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Edited Transcript of TOP.BK earnings conference call or presentation 8-May-20 7:00am GMT

Q1 2020 Thai Oil PCL Earnings Call

Bangkok May 26, 2020 (Thomson StreetEvents) -- Edited Transcript of Thai Oil PCL earnings conference call or presentation Friday, May 8, 2020 at 7:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Tarika Devahastin

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Conference Call Participants

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* Ajay Mirchandani

JP Morgan Chase & Co, Research Division - Senior Analyst

* Mayank Maheshwari

Morgan Stanley, Research Division - Research Analyst

* Oscar Yee

Citigroup Inc, Research Division - Director & Head of Pan-Asia Materials Sector

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Presentation

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Unidentified Company Representative, [1]

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Good afternoon, everyone. Thank you for joining the Earnings Call for the First Quarter 2020 for Thai Oil. With us, we have Ms. Tarika, our VP Financial Planning; and myself; and the IR team; and we have [all the management team].

So for today's session, we'll briefly recap the financial results for about 15 to 20 minutes and then we open the session for Q&A.

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Tarika Devahastin, [2]

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Okay. So let me briefly talk about key highlights of the first quarter of Thai Oil in each business unit, starting with [Refinery] business unit. In terms of utilization rate in Q1, Refinery U-rate slightly dropped from Q4 but we still ran at high level at 111% from 113% in Q4 as we maintained product sale at high level. In terms of gross Refinery in stock loss market here in Q1, we reported a $0.1 loss per barrel, significantly lower Q-on-Q from $2.7 per barrel in Q4, well, that's because of the weakening product rate, especially, substantially falling gasoline debt -- diesel due to softened demand from COVID-19 pandemic, resulting in city lockdown in many countries and worldwide flight cancellation. However, if you see the [house of book -- the oil] product spread, it was extremely higher Q-on-Q due to lower supply. Other regional refineries opt to produce low sulphur fuel oil following the IMO regulation. Moreover, light crude premium in Q1 hasn't been a supportive factor to GRM yet because Middle East crude suppliers/portal Saudi Arabian grade and UAE grade has aggressively announced huge crude discount for crude cargoes in April onwards following the Saudi oil price war in March, after OPEC failed to agree on the production cuts.

For example, in Q1, our extra light premium was around $4.4 per barrel compared with the previous quarter at $3.9 per barrel. And Arab light in Q1 was around $3.4, still higher than the previous quarter at $2.9 per barrel. However, Murban crude premium was about $2.4 per barrel, reduced by $2 per barrel from Q4. However, in Q1, we diversified crude sources from Middle East to more U.S., African and other opportunistic crudes in response to the low sulfur production for IMO 2020.

Thus, Middle East crude production in Q1 was reduced to only 45%, and U.S., African and others crude was increasing to around 40%. If you compare with last year, Middle East crude of around 68% of total and the U.S., African and other opportunistic crudes last year was around 20%. And I would say that the U.S. and in West African, crude is light sweet crude grade. Therefore, the price was quite justified with the quality and with the longer voyage than the Middle East. So we processed the U.S. and African crude in -- crude for Q1 cargoes since the end of Q4 when the crude premium was still high, tracking with the Middle East crude premium, but it reduced in Q2 tracking with Middle East crude as well.

As you can see the -- in Q2, Middle East crude discount in May was around minus $7 per barrel and from the latest announcement, our light and product extra light crude discount in June is around minus $6 and minus $6.5 per barrel, respectively. Thus, due to very huge Middle East crude discount in Q2, we got to use more Middle East crude grade in Q2 to get the most benefit for the lower crude cost. So I would say that GIM in Q2 will be greatly supported from the huge crude discount.

And in terms of the stock loss, crude oil price in Q1, term net debt from Q4 as a result of the COVID-19 pandemic, curving on the global economy and oil demand, especially in the transportation and tourism sectors and causing many refineries reduce [that report] while global oil supply surplus was very messy after OPEC and its allies failed to reach a deal on the production cuts at the meeting on the 5th of March causing concern about the rising inventory and insufficient storage capacity. Accordingly, the Dubai crude price fell around $31 per barrel in Q1. As you can see from the average Dubai price in March, it was around $33.7 per barrel, falling from the average Dubai crude price in December, which was around $65 per barrel.

