Oil Price Drop
As international oil prices are decreasing, it is estimated that the four major domestic oil refining companies suffered more than 2 trillion won (US$1.8 billion) in operating losses in the oil refining business, its main business area.
The performances of the oil refining area by company from Q1 to Q3 of 2014 showed that SK Innovation had 406 billion won (US$376 million) of deficits, GS Caltex 401.6 billion won (US$372.4), and S-Oil 392.3 billion won (US$363.8 million), respectively, with only Hyundai Oilbank recording 179.2 billion won (US$166.1 million) surplus.
As a result, the total losses of the four oil refining companies in the oil refining area recorded 1.207 trillion won (US$1.120 billion) by the third quarter last year. In particular, the loss is expected to surpass 2 trillion won (US$1.8 billion), as the loss of the inventory valuation increased largely due to the sharp decline of oil prices in the fourth quarter.
SK Securities reported that SK Energy, which is the oil refining business unit of the number one SK Innovation, lost 498.7 billion won (US$462.9 million) in the fourth quarter. Hyundai Securities announced a report saying that it lost 568.1 billion won (US$527.4 million) in the same quarter.
GS Caltex is also expected to have lost 400 billion won (US$370 million) in the fourth quarter, but profits from petrochemical, lubricating oil and other businesses made up for the deficit.
The fourth quarter’s total business loss of S-Oil is expected to be between 200 and 300 billion won (US$185 to $278 million), assuming a minimum 300 billion won of operating loss from the oil refining area in the same period.
Although Hyundai Oilbank, where the sales of the oil refining business accounted for 93 percent of the total sales, recorded a 179.2 billion won (US$166.2 million) surplus in the accumulated operating profit in the third quarter last year, it just managed to avoid a deficit in the fourth quarter due to a drastic decline of oil prices.