KUALA LUMPUR: Hengyuan Refining Company Bhd (HRC) which posted exceptional first quarter results said it will adopt a cautiously optimistic outlook in the face of challenging global oil and gas sector.
In its filing to Bursa Malaysia today, HRC, formerly known as Shell Refining Co (Federation of Malaya) Bhd, said its first quarter profits ended March 2017 nearly tripled to RM279.49 million from RM101.65 million, registered in the same period, last year.
It’s first quarter revenue also jumped 1.5 times to RM2.93 billion from RM1.87 billion, posted a year ago.
"Going forward, we'll continue to manage our risks and protect our company," said Hengyuan managing director and executive director Maarten Stals.
"Generally the trend is such that refining margins are unpredictable. The market sees continued signs of oversupply and OPEC (Organization of the Petroleum Exporting Countries) has called for a meeting to potentially further curtail supplies," he told reporters after the company's shareholders meeting held here today.
Earlier, it was reported that top OPEC oil producer, Saudi Arabia, favoured extending the output curbs by nine months rather than the initially planned six months. This is to speed up market rebalancing and prevent crude prices from sliding back below US$50 per barrel.
"We have, since the beginning of this year, refinanced our loan in US dollars upon the change of majority shareholders. This has triggered a change of our functional currency from ringgit to US dollar. Our foreign exchange exposure is reduced as our sales and purchases are US dollar price commodities," revealed Stals.
Meanwhile HRC chief financial officer Foo Ai Li explained that the company's loans were partially denominated in ringgit and US dollars.
"As of now, we have US$350 million in credit availability. So far, we've drawn down US$320 million."
Asked on HRC's plans, Stals replied: “we're evaluating the project to upgrade our production of motor vehicle gas to the Euro 4M specification, is slated to be implemented by Oct 2018, in Malaysia.”
Stals also said that the refinery is looking forward in utilising Hengyuan’s knowledge and experience to develop its projects. This as Hengyuan had been meeting the Euro 6 specification for some time now in their home refinery.
Euro 4 and 6 refers to a European Union fuel standard to define fuel quality.
Shangdong Hengyuan Petrochemical Company Ltd controls 51 per cent of HRC via its unit Malaysia Hengyuan International Ltd. (MHIL)
HRC's 125,000-barrels per day refinery at Port Dickson in Negri Sembilan, sells 90 per cent of its products within Malaysia and exports the remaining 10 per cent to Singapore.
Stals also said that HRC intends to export some of its production to China but has yet to do so.
"We'll leverage on our parent company's knowledge to see which of our products we produce here is suitable there."