Analysts Briefing 24 August 2017

Transcription

1 Analysts Briefing 24 August

2 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. 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. 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; or (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, 24 August

3 Agenda 2017 Future 3

4 RNZ has been foiling 100% [1] DELIVERING WORLD CLASS Health and safety PERFORMANCE DELIVER A WORLD CLASS Environmental 1H 16 1H 17 Personal [2] TRCF LTIF Process Tier 1 (>US$25k [3] ) 1 0 Tier 2 (>US$2.5k [3] ) 0 2 Releases outside consent 1 2 PERFORMANCE BUILD ON Quality and reliability ELEMENTS OF OUR CUSTOMER PROMISE IMPROVE OUR Competitiveness Throughput (million barrels) Operational availability 94.6% 96.2% Gross Refinery Margin (US$/barrel) Free cash flow (NZ$m) [4] (24) 39 Net profit after tax Group (NZ$m) Crude price (US$/barrel) $37 $52 Exchange rate (US$) [1] New America s Cup vernacular for a strong performance [2] Per 200,000 hours, rolling 12-month [3] For a full definition please refer to Glossary. [4] Free cash flow calculated as operating cash flow minus capital expenditures. See our 2017 Interim Report for further detail, available at 4

5 Margins continue at top of historical average Growth strategy continues to pay off in a tough competitive environment US$' Uplift delta 2.76 Freight 0.57 Product quality (0.30) Plant availability 1.17 Crude cost and yield 1.32 * 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. 5

6 Strong net income and cost delivery Resulting in an interim 6cps dividend See our 2017 Interim Report for further detail, available at 6

7 2017 delivery as per promise Post Te Mahi Hou Optimisation: Jun Jul Aug Sep Oct Nov Dec GRM-add (US cents per barrel) - Hydrogen recovery from BRU: compressor Hydrogen recovery from CCR: Advanced Process Control Other short payback projects Natural Gas Pipeline capacity increase: Stages I and II 8.5 at full capacity 5.1 Jet fuel tank farm re-configuration 6.2 Sulphur soldification 4.5 Cumulative TOTAL CAPEX (NZ$m) Natural Gas Pipeline Stage II 7

8 2017 revised profit and borrowings matrix USD Exch. Rate Actual H Forecast H Capex (NZ$ mln) Margin Actual Forecast Full H1 H2 Year USD USD USD NPAT 43 Production, Mbbl Borrowings 85 Non Processing Fee Revenue, $m 94 Depreciation, $m Retain Was Now Grow Was Now 10 5 Sulphur & jet

9 2018 shutdown deep dive 20-Apr-18 Apr-18 May-18 Jun days 38 days 6 days Hydrocracker, High vacuum unit 2 Capital spend NZ$85m Sulphur recovery units Crude distiller 2 Butane de-asphalting unit Crude distiller 1, High vacuum unit 1 Hydrocracker shutdown 38 days comparable with 2014 Financial impact NZ$30m comparable with a normal hydrocracker shutdown Intake 42.7mbbls Shutting down/startup Total refinery shutdown Mechanical/consequential shutdown 9

10 Agenda 2017 Future 10

11 Key drivers and strategy unchanged Drivers Strategy Fuel oil specification changes (MARPOL VI) Fuel emission standards/ petrol and diesel specification changes (Euro 6+) Offshore competition Competitive Quality and Reliability Manufacturing and supply partner of choice Auckland growth, EVs, hybrids World class Health & Safety World class Environmental performance Climate change Advantaged crudes High Performance culture 11

12 We expect continued support for refining margins Capacity additions and retirements locked in to early 2020s Asia Net Capacity Additions vs. Oil Product Demand Growth But.. Caveat emptor Marine industry shifting in 2020 from 3.5% to 0.5% sulphur fuel (MARPOL) Downward price pressure on fuel oil Upward price pressure on gas oil Net effect difficult to predict Studying impact and post 2020 strategy Source: FACTS Global Energy (July 2017) 12

13 The electric vehicle conundrum News of the death of the internal combustion engine greatly exaggerated? Worldwide SUV and Plug-In (battery and hybrid) sales growth Global gasoline increase by 300kb/d in 1H 2017 SUV sales growth higher than plug-ins sales growth. Long term twin track of plug-in sales growth AND gasoline demand growth? Source: FACTS Global Energy (August 2017) 13

14 Longer term growth opportunities In addition to $5 million high return small capital growth projects Dredging Resource consent application Sep/Oct Dredging 2019 onwards* Capital spend NZ$60-70 million Jet tank farm reconfiguration Completion 2018 Capital spend NZ$9 million 2017 LE NZ$6 million WACC+ return Pipeline capacity Phase 1 complete Phase 2 end 2017 Phase * Further expansion Sulphur forming Completion 2018 Capital spend NZ$10 million 2017 LE NZ$5 million WACC+ return * Subject to final Board approval 14

15 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. 15

16 Analysts Briefing 24 August