So we had an exceptionally high stock loss amount around THB 10.8 billion or equivalent to $12.3 per barrel stock loss compared with the stock gain in Q4 at around $0.7 per barrel. As a result, if combined, the GRM with the impact of the stock loss in Q1, Thai Oil reported accounting GRM at minus $12.2 per barrel compared with $3.4 per barrel in Q4.

So next, it would be the Aromatics and LAB business unit. In terms of the Aromatic production rate in Q1, it was 81%, increasing from Q4 at 73% due to an optimization between Refinery and Aromatics plant in order to maximize Aromatics production during the gasoline spread.

For the product-to-feed margin of the Aromatics in Q1, it was around $85 per ton, better than $52 per ton in Q4, tracking with the better product spread of both PX and benzene. So the better Aromatic spread in Q1 was supported by the low feedstock cost, falling gasoline prices. Moreover, lower supply from [other] Refinery run cuts and plant maintenance shutdown also supported Aromatics product spread. So in terms of the contribution to the group integrated margin from Aromatics and LAB business unit in Q1 was around $1.5 per barrel, almost double from Q4 at $0.8 per barrel.

If you move to the Lube Base Oil business unit, base oil production rate in Q1 was around 81%, slightly higher than Q4 of around 77% though the base oil and bitumen product spread was lower Q-on-Q, but it's still at a healthy level due to lower feedstock costs despite weak base oil and bitumen demand from COVID-19.

So in terms of product-to-feed margin of Lube Base Oil in Q1, it was $86 per ton, lower from $119 per ton in Q4, tracking with lower product spread of both base oil and bitumen products. And the contribution to the group integrated margin from base oil business unit in Q1 was $0.6 per barrel, dropped from $0.9 per barrel in Q4.

So if we combined the margin from 3 main businesses together, group integrated margin, excluding inventory loss in Q1, it was $2.1 per barrel compared with $4.4 per barrel in Q4, mainly pressured by falling Refinery margin due to COVID-19 impact.

However, as mentioned earlier, that in this quarter, we have greatly huge stock loss around $12.3 per barrel. Thus group integrated margin, including inventory loss in Q1, was around minus $10.1 per barrel compared with $5.1 per barrel in Q4. So that's for the margin side of 3 main business units.

And if we're looking at the cost side, in terms of total group cash cost in Q1, it was $2.5 per barrel, consisting of operating cost at $1.7 per barrel and the interest expense netting of basic -- sorry, netting of interest income basis, it was around $0.9 per barrel. So the group operating cost of $1.7 per barrel, it was significantly lower than the $2.7 per barrel in Q4. That was mainly from the lower maintenance costs after the major turnaround CDU and Aromatic complex was completed.

While in Q4, operating cost was abnormally high due to very light catch-up payment during the year-end. However, if you compare group operating cost at $1.7 per barrel in the year before, so it's quite the same, although the operating cost was higher or was lower. That's because of -- in terms of dollars per barrel because of the-- in Q1 this year, we have lower intake compared with the Q1 last year. For example, Refinery utilization rate in this quarter, this year around 111% compared with Q1 last year is around 116%. So that's why it made dollars per barrel basis seem higher.

Meanwhile, interest expense, netting off interest income basis in Q1, was $0.9 per barrel, higher than Q4, which was shown as a net interest income of $0.02 per barrel. I would say that's because of -- in Q4, there were adjustments on the capitalization of interest expense during the construction as an asset for the whole year of 2019. However, if you compare with the Q1 last year, the Q1 last year is around $0.6 per barrel. So interest expense in this quarter is higher year-on-year, around $0.30 per barrel. The main reason is from lower interest income in Q1, around THB 300 million due to lower USD fixed deposit of approximately around USD 400 million. So if you just multiply with the interest rate around 2%, so it's roughly half lower interest income.

And in terms of net profit contribution from these 3 main business units, Refinery, Aromatics and LAB and Lube Base Oil in Q1 was contributed net loss around THB 14.5 billion, substantially lower from Q4 due to an exceptionally high stock loss following tumbled crude oil price. And profit contribution from other business units such as Power, Solvents, Marine and Ethanol, altogether were combined around THB 762 million, the majority of which comes from Power business where we reported the net profit from power sector around THB 586 million, consisting of net profit from our SPP around THB 202 million.

