how to calculate weighted average refining margin:
................................................

Yield Basis: Gasoline 35%, Diesel 46%, Jet fuel 7%, the rest 12 % at crack of 10 USD/brl

Refining margin:

= (0.35 x 10.641 ) + (0.46 x 41.46) + (0.07 x 32.30) + (0.12 x 10.0)
= 3.72 + 19.07 + 2.26 + 1.2
= US $ 26 / brl


Posted by hng33 > Aug 17, 2022 10:03 AM | Report Abuse

As of latest up-to-date crack spread level now, obly gasoline crack spread adjust more significantly from peak level, but still remain above USD 10 which is still command fat profit margin. The other two crack spread index remain at elevated level, at multiple year high upper range

1. Gasoline crack USD 10.641/bbl
2. diesel cracks USD 41.46/bbl
3. kero-jet cracks USD 32.30/bb

www.listcorp.com/asx/ald/ampol-limited/news/4q-2021-lytton-refinery-performance-update-2657819.html

4Q 2021 Lytton Refiner Margin UpdateThe Lytton Refiner Margin (LRM)1 for 4Q 2021 was US$11.24 per barrel, significantly higher than the third quarter margin of US$6.76 per barrel. Singapore Weighted Average Margin (SWAM) rose above the 5-year historical average, reaching US$12.79 per barrel in 4Q 2021, as regional refining supply and demand fundamentals improved. This was significantly higher than the US$7.67 per barrel for 3Q 2021.

....

Note how they say 'weighted average' above and that its the highest in last 5 years even at US$12.79/brl in 4Q 2021


Posted by hng33 > Aug 17, 2022 10:03 AM | Report Abuse

As of latest up-to-date crack spread level now, obly gasoline crack spread adjust more significantly from peak level, but still remain above USD 10 which is still command fat profit margin. The other two crack spread index remain at elevated level, at multiple year high upper range

1. Gasoline crack USD 10.641/bbl
2. diesel cracks USD 41.46/bbl
3. kero-jet cracks USD 32.30/bb

However, margin above is not accurate as they have petrochemical & retails

The above is in Australia, and the below is in Vietnam

https://www.hydrocarbonprocessing.com/news/2022/07/binh-son-refinery-q2-net-profit-soars-to-424-mm

Vietnam's Binh Son Refining and Petrochemical recorded net profit of $424 MM in the second quarter, up by nearly six times from a year earlier, the company said on Tuesday.

Binh Son, which owns a 130,000-bpd refinery in central Vietnam

........


130,000 bpd refinery means, 11.7 million barrels per qtr.

refining margin:
= Profit / sales volume
= $424m/11.7m
= $ 36/brl

Look at Ampol refinery's historical refining margins:

4Q 2021 Lytton Refinery Performance Update

https://www.listcorp.com/asx/ald/ampol-limited/news/4q-2021-lytton-refinery-performance-update-2657819.html

Q2 results, 19 July 22'

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

1 barrel = 159 liters

Even Ampol throughput volume is about 9 million barrels per qtr, very close to HY

Jangan lihat harga minyak, klu turun lagi mantap!

Tengok crack spread saja udah cukup...

Sekarang, merekah besar lagi spread nya...

Esok, kemungkinan besar angka dibawa mencecah atas 41 $/brl

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

even if i try to give up for Q2 results, Q3 results is still giving hope unfortunately...ha ha

HY cannot run away from our predictions...looks like :)

If a refinery situated in Australia is basing Singapore platts margin, why can't a refinery from a neighbour country just a few KM away?

with the profit HY will make, it can even buyout shell retails in Malaysia...

Well thats what they are doing now in Sri Lanka:

https://www.republicworld.com/world-news/rest-of-the-world-news/chinas-oil-giant-sinopec-eyes-business-in-sri-lankan-gas-and-energy-market-amid-crisis-articleshow.html


China's largest oil and energy corporation, Sinopec, is looking at retail business opportunities in the Sri Lankan fuel market as the South Asian island continues to suffer a stifling economic crisis.

