KUALA LUMPUR (April 25): Hengyuan Refining Co Bhd described its financial year 2017 (FY17) ended Dec 31 as a “monumental year” with output growing 5.87% to 39.7 million barrels from the year before, the refiner said in its 2017 annual report released today.
“2017 has been a monumental year for Hengyuan. It was a very positive year for us, with higher production numbers and improved plant reliability [achieved],” said its chairman Wang YouDe, a 55 year-old Chinese national who took the helm in December 2016, subsequent to the transition exercise that saw Shell Overseas Holding Ltd selling its 51% stake in Hengyuan (then Shell Refining Company (Federation of Malaya) Bhd) to Malaysia Hengyuan International Ltd.
Indeed, not only did Hengyuan’s output exceed expectations for the year at 39.7 million barrels. It scaled its highest production volume since 2006.
For the past five years — with the exception of FY15’s 33.9 million — production volume hovered around the 37 million mark.
According to the annual report, the refiner saw its kerosene or jet production supported by solid performance of Kerosene Treating unit in the first quarter, although it was impacted by several events in May, including the planned outage on Crude Distiller 1 and Kerosene Treating units.
Gasoil production too improved due to higher crude processing, positive regrade and improvement of global oil cracks; while higher intake and better conversion at its Long Residue Catalytic Converter Unit (LRCCU) helped boost its liquefied petroleum gas and propylene production.
“Though refining margins were volatile during the year, gradual recovery of crude and product prices resulted in a full year average Current Cost of Stock (CCS) of US$7.17 per barrel, while First In First Out (FIFO) margins were US$8.39 per barrel (2016: CCS US$4.06, FIFO US$5.46),” the report read.
It attributed the higher CCS margin to higher product cracks (the pricing difference between product and crude) with rising crude premiums and higher refined products prices year to year, compared with 2016, as well as better plant reliability in 2017.
The group had capitalised on high refining margins when global product prices were affected by the shut-down or refineries and offshore refineries in Netherlands and the US, due to fire and hurricane incidents, the report added.
Hengyuan’s oil refinery complex, located in Port Dickson, Negeri Sembilan, is licensed for a production capacity of 156,000 barrels per day.
The main operating units in the refinery complex consist of two crude distillers, a LRCCU, two naphtha treaters and a Merox plant, one reformer and a gasoil treatment plant.
In FY17, the group's operational availability returned to its 2013 level at 97.4%, after ranging between 82% and 95% for the past three years; while its average plant utilisation rate stood at 86.82%.
And its emphasis on process safety, plant reliability and product optimisation has also substantially improved its unplanned downtime percentage, which decreased from 7.2% in FY16 to 2.3% in FY17, Hengyuan said.
All in all, the group turned in an almost three-fold increase in its annual net profit to RM930 million in FY17, from RM335 million previously; while revenue grew 38.47% to RM11.58 billion, from RM8.37 billion in FY16.
Sales volume rose 5.2% to 41.1 million barrels in FY17, from 39.05 million the year before.
The group paid its first dividend in five years: A single-tier interim dividend of two sen per share, amounting to RM6 million, Hengyuan emphasized.
During the year, Hengyuan's share price spiked eight times, rising from RM2.03 to RM16.26 as at end-2017. The stock has however since lost its steam, falling 53.3% year-to-date to RM7.59, valuing it at a market capitalisation of RM2.28 billion as at today’s closing.