And another thing is the equity income from GPSC around THB 384 million, which is higher Q-on-Q due to the fully contribution from GLOW after the acquisition.

Accordingly, in total, Thai Oil reported consolidated net profit in Q1 was a net loss around THB 13.754 billion or equivalent to the EPS around minus THB 6.74 per share.

And for other item in this quarter, there was an accounting item such the NRV. This quarter, we had a write-down on crude oil and petroleum products inventory of total around THB 3.4 billion, mainly from the write-down on the crude inventory as falling market crude oil price at the end of Q1.

And the second thing is we had a loss on financial instruments. In Q1, we reported the total net loss at around THB 396 million, according to the new IFRS #9, which is consisting of 2 parts. The first part is the realized loss on financial instrument of around THB 19 million, which was mainly from realized commodity hedging loss in Q1, mainly from the margin hedged on petroleum and petrochemical products. So these realized hedging loss item, we normally include it in our EBITDA as a part of our operations.

And the second part is the unrealized loss on financial instruments of around THB 377 million, which was the loss on fair value adjustment on financial instrument in accordance with the TFRS #9. So the loss THB 377 million was mainly from the mark-to-market on the commodity hedging performance for the whole year of 2020.

And also, in this quarter, we had an FX loss in total around THB 2,338 million, which was mainly from the FX loss on the foreign currency assets and liabilities as an FX mismanagement for our core operations of around THB 1,772 million because in Q1, we had USD debt of around USD 2.5 billion as well as a USD deposit of around USD 1.4 billion. So if you multiply with the Thai baht depreciation of around THB 2.5 to the USD in this quarter, so you get roughly number of the FX loss on the foreign currency asset and liabilities.

And the second thing is the FX loss from the AP, AR around THB 566 million, which was from business operation that's been -- classified this as a part of our [corporation] as well.

Lastly, in terms of the tax expense, in Q1, we had reversal of income tax expense of THB 3,558 million due to the net loss in this quarter.

So that brings me to the end of the performance highlights. After this, we will open for Q&A session. (Operator Instructions)

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Questions and Answers

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Mayank Maheshwari, Morgan Stanley, Research Division - Research Analyst [1]

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Mayank here from Morgan Stanley. A couple of questions. First and foremost, on the Refinery utilization rate, you said that it's still running reasonably high. Can you talk about what are the utilization rates now in the month of May and why you're selling your products, considering the demand decline that you would have seen because of the COVID-19? What are you doing there?

And the second thing was I think you kind of said in your MD&A that your sale volumes actually fell 9%, but obviously, utilization rate didn't [really fell] that much. So how much is your storage number right now [like the] product on crude in terms of million barrel?

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Unidentified Company Representative, [2]

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On the first question, in the first quarter, we ran around 111%. And so far, in the second quarter, we slowed out the [corporation] a little bit. That's in the range of 10% to 15%. Actually, the main problem would be the jet fuel demand. So during the peak COVID-19 situation in Thailand, so all the airline operations temporarily shut down at the moment. So we have in that time about 90% to 95% in the domestic jet fuels.

And for other products, I would say the impact is much less than the jet fuel. For gasoline, for example, demand will be declined by 20% to 30% during the peak. And for diesel, it will be slightly lower than that. So for gasoline -- actually, in Thailand, we shut off ethanol-blend gasoline and we need to import around 20%. So with a lower demand of 20% to 30% that will reduce the [import on it first], so our domestic sale for gasoline will be less affected.

And for diesel as well, so we focus on domestic gas sales first, and then we export the rest to the neighboring countries like Myanmar, Laos and Cambodia. And these countries seem to be less affected by the COVID-19 so far. So that's why we still managed to run the Refinery at a high level. So maybe 10% to 15% lower than the first quarter.

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Mayank Maheshwari, Morgan Stanley, Research Division - Research Analyst [3]

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So is it fair to say that there is no buildup in inventory on either product of the crude side premium in the month of April and May?

