"Are you telling us to buy back our own shares and even cancel them?"
Hyun Dong-jin, president of SA Oil, blinked in surprise as he asked the question. Leaning back against the sofa, the man responded calmly.
"That's right."
Buying back treasury shares to defend management control was not uncommon.
However, in most cases, the shares acquired this way were not cancelled. Instead, they were retained and later resold when needed or used strategically.
As a result, even though share buybacks were clearly positive news, they often had little to no impact on the stock price.
'It's only natural. The total number of shares doesn't actually decrease by the amount repurchased—they can always be released back into the market and traded again.'
Because of that, in Korea, share buybacks were often actions taken for the benefit of owners or management rather than shareholders.
"If I remember correctly, including this fourth quarter's results, last year's total net profit was just over 900 billion won, right?"
"Yes. Altogether, it comes to 962 billion won."
Suppressing his unease, President Hyun Dong-jin answered.
"Then even if you maintain the current dividend level, about half would remain."
"I'd have to calculate it precisely to be sure, but that should be the case."
Seok-won nodded, his fingers interlaced.
"Then use 200 billion won to buy back treasury shares and cancel them immediately."
"That much?"
Eyes wide, President Hyun Dong-jin replied with a shocked expression.
Following Seok-won's acquisition of management control, and with the added benefit of the recent surge in oil prices, SA Oil's market capitalisation had risen sharply, approaching 2.5 trillion won.
"Two hundred billion won amounts to as much as 8% of the market capitalisation."
"I know."
Unlike President Hyun Dong-jin, who was breaking into a cold sweat, Seok-won simply shrugged calmly.
"If the company has made a profit, it's only natural to return it to the shareholders."
At that, President Hyun Dong-jin quickly leaned forward in his seat.
"That may be true, but expanding the crude oil storage tanks you previously instructed will require a considerable amount of investment. And shouldn't we also keep a certain level of cash on hand in case of unforeseen variables, like the Iraq War?"
He cautiously tried to persuade him, watching Seok-won's expression.
"Our dividends are already on the higher side, but since the stock price has risen recently, the yield has decreased. Wouldn't it be better to slightly increase the dividend instead?"
But Seok-won's expression remained calm.
"We'll generate even more profit next quarter than this one, so there's no need to worry about investment funds."
"What do you mean by that?"
At President Hyun Dong-jin's puzzled question, Seok-won formed a faint smile.
"You remember that right after I took over management control, we signed a four-year long-term supply contract with Aramco, don't you?"
"Of course."
Although Seok-won, the owner, possessed the offshore Sakhalin oil field, full-scale production had not yet begun.
Even aside from that, SA Oil's refining facilities were optimized for heavy crude from the Middle East, so it was advantageous in many ways to continue importing crude oil from Saudi Arabia, their existing supplier.
Of course, the crude produced from the Sakhalin offshore field was a high-quality light oil—far superior to North Sea Brent crude—with 0.23% sulfur content and an API gravity of 37.9. Once production was fully underway, a significant portion was expected to be supplied to SA Oil.
'Wait. Back then, he definitely…?'
As he recalled that, when signing the long-term supply contract with Saudi Aramco, Seok-won had inserted a special clause capping the crude supply price at 28 dollars per barrel, President Hyun Dong-jin's eyes began to tremble.
"S-Surely you're not saying that international oil prices will exceed 28 dollars per barrel?"
"Exactly. Why do you think I went out of my way to concede several conditions just to include a price cap clause?"
Seok-won answered calmly, meeting his gaze without the slightest hesitation.
Hearing this, President Hyun Dong-jin was so shocked that he couldn't close his gaping mouth.
The recent surge in global oil prices was caused by exceptional circumstances, with the Iraq War and various adverse factors overlapping. For the past ten years, crude oil prices have remained stable, rarely exceeding the low 20-dollar range per barrel.
The reason Saudi Aramco had agreed to include the price cap clause in the contract was precisely that they were confident that, even if there were temporary spikes, the average price would not surpass the agreed level.
Yet now he was being told that high oil prices—breaking past 28 dollars per barrel—would persist, making it impossible not to be astonished.
"You're already aware that Middle Eastern Dubai crude has exceeded 26 dollars per barrel, right?"
"That is true, but…"
"If my prediction is correct, it will surpass 30 dollars per barrel within this year based on Dubai crude—and it will never return to the 20-dollar range again."
No matter how many adverse factors overlapped and disrupted supply, the idea that international oil prices could exceed 30 dollars per barrel was simply unimaginable.
Frankly speaking, unless a major war broke out again in the Middle East—triggering something like the oil shock of the past—it was an absolutely impossible price.
'But this is the chairman's judgment…'
President Hyun Dong-jin pressed his lips together.
Seok-won was a heavyweight investor on Wall Street, known as a Midas touch.
Moreover, he had personally witnessed Seok-won accurately predict the movements of international oil prices—so volatile in the short term they were almost dizzying—and generate enormous profits from them. It wasn't something he could dismiss as mere delusion.
As President Hyun Dong-jin imagined what would happen if oil prices truly surpassed 30 dollars per barrel, he unconsciously swallowed dryly.
Watching him, Seok-won spoke in a relaxed tone.
"If we combine the crude oil inventory we've already stockpiled at low prices with additional supply secured from Aramco at prices below the international market rate, our net profit will increase significantly."
