SET Announcements

TRANSLATION AUDITORS' REPORT TO THE SHAREHOLDERS OF THE BANGCHAK PETROLEUM PUBLIC COMPANY LIMITED We have reviewed the balance sheets of The Bangchak Petroleum Public Company Limited as of September 30, 1998 and 1997 and the statements of income for the third quarter then ended in accordance with standards established by the Institute of Certified Accountants and Auditors of Thailand. A review of such interim financial statements consists principally of obtaining an understanding, by enquiries, of the system for preparation of the financial statements, making an analytical review of pertinent financial data and making enquiries of certain officials of the Company who have responsibility for financial and accounting matters. Our review is substantially less in scope than an audit in accordance with generally accepted auditing standards , the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Thus , we do not express such an opinion on the financial statements referred to above. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with the generally accepted accounting principles. (Sign) Pradharn Darbphechra ( Mr. Pradharn Darbphechra) Deputy Auditor General For Auditors General (Sign) Duangta Jantong ( Ms.Duangta Jantong ) Auditor-in-charge November 3, 1998 REVIEWED THE BANGCHAK PETROLEUM PUBLIC COMPANY LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE THIRD QUARTER ENDED SEPTEMBER 30,1998 AND 1997 1. Summary of Significant Accounting Policies 1.1 The accounting transactions of the Company have been recorded on the accrual basis. 1.2 Allowance for Doubtful Accounts The allowance for doubtful accounts is set-up based on debts deemed uncollectable from debtors as judged from the current status of each account receivable. 1.3 Inventories Finished petroleum products are stated at the lower of cost or market, whichever is lower. The unit cost is determined by the weighted average of monthly production costs and the volume of each oil product and ex-refinery selling prices. Product inventories are priced on a first-in, first-out method. Crude oil is stated at the lower of cost or market, whichever is lower. The unit cost is determined by the weighted average cost and the volume of monthly purchased crude oil. Crude inventories are priced on a first-in, first-out method. 1.4 Materials and Supplies Materials and supplies are stated at cost determined by the moving average method. 1.5 Long-Term Investment 1.5.1 The investment equal to or over 20 % of the paid-up share capital is recorded on the equity method. 1.5.2 The investment less than 20 % of the paid-up share capital is recorded on the cost method. 1.6 Property, Plant and Equipment Property, plant, equipment and depreciation are carried at cost. Interest expenses which are related to fixed assets, are booked to the cost of assets. Depreciation is computed by the straight-line method at rates varying from 5% to 20% per annum based upon the estimated useful life of the assets. The company revises the value of its fixed assets should serious fluctuation in the economy occur which has direct effect on the assets. The surplus value from the revaluation is recorded under account "Surplus on fixed assets revaluation"" in Shareholders' Equity, which is not available for dividend distribution. Depreciation on the increased value of the assets is deducted from the "Surplus on fixed assets revaluation"". 1.7 Deferred Income Tax The company records the difference in the corporate income tax numbers, calculated on the basis of the company's financial statement and that of the Revenue Code, as "Deferred Income Tax" in the Balance Sheet. Amortization of this account is made as the income or expense booked is realized or used for tax credit when permitted under the Revenue Code. 1.8 Deferred Charges The prepaid land lease for service stations are amortized over the term of the land lease contract. Deferred charges related to the exchange of buildings between the company and Defence Energy Department,of the Ministry of Defence is amortized over a contracted term of 20 years. Other deferred charges are amortized within five years. 1.9 Foreign Currencies 1.9.1 Foreign currency transactions are converted into Baht at the exchange rate on the date the transactions incurred . The outstanding balance as of the ending period is translated into Baht using the exchange rate as announced by the Bank of Thailand. Differences from foreign exchange translations are booked the total amount as income or expense except for foreign exchange losses prior to year 1996, which are booked as deferred expense and amortized over the period of the loan . 1.9.2 Gains or losses resulting from the repayment during the year are recorded as income or expense. 1.9.3 In cases where forward exchange contracts are purchased to minimize the risk exposure on foreign exchange of debts in foreign currency, the Company books the exchange rate as per the contract . The Premium associated with this is amortized over the period of the contract. 1.10 Deferred Revenue Deferred revenue, the advance lease income of equipments and others, are amortized over the term of the contract. 1.11 Interest Expense Interest on loans which is related to the construction of fixed assets are booked to the cost of work in progress until projects are completed. Interest costs incurring after the project is completed , are booked to expense. 