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Unidentified Company Representative, [4]

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On the product side, we try to minimize the product. So in case the situation get worse, then we are not constrained by the inventory of the product. So we managed to reduce the jet production. In the past, we produced around 22% of jet U. Now we can lower the jet production to below 10%. And if it get worse, then we plan to reduce further in June. So on the jet supply and jet inventory, we're still at that very minimum level, so we still manage the slowdown in domestic lifting.

And on the crude side, because we just finished the crude tank building during last year, so we have additional crude capacity. So that's why we can maintain the run at a very high level. And although we reduced around by 10%, 15%, we still have a lot of room to keep the inventory on the crude side.

And as you may know, Thailand announced to reduce the legal reserve requirement on the crude side from 6% to 4% starting in May. So that will release the crude capacity around 1.7 million barrel for Thai Oil. So that gives us the room to manage that lower demand from COVID. So...

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Mayank Maheshwari, Morgan Stanley, Research Division - Research Analyst [5]

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So just -- I think this is quite interesting. So can you just tell us of what was -- what is your new inventory levels now in either number of days or million barrels on the crude side?

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Unidentified Company Representative, [6]

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On the crude side, typically, we keep around 30 days of inventory. So it's still around that level, 30 to 35 days.

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Mayank Maheshwari, Morgan Stanley, Research Division - Research Analyst [7]

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Okay. So it's not really picked up, only the utilization rates have come down?

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Unidentified Company Representative, [8]

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Right. And we still have the capacity to add those up, more and more supply.

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Mayank Maheshwari, Morgan Stanley, Research Division - Research Analyst [9]

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Okay. And the second question was related to the crude premiums itself. How much of the crude premiums you had in the first quarter? And what are the premiums that you're getting in the current numbers or quarter-to-date?

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Unidentified Company Representative, [10]

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As Khun [Tarika] mentioned earlier, in the first quarter, we used 45% of Middle East crude and around 40% of the U.S. and less than 10% are also Russian crude. So the 45% of the Middle East consisting of around 30% of Saudi and around 15% of Murban. So in the first quarter, the Saudi premium was still higher than the fourth quarter. So that will go in still high the crude premium overall in the first quarter.

But on the second quarter, so far Saudi oil announced the premium until June. So we see the entire quarter for the premium discount. So Q-on-Q will be around $9 to $10 per barrel lower on Saudi crude, and we still use around 30% from Saudi and the rest will be from other Middle East countries. So we plan to increase the Middle East crude to around 65% to 70%. And Murban, for example, is also lower Q-on-Q, around $7 to $8 per barrel.

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Mayank Maheshwari, Morgan Stanley, Research Division - Research Analyst [11]

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Got it. So overall, I think your mix will shift to 70% or so Middle Eastern rates. And overall, that has that $8, $9 change in total barrels.

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Unidentified Company Representative, [12]

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Yes, sir.

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Mayank Maheshwari, Morgan Stanley, Research Division - Research Analyst [13]

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Okay. And the final question from me was on the product side. Have you -- apart from the jet fuel shift that you talked about, anything on gasoline that you have done?

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Unidentified Company Representative, [14]

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We try to maximize Aromatics production as you've seen from the utilization of the Aromatic plants. In the first quarter, they increased to over 80% in the first quarter. But because the U of Aromatics are much less than gasoline, so I would say that the shift would be only 1% to 2% after gasoline. But we still try to manage the gasoline sale in domestic markets.

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Ajay Mirchandani, JP Morgan Chase & Co, Research Division - Senior Analyst [15]

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This is Ajay, JPMorgan. Can you hear me?

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Tarika Devahastin, [16]

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Yes.

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Unidentified Company Representative, [17]

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Yes.

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Ajay Mirchandani, JP Morgan Chase & Co, Research Division - Senior Analyst [18]

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Okay. A couple of questions from me. The first one, I just wanted to confirm specifically on LSFO, the percentage of the scale we've seen in terms of production and how do you think about that moving forward for the rest of the year. And the second question I really had was just trying to better understand for your CapEx needs, $2 billion this year and $1 billion next year, how should we be thinking about the funding for that? Do you need any further debt that needs to be raised for that one as well?

