SEOUL, KOREA - Despite the high expectations of across-the-board increase in oil stocks following the air strikes in Iraq, the S-Oil stock is still unable to find an upward momentum. On August 8, S-Oil shares were closed at 53,500 won, down 0.37 percent from the previous day. This is in contrast to a 1.49-percent rise of the SK Innovation stock as the West Texas Intermediate crude oil price on the same day rose 0.3 percent to US$97.65.

 

 

 

As a general rule, the overall rise in international oil prices benefits oil refiners. That's because a higher oil price may increase the refiners' profit, with their inventories selling faster on worries of future price increases. Still, S-Oil has seen its share price fall 35.5 percent this year to date. Both institutional investors and foreign investors have continuously net-sold the company shares. The biggest culprit above all is its bad financial performance.

 

During the second quarter of this year, S-Oil posted an operating loss of 54.9 billion won, with sales revenue of 7,418.8 billion won, up 6.4 percent from a year ago. In the refining division that accounts for more than 80 percent of all sales, it reported an operating loss of 153.4 billion won due to lowered refining margins and the strong won. This is operating loss for five consecutive quarters since the second quarter in 2013.

 

Analysts have accordingly adjusted their target price for the company downward. Kwak Jin-hee, Eugene Investment & Securities analyst, said, "The company needs a set of new strategies to improve its competitiveness." He withheld putting out an investment opinion, with the target price on the stock at 60,000 won, down 37 percent. SK Securities analyst Sohn Ji-woo said, "In the third quarter, the possibility of improving its financial performance is limited due to the double trouble in the refining and petrochemical units," adjusting the target price downward to 65,000 won from 70,000 won.