Aug. 12--Thai Oil (TOP) posted a net profit of 8.47 billion baht in the first half of 2009, down 41 percent on the rapid fall of oil prices and narrow gross refining margins, reflecting the higher value of crude stock and the increase of its petrochemical product prices, said the company yesterday.

For the first half of 2009, Thai Oil and its subsidiaries recorded total sales revenue of 127.14 billion, down 43 percent from 223.26 billion a year earlier, with a gross integrated margin per barrel of US$5.70, a decline from $8.90 in the same period last year.

For the second quarter alone, total sales revenue was 70.6 billion baht, a decrease of 44 percent year-on-year from 126.9 billion, as net profit dropped by 42 percent to 6.19 billion, of which 3.9 billion of the total was from crude oil stock gains.

Managing director Viroj Mavichak said the decrease was mainly due to oil prices dipping far lower than the first half of last year when they reached a record high, even though crude started to rise in price in the second quarter on signs of global economic recovery.

As well, its gross refining margin fell dramatically to $1.20 a barrel from $9.60 a year earlier, while the first quarter was at $2.5, down from $7.1 a year earlier.

According to the company, West Texas Intermediate (WTI) prices in the first half of 2009 fluctuated due to the global economic downturn, and reduced demand pushed prices below $35 a barrel in the middle of February.

Then the price of WTI gradually rose as did global stock markets on encouraging global economic data and a weakened US dollar. This led to investors speculating on oil, leading WTI prices to top $70 in June.

Despite that rise, Mr Viroj cautioned that the most important indicator, demand for refined-oil products, especially jet fuel and diesel, fell rapidly as the number of travellers declined in line with their purchasing power as well as the fear of the H1N1 flu.

A break in the clouds is seen in the integration between the company's oil refinery and related petrochemical products such as paraxylene and lube-base oil production plants. This provides higher-value products, while its petrol can be used as a feedstock to produce paraxylene, which still has a high price.

TOP can adjust its production process between oil products and petrochemicals as well as lube base oil in accordance with the price and market situation.

"We have switched our production to focus on products that have a better margin. This also helped us reduce risk exposure on the volatile effects of price cycling," said Mr Viroj.

Aromatics prices surged in the first half, leading to the margin between PX and petrol price increasing to $429 a tonne from $300 per tonne a year earlier due to strong demand from new PTA plants being commissioned in China, while PX supply was tight as a result of some plants in Asia shutting down in the fourth quarter of last year.

TOP's performance was in line with Macquarie Research's expectation that refineries would post relatively strong results in the second quarter due to inventory gains and improvements in petrochemical spreads.

The brokerage had forecast an average GRM at $3 a barrel with the paraxylene spread averaging $400 a tonne, up 28 percent quarter-on-quarter.

Shares of TOP closed yesterday on the Stock Exchange of Thailand at 39.25 baht, down 75 satang in trade worth 768.4 million baht.

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