@NoviceJ & @ValueInvestor88, best of luck... I am with you

Great thing about the above news is, Ampol also reported about the same gross margin HY had reported for Q1 22.

Lets pray for the best for Q2 22'.

https://www.bunkerspot.com/asia/56744-asia-pacific-ampol-reports-huge-refining-margin-hike

Australia’s Ampol has reported that the refining margin for its Lytton refinery reached the ‘unprecedented level ‘of US$32.96 per barrel in the second quarter of this year – up threefold from the US$10.59 per barrel achieved in the first quarter, and a five-fold increase on the $6.29 per barrel reported for Q2 2021.

In a statement issued today (19 July), Ampol said that the ‘significant increase in Singapore Weighted Average Margin (SWAM) was the key driver’ for the margin hike

..


for HY , we only avg 13 USD/brl for RM 1 EPS, sad to see investors dumping the shares...

by the way live data indicates margins are exploding again at the moment.... tomorrow we shall see the diesel crack spread chart further strengthening from 40.36

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

u mean they always have big jump in gross profit from qtr to qtr but hedging will wipe it out completely?

in the same sense i wish there is a company where they will report big loss in gross profit but hedging will save them to report bigger gain..

if the former can exist, i guess latter can too by the same principle

Post removed.Why?

Fantastic - oil price dropping and crack spread rising on live data!

This what we want - LOW OIL PRICE!!

Posted by probability > Aug 12, 2022 4:19 PM | Report Abuse X

Hope investors get the clear message that, as a refinery , HY need crude oil price to be low to sustain demand to an extent that the constraint becomes refining capacity instead of crude oil availability - only then crack will remain strong.

Morgan Stanley Upgrades Thai Oil Public Listed Co. to Overweight as Refining Upcycle Remains

15/08/2022

Read More: https://www.kaohooninternational.com/markets/515261/

Although headline refining margins have volatility of 25% daily in Asia, MS believed strength in diesel margins and quick recovery in gasoline margins in the past few weeks does underline marginal cash cost economics in play as the majority of global refiners are struggling to raise their utilization rates.

In this regard, Morgan Stanley upgraded TOP’s rating to Overweight and raised target price to THB65 from THB57 per share as the company has the highest exposure to middle distillates, among Asian refining peers and should be a key beneficiary of the upcycle in refining margins over 2023-24.

If gasoline crack drops too low, simple refiner will reduce output (or even stop producing) affecting even diesel availability on the market, thus supporting complex refinery margin who can produce more Diesel.

I.e, the simple refiner gets the damage first due to the negative crack spread of fuel oil.

Well summarized John, thanks

Any higher GP reported than $1,056 will result equally higher hedging loss to give back the same after hedging loss of $956.

Just some notes from below link why it matters the complexity refinery (complex vs simple refinery)

https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/petrochemicals/072722-refinery-news-roundup-some-maintenance-continues-in-russia

As of June 30, complex refining margins increased 160% from February 22 to Rub21,000/mt ($382/mt), while simple refining margins quadrupled, reaching Rb5,000/mt over the same period, Petromarket told S&P Global Commodity Insights.

Finding alternative outlets for fuel oil and the switch to bitumen production in the summer months has also provided a relief to less complex refineries whose storages were flooded with fuel oil as international buyers avoided taking it, according to market sources. However, the situation might reverse again as the road repair and construction season ends with the advent of cold temperatures, and refineries increase fuel oil production.

No gloves stock had hit such high EPS we are estimating and unlike gloves, no one is going to build refineries in a year....

No one will invest in new refinery - pretty sure on that. I think nuclear fission is the next future of energy....

So, if you ask me what i will bet as the PBT as the most closest figure, i would say ~700 million.

However, be prepared knowing HY will always come with some unexpected costs...he he

lets not have too much expectation. Lets just aim EPS of RM 1....

With Hy proving such profit and market later realizing that full implementation of russian oil restriction will only take place end of the year like what @information had shared... HY should at least hit RM 10 as long term visibility would be there.

Take note to take out about 80 million MYR from the gross profit as the cost of production (the utilities cost of production like natural gas, chemicals etc) before arriving at other expenses such S&A, D&A, Interest etc of another 100 million MYR.

