Interesting..could be true John.

To me the moment you realise a derivative loss realized or unrealized, then you have pegged the margin with a new level (mark to mark)...

so the next report will reflect the market margin at the end of June 22', if it had not changed further by end of Sept 22''

Posted by Johnzhang > Aug 27, 2022 11:07 AM | Report Abuse


That’s what I think too. The provision for hedging loss of $166.8 mil made in Q2 stands good chance for write back as additional profit in Q3 if crude in Q3 is flat or lower . Is my understanding correct?

@sslee, appreciate your comments on the above too

The above means PetronM is making huge margin at their refinery even using Tapis at a premium to Brent.

We can expect superb results for Hengyuan...

60% (diesel + Jet fuel) crack at say avg 40 USD/brl
20% (gasoline) avg 20 USD/ brl

If we use 47 kbpd, sales per qtr is :

= 47,000 bpd x 90 days
= 4.2 million barrels

Gross profit from Diesel + Jet fuel:

= 40 USD/brl margin x 4.2 million barrel/qtr x 60%
= 443 million MYR

Gross profit from Gasoline:

= 10 USD/brl margin x 4.2 million barrel/qtr x 20%
= 40 million MYR

Assuming the fuel cost offset the rest of the refinery product margin, the refinery contribution to gross profit:

= 443 + 40
= 483 million

Before the above changes, when refinery margin was low, retail contributes approximately 120 million gross profit

If we add the above two, we obtain about 600 million gross profit as reported.

ok thanks John. If thats true, then actual gross profit is 415 + 207 = 622 million MYR

thats very interesting as i firmly believe derivative loss will disappear once the crack and oil price steadies...

for HY the gross profit shown in income statement is before accounting derivative loss / gain

at the bottom pf page 14 under section 18, they do seem to be saying its accounted on the gross profit

if thats true, then petronm actual gross profit without derivative loss is much greater then?

yes John, but i am trying to tally this with the Income statement

does that mean the gross profit of 415m is after accounting this loss?

or is it accounted in 'óther expenses' after 'finance cost' on income statement?


Posted by Johnzhang > Aug 27, 2022 10:29 AM | Report Abuse

@probability, go to note 18 where it mentioned Profit before tax after charging the following:
Derivative realized loss $207.86 mil
Unrealized loss $166.8 mil.

@sslee, is the gross profit reported in Q2 of 415 million accounted the derivative loss (realized 207m & unrealized 166m) shown on section 18 of the financial report?

i cant see where it is accounted on the income statement

if its accounted, then PetronM is indeed benefitting significantly from the Diesel crack spread rise

Revised below:
............

@sslee, 60% (diesel + Jet fuel) crack at say avg 40 USD/brl minus Tapis premium of 20 USD/brl, should provide at least a margin of 20 USD/brl in Q2 for PetronM.

If we use 47 kbpd, sales per qtr is :

= 47,000 bpd x 90 days x 60%
= 2.5 million barrels

As such gross profit from Diesel + Jet fuel ALONE:

= 20 USD/brl margin x 2.5 million barrel/qtr
= 220 million MYR

Gasoline margin was also high in Q2. As such something is missing or not accurate on their yield info from the AGM i think

Crack rose to USD 46.18 / brl as predicted...

Posted by probability > Aug 26, 2022 11:15 PM | Report Abuse X

live data shows refining margin is further rising, we will see a further rise in Diesel crack spread soon:

https://www.tradingview.com/symbols/NYMEX-GZ1!/

Extract from a news in June 22' concerning Diesel margin:

https://sg.finance.yahoo.com/news/red-hot-asia-gasoil-margins-075310521.html

Refining margins for the benchmark 10 ppm gasoil in Singapore, which have soared nearly 63% in the last two weeks, hit $55.77 a barrel over Dubai crude on Monday, an all-time high according to Refinitiv data that goes back to 2014. Gasoil is currently the top money spinner for Asian refineries.

