Due to Favorable Market Conditions
South Korea’s four oil companies are expected to post far above 2 trillion won (US$1.79 billion) in operating profits in the second quarter this year. As the international oil prices shot up, the price of oil which was purchased by the four in advance also increased, leading to higher profits on the books. In addition, the refining margins rose from US$4.1 (4,592 won) per barrel at the fourth week of June to US$6 (6,720 won) in July. Therefore, all eyes are on the combined operating profits of the nation’s four oil firms will be able to surpass 8 trillion won (US$7.14 billion) once again this year. The figure reached 8 trillion won (US$7.14 billion) last year for the first time.
According to the Financial Supervisory Service and industry sources on July 31, four oil companies saw their operating profits in the second quarter increase by 55 percent to 243 percent compared to a year earlier. Currently, the combined operating profits of the four firms in the second quarter are forecast to exceed 2.17 trillion won (US$1.94 billion). SK Innovation Co., the first and the largest oil company in South Korea, posted 13.44 trillion won (US$12 billion) in consolidated sales and 851.6 billion won (US$760.36 million) in operating profits in the second quarter. The company’s sales rose 27.5 percent from a year ago, while its operating profits increased as much as 103.2 percent. S-Oil Corporation recorded 6 trillion won (US$5.36 billion) in consolidated sales and 402.6 billion won (US$359.46 million) in operating profits. The figures showed a whopping 28.7 percent and 243.3 percent growth, respectively, compared to the same period last year.
Hyundai Oilbank Co., which has applied for a preliminary review on its planned initial public offering (IPO), also put up a good show both in the first and the second quarter. The company saw its sales grow 34.5 percent to 5.44 trillion won (US$4.85 billion) and operating profits 66.4 percent to 313.6 billion won (US$280 million) in the second quarter compared to the same period a year earlier. GS Caltex Corporation, which is about to announce its Q2 results, is expected to post 4.58 trillion won (US$4.09 billion) in sales and 610.5 billion won (US$545.09 million) in operating profits in the second quarter. When GS Clatex announces the same Q2 results as expected, the combined operating profits of the four oil companies will reach 2.18 trillion won (US$1.94 billion) in the second quarter.
However, it remains to be seen whether the figure can surpass 8.03 trillion won (US$7.17 billion), which was the highest annual operating profits recorded last year. This is because GS Caltex’s operating profits in the first half of this year fall far short of 4 trillion won (US$3.57 billion) due to its poor performance in the first quarter. The combined operating profits of the four firms in the first half stand at only 3.71 trillion won (US$3.31 billion) – SK Innovation with 1.56 trillion won (US$1.4 billion), S-Oil with 657.1 billion won (US$586.7 million), Hyundai Oilbank with 596.3 billion won (US$532.41 million) and GS Caltex with 891.2 billion won (US$795.71 million) which includes the estimated figure in the second quarter.
Market experts have come with rosy prospects for market conditions in the second half because the refining margins are improving. In fact, the refining margins, which recorded at US$7 (7,840 won) per barrel on average in the first quarter, dropped to US$4.1 (4,592 won) at the fourth week of June. However, it has rebounded in the past four weeks and reached US$6 (6,720 won) at the fourth week of July. The refining margins in the third quarter last year was US$8.3 (9,296 won) on average. Lee Ji-yeon, an analyst at Shinyoung Securities Co., said, “The gasoline margins are expected to rise due to the start of the summer driving season in the third quarter, while the refining margins are also forecast to increase because of low stocks of diesel.”