However, my derivation above of 956 million (after hedging loss) is based on data published for actual refinery producing 10 % Fuel Oil yield which has a 'negative' crack spread of above 20 USD/brl and Diesel yield of only 34%.

Whereas HY has yield of 46% for Diesel and 2% for Fuel Oil.
As such, the actual refining margin of HY can be much higher than the above derivation.

@john, as you are aware Q2 PAT (gross profit after taking out the hedging loss), shall be based on gross profit of Mar 22', Apr 22', and May 22' referring to average crack spread data on these months.

As such the peak crack spread of June 22' will be reflected on July 22' PAT.

The gross profit (before hedging loss) reported in Q2 however, will have the figures of Apr 22'. May 22 and Jun 22'.

......

Though the crack spread for Jun 22 is phenomenal, and it was not available to take into consideration on my derivation below early Jun 22, it does not matter since it will have the same 'phenomenal rise' in hedging loss to deliver almost the same Gross profit minus hedging loss of MYR 955 million as derived on link below:

https://klse1.i3investor.com/blogs/2017/2022-06-11-story-h1624320379-HENGYUAN_derivatives_loss_on_Q1_22_completely_clarification.jsp

spot on, thanks
Posted by stockwin > 17 seconds ago | Report Abuse

As we are only 2 weeks away before end of August, we can safely say that Q3 explosive result is in the bag now.
So we are staring at Q2 and Q3 2022 eps of at least RM1 per quarter. Logically that should be the case.

If any of you doubt that HY could have increased its Diesel yield to 46% as it was for the previous year, you can assume its just 39% and add Jet Fuel at 7% which has relatively similar crack spread. As such the above simple derivation will likely hold true as a 'bottom low possible gross profit' for conservative estimates.

Guys, as predicted crack spread had hit above 40 USD/brl

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

Posted by probability > 15 hours ago | Report Abuse

DIESEL crack spread is again exploding on live data, you will likely see the crack spread figure on chart below exceeding 40 USD/brl by Monday:

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

HY produces 10.7m barrel of sales per QTR. Gross profit from Diesel alone at 46 % yield:

= 10.7 million barrel sales x ( 46/100 yield of diesel) x (37 USD/brl crack ) x ( 4.40 MYR/USD exch)
= 800 million MYR gross profit

DIESEL crack spread is again exploding on live data, you will likely see the crack spread figure on chart below exceeding 40 USD/brl by Monday:

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

HY produces 10.7m barrel of sales per QTR. Gross profit from Diesel alone at 46 % yield:

= 10.7 million barrel sales x ( 46/100 yield of diesel) x (37 USD/brl crack ) x ( 4.40 MYR/USD exch)
= 800 million MYR gross profit

........

Just monitor the above for HY, and make your valuation. You cant go wrong on above derivation of minimum gross profit as we are using its lowest crack value for last 5 months for Diesel and have not bring in other refined products contributions yet

They also mentioned efficiency of the plant will significantly improve with the H2 gas generation plant that should be completed by Q2 2022.

EV/EBITDA at current price is way more attractive than when Shandong Hengyuan bought over the refinery from Shell. What more at current future earnings prospect...with the already done capex for significant upgrade of the existing plant. They say with upgrade done - the FCC can continue operating maintenance free for another 20 years..

Noted Anthony. Thanks for all the warnings when price is low and earnings prospect is good. Let the future take care of the balance sheet...

https://www.qcintel.com/article/europe-oil-products-diesel-cracks-rise-as-iea-warns-of-gas-switching-7822.html

https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/oil/081122-oil-futures-prices-strengthen-after-iea-hikes-global-demand-growth
HIGHLIGHTS
Diesel cracks elevated on tight inventories

IEA cites gas-to-oil switching

Latin American diesel imports rise


European refiners are increasingly moving away from the higher-priced natural gas and using oil products for energy and hydrogen production, the IEA said. A number of oil companies, including Shell's Rotterdam and Rheinland refineries, BP European refiners, and Italy's Eni refiners, said in recent quarterly reports they are reducing the use of natural gas.