Extract from a news in June 22' concerning Diesel margin:

https://sg.finance.yahoo.com/news/red-hot-asia-gasoil-margins-075310521.html

Refining margins for the benchmark 10 ppm gasoil in Singapore, which have soared nearly 63% in the last two weeks, hit $55.77 a barrel over Dubai crude on Monday, an all-time high according to Refinitiv data that goes back to 2014. Gasoil is currently the top money spinner for Asian refineries.

refer Page 22 of the annual report for complete picture on HY products.

As a complex refinery HY has to ability to adjust yield of its products. HY produces 46% Diesel on this table.

https://klse1.i3investor.com/servlets/staticfile/422363.jsp

yes exactly..

Posted by sonyx > Aug 26, 2022 10:39 PM | Report Abuse

And is it correct to interpret that the basket of products would then be referred to let say (Diesel (which is 46% of mix) multiply with the market selling price based on the index + Fuel * D1N1 + ....)?

Asia's record level margin ever was in June 22' where diesel margin hit above 58 USD/brl.

Due to HY hedging effects the profit will fall into July.

July crack was relatively lesser and this will fall into Aug 22'.

Now crack has averaged quite good for Aug and this will reflect on Sept 22.

As such Q3 is secured with PAT that is very likely to be higher than Q2 results.


Posted by sonyx > Aug 26, 2022 10:30 PM | Report Abuse

Thanks for the prompt response @Probability. Ok looks like the Diesel mix should keep the blended crack margin intact for Q3 2022.... at least for now

Refer to the notes on how the weighted average refining margin is calculated:

Weighted Singapore product prices (for a standard Lytton Refinery basket of products)

Less: Reference crude price (the Ampol reference crude marker is Dated Brent)
Equals: Singapore Weighted Average Margin (Dated Brent basis)

https://www.listcorp.com/asx/ald/ampol-limited/news/2q-2022-lytton-refinery-performance-and-trading-update-2736295.html?ref=more_news


The Lytton Refiner Margin (LRM)1 for the second quarter reached the unprecedented level of US$32.96 per barrel, materially higher than the US$10.59 per barrel realised in the first quarter. The significant increase in Singapore Weighted Average Margin (SWAM) was the key driver of the increase, reaching US$33.62 per barrel for the quarter

@sonyx, refer Page 22 of the annual report for complete picture on HY products.

As a complex refinery HY has to ability to adjust yield of its products. HY produces 46% Diesel on this table.

https://klse1.i3investor.com/servlets/staticfile/422363.jsp

the above is just for uncle's record

HY Complex refinery margin update - 26/08/22
...........

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 45.95/bbl
2. Jet fuel at 7% yield, cracks USD 34.30/bb
3. Gasoline Mogas 95 at 35% yield, cracks USD (10.00 + 3.96) / bbl
4. Rest of product yield at 12%, using Mogas 95 cracks USD 13.96/bbl

Gross refining margin:

= (0.46 x 45.95 ) + (0.07 x 34.30) + (0.35 x 13.96)+ (0.12 x 13.96)
= 21.14 + 2.40 + 4.88 + 1.67
= US $ 30.1 / brl
.................

Gross Profit at above derived present refining margin

= (10.7 million barrel sales per qtr) x ( US $30.1/brl) x (MYR 4.4/USD)
= 1.417 Billion MYR
...................

ok superpanda - just move on.. thought my msg will end the arguments.

hope it ends and go for more fruitful discussion

yes John, some just seems to enjoy poking others..could be many useless motives like ego, sadism, revenge, brag etc...

and useful motives too - to bring down share price using deceptive information
its unfortunate part of human nature...

just focus where its most beneficial to self

@Blee, agree..

Post removed.Why?

