2016. 7. 22

2Q 2016 Earnings Release

SK innovation

This presentation contains forward-looking statements with respect

to financial conditions, results of operations and business of SK Innovation,

and plans and objectives of the management of SK Innovation.

Statements that are not historical facts, including statements about

SK Innovation’s beliefs and expectations, are forward-looking statements.

Such forward-looking statements involve known and unknown risks,

uncertainties and other factors which may cause the actual results or

performance of SK Innovation to be materially different from any future results

or performance expressed or implied by such forward-looking statements.

Financial results for 1Q16 are subject to change according to the outside

independent auditors’ review.

Disclaimer

Agenda

2Q 2016 Financial Results

2Q 2016 Business Highlights

I/E Materials Business

Q&A

Appendix

(Unit: bn KRW) 2Q16 1Q16 QoQ 2015

Sales 10,280.2 9,458.2 +822.0 48,356.3

Operating Profit 1,119.5 844.8 +274.7 1,979.6

EBITDA 1,346.4 1,082.7 +263.7 2,931.1

Non-Operating

Profit △218.3 △104.8 △113.5 △325.5

Pre-Tax Income 901.2 740.0 +161.2 1,654.1

3

Sales & Operating Profit

* P/L from TAC business reclassified as discontinued operation in FY2015.

4

(Unit: bn KRW) 2016. 2Q 2015 Y-o-Y

Assets 32,586.6 31,359.8 +1,226.8

- Current assets 14,686.6 12,842.1 +1,844.5

Liabilities 14,844.0 14,313.5 +530.5

- Debt

(Net Debt)

7,569.3

(1,398.9)

8,174.8

(3,515.2)

△605.5

(△2,116.3)

Shareholders’

Equity 17,742.6 17,046.3 +696.3

- Paid-in Capital 468.6 468.6 -

Debt/Equity 83.7% 84% △0.3%p

Balance Sheet

Agenda

2Q 2016 Financial Results

2Q 2016 Business Highlights

I/E Materials Business

Q&A

Appendix

0

20

40

60

80

100

120

13.01 13.04 13.07 13.10 14.01 14.04 14.07 14.10 15.01 15.04 15.07 15.10 16.01 16.04

6

Refining – Refining Margins

Production troubles in Canada, Nigeria

Lower US crude inventory and production

($/B) Dubai Crude oil

Diesel Crack

Gasoline Crack ($/B)

Oil prices showed upward trend on

lower global output level

Refining margin weakened on

higher run-rates, despite robust

demands

0

5

10

15

20

25

13.01 13.04 13.07 13.10 14.01 14.04 14.07 14.10 15.01 15.04 15.07 15.10 16.01 16.04

$22.8 (‘16.1.21)

Gasoline Crack

‘16.1Q: 15.6$/B → ‘16.2Q: 11.5$/B (△4.1$/B)

Diesel Crack

‘16.1Q: 9.6$/B → ‘16.2Q: 10.5$/B (+0.9$/B)

7

(Unit : Bn. KRW)

Margin Others 1Q16

OP

2Q16

OP

Inventory

Effect

Operating profit increased on

inventory-related gains from crude

price rise

Crude price to continue recovery

trend on improved supply and

demand

Refining – Performance Analysis

△266.9 490.5

+474.9 +6.7 705.2

Dubai Crude Price

‘16.1Q : 30.4$/B → ‘16.2Q : 43.2$/B (+12.8$/B)

S’pore Cracking Margin

‘16.1Q : 7.8$/B → ‘16.2Q : 5.0$/B (△2.8$/B)

8

Demands for refined products

outgrows global capacity additions

Fall T/A amount expected to be

larger than previous years

Global T/A Schedule

’16.10 6 Mil.B/D (+1.5 Mil.B/D YoY)

0

2,000

4,000

6,000

8,000

Aug 16 Sep 16 Oct 16 Nov 16 Dec 16

[Unit: Mil. b/d]

[Source: IEA, Bloomberg, Company estimates]

8

6

4

2

Capacity additions vs. Demand growth

Global T/A Schedule

[Unit: Mil. b/d]

0

0.5

1

1.5

2

2015 2016 E 2017 E

Net Capacity Additions Demand Growth

Refining – Margin Outlook

9 9

Olefin spreads improved moderately

Ethylene spreads improved with tight

supply on the back of facility turnaround

and trouble

PE spreads narrowed on new facility

startups and weak ME & WE demand

Aromatics narrowed marginally

PX spreads maintained solid trend on

steady PTA utilization rates

BZ spreads decreased slightly on weaker

demand

Petrochemical – Product Spreads

0

200

400

600

800

1,000

2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Naph Ethylene-Naph PE-Naph

0

200

400

600

800

1,000

2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

BZ-Naph PX-Naph SM-Naph

PE

(US$/Ton)

