2018. 5. 15

2018 1Q Earnings Release

SK innovation

This presentation has been prepared and is presented by SK Innovation, based

on the first quarter 2018 financial results, which was review by the independent

auditors.

This presentation contains forward-looking statements based on the estimates

and forecasts by the management of SK Innovation. While the Company

believes the estimates underlying the forecasts are reasonable, by their nature,

such forward looking statements involve risk and uncertainty in the future

business environment. The actual result may differ from those expressed in

such statements due to a variety of factors.

Disclaimer

Table of Contents

1Q 2018 Financial Results

1Q 2018 Business Highlights

Recent Corporate Actions & Events

Q&A

Appendix

(Unit: KRW in

Billion) 1Q18 4Q17 QoQ 2017

Sales 12,166.1 12,553.9 △ 387.8 46,260.9

Operating Profit 711.6 845.3 △ 133.7 3,234.4

EBITDA 934.6 1,073.8 △ 139.2 4,134.5

Non-Operating

Profit △ 32.7 △ 183.9 + 151.2 0.4

Pre-Tax Income 678.9 661.4 + 17.5 3,234.8

Sales & Operating Profit

4

Balance Sheet

(Unit: KRW in Billion) 1Q18 2017 Change from

FY 2017

Assets 33,677.4 34,243.6 △ 566.2

- Current assets 15,524.8 16,219.2 △ 694.4

Liabilities 14,405.6 14,934.3 △ 528.7

- Debt

(Net Debt)

5,192.4

(977.8)

5,578.1

(1,328.9)

△ 385.7

(△ 351.1)

Shareholders’

Equity 19,271.8 19,309.3 △ 37.5

- Paid-in Capital 468.6 468.6 -

Debt/Equity 74.7% 77.3% △2.6%p

Table of Contents

1Q 2018 Financial Results

1Q 2018 Business Highlights

Recent Corporate Actions & Events

Q&A

Appendix

6

Refining – Refining Margin

High level of compliance with supply

cut by OPEC and continued robust

demand growth supported crude

prices

Unseasonable winter weather and

low inventories supported middle

distillate crack

($/B)

High level of compliance with ongoing

supply cut by OPEC

:‘17.4Q: 115% → ‘18.1Q: 151% (+36%p)

Crack ($/B)

‘17.4Q ‘18.1Q QoQ

Gasoline 11.8 11.1 △0.7

Diesel 13.3 15.5 +2.2

Fuel Oil △4.8 △7.2 △2.4

($/B)

0

10

20

30

40

50

60

70

16.1Q 16.2Q 16.3Q 16.4Q 17.1Q 17.2Q 17.3Q 17.4Q 18.1Q

Dubai ($/B)

(15)

(10)

(5)

0

5

10

15

20

16.1Q 16.2Q 16.3Q 16.4Q 17.1Q 17.2Q 17.3Q 17.4Q 18.1Q

Gasoline crack Diesel crack FO Crack

4Q17

영업이익

마진효과 재고관련 이익 기타 1Q18

영업이익

7

Refining – Performance Analysis

△223.6

△150.6 509.3

Weaker refining margin and less

inventory valuation gain q-o-q

Refining margins expected to

maintain at a stable level on robust

demand growth

S’GRM (Spot Margin)

‘17.4Q: $7.2/B → ‘18.1Q: $7.0/B (△$0.2/B)

Condensate premium

’17.4Q: $1.4/B → ‘18.1Q: $3.0/B (+$1.6/B)

Change in crude price (QoQ)

’17.4Q: +$7.9/B → ‘18.1Q: +$1.1/B (△$6.8/B)

325.4

Low inventory level of middle distillate to

continue

+190.3

Margin

Effect Others 4Q17

Operating Profit

1Q18

Operating Profit

Inventory

Effect

(Unit: KRW in Billion)

* Include SK IPC’s refining business performance

8

Petrochemical – Product Spreads

($/Ton)

8

($/Ton)

Strong olefin spread contributed by

demand increase from inventory

stocking prior to 2Q turnaround in

the region

Upward trend in aromatics spread

due to demand from startup of new

PTA facilities and stronger SM

demand

Spread

($/MT) ‘17.4Q ‘18.1Q QoQ

C2 728 734 +6

PE 635 686 +51

Spread

($/MT) ‘17.4Q ‘18.1Q QoQ

PX 317 383 +66

BZ 269 310 +41

0

300

600

900

16.1Q 16.2Q 16.3Q 16.4Q 17.1Q 17.2Q 17.3Q 17.4Q 18.1Q

Naphtha Ethylene-Naph PE-Naph

0

200

400

600

16.1Q 16.2Q 16.3Q 16.4Q 17.1Q 17.2Q 17.3Q 17.4Q 18.1Q

BZ-Naph PX-Naph

4Q17

영업이익

마진효과 물량효과 기타 1Q18

영업이익

9

Petrochemical – Performance Analysis

9

Major product spread (PX, PE)

showed stronger trend resulted in

higher operating profit

△27.6 +75.1

284.8 262.9

Solid demand for aromatics to

offset inflow of olefin products,

leading to stable market

△25.6

(Unit: KRW in Billion)

