Management's Discussion and Analysis (MD&A) and Operating Results for the 4th Quarter of 2008 and for the year 2008 1. Financial and Operating Highlights 4Q 2008 4Q 2007 2008 2007 Crude intake (kbpd) 136.0 147.1 138.1 144.3 Paraxylene production (thousand tons) 71 96 316 408 Average forex rate (Baht/US$) 34.8 33.9 33.4 34.6 Gross refining margin (US$/BBL) -28.3 9.0 -2.3 7.3 Paraxylene margin (US$/Ton) n/a n/a -81 178 Sales (million Baht) 38,184 54,799 222,234 199,904 Gross profit (million Baht) -13,147 4,231 -4,159 15,048 EBITDA (million Baht) -13,892 3,371 -7,058 12,603 Net profit (million Baht) -10,255 3,504 -6,864 7,054 (1) Earnings per share (Baht) -2.96 1.34 -2.16 6.57 (2) Adjusted Earnings per share (Baht) -2.96 1.01 -1.98 2.04 (1) Based on actual weighed average number of common shares during the period: - 4Q 2007 2,610 million. shares - FY 2007 1,074 million. shares - 4Q 2008 3,461 million. shares - FY 2008 3,174 million. shares (2) Based on total current number of shares: 3,461 million.shares 1 2. Benchmark Prices for Crude Oil and Refined Petroleum Products Average Platts Singapore quoted prices for crude oil and refined products Unit: US$/BBL 4Q 2008 3Q 2008 4Q 2007 2008 2007 Dubai 52.6 113.3 83.2 93.6 68.4 Tapis 59.7 125.2 93.4 104.2 77.9 Gasoline (95 Ron) 56.3 119.3 95.8 102.6 82.9 Jet fuel / kerosene 74.7 142.1 105.9 121.4 86.9 Diesel (0.5%S) 70.3 139.0 102.6 119.5 85.1 Fuel oil (180 cs) 44.8 102.5 73.2 78.6 58.0 LPG 47.9 77.7 67.0 68.7 53.9 Paraxylene - US$/Ton 673 1,348 1,075 1,119 1,100 (1) Gasoline (95 Ron) - US$/Ton 479 1,014 814 872 704 Source: Mean of Platts Singapore and PCI (1) Converted to US$/Ton using 1 Ton = 8.5 barrels Driven by weaker global demand, crude prices fell sharply in 4Q 2008; dubai dropped by 60% from 94$/bbl at the beginning of the quarter to 37$/bbl, a four-year low, at end-quarter. Average dubai and tapis crude prices for the quarter were 52.6$/bbl and 59.7$/bbl respectively, falling by more than half from 3Q 2008.Average 2008 dubai and tapis crude prices were 93.6$/bbl and 104.2$/bbl respectively. Overall product prices for 4Q 2008 were depressed by weaker global oil demand. With the exception of fuel oil prices, which were stronger in comparison to dubai crude, decreases in gasoline,jet fuel, and diesel prices outpaced crude price declines in 4Q 2008. However, due to very strong diesel and jet fuel prices in the first half of the year, increases in jet fuel and diesel prices outpaced crude comparing 2008 with 2007, whereas gasoline and fuel oil prices were outpaced by crude. LPG prices remained under government control at 11 Baht/kg (US$320/Ton or US$28/barrel). The gap between paraxylene and gasoline prices was narrower during the quarter and for the year, led by weaker demand for PTA together with excess industry supply from new capacity additions. 2 3. Production and Gross Margin 4Q 2008 4Q 2007 +/(-) 2008 2007 +/(-) Refining capacity (kbpd) 177.0 177.0 - 177.0 177.0 - Crude intake (kbpd) 136.0 147.1 -11.1 138.1 144.3 -6.2 Refinery production (1) - Light products (%) 35.4% 33.7% 1.7% 35.4% 34.6% 0.8% - Middle distillates (%) 49.0% 52.9% -3.9% 50.6% 51.1% -0.5% - Heavy products (%) 15.6% 13.4% 2.2% 14.0% 14.3% -0.3% Paraxylene production ('000 tons) 71 96 -25 316 408 -92 Paraxylene Margin (US$/Ton) n/a n/a - -81 178 -259 Gross Refining Margin (US$/BBL) -28.3 9.0 -37.3 -2.3 7.3 -9.6 (1) Excludes reformate for chemical feedstock Lower crude intake in 4Q 2008 compared to 4Q 2007 was impacted by weaker industry margins. For the year, the crude run level was high during the first half of the year when margins were robust; however, the temporarily planned shutdown of certain refinery units and weaker oil margins brought down crude run levels for the latter half of the year. Average 2008 crude run was 138.1 KBD or 6.2 KBD lower than 2007. Paraxylene production declined in 4Q 2008 from 4Q 2007 affected by weak margins which made higher productions uneconomical. Total 2008 paraxylene production was 316 thousand tons or 102 thousand tons lower than 2007. Gross refining margin (GRM) was -28.3 $/bbl in 4Q 2008, compared to 9.0 $/bbl in 4Q 2007.The negative GRM was mainly due to stock losses as a result of the steep fall in crude prices. 