Thai Oil mulls M&A

"We've had many offers from oil refineries and petrochemical plants that could not adjust their business to cope with the fluctuating prices in the energy market," said managing director Viroj Mavichak.

He said Thai Oil would invest in related businesses with the potential for granting an internal rate of return of more than 15 per cent.

"Mergers and acquisitions should be better investments than greenfield plants. If we set up a new refinery, the cost per barrel will be US$16,000 to $20,000 [Bt566,000 to Bt707,000]," he said.

Meanwhile, the company received approval for a debenture worth $500 million from its shareholders yesterday.

However, Viroj said the company had no large pipeline investment this year, so the debenture would probably be used for mergers and acquisitions in the future.

Viroj said Thai Oil had a solid financial status and a lot of room for borrowing from banks, as its current debt-to-equity ratio was only 0:7.

The company predicts oil-price fluctuations will last until the global economy recovers.

"Less-efficient refineries suspend production when demand in the market shrinks. On the contrary, when the supply reduces and the price starts to pick up, supply will bounce back," Viroj said.

He is confident Thai Oil can grow continuously, because its refineries have high flexibility and high efficiency, compared with other refineries in the region.

The integrated margin is forecast to be similar to last year's $7.90 a barrel.