Empresa Nacional del Petróleo Q1 2015 Investor Presentation Santiago, May 2015
Disclaimer Forward-looking statements are based on the beliefs and assumptions of ENAP s management and on information currently available to the Company. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of ENAP and could cause results to differ materially from those expressed in such forward-looking statements This presentation contains certain performance measures that do not represent Chilean GAAP and IFRS definitions, such as EBITDA and Net financial debt. These measures cannot be compared with the same previously used by ENAP and the same used by other companies 2
Table of Contents 1. ENAP Overview 1.1 ENAP in a Nutshell 1.2 Refining & Marketing 1.3 Gas & Power 1.4 Exploration & Production 2. Investment Highlights 3. Relevant Financial Metrics 3
ENAP in a Nutshell Support, control & supervision (100% ownership) Fully owned by the Chilean State, ENAP has a strategic role in fuel supply in Chile (60% Market Share in Refined Products) Empresa Nacional del Petróleo (ENAP) Profile Created by law by the Chilean state in 1950 Only refiner in the country More than 3,000 employees 3 refineries, marine terminals, storage facilities for crude and refined products, pipelines, and partial ownership of the southern hemisphere first LNG terminal Solid credit ratings CHILE Aa3 (Stable) AA- (Stable) A+ (Stable) direct ownership ENAP Baa3 (Stable) BBB- (Stable) A (Stable) Business highlights Refining and Marketing (R&M) Total aggregate refining capacity of ~ 230,000 bbl/day Exploration and Production (E&P) (1) Proved Oil & Gas Reserves: 138 MM boe (2) Oil production: ~ 39,000 bbl (3) per day Gas production: ~ 19,000 boe per day Gas and Power (G&P) Created in Aug-14 to drive the development of the LNG business and power energy projects. (1) O&G Production as of Mar 31, 2015 / Developed and undeveloped reserves as of Dec 31, 2014. (2) (3) boe: Barrel of Oil equivalent / bbl: Oil barrel (US barrel) Q1 2015 EBITDA by Business Unit Q1 2015 Revenue by Business Unit Downstream Upstream 7% 21% 5% 9% Refining and Marketing (R&M) Exploration and Production (E&P) 72% E&P R&M G&P EBITDA Q1 2015 US$ 207.8 MM 86% E&P R&M G&P Revenues Q1 2015 US $ 1,623.9 MM Gas and Power (G&P) 4
ENAP in a Nutshell Government support evidenced by Relationship with the owner Capital injections US$ 250 MM capital increase in 2008. In May, 2014 President Bachelet announced an Energy Agenda for the country that considered a capital increase of US$ 400 MM for ENAP. This capital injection will be made in conjunction with a Corporate Governance law for the company. The law is expected to be sent for discussion in Congress no later than Q1 2016. Corporate Governance Integration A new Corporate Governance law is in development, in order to give more stability to the company in terms of long-term plans, following best practice of private side. Chilean government and and its regulatory its regulatory bodies bodies closely closely supervise supervise operations operations Capitalization of retained earnings (Subsidiaries) Capitalization of retained earnings at ENAP s Capitalization of retained earnings at ENAP s subsidiary subsidiary level. Capitalization level. Capitalization is approved on a is yearly approved basis on a yearly basis Board The Chairman of of the the Board Board is the is Minister the Minister of Energy of Energy (Mr. Máximo (Mr. Máximo Pacheco) Pacheco) Dividends The government has has waived its its right right to receive to receive any any dividends dividends for the for past the six past years, six years, strengthening strengthening ENAP s ENAP s capital base capital base Finance Budget and and debt debt issuance issuance approved approved by the Ministry by the of Ministry Finance of Finance Gas Sales Subsidy in Magallanes Compensation for subsidized natural gas sales to the Magallanes region which was granted and increased for 2015 from CLP 31,999 MM (2014) to CLP 54,115 MM (approx. US$ 90 MM). Subsidy started in 2013 and it is approved on a yearly basis as part of the Chilean General Budget Law. Management Professional and experienced management team team 5