2008 GRM was -2.3$/bbl, compared to 2007 GRM of 7.3$/bbl. Gross paraxylene margin was -81$/Ton for 2008 reflecting weaker industry conditions. The decrease in the middle distillates portion in 4Q 2008 as compared to the same period of 2007 was mainly due to weaker diesel and jet fuels realizations. However, the 2008 yield of middle distillates was unchanged from 2007 as the diesel production level was high in the first half of the year to capture strong diesel realizations. 3 4. Financial Performance of 4Q 2008 and full year 2008 (Unit: million Baht) 4Q 2008 4Q 2007 +/(-) 2008 2007 +/(-) Sales 38,184 54,799 (16,615) 222,234 199,904 22,330 Cost of sales (51,331) (50,568) (763) (226,393) (184,856) (41,537) Gross profit (13,147) 4,231 (17,378) (4,159) 15,048 (19,207) Selling and (1,247) (1,325) 78 (4,874) (4,425) (449) administrative expenses Profit from sales (14,394) 2,906 (17,300) (9,033) 10,623 (19,656) Memo: - Downstream (12,679) 2,688 (15,367) (7,169) 8,970 (16,139) - Petrochemicals (1,715) 218 (1,933) (1,864) 1,653 (3,517) Other income 6 18 (12) 87 111 (24) Operating profit (14,388) 2,924 (17,312) (8,946) 10,734 (19,680) Other non-operating income - - - - 430 (430) Share of profit from an associate 52 36 16 218 184 34 Profit before interest and income tax (14,336) 2,960 (17,296) (8,728) 11,348 (20,076) Interest income 7 13 (6) 55 146 (91) Interest expense (362) (224) (138) (1,244) (3,448) 2,204 Profit before income tax (14,691) 2,749 (17,440) (9,917) 8,046 (17,963) Income tax charge 4,436 755 3,681 3,053 (992) 4,045 Net profit (10,255) 3,504 (13,759) (6,864) 7,054 (13,918) Gross profits in 4Q 2008 were mainly affected by poor refining and paraxylene margins.Negative GRM was mainly due to stock losses as a result of the steep fall in crude prices. The profound impact of stock losses in 4Q 2008 turned gross profits for 2008 to negative Baht 4.2 billion Baht, compared to positive Baht 15.0 billion Baht in 2007. Selling and administrative expenses were lower in 4Q 2008 comparing to 4Q 2007. However,the 449 Million Baht increase in 2008 as compared to 2007 was mainly due to the inclusion of expenses incurred by the chemical marketing business, resulting from the entire business transfer of ExxonMobil Chemical (Thailand) Limited or EMCTL to the Company in September 2007, and increases in maintenance and sales promotion expenses. 4 Other income included dividend receipts from Bangkok Aviation Fuels Services (BAFS) shares and gains from asset disposals. Other non-operating income in 2007 consisted of the deferred gain amortization on the sale and leaseback transaction which the Company entered into in 2000 to lease certain assets that were sold to EMCTL. The absence of other non-operating income since 4Q 2007 resulted from the entire business transfer of EMCTL as mentioned above. Higher interest rates partly offset with lower debts of 4Q 2008 compared to 4Q 2007 resulted in Baht 138 million higher interest expenses in 4Q 2008. Interest expenses reduced significantly in 2008, compared to 2007, as a result of lower debt (due to the debt repayment associated with the capital injection in September 2007, the IPO proceeds in May 2008, and operating cash flow) as well as lower interest rates (due to the debt refinancing completed in December 2007). The effective tax rate for 4Q 2008 was 30%, while income tax for 4Q 2007 was a net credit of Baht 755 million mainly due to the reversal of a deferred tax asset valuation