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Tarika Devahastin, [19]

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So for the LSFO production in Q1, it's about 4%.

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Unidentified Company Representative, [20]

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And for the rest of the year, we made lower -- low sulphur fuel oil production a little bit because the price gap between [middle distillate oil and fuel oil] is much narrower than the beginning of the year. So we had switched back a little bit to high sulphur production as we use more [energy, too]. And it can be like 1% to 2%. And on the second one?

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Ajay Mirchandani, JP Morgan Chase & Co, Research Division - Senior Analyst [21]

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Down for LSFO.

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Unidentified Company Representative, [22]

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Right. Down.

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Ajay Mirchandani, JP Morgan Chase & Co, Research Division - Senior Analyst [23]

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Down to 2%. Okay.

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Unidentified Company Representative, [24]

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Right. And on the second question on the investment, so our previous CapEx plan for 2020 was around USD 2.2 billion for mainly from CFP, but due to the impact of the COVID-19 and also the delay of some delivery that rose in 2020, we can manage to delay the payment a little bit to around USD 1.8 billion. And at the end of the first quarter, we had cash on hand around USD 1.9 billion. And the spending was around USD 0.5 billion in the first quarter.

So the remaining spending for the last 3 quarter will be up around USD 1.3 billion. Our cash on hand at the end of the first quarter would be sufficient to fund the project this year. And for the delayed payment from this year will be catch up in 2021. So '21 CapEx will be up to around $1.5 billion. And 2022 CapEx was still quite the same at $0.5 billion. So we still have a funding gap around $1.5 billion to $2 billion if we assume that we have no cash from operation at all.

So the funding plan after we arrange AGM meeting in coming months, then we will request the line from shareholders around $2 billion on the bond issuance in the next 5 years. And after that, we plan to issue the bond around $1 billion first to fund -- prefund the project for next year. And also, in discussion with PTT to extend the crude credit term from 30 days to 90 days. And that will release the working capital from the group testing cohort to USD 600 million. So depending on an accrued price that we assume, so that will be sufficient for next year. And then we will see the situation of the market in coming years first if we need extra funding options.

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Ajay Mirchandani, JP Morgan Chase & Co, Research Division - Senior Analyst [25]

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So can I just confirm? You don't need to raise any money at least for this year, incremental, that's a fair comment?

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Unidentified Company Representative, [26]

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We still open for the windows after we get the lines from shareholders. So it can be after coming months, then we'll see if the coupon rate is still attractive.

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Ajay Mirchandani, JP Morgan Chase & Co, Research Division - Senior Analyst [27]

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Understand. And just last question from me. It's only been a month and a bit, but any quick views on how GRMs have actually trended in the month of April and early May, if you have any color you can share with us?

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Unidentified Company Representative, [28]

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So far, the quarter-to-date, the main benefit would come from the lower crude cost that we talked about from the first half based in the year. So it will be $8 to $9 per barrel lower on Middle East discount. And if you use 70% on the Middle East crudes, then it will lower the crude cost by $6 to $7 per barrel. And on the product side, because we had a lot impact on jet fuel and gasoline, the spread over Dubai is nearly flat or sometime negative to Dubai. So that if we combine the spread Q-on-Q with the new, the product margin will be lower, around $4.5 per barrel. So net-net, we do see a general improvement on the first quarter at around $3 to $4 per barrel.

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Mayank Maheshwari, Morgan Stanley, Research Division - Research Analyst [29]

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I think if there are no other questions, can I just ask a couple of other questions as well. This is Mayank.

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Unidentified Company Representative, [30]

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Yes, please.

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Mayank Maheshwari, Morgan Stanley, Research Division - Research Analyst [31]

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Yes? So just on the funding side, are you looking to refinance anything at all? Or just raising the [new point] itself of $1 billion that you are asking for approval?

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Unidentified Company Representative, [32]

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We have a line for $2 billion. That includes the refinancing. And if you look at our debt maturity in the next few years, we only have a small maturity, only $0.5 billion sum in 2023. So well open the room for financing if the coupon rate is attractive. So...

