TOP: Gain or Loss for 4Q21 Hedging?

Thai Oil Plc. reported quite disappointing 3Q21 results at 2,063 million baht, compared to roughly 3,000 million baht estimated by the market. Still, the performance showed signs of recovery from a net profit of 715 million baht in 3Q20. Meanwhile, the overall outlook for the first nine months of 2021 at 7,545 million baht outperformed the 9-month period in 2020 where the company recorded more than 10 billion baht of net loss.

The company recorded a stock gain of 3,915 million baht or a 132 million baht increase from 2Q21 and 929 million baht increase from 3Q20. Meanwhile, GIM including stock gain / (loss) was 10.5 US$/bbl, an increase of 0.5 US$/bbl from 2Q21 and an increase of 5.6 US$/bbl from 3Q20.


The main factors that hindered Thai Oil Public Company Limited (TOP) from achieving the expectations of the market are a net realized loss on financial instruments, a loss on fair value measurement of financial instruments and a loss from foreign exchange.

A gain or loss from foreign exchange may be difficult to control, but hedging in commodities could lead to additional gain at the bottom line. However, TOP recorded a net loss on fair value measurements of financial instruments of 1,429 million baht in 3Q21, which was mainly from mark-to-market commodity hedge. Moreover, the company recorded a net loss of 479 million baht from net realized loss on financial instruments in which the market anticipated that the loss could be largely due to a closing commodity contracts that the company had to realize during the period, otherwise the figure would be added in a net loss on fair value measurements of financial instruments.


According to the company’s data of averaging Dubai crude oil at $71.7 a barrel in 3Q21 which may indicate that the hedging by TOP could be higher than the average crude price during the period that leads to a net loss on fair value measurements of financial instruments and net realized loss on financial instruments. And this could be implied to other commodities as well.

In assumption of steady or better operating performance in 4Q21, the aforementioned two factors will also play a great role to TOP’s bottom line. Thus, comes the question of what will the average crude price in 4Q be? And at what price is the hedging price TOP had made?