Refining NZ Analyst Briefing 23 August 2018 1 DISCLAIMER This - - PowerPoint PPT Presentation

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Refining NZ Analyst Briefing 23 August 2018 1 DISCLAIMER This - - PowerPoint PPT Presentation

Refining NZ Analyst Briefing 23 August 2018 1 DISCLAIMER This presentation contains forward looking statements concerning the financial condition, results and operations of The New Zealand Refining Company Limited (hereafter referred to as


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Refining NZ Analyst Briefing

23 August 2018

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DISCLAIMER

  • This presentation contains forward looking statements concerning the financial condition, results and operations of The New Zealand Refining Company Limited (hereafter referred

to as “Refining NZ”).

  • Forward looking statements are subject to the risks and uncertainties associated with the refining environment, including price and foreign currency fluctuations, production results,

demand for Refining NZ’s products or services and other conditions. Forward looking statements are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements.

  • Forward looking statements include among other things, statements concerning the potential exposure of Refining NZ to market risk and statements expressing management’s

expectations, beliefs, estimates, forecasts, projections and assumptions. Forward looking statements are identified by the use of terms and phrases such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “goals”, “intend”, “may”, “objectives”, “outlook”, “plan”, “probably”, “project”, “risks”, “seek”, “should”, “target”, “will” and similar terms and phrases.

  • Readers should not place undue reliance on forward looking statements. Forward looking statements should be read in conjunction with Refining NZ’s financial statements released

with this presentation. This presentation is for information purposes only and does not constitute legal, financial, tax, financial product advice or investment advice or a recommendation to acquire Refining NZ’s securities, and has been prepared without taking into account the objectives, financial situation or needs of individuals. Before making an investment decision, you should consider the appropriateness of the information having regard to their own objectives, financial situation and needs and consult an NZX Firm or solicitor, accountant or other professional adviser if necessary.

  • In light of these risks, results could differ materially from those stated, implied or inferred from the forward looking statements contained in this announcement. Refining NZ does

not guarantee future performance and past performance information is for illustrative purposes only. To the maximum extent permitted by law, the directors of Refining NZ, Refining NZ and any of its related bodies corporate and affiliates, and their offices, partners, employees, agents, associates and advisers do not make any representation or warranty, express or implied, as to accuracy, reliability or completeness of the information in this presentation, or likelihood of fulfilment of any forward-looking statement or any event

  • r results expressed or implied in any forward-looking statement, and disclaim all responsibility and liability for these forward-looking statements (including, without limitation,

liability for negligence).

  • Except as required by law or regulation (including the NZX Main Board Listing Rules), Refining NZ undertakes no obligation to provide any additional or updated information

whether as a result of new information, future events or results or otherwise.

  • Forward looking figures in this presentation are unaudited and may include non-GAAP financial measures and information. Not all of the financial information (including any

non-GAAP information) will have been prepared in accordance with, nor is it intended to comply with: (i) the financial or other reporting requirements of any regulatory body;

  • r (ii) the accounting principles generally accepted in New Zealand or any other jurisdiction with IFRS. Some figures may be rounded and so actual calculation of the figures may

differ from the figures in this presentation. Non-GAAP financial information does not have a standardised meaning prescribed by GAAP and therefore may not be comparable to similar financial information presented by other entities. Non-GAAP financial information in this presentation is not audited or reviewed.

  • Each forward looking statement speaks only as of the date of this announcement, 23 August 2018.
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AGENDA

2018 PERFORMANCE THE FUTURE

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FIRST HALF NUMBERS DOMINATED BY THE SHUTDOWN

3 cps interim dividend

HY 17 HY 18 Gross Refinery Margin (US$/barrel) 7.70 5.65 Free cash flow (NZ$m) [1] EBITDA 39 105 (75) 50 Net profit after tax – Group (NZ$m) 35.2 (2.8) Personal TRCF [2] 0.94 0.75 LTIF [2] 0.13 0.47 Process Tier 1 (>US$25k) [3] 2 Tier 2 (>US$2.5k) [3] 2 2 Releases outside consent 2 1 Throughput (million barrels) 20.1 17.9 Operational availability 96.2% 83.3% Brent price (US$/barrel) $52 $71 Exchange rate (US$) 0.71 0.73

[1] Free cash flow calculated as operating cash flow minus actual capital expenditures [2] Per 200,000 hours, rolling 12-month [3] For a full definition please refer to Glossary in Appendix I See our Half Year Report for further detail, available at http://www.refiningnz.com/investor-centre.aspx

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SHUTDOWN COMPLETED

Major re-life

  • 1,700 work packs
  • 2,000 welds
  • 1,300 additional people on site (at peak)
  • 1,100 tonnes of scaffolding

Complex brownfield retrofits

  • Hydrogen Manufacturing Unit
  • Mid-section replacement – High Vacuum Unit

But…

  • Brownfield, emergent work and weather challenges (13 days delay, $22m capital

spend)

  • Original Equipment Manufacturer valve failure (8+ days delay)
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UNDERLYING MARKET FUNDAMENTALS STRONG

Refining margin adjusted for shutdown at US$8.25 per barrel

* The Singapore Complex Margin is calculated using Platts Dubai crude and Singapore product prices, VLCC freight to Singapore, and the International Energy Agency’s Dubai complex refinery yields adjusted for fuel & loss.

