction on worker camps, testing pond, and drilling campaign to name a few. In the first phase, production will be at 25,000 tons/year, we estimate that production can begin in 2019 and will reach full capacity in 2021. Also the project has plans to expand with a second phase that will increase production by 25,000 tons/year coming to a total of 50,000 tons/year. As for the capital needed for the first phase, it is roughly 500$ Million and about 300$ million more for the second phase.


Q: What is your opinion of the future of the lithium business? What factors would affect the business and its growth trends?

A: The amount of lithium used in comparison to LCE last year was 160,000 tons, and is estimated to rise to 600,000 tons per year in the next 20 years. This is due to the growth of EV cars from policies that support their use in various countries. Also, there will be contributions from Smart Grids and Smart Cities which plans to use Energy Storage Systems (ESS) to store renewable energy, whether produced from solar cells or wind production, which has limited hours of production, thus the need to have an Energy Storage Systems.


As for factors that will affect the business, when lithium becomes a commodity product, its price in the future could lower slightly, but with low production cost from brine mines, the margin would still remain at a competitive level. Other factors may include new battery technologies which from close observation, Lithium-Ion batteries will still have the highest continuous growth. With lithium’s metallic properties, even new batteries still include lithium as a key component. I see that this business is great and will exhibit continuous growth following global trends, and with our investment in this business, we see it as an opportunity for Bangchak to capitalize future business opportunities.

Mr.Kanet Visarutpong

Vice President of Resource Business Development

Oil Market Outlook

Surplus stock reduction moderates, higher us oil production looming
Crude Oil Price Outlook: Surplus will decrease but oil prices capped by rising of U.S. production

Market Highlights in 2017:

  • Surplus inventory will moderate decrease
  • China buying for SPR filling.

  • Fed seen raising rates 2-3 times in 2017.
  • U.S. shale production recover.
  • Libya and Nigeria production increase.

Focus on 3Q/2017:

  • OPEC’s and non-OPEC extension cut would lower excess crude inventories.
  • Firm refining margins to support crude oil demand.
  • Stronger crude demand after refinery return from maintenance.

  • Higher supply from OPEC producers
  • U.S. oil production at highest since 3Q/2015
Refining margins to continue to be supported through 3Q as regional demand remains robust through summer

Market Highlights in 2017:

  • Asian CDU capacity additions will rebound in 2017 but some delay is likely.
  • Continuation of relative light end support compared to middle distillates on still strong demand.
  • Fuel oil supply decrease on export tax hike, refinery upgrade in Russia, some closure in Japan and Kuwait and OPEC’s heavy crude export limit.

Focus on 3Q/2017:

  • Strong product demand driving large stockdraws, but runs drop in September.
  • Planned/unplanned refinery shutdown and stronger demand support refinery margins
  • Summer driving demand support gasoline cracks.

  • Higher fuel oil supply from higher refinery run and more arbitrage inflow to Asia.
  • India’s refinery return from maintenance.
  • China’s new refinery startup in late of Q3.

IR Activities

31 May 2017

Opportunities Day (Q1/17 Performance Result)

Bangchak Corporation Plc. by Mr. Chaiwat Kovavisarach, President and Chief Executive Officer announced the company’s Q1/2017 performance to investors at at Stock Exchange of Thailand on May 31, 2017.

7-8 Jun 2017

Thai Corporate event in Shenzhen: One belt one road Conference

Bangchak Corporation Plc. by Mr. Surachai Kositsareewong, Senior Executive Vice President Accounting and Finance joined One Belt One Road Conference at Shenzhen in China on June 7-8, 2017.

9 Jun 2017

7th Asian Excellence Awards

Bangchak Corporation Plc. by Mr. Surachai Kositsareewong, Senior Executive Vice President Accounting and Finance joined 7th Asian Excellence Award 2017 at JW Marriott Hotel in Hongkong on June 9, 2017. Bangchak Corporation Plc got 3 awards which were Asia's Best CEO, Best Investor Relations Company, and Best Environmental Responsibility

21-22 Jun 2017

Shareholder Site Visit 2017

The Bangchak Petroleum Plc. by Mr. Chaiwat Kovavisarach, President and Chief Executive Officer, Mr. Yodphot Wongrukmit ,Senior Executive Vice President, Corporate Management and Sustainability Development, and Mr. Surachai Kositsareewong, Senior Executive Vice President, Accounting and Finance had welcome and update BCP information to investors on June 21-22, 2017

11 Aug 2017

Analyst Meeting (Q2/2017 Performance Result)

Bangchak Corporation Plc. by Mr. Chaiwat Kovavisarach, President and Mr. Surachai Kositsareewong, Senior Executive Vice President, Accounting and Finance has announced the company’s 2Q/2017 performance to analysts and investment communities at Bangchak Corporation HQ, M Tower Building on August 11, 2017