@superpanda, i think much people values Johnzhang's opinion than yours as he had shown integrity...

once you show disrespect and lack of integrity, eventually people no longer value your opinion..

your comments are just a waste of forum space then

no doubt there are no rules set in the real world including forum here....any meaningful interaction needs some basic social etiquettes, integrity, honesty, reliability etc..

these are unwritten rules for mutual benefit

sslee is a great asset to i3, all the questions asked to PetronM during AGM that has been documented was likely from sslee

sslee made a lot of money from CW i think..aiming to be significant shareholder of Petronm..

not the money itself i mean..ha ha

yes - will share the money made too...

i am hoping EPS above RM 1 will do...

the price movement effects will happen once market understands how HY is deriving the earnings...

if market dont understand - we will teach ..he he


Posted by CharlesT > Aug 26, 2022 1:20 PM | Report Abuse

If this Q can make EPS rm2 but cant bring the price back to RM6+...

Then if Q3 of EPS goes back to RM0.20 u think share price then can go back to RM6 ah

ha ha...past bite still lingers...

this is true if the russian oil sanction will be cancelled..

Posted by Mikecyc > Aug 26, 2022 1:11 PM | Report Abuse

Haha I had posted in i3 on August 2020 on Nitrile Gloves Demand vs Supply for 7 Glove Companies , that Supply can meet the Demand in a Year time span starting from September 2020 to August 2021 ….

its very very probable for this TP to come true by Dec 2022, provided the below crack spread maintains till end of the year and russian oil sanction takes place by 5th Dec 2022 as decided by EU.

https://www.tradingview.com/symbols/NYMEX-GZ1!/

almost certain with the above two conditions

Posted by NoviceJ > Aug 26, 2022 11:35 AM | Report Abuse

If the share prices is @RM18.89 I'm a Very very happy man
Thank you Probability for the clarification

use the below as a very fair guidance

Posted by Johnzhang > Aug 14, 2022 4:15 PM | Report Abuse

Hi probability, Thanks for the explanation.

Total expenses after GP (ie manufacturing, Adm, Dep & Amortisation, Finance) was $95M for Q1 2022, $100M per qtr average for 2021 and $106M per qtr average for 2020. Your $80+100 M = $180M expenses for Q2 is well above the actual in recent qtrs and therefore with huge buffer built-in.

Your estimated GP is $1,056 M
less hedging loss ($100M)
less Expenses ($180M)
-------------------------------------
PBT $776M

Tax $100m @24% ($24M)
Tax $676M @33% ($223M)
-----------------------------------------
NPAT $529M
EPS $1.76

The upside are :
1. lower expenses than the $180M built-in the calculation
2. Higher GP from significantly higher Diesel yield (46 vs 34%) and lower Fuel oil.

The reservation i have if the Management's actual hedging deviate from the model described by you. Let's wait for the QR with much excitement.


We look forward to the exciting QR.

need to deduct manufacturing, s&A cost etc..interest and tax before arriving at PAT and EPS

Posted by NoviceJ > Aug 26, 2022 10:50 AM | Report Abuse

Hope that your forecast profit will come true Base on Probability estimate and if we work out the sum
1417/300=4.72
4.72X4Q=18.89 per year profit
Guess what will the share prices be

It is for certain that HY hedging loss / gain will be neutral soon.. i.e zero.

.....

If not in Q2, it will be in Q3...and then even gain after that.

hedging gain /loss only occurs when a variable is changing such as expansion or contraction of margin (price difference between refined products & feed crude), or the oil price changes...

as long as the change in these variable is not on the same direction continuously indefinitely, the hedging gain / loss will eventually come to a stand still...and reverse when the direction changes

its like the tail catching up with head and going at same speed eventually.

at times the tail speed is slower (hedging loss) and at times faster (hedging gain)...but it can never runaway from the average head speed (the gross profit).

HY Complex refinery margin update - 26/08/22
...........