UPLIFT US$/BARREL HY17 HY18

Δ

Freight 1.59 2.16 0.57 Product quality 1.04 0.94 (0.10) Plant availability (0.27) (2.60) (2.33) Crude cost and yield 2.23 1.91 (0.32)

  • TOTAL

4.59 2.42 (2.17)

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IMPACT OF SHUTDOWN DOMINATES

See our Half Year Report for further detail, available at http://www.refiningnz.com/investor-centre.aspx

NZ$m

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0.60 0.65 0.70 0.75 H2 FY 10 2 (4) (10) 5.00 5.28 270 281 290 298 30 21 13 6 6.00 5.85 250 259 266 276 49 39 30 22 7.00 6.41 230 240 250 257 69 57 47 38 8.00 6.97 210 222 233 242 89 75 63 53 9.00 7.54 190 204 216 226

NPAT

41 Production, Mbbl 99 Non Processing Fee Revenue, $m

Borrowings

97 Depreciation, $m USD/NZD GRM (USD/bbl)

2018 REVISED PROFIT MATRIX

CAPEX NZD M *)

2018 2019 Retain 139 50/55 Was 139-144 80 Grow 18 20/25 Was 20 5

* Subject to final Board approval

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AGENDA

2018 PERFORMANCE THE FUTURE

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STRONG MACRO CONTINUES

With IMO and Chinese export caveats

  • 600
  • 400
  • 200

200 400 600 800 1,000 1,200 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 kb/d Incremental CDU Capacity * Incremental Refinery Product Demand

Source: FACTS Global Energy (July 2018)

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SURPLUS CAPACITY TRENDING DOWN TO THE “GOLDEN AGE”

With IMO and Chinese export caveats

1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 mmb/d Golden Age

Source: FACTS Global Energy (July 2018)

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IMO STEP CHANGE IN BUNKER FUEL DEMAND FROM 2020

  • Sulphur decrease from 3.5% to 0.5%
  • Expected impact
  • Price volatility in 2020 - 2023
  • Lift in diesel demand and price
  • Depressed HSFO demand and price
  • Scrubber sales increasing
  • Large refineries installing conversion capacity

Diesel HSFO

Source: FACTS Global Energy (July 2018)

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PIPELINE CAPACITY ON SCHEDULE DREDGING CONSENT GRANTED SULPHUR FORMING REPHASED JET IMPORT FACILITY DELIVERED SHORT PAYBACK PROJECTS DELIVERED

GROWTH AGENDA

  • Hydrogen optimisation

(6 USc/bbl)

  • Additional nitrogen

storage (0.5 USc/bbl)

  • Variable speed drive on a key

compressor (0.5 USc/bbl)

  • Resource consent

challenged August 2018

  • Dredging 2019/2021
  • nwards*
  • Studying tankage

conversion

  • 2019 completion
  • 2019 completion

* Subject to final Board approval

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1 1 2 2 3

CO2 Near term

BIO-FUELS ENERGY SAVINGS

Mid- to long-term

CLIMATE CHANGE PRESENTS AN OPPORTUNITY

TE MAHI HOU BIO-FUELS HYDROGEN

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CLIMATE CHANGE PRESENTS AN OPPORTUNITY

Te Mahi Hou $4.6 billion spent on Tesla Model 3s 60,000 Toyota Corollas

TOYOTA COROLLA 2017 – 2018

Small Car: Saloon

TESLA MODEL 3 TE MAHI HOU

$365 million 120,000 tonnes/year CO2 reduction

= =

Note: based on NZTA mileage and CO2 emission statistics and price of current Tesla model 3 model available in NZ

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KEY TAKE-OUTS

  • Shutdown completed
  • Current margin and forex environment favourable
  • Next shutdown in 2020
  • Short payback projects agenda continues
  • Climate change presents an opportunity
  • Assets integral to a brownfield biofuels and H2 future re-lifed
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Refining NZ Analyst Briefing

23 August 2018

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APPENDIX I

Glossary

  • LTIF - Lost time injury frequency (rolling 12 month per 200,000 hours)
  • TRCF - Total recordable case frequency (rolling 12 month per 200,000 hours)
  • Tier 1 Process Safety Event (API 754) - A tier 1 Process Safety Event (PSE) is an unplanned or uncontrolled release of any material, including non-toxic

and non-flammable, from a process which results in one or more of the following: A LTI and/or fatality; A fire or explosion resulting in greater than or equal to $25,000 of direct cost to the company; A release of material greater than the threshold quantities given in Table 1 of API 754 in any one- hour period; A officially declared community evacuation or community shelter-in-place.

  • Tier 2 Process Safety Event (API 754) - A tier 2 Process Safety Event (PSE) is an unplanned or uncontrolled release of any material, including non-toxic

and non-flammable, from a process which results in one or more of the following: A recordable injury; A fire or explosion resulting in greater than or equal to $2,500 of direct cost to the company; A release of material greater than the threshold quantities given in Table 2 of API 754 in any one-hour period.