Naturally, the entire difference would be recognized as profit.
President Hyun Dong-jin could not hide his shock upon realizing that what he had thought was merely a precautionary measure was, in fact, the true purpose of the long-term contract with Saudi Aramco—the cleverly inserted price cap clause.
At the same time, as he imagined the enormous profits SA Oil would generate if Seok-won's prediction proved correct, a shiver ran down his spine.
Just how many steps ahead had Seok-won planned all of this? There was no other way to describe it but extraordinary.
Watching President Hyun Dong-jin's expression change moment by moment, Seok-won crossed one leg over the other and spoke.
"Even if my prediction turns out to be wrong, I'll take responsibility for securing the necessary funds. So don't worry about the investment capital—just proceed with the steps needed to bring the share buyback and cancellation proposal before the general meeting."
"Yes, understood."
This time, President Hyun Dong-jin did not object further.
In addition to the large-scale investment in expanding crude oil storage tanks, Seok-won's decision to carry out both share buybacks and cancellations—clearly rewarding shareholders—stood in stark contrast to the past, when Saudi Aramco, as the major shareholder, had taken out profits almost entirely through dividends whenever the company made money.
There was a reason why SA Oil had been considered one of the highest dividend-paying stocks in the domestic market.
"Oh, and since we generated significant profits last year, it would be disappointing if we simply gave employees the usual year-end bonus and left it at that, wouldn't it?"
"You're planning to take care of the employees as well?"
Surprised, President Hyun Dong-jin asked, and Seok-won replied as if it were only natural.
"They're not just shareholders—our employees are also proud members of the company."
"Haha… that's true."
President Hyun Dong-jin said with an awkward smile.
It was an entirely common-sense remark.
However, in most domestic companies, it was typical to treat shareholders and employees as mere figureheads while regarding the company as the personal property of the owner. Because of that, Seok-won's casually spoken words resonated even more deeply.
"Let's grant all employees a special performance bonus of 200%."
Paying out such a bonus would require an additional expenditure amounting to hundreds of billions of won. Still, knowing that this wasn't reckless spending, President Hyun Dong-jin nodded without objection.
"We'll proceed as you instructed."
Then, President Hyun Dong-jin broke into a faint smile.
"They'll be delighted when they hear the news."
"If employee morale improves, they'll work harder. That's good for the company as well, isn't it?"
"Haha, that's absolutely right."
Afterwards, the two of them had an in-depth discussion about the expected future trends in international oil prices and how SA Oil should respond accordingly.
"Then I'll be on my way."
President Hyun Dong-jin rose from the sofa and bowed politely.
After he left and closed the door behind him, Seok-won also stood up and moved over to his desk.
Just as he was about to reopen the report he had been reading earlier, the phone he had set aside began to ring.
"Hello."
[Boss. There's something I need to report—are you available to talk right now?]
At the sound of Branch Manager John Porter's voice, Seok-won leaned back.
"Go ahead."
Porter immediately got to the point.
[We've just started closing out the short positions we took on the yen.]
Holding the phone to his ear, Seok-won grabbed the mouse with his other hand and pulled up the USD/JPY exchange rate on his monitor.
[USD/JPY: 141.24 (▲0.73)]
"How is the market reacting?"
[We've only just begun closing positions, so we'll need to watch the movement a bit longer, but there are no signs that the upward trend will reverse anytime soon.]
"That's a relief."
Seok-won replied, his eyes still fixed on the monitor.
"It seems that the Bank of Japan and the government halting their large-scale sales of U.S. Treasury bonds to defend the exchange rate since yesterday afternoon has had an impact."
"Looks like Secretary Kit's pressure worked."
Seok-won curled one corner of his lips into a grin.
With strong ties to the Bush administration, Seok-won had already learned that the White House—uncomfortable with the drop in U.S. Treasury prices caused by Japan's massive sell-off—had sent a warning message through Chief Cabinet Secretary Hirata.
[No matter how powerful Japan is, it can't ignore the United States—the world's strongest nation.]
"Of course."
Seok-won nodded as he replied.
"Still, if we unwind the position too quickly, the exchange rate could drop sharply. So manage it carefully and proceed at a controlled pace."
[Hahaha. That's my speciality, so there's no need to worry.]
Although the position was quite large, Seok-won trusted Branch Manager Porter to handle it competently.
[And the Nikkei keeps sliding—it's now barely holding above 8,000. Should we keep holding?]
"There's still room for it to fall further, so just leave the Nikkei as it is."
At Seok-won's unwavering reply, Branch Manager Porter readily agreed.
[It's already plunged dramatically, but if you say it will fall further, Boss, then that must be the case. I'll proceed as instructed.]
"Then continue unwinding the position at your discretion, and report back if any variables arise."
[Understood.]
Hearing that everything was being entrusted entirely to him, Porter responded with a tone that was slightly more energised.
After ending the call, Seok-won set his phone down and looked at the exchange rate displayed on the monitor.
[USD/JPY: 141.13 (▲0.62)]
Judging by the slightly reduced rate of increase, it seemed their position was already beginning to unwind.
However, this was a natural response, so Seok-won murmured to himself with an expectant expression.
"141 yen… I'm already looking forward to seeing how much profit we'll ultimately make."