Singapore Petroleum Q2 net up, sees softer demand

Singapore Petroleum Q2 net up, sees softer demand

Oil and gas refining and marketing firm Singapore Petroleum Co. Ltd. (SPC) posted a 33.5 percent jump in second-quarter net profit on Wednesday but warned that demand for refined products may soften.

The company said it would shut a cracker complex for maintenance from September to October, resulting in a drop in its refinery’s throughput.

SPC, 49-percent owned by Singapore top conglomerate Keppel Corporation Ltd. , earned a net profit of S$135.7 million ($85.78 million) up from S$101.7 million a year ago, it said in a statement.

It said strong demand for refined products and shutdowns at some refineries in Asia helped refining margins to recover in the second quarter.

“This, combined with the escalating geopolitical tensions and conflict, enabled the SPC Group to achieve refining margins of above US$8.00 per barrel,” the statement said.

Asian complex refining profit margins during the April-June quarter averaged at US$8.9 a barrel, compared with an average of $4.6 in the previous quarter, according to Reuters calculations.

However, the company warned that refining margins and demand for its products could ease as rising interest rates — resulting from inflationary concerns — and the ongoing Middle East conflict were likely to moderate growth of the global economy.

“Regional demand for refined products is expected to soften as there are signs of adequate inventories in the region. Refining margin is hence expected to trend lower,” it said.

SPC’s major asset is its 285,000 barrel-per-day refinery of Singapore Refining Company (SRC) — a 50-50 joint venture between the company and Chevron — which mainly exports products to China and Southeast Asia.

The company said that as part of a scheduled maintenance programme, the residue catalytic cracker complex at SRC will be shut down for more than 30 days from September to October.

“This will result in a reduction of throughput by about 7 percent for the quarter. This maintenance programme will not disrupt the group’s marketing and trading activities as the group will have sufficient inventory to meet demand,” it said.

Shares in SPC have risen about 7 percent this year, after a 26 percent gain in 2005, lifting the firm’s market capitalisation to US$1.7 billion.

According to a median of Reuters Estimates’ poll of five analysts, SPC is likely to post a net profit of S$411.5 million in full-year 2006, compared with S$403.6 million in 2005.

SPC shares trade at 6.4 times their 2006 forecast earnings. Among its Asian peers, Thai Oil PCL trades at about 8 times earnings and Shell Refining , the Malaysian refining unit of Royal Dutch Shell , trades at 11 times. (Source: REUTERS)

Share this post