1.12 Earnings Per Share Earnings per share is calculated from the net profit (loss) divided by the weighted average of issued and paid-up share capital. 2. Short -Term Investments consisted of : Million Baht 2541 2540 Fixed Deposit Account 2,028.41 95.81 Promissory notes - 120.00 Total 2,028.11 215.81 Fixed deposit account for this quarter 1998 of Baht 2,028.11 million consists of Baht 268.96 million and of USD 45 million (or Baht 1,759.15 million) . The USD account is reserved for the settlement of crude purchases when due . 3. Trade Accounts and Notes Receivable - Net The Company has trade account receivables that have problems in repaying debts. The following is an age analysis of the outstanding amount of such debts. Million Baht over 3 - 6 months 6.81 over 6 - 12 months 6.87 over 12 months 50.75 64.43 The Company has set up an allowance for doubtful receivables of Baht 53.58 Million. 4. Investments and Loans to Related Parties of Baht 427.08 million consists of investments in related parties of Baht 203.45 million ( on cost method of Baht 163.00 million and on equity method of Baht 40.45 million ) and Tariff Prepayment of Baht 223.63 million. The details of which are as follows :- 4.1 Investments in related parties Company Type of Business Relationship Paid-up Share Investment(Million Baht ) Dividend share holding As of 30 Sep 1998 and 1997 capital Ratio Cost Method Equity Method (Million (%) 1998 1997 1998 1997 Baht) Associated company The Retail Business Share holding 1.00 49.00 - - 20.40 17.01 - Bangchak and Service Green Net Co.,Ltd. The Transportation Share holding 0.10 49.00 - - 2.93 1.53 - Bangchak and Service Green Line Co.,Ltd. Mongkhol RetailBusiness Share holding 3.00 48.98 - - 1.96 1.59 - Chaipattana and Service Co.,Ltd. The Power Generation Share holding 40.00 39.99 - - 15.16 16.60 - Bangchak and Steam Power Production Co.,Ltd. Related company FuelPipeline Transportation Share holding 796.00 16.71 133.00 133.00 - - - Transportation and Service Ltd. Auchan Wholesale, Share holding 300.00 10.00 30.00 30.00 - - - Chiang Mai Retail Co.,Ltd. Business Total 163.00 163.00 40.45 36.73 - The Company realized earnings from The Bangchak Green Net ,The Bangchak Green Line, Mongkhol Chaipattana and The Bangchak Power in the amounts of Baht 1.75 million ,Baht 0.30 million , Baht 0.10 million and Baht 0.57 million ,respectively. These earnings are recorded under the equity method as stated above in note 1.5.1 4.2 Tariff Prepayment to Fuel Transportation Ltd. of Baht 223.63 million. In providing financial support to FPT, the company paid a tariff prepayment to FPT on June 17, 1995. This was to be repaid through the deduction of the monthly throughput fee. But as FPT is currently encountering financial problems and is in the process of restructuring its debts, both parties agreed in writing that in the first to the third year, the monthly deduction will be made only against the interest owed and after that the deductions will be applied against both the prepayment as well as the interest , until the full amount is settled. This Memo of Understanding took effect as May 16, 1996. 5. Risk Management 5.1 Foreign Currency Risk Management As of September 30, 1998, the total foreign currency loan of the company consists of a short term loan of USD 150 million and of YEN 600 million, and the current portion of loan, due in one year of USD 8.5 million. To minimize foreign exchange risk exposure, a forward foreign exchange contract was obtained for USD 20.44 million and YEN 600 million. The premium on the forward contract will be amortized over the period of the contract as referenced in note 1.9.3 5.2 Oil Price Risk Management As of September 30, 1998, the company has an agreement guaranteeing the sale price of oil product of 1.6 million barrels, so as to reduce the risk of changes in the oil price. 6. Contingent Liabilities As of September 30 ,1998 the Company+s contingent liabilities consisted of : 6.1 Obligations Bank guarantees issued by the banks on behalf of the Company as of September 30, 1998 and 1997 at the amount of Baht 166.90 and 204.25 million. 6.2 Allegation The Ministry of Finance(the first defendant) was alleged in a land right transgression case (The claim for damages,which was filed with the civil court, amounts to Baht 1,055 million). The land in question ,which is located at the pier of the Refinery,was leased from the Ministry of Finance. The Company,as the lessee of land owned by the Ministry of Finance,was alleged as the fifth defendant along with the Ministry of Finance. According to the Company's Legal Office opinion,regardless as to the outcome of the case, the Company would not be liable for any losses associated with the above mentioned claim as it is protected under a lease agreement. The case is being appealed with the civil court. 7. Action taken in solving problems and modifying the computer system in readiness for the year 2000 (Y2K) The Company has, since the first quarter of 1997, taken steps to solve the problem associated with the year AD 2000 and has set aside a budget of Baht 49 million for this . As of September 30, 1998 , 81 % of the work has been completed. However, there are some risks that companies, with whom the company does business, may not be ready in time to adjust their system. In any case , the Company does not expect any major problem that would affect its business as a result of this.