Table of Contents 1. ENAP Overview 1.1 ENAP in a Nutshell 1.2 Refining & Marketing 1.3 Gas & Power 1.4 Exploration & Production 2. Investment Highlights 3. Relevant Financial Metrics 6
Refining & Marketing Leading position based on refining capacity and extensive oil and gas wholesale distribution network in Chile which delivers natural gas and refined products to key energy centers Unmatched asset base of critical importance to Chile Three refineries, crude oil storage facilities, refined products storage facilities, marine terminals, gas pipelines, among others The three refineries owned by ENAP are the only refining facilities in Chile ENAP s refineries produce a full range of refined petroleum products including LPG, olefins, gasoline, jet fuel, diesel fuel, fuel oil, and pitch, among others ENAP distributes and markets most of these products domestically ENAP s refineries process crude oil, substantially all of which is purchased from foreign third parties ENAP s Refining Rates (%) 633 km Q1 2015 - Sales breakdown by client 1 2 Concón: Aconcagua Refinery Santiago: ENAP Headquarters Linares: Terminal Hualpén: Bío Bío Refinery Main Locations 4,270 km 3 Santiago: ENAP Sipetrol S.A. (HQ) Maipú: Fuel Storage Terminal San Fernando: Terminal Chillán: Pumping Station Punta Arenas: Gregorio Refinery Q1 2015- Sales breakdown by product 1 2 Refining capacity Aconcagua Refinery 43% Products Gregorio Refinery 7% Gasoline Fuel Oil Natural Gas Diesel Kerosene Others Biobío Refinery 49% Refining capacity: ~ 230,000 bbl / day 76% 75% 74% 75% 15% 17% 45% 10% 4% 5% 7% 38% 3 Storage Refineries, facilities and oil and gas pipelines 71% 23% 36% 4 Main customers 2011 2012 2013 2014 Q1' 15 Copec Petrobras Enex Others Gasoline Fuel Oil Natural Gas Diesel Kerosene Others 7
Undisputed Leadership in the Chilean Market Key strategic asset for Chile ENAP has a dominant position in the domestic refining market, representing up to approximately 40% of Chile s energy matrix and 60% of Chilean demand for refined oil products. ENAP utilizes a pricing policy based on an import parity formula Sets the benchmark for the implied cost of importing refined petroleum products The consistent use of import parity pricing has reinforced ENAP s ability to effectively compete with international competitors. Almost 40% of Chile s energy matrix is supplied by ENAP Refined products Natural Gas Coal Hydroelectricity Firewood and others ENAP s share (Oil + Gas) 14% 14% 15% 12% 15% 15% 15% 17% 18% 19% 15% 13% 13% 12% 12% 13% 13% 12% 16% 17% 19% 9% 5% 13% 7% 13% 12% 11% 47% 48% 40% 38% 33% 32% 31% 47% 49% 47% 46% 43% 43% 43% 2007 2008 2009 2010 2011 2012 2013 Refined oil products market share 100% 100% 100% 100% 48% 44% 66% 61% 80% 68% 64% 60% 22% 19% Diesel Gasoline LPG Fuel Oil Kerosene Other Average mar-14 mar-15 8
US$/bbl US$/bbl Supply and Production Crude Oil Supply by Country [Mm3] Crude Oil Volume Processed (Mm 3 ) Brazil 57% Ecuador Angola 6% 36% 834 264 564 1,203 1,150 1,181 957 484 Light Medium Heavy Other gross inputs Total Crude Oil Purchases: 15,460,000 bbl (Q1 2015) / 9 different suppliers mar-14 mar-15 ENAP s Refining Margin ( Margen Primo ) (1) Refined Products Production (Mm 3 ) 140 25 120 22 100 80 60 40 19 16 13 10 7 998 959 882 933 172 144 298 326 242 196 423 345 ENAP's Refining Margin ENAP's Oil Cost ENAP's Product Prices Brent (1) It represents the difference between ENAP s product prices and their direct cost (Oil), excluding others like energy and G&A costs Diesel Gasoline LPG Fuel Oil Kerosene Others mar-14 mar-15 9