Refined products crack spreads had eased since mid-July as global refiners exited maintenance, boosting gasoline, diesel, and jet production. However, diesel crack spreads have rallied this week on continued supply tightness heading into winter.

The NYMEX front-month ULSD crack spread vs ICE Brent was trading around $46.30/b late Aug. 11, up from $36.09/b Aug. 8. The NYMEX front-month RBOB crack spread was trading around $18.63/b, up from $14.64/b Aug. 8.

US distillate stocks climbed 2.17 million barrels last week to 111.49 million barrels, US Energy Information Administration data showed Aug. 10, but while the deficit to the five-year average tightened slightly on the week, inventories were 24% below the five-year average.

And stocks on the US Atlantic Coast at 26.4 million barrels were 47% below the five-year average, supportive of the New York-delivered NYMEX ULSD contract.

Refiners should be increasing production as they exit maintenance and are lured by high margins.

According to S&P Global data, global CDU outages are expected to fall to 8.15 million b/d in August, trending down from 13.5 million b/d in April.

But outages are expected to climb to 11.3 million b/d in October. And Europe, which is heavily dependent on Russia for diesel fuel, is looking to secure supplies ahead of a ban on Russian barrels due to take effect in early 2023.

Hope investors get the clear message that, as a refinery , HY need crude oil price to be low to sustain demand to an extent that the constraint becomes refining capacity instead of crude oil availability - only then crack will remain strong.

Beauty of it is that, even at the record lowest values of all diesel gasoline and jet fuel crack in last 5 months, the refining margin will deliver close to a billion gross profit. Cannot imagine when russian refined oil is completely banned end of the year and Saudi increase crude oil out beginning September (Released from OPEC obligation to Russia)..

yes, agree on what you are saying.

we need investors here to understand how the hedging works, where in summary - PAT is basically lagging by 1 month on the would be profit without hedging.

Q1 is reflective of : Dec 21' , Jan 22', Feb 22'

Q2 is reflective of : Mar 22' , Apr 22', May 22'

Q3 is reflective of : Jun 22' , July 22', Aug 22'

The hedging loss / gain they show in the report is the difference in profit due to the lag by 1 month.

Also, we must stress that the crack spread shown on the future is an approximate of the 'potential margin' they can make.

Actual margin will depend on the exact timing HY sells products & buy crude simultaneously on futures market (i.e the hedging).


Posted by investor77 > Aug 11, 2022 5:10 PM | Report Abuse

OTB never badmouthed Heng Yuan . All other refiners reporting awesome profit, why is Malaysia the exception ? Only because many afraid of Derivative loss, or hedging loss. Anyway, better to have low expectations of Eps of Rm1 or Nett profit of 300 mil, Too high expectations of Gross Profit of 1 bil, and when it is lower, price will fall as happen last time HY touch RM17. Thus when profit is more than RM 1, then price will go up.

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

You are totally right Zhuge

For Mogas 95, we can see here the selling price

GASOLINE
.........

https://www.tradingview.com/symbols/NYMEX-AV01!/

What is even more important is to realize that more than 53% of their products is the below Diesel & Jet Fuel:


DIESEL
.......

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

JET FUEL:
.......

https://www.tradingview.com/symbols/NYMEX-ASD1!/


The refining margin is simply the selling price of products above minus their feed crude cost.

Its totally unbelievable market is not realizing that you only need avg about 13 USD/brl margin to earn EPS above RM 1 per qtr.

Time is the ultimate voting machine of truth, lets see



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

Posted by Sslee > 4 hours ago | Report Abuse

D1N1!
SINGAPORE MOGAS 92 UNLEADED (PLATTS) BRENT CRACK SPREAD FUTURES (CONTINUOUS: CURRENT CONTRACT IN FRONT)NYMEX
9.759.
Singapore Mogas 95 future quote = 106.21
Singapore Mogas 92 future quote = 102.46
The difference = Around 3.75.