Margin

Effect

Others 4Q17

Operating Profit

1Q18

Operating Profit

Volume

Effect

* Includes SK IPC’s petrochemical business performance

PE : Strong inflow from outside Asia despite regional turnaround

PX : robust downstream demand despite additional supply from new capa. addition

Lubricants – Performance Analysis

($/Bbl) Spread marginally declined from

rising oil price, resulting in increase

of G.O price

B.O Spread (150SN − Gas Oil)

‘17.4Q: $22.2/Bbl → ‘18.1Q $:22.1/Bbl(△$0.1/B)

4Q17 마진효과 물량효과 기타 1Q18영업이익

영업이익

△19.8

△5.5 +8.2 128.6

145.7

0

25

50

75

100

125

150

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18

150SN Gas Oil 150SN-G.O

10

Margin

Effect Others

3Q17

Operating Profit

4Q17

Operating Profit

Volume

Effect

(Unit: KRW in Billion)

Operating profit declined QoQ due to

reduced sales volume on seasonal

factors and time lag effects of rising

oil prices

11

E&P Business

4Q17 1Q18

Sales 173.7 157.2

Average daily production 57 46

- Peru 88 30 24

- Peru 56 19 14

- Vietnam15-1 5 5

- SK E&P America 3 3

Oil Portion (%) 34% 37%

Despite the rise in oil prices,

operating profit fell q-o-q on

decrease in sales volume due to the

Peruvian Pipeline Trouble

Operating Profit (Q-o-Q)

Benchmark ‘17.4Q ‘18.1Q QoQ

Brent ($/B) 61.4 66.8 +5.4

WTI ($/B) 55.3 62.9 +7.6

HH ($/mmbtu) 2.9 3.0 +0.1

4Q17 매출변동 비용효과 기타 1Q18

51.2

+8.8 +1.3 44.8

△16.5

영업이익 영업이익

(Unit: KRW in Billion, MBOE/D)

Change in Sales Others 4Q17

Operating Profit

1Q18

Operating Profit Cost Effect

(Unit: KRW in Billion)

I/E Materials Business*

16.4

13.9

+4.5 △2.6 △4.4

4Q17

영업이익

1Q18

영업이익

판매증가 기타

12

중단사업

효과 등

Decrease in operating profit from

discontinued operations resulted

from disposal of FCCL business

Line #10, #11 started commercial

production

- Annual production capa. : 360 ㎡

* Excluding Battery business earnings

Discontinued

Business, etc Others

4Q17

Operating Profit

1Q18

Operating Profit

Volume

Effect

(Unit: KRW in Billion)

Table of Contents

1Q 2018 Financial Results

1Q 2018 Business Highlights

Recent Corporate Actions & Events - Withdrawal of SKL IPO plan - Announcement of Share Buyback

Q&A

Appendix

Withdrawal of SKL IPO Plan & Share Buyback

• Submission of application to withdraw its plan to list SK Lubricants, in consideration of a

variety of factors that are difficult to determine the fair value of the Company after the book

building process (Apr. 27)

Withdrawal of IPO Plan

• Approval by the Board on share buyback of c. 1 trillion KRW to enhance shareholder value

(Apr. 30)

Share Buyback Program

【Share buyback program】

Number of Shares to be

Acquired(Shr.) 5,208 thousand shares (at 4/27, closing price)

Estimated Acquisition Amount

(KRW) c. 1 trillion KRW

Scheduled Acquisition Period 2018. 5. 2 ~ 8. 1 (3 months)

Table of Contents

1Q 2018 Financial Results

1Q 2018 Business Highlights

Recent Corporate Actions & Events

Q&A

Appendix

Table of Contents

1Q 2018 Financial Results

1Q 2018 Business Highlights

Recent Corporate Actions & Events

Q&A

Appendix

(Unit: KRW in

Billion) Refining Petchem Lube E&P Others ‘18. 1Q

Sales 8,687.3 2,439.0 779.8 157.2 102.8 12,166.1

Operating Profit 325.4 284.8 128.6 44.8 △ 72.0 711.6

Non-operating

profit △ 36.8 25.1 △ 3.8 △ 11.1 △ 6.1 △ 32.7

Pre-tax Income 288.6 309.9 124.8 33.7 △ 78.1 678.9

17

1. Business Performance (excluding intercompany transactions)

* Refining: SKE, SKTI, SKIPC-Refining / Petchem : SKGC, SKIPC-Petchem

18

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18

NCC 100% 100% 86% 75% 99% 100% 100% 100% 100%

PE 98% 98% 84% 72% 97% 98% 98% 99% 99%

PP 100% 100% 86% 78% 100% 100% 99% 99% 100%

PX 100% 89% 100% 90% 100% 83% 100% 100% 100%

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18

CDU 90% 84% 85% 83% 91% 81% 94% 93% 88%

Ulsan 92% 85% 91% 91% 94% 79% 95% 94% 89%

Incheon 83% 81% 67% 58% 82% 89% 89% 91% 86%

HOU 91% 98% 100% 100% 92% 98% 100% 100% 81%

#1 RFCC 100% 100% 100% 100% 99% 64% 97% 100% 100%

#2 RFCC 100% 100% 100% 58% 100% 100% 100% 100% 100%

2. Utilization Rate – Petroleum/Petrochemical Plants

Petrochemical Plant

Petroleum Plant