Table of Contents 1. ENAP Overview 1.1 ENAP in a Nutshell 1.2 Refining & Marketing 1.3 Gas & Power 1.4 Exploration & Production 2. Investment Highlights 3. Relevant Financial Metrics 10
Gas & Power Strategy GNL Quintero & SRP in Pemuco In August, 2014 ENAP created a third business unit, called Gas & Power (G&P), in order to lead initiatives and projects that are going to promote the use of Natural Gas (NG) in the Chilean Energy Matrix, in line with the objectives that were proposed in the Energy Agenda presented on May 2014 by the Government. The two main goals of the G&P division are: Increase the use of NG in power generation, industrial and domestic use. Promote the development of power generation projects, bringing new projects and actors into the power generation market, in order to increase competition and lower energy prices. G&P is organized in three areas : Gas: Its main objectives are to develop the NG market in Chile through the marketing of LNG or natural gas volumes to customers in the industrial, thermoelectric and distribution markets. Power: Its main objectives are to promote and participate in new electricity generation projects; and to support the other two business units on their energy requirements. Projects: Its main objectives are project definition, direction, control, planning, construction overseeing and implementation until completion. ENAP has two different ways to distribute LNG/NG: By pipeline: The LNG that we receive from GNL Quintero is injected as NG to the Electrogas gas pipeline and transported to the Aconcagua Refinery and to other customers. By Virtual pipeline (trucks): Using a 25 trucks fleet, with a capacity of 21 tons each, we can transport daily LNG from Concón to Pemuco (535 kms). ENAP has a Satellite Regasification Plant in Pemuco (VIII Region) where the LNG (transported using trucks) is regasified and then distributed mainly to the Biobío Refinery and also to other customers in the area through the gas pipeline Gasoducto del Pacífico. 535 km G&P in figures Q1 2015 Q1 2015 Revenues and EBITDA As of Mar-15 US$ million Revenues 87.2 EBITDA 14.7 EBITDA margin 17% 15 MM m3/day 25 Trucks fleet 21 Tons of LNG (per truck) 650 M m3/day Q1 2015 Revenues by client type 32% 13% 55% Power Generators Distributors Others 11
Table of Contents 1. ENAP Overview 1.1 ENAP in a Nutshell 1.2 Refining & Marketing 1.3 Gas & Power 1.4 Exploration & Production 2. Investment Highlights 3. Relevant Financial Metrics 12
Exploration & Production Operations Geography ENAP s E&P operations have allowed the Company to develop field expertise and deepen relationships with E&P partners and crude oil suppliers from different parts of the world The Company s operations are focused on Latin America & North Africa with fields in Chile, Argentina, Ecuador and Egypt, producing crude oil and natural gas ENAP s main goal for its E&P operations is to increase oil and gas reserves both in Chile and abroad, and manage its E&P portfolio through sales and acquisitions In average during the last years, approximately 2% of the crude oil used by ENAP s refineries has been produced in Magallanes Investments reached US$ 77 MM during Q1 2015 Total crude oil production from ENAP s E&P division represents approximately 15% of the crude oil required by ENAP s refineries Ecuador MDC (100%) PBHI (100%) Block 3J (100%) Block 28 (42%) Chile Magallanes Chile (100%) Egypt East Ras Qattara (50.5%) Argentina Area Magallanes (50%) CAM 2/A Sur (50%) E2 (33%) * Camp. Central (50%) * Pampa del Castillo (100%) (%) Ownership * Blocks where ENAP is not an operator Oil and gas production Proved oil & gas reserves (1) (in 000 barrels per day) 29 3 3 28 2 4 Oil 37 35 33 3 2 2 7 9 11 39 3 13 27 20 Gas 21 18 18 18 Argentina 29% Egypt 9% Chile 38% 14 13 14 13 12 14 10 9 10 11 10 10 2010 2011 2012 2013 2014 Q1'15 Argentina Ecuador Egypt Chile 22 17 15 12 11 11 5 3 6 7 7 7 2010 2011 2012 2013 2014 Q1'15 Argentina Chile (1) Developed and Undeveloped reserves Ecuador 24% Dec-14: 138 MM boe 13