1 barrel of Mogas 95 = 106.21
1 barrel of crude oil = 89.00
Gross profit = 17.21
Refinery cost = 3.00 to 4.00 per barrel (according to goggle)
Net profit margin = 14.21 to 13.21 (average 13.71)

If you add 3.75 to 9.76 = 13.51
My sifu said, you should add 3.75 to Singapore Mogas 92 crack spread margin in order to be accurate.
I get permission from my sifu to post this information for benefit of all readers here.

Column: U.S. diesel shortage shows economy hitting capacity limit

LONDON, Aug 4 (Reuters)

https://capital.com/column-u-s-diesel-shortage-shows-economy-hitting-capacity-limit-kemp

German Oil Refiner Is Seeing ‘Run on Heating Oil and Diesel’

4 August 2022

https://www.bloomberg.com/news/articles/2022-08-04/oil-refiner-omv-germany-seeing-run-on-heating-oil-and-diesel#xj4y7vzkg

The Diesel Crisis Is Far From Over

By Charles Kennedy - Aug 02, 2022

https://oilprice.com/Energy/Energy-General/The-Diesel-Crisis-Is-Far-From-Over.html

Diesel crack spread is moving up again on live data..
Tomorrow will be even higher with the crude oil price drop.


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

= (10.5 million barrels sales /qtr ) x (yield at 46 % for Diesel) x ( crack spread USD 40/brl)
= MYR 846 million gross profit

and you only need a gross profit of 500 for EPS of RM 1

lets not bring in Mogas 95 , Jet Fuel, LPG etc...for simplicity

Relax....just 24 days to go.

https://paultan.org/2009/02/15/how-fuel-prices-are-calculated-in-malaysia/

retail margin is fixed as per the mechanism derived by Govn

@stockwin, good you reminded on the hedging

For those who are fearful on hedging loss, kindly check on the below

In summary, hedging done by HY is absolutely mandatory as pure refiner unlike PetronM (who's selling price is naturally hedged by the retail price that floats) to secure refining margin (else, HY would be considered a trader). The hedging loss is purely a delayed gain that will be reflected on the following month and vise versa for hedging gain.

There is really no other way to go about it.

https://klse1.i3investor.com/blogs/2017/2022-06-11-story-h1624320379-HENGYUAN_derivatives_loss_on_Q1_22_completely_clarification.jsp

Simple refiners will soon stop producing (as they mainly produce Gasoline & Fuel Oil with only a small amount of Diesel). This then will further reduce diesel supply in the market.

Bear in mind Fuel Oil crack spread is negative - 27 USD/brl

You can see the detail yield difference between Complex refinery & Simple refinery on the link below

https://klse1.i3investor.com/blogs/Insight1/2018-02-03-story146257-DIFFERENCE_between_PETRONM_and_HENGYUAN.jsp

Such low margin of Gasoline will kill SIMPLE refiners.

now the low price of Gasoline will leverage the margin of Diesel produced by Complex refiners as the Simple Refiners like PetronM will cease to become profitable at very low crack (especially European refineries which are mostly simple type). This will force them to reduce output....

the Mogas 92 was the most conveniently accessible earlier - thats why we used it

It was very simple for everyone to see it instead of complicating the derivation with all the products a Complex refinery like HY produce

HY if you refer all their annual reports had always been producing 44 % over Diesel, they still produce Gasoline at 30% yield

HY has the flexibility to adjust the yield of their products based on profitability and demand due to their catalytic cracking unit

The world demand for Diesel is so high that the refinery cannot produce to meet its demand (at maximum yield selection for Diesel). As such they inevitably produce gasoline where the demand has not catch up yet


Posted by vinc3362 > Aug 1, 2022 8:00 PM | Report Abuse

So why are we using Mogas 92 crack spread for reference when Gasoil(46%) is the main product of HRC?

17 June 2022 news verifying the crack spread for Asian gasoil (DIESEL) hitting 67$/brl

No wonder Binh Son reported 420 million USD profit.

https://www.qcintel.com/article/distillate-summary-asia-gasoil-cracks-hit-fresh-records-jet-loses-steam-6664.html

Spot 10ppm gasoil traded in Singapore jumped to $185.68/b by the Friday's close, with the crack rising to $67/b, a fresh record