Singapore Petroleum says 2006 net down, outlook positive

Singapore Petroleum says 2006 net down, outlook positive

Oil and gas refining and marketing firm Singapore Petroleum Co. Ltd. (SPC) reported a 29.5 percent fall in full year 2006 net profit on Wednesday due to a sharp drop in refining margins in the second half of the year.

SPC , however, said it was optimistic over the outlook for 2007 when Asia’s economic growth was likely to continue and boost demand and margins for petroleum products.

“Regional demand for refined petroleum products is thus anticipated to remain robust and this, coupled with the projected tight refining capacity, will likely result in continued healthy refining margins in 2007,” the company said in a statement.

SPC, 49-percent owned by the world’s top offshore oil drilling rig builder Keppel Corporation Ltd. , said it earned a net profit of S$284.6 million ($185.6 million) in 2006, compared with S$403.6 million in 2005.

That was lower than an average forecast of S$313.3 million, according to Reuters Estimates’ poll of three analysts. For 2007, analysts expect SPC to post a profit of S$318.8 million.

SPC did not release fourth quarter figures, but according to Reuters calculations, the net profit in the Oct-Dec period was S$57.8 million, down from S$122.3 million in the same year-ago period but above the third-quarter profit of S$23.2 million.
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The statement said SPC achieved an average refining margin of just US$3.00 a barrel in the second half, compared with more than US$6.00 per barrel in the first half of 2006.

“This was the result of slowing regional demand growth coupled with the high inventories of crudes and refined petroleum products globally. The late northern winter also contributed to the weaker refining margins in the second half,” it said.

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

SPC said that a scheduled maintenance turnaround of a Residue Catalytic Cracker unit at SRC, that started in September, was completed in October and the refinery has since been operating at full capacity.

Shares in SPC fell 8.4 percent decline in 2006 compared with a 27 percent gain in the broader Singapore market . The firm’s market capitalisation stands at around US$1.4 billion.

SPC shares trade at 6.7 times their 2007 forecast earnings. Among its Asian peers, Thai Oil PCL trades at about 6.8 times earnings and Shell Refining , the Malaysian refining unit of Royal Dutch Shell , trades at 9.7 times.

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