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 45.95/bbl
2. Jet fuel at 7% yield, cracks USD 34.30/bb
3. Gasoline Mogas 95 at 35% yield, cracks USD (10.00 + 3.96) / bbl
4. Rest of product yield at 12%, using Mogas 95 cracks USD 13.96/bbl

Gross refining margin:

= (0.46 x 45.95 ) + (0.07 x 34.30) + (0.35 x 13.96)+ (0.12 x 13.96)
= 21.14 + 2.40 + 4.88 + 1.67
= US $ 30.1 / brl
.................

Gross Profit at above derived present refining margin

= (10.7 million barrel sales per qtr) x ( US $30.1/brl) x (MYR 4.4/USD)
= 1.417 Billion MYR
...................

wah...after uncle Koon say Hengyuan has very 'Erotic' earnings, you guys started behaving one kind already..LOL!

@TakeProfits, i dont think it will limit up, but it may eventually go up higher than 30%....just keep it for sometime. Sell whenever you feel profit is good enough for you.

Kasi limit up tomorrow!

Fantastic results of PetronM as predicted by Sslee... congrats!!

@Goldberg, thats for Q3 results

Sorry MM, i cant be bothered to explain when i had posted too many information concerning this here earlier...

go ahead say what you want here..np

@BobAexlrod, help me calculate the below with the latest figures from crack spread chart link below: - TQ
.........................................

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 42.98/bbl
2. Jet fuel at 7% yield, cracks USD 34.54/bb
3. Gasoline Mogas 95 at 35% yield, cracks USD (11.35 + 3.84) / bbl
4. Rest of product yield at 12%, using Mogas 95 cracks USD 15.19/bbl

Gross refining margin:

= (0.46 x 42.98 ) + (0.07 x 34.54) + (0.35 x 15.19)+ (0.12 x 15.19)
= 19.77 + 2.42 + 5.31 + 1.82
= US $ 29.3 / brl
.................

Gross Profit at above derived present refining margin of US $29.3/brl

= (10.7 million barrel sales per qtr) x ( US $29.3/brl) x (MYR 4.4/USD)
= 1.379 Billion MYR
...................

A Big Bang? Anticipating the Impact of Europe’s Sanctions on Russian Energy

https://carnegieendowment.org/eurasiainsight/87318

So, if we assume that the total of the current 7.5 million bpd of Russian petroleum exports will be slashed in half, with the other half managing to make its way past the sanctions barriers, the world petroleum balance would be short 3 to 4 million bpd, which is comparable to all of Western Africa’s production or Japan’s consumption. Such a disruption has the potential to exceed the previous oil crises of 1973, 1979, and 1991, and unlike the previous disruptions, it promises to last not just a few weeks or months, but years.

.........

they say YEARS...

The above is very much like i had estimated for Diesel alone.

EU consumes 820,000 bpd of Diesel currently from Russia. Thats 2 million barrels per day capacity of a complex refinery.

I believe EU & US is determined to weaken nuclear power russia and completely move away from dependence on their fuel.

This is marathon, do not give up on Hengyuan easily...

Bear in mind that EU will also likely not import refined oil from countries that buy russian oil, as it effectively means they are still supporting russian oil business.

India had been systematically reducing russian oil intake recently.

@sonyx123, the cause of the recent rise could be either on anticipation of good results for qtr ending June 22' or due to the fact that diesel shortage in EU is benefitting refineries from Asia who are able to sell at good margin and this is expected to be a prolonged phenomenon potentially worsened further when sanction is in full force by Dec 22'.


I believe the latter is the actual reason.

820,000 bpd diesel is imported by EU from Russian despite US exporting as much as possible to EU. Its difficult to fill this gap unless 2 million barrels per day refinery capacity comes up outside Russia.

https://www.google.com/finance/quote/543373:BOM?sa=X&ved=2ahUKEwjs8fv7jNr5AhXNi_0HHY1CDkUQ3ecFegQIFhAg&window=1M

glad to hear that from you John.. lets hope for the best

thanks Zhuge, lets hope results is as expected

Posted by Zhuge_Liang > Aug 23, 2022 4:40 PM | Report Abuse

Good job done by probability.
Thank you for your excellent work