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Mayank Maheshwari, Morgan Stanley, Research Division - Research Analyst [33]

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And on the ratings side, are you worried that because of the net debt to equity, you could have issues -- net debt-to-EBITDA metrics, that you could have issues with the rating agencies or that's not concerning to you right now?

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Unidentified Company Representative, [34]

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Yes. We are in close discussion with the rating agency, all rating agencies. So they are quite informed with our funding plan and also the projection. So during this period, because the funding is affected by the COVID-19, so we have huge inventory loss and also very weak margin. But in coming years, the market should recover. And as we have more plan like the equity-light fund raising, like the crude extension that we talked about earlier and also, we have adoption, like asset monetization, so that will release the cash to the company and the ratio will trend to be lower in the coming years. And after we complete the CFP, the EBITDA will be better and [EBITDA] will support the ratio as well.

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Mayank Maheshwari, Morgan Stanley, Research Division - Research Analyst [35]

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Okay. So when you talk about asset monetization, can you just talk about what exactly are you saying here? Like what asset monetization are we talking about?

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Unidentified Company Representative, [36]

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We have the -- maybe the [10 top line] import at the Refinery, so you can [cut out] and sell that asset to many investors from equity, private equity, for example, to raise fund. So the sizing would be USD 0.5 billion to USD 1 billion.

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Mayank Maheshwari, Morgan Stanley, Research Division - Research Analyst [37]

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Okay. Okay. Okay. So what you're really saying is that to upgrade yourself, you will be selling assets right now. That's what the plan is.

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Unidentified Company Representative, [38]

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Yes. We are studying several funding options. So it depends on cost as well. So we'll finalize in the second half of this year.

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Mayank Maheshwari, Morgan Stanley, Research Division - Research Analyst [39]

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Okay. And are these options now kind of more confirmed because of where the market is? Or do you think this may kind of change and very fluid?

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Unidentified Company Representative, [40]

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For the crude credit term extension, I would say it's quite confirmed because in terms of cost, it's quite cheaper than other options that it will -- it will be like the short-term lending rates. But for asset monetization, it will need to work a bit more in detail.

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Mayank Maheshwari, Morgan Stanley, Research Division - Research Analyst [41]

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Okay. And what will trigger the confirmation of an asset monetization? Is it a rating downgrade? Or is there something else that could lead to you kind of completing the asset monetization?

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Unidentified Company Representative, [42]

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So the fundraising from the Board and that [credit] extension will be sufficient. So if the situation prolong into the end of the year, then that will be the key consideration.

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Mayank Maheshwari, Morgan Stanley, Research Division - Research Analyst [43]

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Okay. So you will wait until end of the year before you kind of think about asset monetization and other things, if things don't improve?

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Unidentified Company Representative, [44]

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Right. Right.

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Ajay Mirchandani, JP Morgan Chase & Co, Research Division - Senior Analyst [45]

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Can I just start at the end? Can you look at...

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Tarika Devahastin, [46]

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So Mayank, you could go ahead.

Please wait a bit, for Ajay.

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Ajay Mirchandani, JP Morgan Chase & Co, Research Division - Senior Analyst [47]

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Okay. Yes.

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Mayank Maheshwari, Morgan Stanley, Research Division - Research Analyst [48]

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Okay. So no, I was just saying that the final point was that if you're kind of thinking that if margins are only $3, $4 per barrel, and as you said, demand is starting to recover a bit, is there a thing that this may actually be just an option? It may not really kind of be a -- probability will be really not that high right now?

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Unidentified Company Representative, [49]

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[A second, please?]

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Mayank Maheshwari, Morgan Stanley, Research Division - Research Analyst [50]

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No. I was just saying that because you're already seeing margins improve and if demand starts to recover, this option of asset monetization could only be a low probability you have right now.

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Unidentified Company Representative, [51]

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Right. That would be fair to say.

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Tarika Devahastin, [52]

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Ajay, please.

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Ajay Mirchandani, JP Morgan Chase & Co, Research Division - Senior Analyst [53]

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Yes. Just to clarify, so with regards to asset monetization, I just wanted to kind of confirm why would you consider asset monetization instead of just doing a straight equity, which is backed by parent? Why is that not on the table rather than doing asset monetization?