E&P G&P R&M World Class Operator with Unmatched Asset Base Refineries Three refineries with a total aggregate refining capacity of ~230,000 bbl/day Aconcagua: Capacity: ~ 97,000 bpd / Refinery complexity factor Solomon: 12.1 Biobío : Capacity: ~ 111,000 bpd / Refinery complexity factor - Solomon: 10.2 Gregorio : Capacity: ~ 20,000 bpd / 1 vacuum topping Midstream assets Crude oil storage facilities with an aggregate storage capacity of 1.1 MMm3 LNG Terminal Refined products storage facilities with a total capacity of approximately 1.5 MMm3 Marine terminals with capacity to receive 100% of the refineries requirements Gas pipelines in the Magallanes region First Liquefied Natural Gas (LNG) regasification terminal of the region: GNL Quintero (GNLQ) ENAP s Ownership: GNLQ (20% of stake) / GNL Chile (33.3% of stake) GNLQ s Regasification capacity: 15 MM m3/day / Trucks Loading Facility (TLF) of 2,500 m3/day. During 2014, GNLQ developed an expansion project adding a 50% of extra regasification capacity and doubled the TLF capacity in comparison with the original design of both installations. Investments of US$ 59.7 MM during Q1 2015 Oil reserves of 6.1 MMbbl and gas reserves of 7.6 MM m3 as of Dec-14 Exploration of new gas reserves in unconventional reservoirs as well as conventional oil and gas reserves Investments of US$ 12.2 MM during Q1 2015 Oil reserves of 17.2 MMbbl and gas reserves of 3.9 MM m3 as of Dec-14 Investments of US$ 1.6 MM during Q1 2015 Oil reserves of 34.5 MMbbl as of Dec-14 Operates under Service Contracts Investments of US$ 3.5 MM during Q1 2015 Oil reserves of 12.3 MMbbl as of Dec-14 14
Table of Contents 1. ENAP Overview 1.1 ENAP in a Nutshell 1.2 Refining & Marketing 1.3 Gas & Power 1.4 Exploration & Production 2. Investment Highlights 3. Relevant Financial Metrics 15
US$/bbl US$/bbl International Market Prices 140 120 Basket 6:2:3:1 vs. ICE Brent (US$/bbl) Basket 6:2:3:1 (US$/bbl) ICE Brent (US$/bbl) 25 20 ENAP is making better use of its refineries given refining margins in the current market and the estimated demand of the contracts in place with our clients. 100 80 60 15 10 5 0 Despite oil price volatility, several factors have helped ENAP s efficiency and operations: Advanced and capable refineries Import parity pricing mechanism Active Hedging policy 40-5 Dominant market share in Chile High-value and quality products 35 25 15 5-5 -15-25 ULSD USGC(US$/bbl) vs. ICE Brent (US$/bbl) Unl87 USGC (US$/bbl) vs. ICE Brent (US$/bbl) F.O N 6 3% S. USGC (US$/bbl) vs. ICE Brent (US$/bbl) 16
Table of Contents 1. ENAP Overview 1.1 ENAP in a Nutshell 1.2 Refining & Marketing 1.3 Gas & Power 1.4 Exploration & Production 2. Investment Highlights 3. Relevant Financial Metrics 17
Financial Summary Income Statement Period ended in Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Mar-14 Mar-15 Summary Income Statement Sales 8,180 10,835 11,612 11,211 9,837 2,575 1,633 % growth 15% 32% 7% (3%) (12%) (14%) (69%) COGS (7,934) (10,663) (11,778) (10,638) (9,358) (2,448) (1,462) Gross profit 246 172 (166) 573 479 127 171 % margin 3% 2% (1%) 5% 5% 5% 10% SG&A and Distribution cost (104) (85) (88) (270) (247) (21) (20) EBIT 142 88 (254) 303 231 106 151 % margin 2% 1% (2%) 3% 2% 4% 9% Other expense (income) 106 16 130 23 97 (8) 9 D&A 243 256 292 331 373 94 100 EBITDA 402 372 57 678 621 162 208 % margin 5% 3% 0% 6% 6% 6% 13% EBITDA (LTM) 402 372 57 678 621 628 667 Interest expense 177 171 195 192 172 44 44 Net income 70 (67) (319) 134 157 16 65 18