SM

PX

BZ

Naph

Ethylene

(US$/Ton)

10 10

Increase in operating profit due to

healthy product spreads and

inventory-related gain

Ethylene spreads to maintain firm

trend with ongoing facility troubles

in the region,

PX spreads to remain steady as

high utilization rates of PTA facility

continues

Petrochemical – Performance Analysis

(Unit : Bn. KRW)

+8.6

+99.5

△29.7 224.3

302.7

Ethylene spread (/Naph)

’16.1Q : 674 → ’16.2Q : 727 $/ton

PX spread (/Naph)

’16.1Q : 406 → ’16.2Q : 395 $/ton

Margin Others* 1Q16

OP

2Q16

OP Volume

* inventory-related gain of 68 bil. KRW included

Lubricants Business

Operating profit remained steady

on inventory-related gain and

increased sales volume

Despite capacity addition,

base oil market to remain stable on

growing demand for premium base

oil

132.2

OP OP

1Q16 Margin Volume Others 2Q16

△70.0

+16.7

+54.0 132.9

(Unit : Bn. KRW)

12

E&P Business

1Q16 2Q16

Despite increased crude price,

sales remained flat due to the decline

in sales volume and exchange rates

Volume settlement in Vietnam block

Operating profit decreased

on higher operating cost

Increased production from

Peruvian block

Sales 120.0 120.2

Average daily production 55 61

- Peru 88 27 32

- Peru 56 17 19

- Vietnam15-1 7 6

- SK E&P America 4 3

Oil Portion 36% 34%

1Q16 OP

Sales Change Cost Effect Others 2Q16OP

(Unit : Bn KRW, 1000 BOE/D)

Operating Profit (Q-o-Q) (Unit: Bn KRW)

23.2 (-) △6.8

+0.2 16.6

Agenda

2Q 2016 Financial Results

2Q 2016 Business Highlights

I/E Materials Business

Q&A

Appendix

14

I/E Materials Business

14

Global No.2 LiBS maker

(based on sales volume)

‘16. 2Q Revenue 61.4 billion won

QoQ +3%, YoY+38%

‘16. 2Q EBITDA 32.6 billion won

QoQ +5%, YoY+236%

(Unit: 100mn won)

I/E Materials Business Financial result

LiBS Demand Outlook

(Unit: 100mn m2)

CAGR: 16% (IT: 12%, xEV: 45%)

LiBS demand likely to increase at

CAGR 16% by 2020

Source) TSR LIB Material Market Analysis (2015 edition), Company estimate

0

4

8

12

16

2015 2016 2017 2018 2019 2020

xEV

IT

0

200

400

600

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

EBITDA

Revenue

Agenda

2Q 2016 Financial Results

2Q 2016 Business Highlights

I/E Materials Business

Q&A

Appendix

Agenda

2Q 2016 Financial Results

2Q 2016 Business Highlights

I/E Materials Business

Q&A

Appendix

1. Business Performance

2. Utilization Rate – Petroleum/Petrochemical Plants

Appendix

18

1. . Business Performance (excluding intercompany transactions)

* SK Energy (including SKTI and SKIPC quarterly results)

(Unit: Bn KRW) SK

Innovation

SK

Energy*

SK

Global

Chemical

SK

Lubricants

2Q

Total

Sales 2,394 74,425 19,450 6,533 102,802

Operating Profit △213 7,052 3,027 1,329 11,195

Non-operating profit △1,030 △904 △182 △67 △2,183

Pre-tax Income △1,243 6,148 2,845 1,262 9,012

Petrochemical Plant

Petroleum Plant

19

2. Utilization Rate – Petroleum/Petrochemical Plants

2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

CDU 75% 68% 75% 76% 70% 77% 83% 83% 84% 89% 85% 90% 84%

Ulsan 84% 78% 91% 89% 80% 84% 89% 90% 86% 93% 86% 92% 85%

Incheon 48% 38% 27% 37% 39% 60% 66% 67% 78% 77% 81% 83% 81%

HOU 94% 94% 99% 92% 92% 99% 100% 83% 81% 100% 100% 91% 98%

#1 RFCC 100% 100% 100% 100% 54% 81% 100% 100% 100% 100% 100% 100% 100%

#2 RFCC 100% 40% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

NCC 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 92% 100%

PE 100% 100% 93% 100% 100% 100% 100% 100% 99% 100% 100% 98% 98%

PP 100% 90% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

PX 73% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 89%