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Unidentified Company Representative, [54]

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The asset monetization, I would say that the cost will be lower than equity raising because the fund or other -- the company itself can -- we can raise the bond or other investors can raise the bond by themselves. So the weighted cost to us will be lower than the direct equity raising.

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Oscar Yee, Citigroup Inc, Research Division - Director & Head of Pan-Asia Materials Sector [55]

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This is Oscar. Could I ask a question?

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Unidentified Company Representative, [56]

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Yes.

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Tarika Devahastin, [57]

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Yes.

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Oscar Yee, Citigroup Inc, Research Division - Director & Head of Pan-Asia Materials Sector [58]

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Hello?

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Unidentified Company Representative, [59]

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Yes, please.

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Oscar Yee, Citigroup Inc, Research Division - Director & Head of Pan-Asia Materials Sector [60]

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Could I ask you for your lower cost of market? So what part of the Dubai price do you mark down to for your LTM losses?

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Unidentified Company Representative, [61]

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We mark down to the average Dubai March around $33.7 per barrel. But actually, we mark down crude by crude. So for example, if we have here Murban, in the inventory, we'll mark down as a Murban price. But if you use Dubai as benchmark, then the Dubai March will be -- yes, your consideration.

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Oscar Yee, Citigroup Inc, Research Division - Director & Head of Pan-Asia Materials Sector [62]

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So that means that there will still be more stock loss in 2Q?

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Unidentified Company Representative, [63]

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Yes, and it's lower than $33.

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Oscar Yee, Citigroup Inc, Research Division - Director & Head of Pan-Asia Materials Sector [64]

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And could I ask you what is the Murban premium for the latest month because the [June one] just came out, right? I know it's [reflected]. But what's the latest Murban premium?

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Tarika Devahastin, [65]

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So the -- yes, the latest Murban premium in May is about minus $6.95 per barrel.

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Oscar Yee, Citigroup Inc, Research Division - Director & Head of Pan-Asia Materials Sector [66]

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Minus $6.95?

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Tarika Devahastin, [67]

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Right.

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Oscar Yee, Citigroup Inc, Research Division - Director & Head of Pan-Asia Materials Sector [68]

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And April, it's minus how much? Two point something, right?

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Tarika Devahastin, [69]

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Minus $2.75.

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Oscar Yee, Citigroup Inc, Research Division - Director & Head of Pan-Asia Materials Sector [70]

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$2.75. Okay. Okay. Okay. So right now, based on your crude mix and also your new sort of product mix, how much lower can you squeeze your share [standing]? You mentioned below 10% right now, but exactly how low can you get that number down to?

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Unidentified Company Representative, [71]

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It can be lower than 5%.

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Oscar Yee, Citigroup Inc, Research Division - Director & Head of Pan-Asia Materials Sector [72]

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Can be lower than 5%, I see. So -- and I presume the rest of your product, basically, your new share, basically, [the product will be in those], right?

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Unidentified Company Representative, [73]

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Yes. We believe so.

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Oscar Yee, Citigroup Inc, Research Division - Director & Head of Pan-Asia Materials Sector [74]

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So based on your understanding, are the other high refiners also making a sort of similar switch at the moment? And if so, is this a reason explaining why currently the diesel crack is so low right now? Because if you look at past few days, diesel crack [in Russia] is collapsing very fast, okay? Is it a reflection that every refiner is making the switch? It kind of means that, I think, the overall GRM recovery will not be as long because of a sort of drag. Maybe the jet crack recovery will come down further because of the diesel, but there's still probably a weak outlook for diesel into the next couple of months. Is it something that you share and in [probability]?

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Unidentified Company Representative, [75]

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Yes. Yes. All right. Because jet and diesel product are similar and most refineries will maximize diesel in the expanse of the extraction. So they'll put all the jet into diesel as long as the final spec is met. So I will say 5% to 10% increase, you switching from jet to diesel is possible.

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Tarika Devahastin, [76]

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Is there any further question?

So I guess there's no further questions. If there's no further question, we will end the call here. But if you have more questions, you can contact us either via phone or e-mail. So thank you for joining the call today.

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Unidentified Company Representative, [77]

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Thank you.

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Tarika Devahastin, [78]

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Thank you.