Financial Summary Balance Sheet Period ended in Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Mar-14 Mar-15 Summary Balance Sheet Total current assets 2,283 2,919 2,778 2,832 1,924 2,411 1,649 Cash & equivalents 62 284 181 469 154 280 77 Accounts Receivables 883 852 909 996 702 916 610 Inventories 1,090 1,487 1,498 1,301 741 1,139 763 Total non-current assets 3,450 3,284 3,534 3,442 3,733 3,405 3,786 Net PP&E 2,634 2,672 2,648 2,637 2,753 2,617 2,759 Total assets 5,733 6,203 6,312 6,274 5,657 5,816 5,435 Total current liabilities 1,961 2,516 2,906 2,239 1,392 1,805 1,142 Short-term debt 648 1,052 1,142 486 459 253 471 Total non-current liabilities 3,315 3,306 3,324 3,804 3,719 3,749 3,685 Long-term debt 2,819 2,985 3,013 3,416 3,372 3,356 3,338 Total liabilities 5,277 5,822 6,230 6,043 5,112 5,554 4,827 Shareholders' equity 444 368 70 218 533 250 595 Minority interest 12 13 13 13 12 13 13 Total equity 456 381 83 231 546 263 608 Total liabilities + SHE 5,733 6,203 6,312 6,274 5,657 5,816 5,435 19
Financial Summary : Key Financial Ratios Key Financial Ratios (US$ MM) Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Mar-14 Mar-15 Total debt 3,466 4,037 4,155 3,902 3,831 3,609 3,808 Total net debt 3,404 3,753 3,974 3,433 3,678 3,329 3,731 EBITDA (LTM) 402 372 57 678 621 628 667 Interest expense (net) 177 171 195 192 172 44 44 Net Income 70-67 -319 134 157 16 65 Total net debt / EBITDA (LTM) 8.5x 10.1x 69.6x 5.1x 5.9x 5.3x 5.6x Total net debt / Equity 7.5x 9.9x 48.1x 14.9x 6.7x 5.3x 6.1x EBITDA / Interest expense 2.3x 2.2x 0.3x 3.5x 3.6x 3.7x 4.7x Total net debt / EBITDA (LTM) 69.6x Total net debt / Equity 48.1x EBITDA / Interest expense 3.5x 3.6x 4.7x 2.3x 2.2x 8.5x 10.1x 5.1x 5.9x 5.6x 7.5x 9.9x 14.9x 6.7x 6.1x 0.3x Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Mar-15 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Mar-15 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Mar-15 20
Financial Summary: Debt Profile Financial Debt and Supplier Credit (1) (US$ in millions) 4,779 4,998 4,731 4,338 871 742 843 829 4,119 287 3,808 0 3,466 4,037 4,155 3,902 3,832 3,808 dec-10 dec-11 dec-12 dec-13 dec-14 mar-15 Total Financial Debt Supplier's Credit (1) Does not consider MtM (Mark to Market) of derivatives (as of Dec 31, 2014) Maturity profile (US$ in millions) Projects International Bonds Local Bonds ST Bank Debt LT Bank Debt 732 41 600 551 300 504 44 398 367 22 285 39 600 40 500 500 329 79 221 383 157 110-43 167 47 67 107 - - - 157 7 7 4 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2033 74% Banks 26% Bonds 21
Relevant Financial Metrics EBITDA and EBITDA margin (US$ in millions) Capital Expenditure (1) (US$ in millions) 678 621 13% 402 5% 372 3% 57 6% 6% 208 320 264 225 243 248 1% 101 Total assets (US$ in millions) 2010 2011 2012 2013 2014 Q1' 15 EBITDA EBITDA margin 2010 2011 2012 2013 2014 Q1' 15 (1) Including only investments in new projects (Maintenance CAPEX is not considered in this chart) Equity (US$ in millions) 6,203 6,312 6,274 5,733 5,657 5,435 2010 2011 2012 2013 2014 Q1' 15 456 608 546 381 231 83 2010 2011 2012 2013 2014 Q1' 15 22
Highlights 100% State owned, the second largest Chilean state-owned company (in terms of revenues) Q1 2015 Revenues and EBITDA of US$ 1,623 MM and US$ 208 MM, respectively A key strategic asset for Chile and the only refiner in the country Represents approximately 40% of Chile s energy matrix Satisfies approximately 60% of Chilean demand for refined oil products World class operator with state of the art facilities and an extensive logistics network in Chile 3 refineries, marine terminals, storage facilities for crude and refined products, pipelines, and partial ownership on the southern hemisphere first LNG terminal (GNL Quintero S.A.) Stable & long-term relationships with a diverse base of suppliers & buyers Proven access to multiple sources of financing Experienced and professional management Investment grade ratings since 2002 in the international market (Baa3/BBB-/A ) and the local market (AAA/AA-) 23
Contact us at ir@enap.cl 24