S-Oil logs record earnings in Q1 on high crude, margins

S-Oil Corp., Saudi Aramco’s refining unit in South Korea, enjoyed record earnings in the first quarter on healthy crude prices and refining margins while expecting the company to maintain strong momentum in the second.

S-Oil, the third-largest refiner in South Korea, said on Wednesday its operating profit more than doubled to a record 1.3 trillion won ($1.1 billion) in the January-March period from 629.2 billion won a year earlier. Its sales also jumped 73.8% to an all-time high of 9.3 trillion won.

“Regional refining margins surged as Russia-Ukraine conflicts further deepened tightness in supply-demand balance that was ongoing under multi-year low product inventory across the world,” said the company in a statement.

The margins are expected to stay firm in the second quarter on seasonal demand and easing pandemic restrictions amid sustained global supply tightness, said S-Oil, 63.4% owned by Saudi Aramco.

RECORD REFINING MARGIN

The benchmark Singapore gross refining margin against Dubai soared to a record $18.7 per barrel last week, according to industry sources. The margin was a mere $2.5 on average in April 2021. Asian refiners can make a profit when the margins are higher than $4.

S-Oil ramped up runs of its refining complex with a crude processing capacity of 669,000 barrels a day to an all-time high of 99.6% in the first quarter from 98.7% in the previous three months on the strong margins.

Its refining business reported an operating profit of 1.2 trillion won in the first quarter, more than triple of 342 billion won a year earlier. But its petrochemical business suffered a loss of 65.6 billion won, compared with a profit of 98.3 billion won, due to surging prices of naphtha, a key feedstock of chemicals such as ethylene and propylene.

Soaring crude prices raised its inventory gains. Its inventory-related gain jumped to 562 billion won in the first three months of the year from 84.8 billion won in the fourth quarter of 2021.

Write to Ik-Hwan Kim at lovepen@hankyung.com
Jongwoo Cheon reported this article.