allowance following the debt refinancing which more than offset income tax charges. The effective tax rate for 2008 was 31% due to profits from an associate which was not tax affected.The effective tax rate for 2007 was only 12% due to the reversal of a deferred tax asset valuation allowance and the income generated by the Aromatics Plant which was subject to an income tax holiday granted by the Board of Investment, which expired on 10 September 2007. As a result of the foregoing factors, our net loss for 4Q 2008 was Baht 10,255 million or Baht 13,759 million lower than 4Q 2007, and 2008 net loss was Baht 6,864 million or Baht 13,918 million lower than 2007. 5 5. Balance Sheet (Unit: million Baht except for percentages) 31 Dec,2008 31 Dec,2007 +/(-) +/(-) % Assets -Current assets 18,434 36,482 (18,048) -50% -Non-current assets 36,636 34,332 2,304 7% Total assets 55,070 70,814 (15,744) -22% Liabilities -Current liabilities 33,682 34,408 (726) -2% -Non-current liabilities 968 12,011 (11,043) -92% Total liabilities 34,650 46,419 (11,769) -25% Shareholders' equity -Issued & paid-up share Capital 17,075 12,877 4,198 33% -Premium on share capital 4,032 0 4,032 - -Retained earnings (802) 11,254 (12,056) -107% -Fair value reserve 108 257 (149) -58% Minority interest 7 7 - - Total shareholders' equity 20,420 24,395 (3,975) -16% Total liabilities and shareholders' equity 55,070 70,814 (15,744) -22% As of year-end 2008, current assets decreased Baht 18,048 million from 2007 primarily due to lower accounts receivable and inventory resulting from lower crude and product prices and lower tax claims receivable due to receipt of tax refunds. Non-current asset increased Baht 2,304 million as net losses in 2008 increased deferred income tax assets. Non-current liabilities decreased by Baht 11,043 million as the Baht 2,750 million portion of long term debt due in 2009 was reflected as a current liability and as Baht 8,250 million of long term debt was re-characterized as a current liability in accordance with TAS35 as described in footnote 16 of the financial statements. As of year-end, total outstanding borrowings were Baht 27,971 million. Total shareholders' equity decreased Baht 3,975 million, resulting from net loss for the year of Baht 6,864 million, dividends paid (1 Baht/share dividend in June and 0.5 Baht/share dividend in September) of Baht 5,191 million, and the decrease in fair value reserve of Baht 149 million, offset with increases in paid-up and premium on share capital of Baht 8,230 million from the initial public offering (IPO) new share issuance. 6 6. Financial Ratios Comparison of financial ratios are as follows: Profitability ratios 4Q 2008 3Q 2008 4Q 2007 2008 2007 Gross profit margin (%) -34.4% -6.0% 7.7% -1.9% 7.5% Net profit margin (%) -26.9% -5.7% 6.4% -3.1% 3.5% Interest coverage ratio (times) N/A N/A 15.4 N/A 3.7 Liquidity and debt to equity ratios 31 Dec,2008 31 Sep,2008 31 Dec,2007 Current ratio (times) 0.5 1.3 1.1 Quick ratio (times) 0.1 0.2 0.3 Total debt to equity ratio (times) 1.4 1.0 1.4 Long term debt to equity ratio (times)*0.0 0.3 0.5 Net debt to equity ratio (times) 1.3 1.0 1.4 Financial ratios calculation: Gross profit margin = Gross profit / Sales Net profit margin = Net profit / Sales Interest coverage ratio = EBITDA / Interest expense Current ratio = Current assets/Current liabilities Quick ratio = (Cash and cash equivalents+ Short term investments+ Trade receivables)/Current liabilities Total debt = Current borrowings + Non-current borrowings Total debt to equity ratio = Total debt/Total shareholders'equity Long term debt to equity ratio = Non-current borrowings / Total shareholders' equity Net debt to equity ratio = (Total debt - Cash and cash equivalents) / Total shareholder's equity ____________________ Name: Daniel E. Lyons Title: Managing Director Date: March 2, 2009 7