Empresa Nacional del Petróleo Q2 2017 Investor Presentation Santiago, August 2017
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 & Energy 1.4 Exploration & Production 2. Investment Highlights 3. Relevant Financial Metrics 3
ENAP in a Nutshell CHILE direct ownership ENAP Aa3 (Stable) A+ (Stable) A+ (Negative) 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) Solid credit ratings Baa3 (Stable) BBB- (Stable) A (Stable) Empresa Nacional del Petróleo (ENAP) Profile Business highlights Created by law by the Chilean state in 1950 Only refiner in the country More than 3,700 employees 3 refineries, marine terminals, storage facilities for crude and refined products, pipelines, and partial ownership of the southern hemisphere first LNG terminal Refining and Marketing (R&M) Total aggregate refining capacity of ~ 230,000 bbl/day Exploration and Production (E&P) (1) Proved Oil & Gas Reserves: 146 MM boe (2) Oil production: ~ 33,000 bbl (3) per day Gas production: ~ 23,000 boe per day Gas and Energy (G&E) Created in Aug-14 to drive the development of the LNG business and power energy projects. (1) O&G Production as of Jun 30, 2017 / Developed and undeveloped reserves as of Jun 30, 2017. (2) boe: Barrel of oil equivalent (3) bbl: Oil barrel (US barrel) Q2 2017 EBITDA by Business Unit (1) Q2 2017 Revenue by Business Unit (1) Downstream Upstream 63% 38% -1% 87% 9% 4% Refining and Marketing (R&M) Exploration and Production (E&P) Jun-17 Jun-17 (1) YTD R&M E&P G&E EBITDA Q2 2017 US$ 322.4 MM R&M E&P G&E Revenues Q2 2017 US$ 3,103.3 MM Gas and Energy (G&E) 4
ENAP in a Nutshell Government support evidenced by Relationship with the owner Capital injections US$ 250 MM capital increase in 2008. Capital increase of up to US$ 400 MM recently approved in conjunction with the new Corporate Governance Law for ENAP. This law was promulgated on July 27th, 2017 and will take effect on December 1st, 2017. Corporate Governance Integration A new Corporate Governance law was promulgated in order to give more stability to the company in terms of long-term plans, following best practice of private sector. 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. Andrés (Mr. Rebolledo). Máximo Pacheco) Dividends The State government has waived has its waived right to receive its right any to dividends receive any for the dividends past seven for years, the past strengthening six years, strengthening ENAP s capital ENAP s 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 2017, from CLP 64,759 MM (approx. US$ 90 MM) in 2016 to CLP 66,701 MM (approx. US$ 95 MM) in 2017. 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 & Energy 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 (%) (1) Q2 2017 - Sales by client (m 3 ) (1) Q2 2017 - Sales by refined product (m 3 ) (1) 633 km 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 1 Refining capacity Aconcagua Refinery 43% 2 Products Gregorio Refinery 7% Gasoline Fuel Oil Natural Gas Diesel Kerosene Others Biobío Refinery 50% Refining capacity: ~ 230,000 bbl / day 75% 74% 75% 74% 75% 16% 16% 45% 8% 8% 3% 2% 38% 3 Storage Refineries, facilities and oil and gas pipelines 71% 4 Main customers 23% 41% 2012 2013 2014 2015 2016 Q2'17 Copec Enex Esmax (Ex-Petrobras) Others Gasoline Diesel Fuel Oil Kerosene LPG Others (1) YTD 7
Undisputed Leadership in the Chilean Market Key strategic asset for Chile Relevant participation in Chile s energy matrix ENAP has a dominant position in the domestic refining market, representing up to approximately 30% of Chile s energy matrix and nearly 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. ENAP s share (Oil + Gas) 12% 15% 15% 15% 19% 19% 15% 13% 13% 12% 14% 15% 13% 16% 17% 19% 18% 18% 13% 13% 12% 11% 9% 10% 38% 33% 32% 31% 28% 46% 43% 43% 43% 40% 39% 27% 2010 2011 2012 2013 2014 2015 Crude Oil Natural Gas Coal Electricity Firewood and others Refined oil products market share (1) 99% 97% 98% 97% 44% 51% 66% 63% 79% 69% 59% 62% 16% 16% Diesel Gasoline LPG Fuel Oil Kerosene Other Average Jun-16 Jun-17 (1) YTD 8
US$/bbl US$/bbl Supply and Production Crude Oil Supply by Country (Mm3) (1) Crude Oil Volume Processed (Mm 3 ) (1) Argentina 1% Brazil 56% 2,813 2,858 2,075 1,928 Ecuador 43% 881 829 152 155 Light Medium Heavy Other gross inputs Total Crude Oil Purchases: 30,123,000 bbl (Q2 2017 - YTD) / 7 different suppliers Jun-16 Jun-17 ENAP s Refining Margin ( Margen Primo ) (2) Refined Products Production (Mm 3 ) (1) 140 120 100 80 60 40 20 32 27 22 17 12 7 2,084 2,051 1,727 1,739 530 622 478 458 627 450 232 222 Diesel Gasoline LPG Fuel Oil Kerosene Others ENAP's Refining Margin ENAP's Oil Cost ENAP's Product Prices Brent Jun-16 Jun-17 (1) YTD (2) It represents the difference between ENAP s product prices and their direct cost (Oil), excluding others like energy and G&A costs 9
Table of Contents 1. ENAP Overview 1.1 ENAP in a Nutshell 1.2 Refining & Marketing 1.3 Gas & Energy 1.4 Exploration & Production 2. Investment Highlights 3. Relevant Financial Metrics 10
535 km Gas & Energy Strategy In 2014 ENAP created a third business unit, called Gas & Energy (G&E) The two main goals of the G&E division are: Increase the use of Natural Gas ( NG ) in power generation, industrial and domestic use Maintaining a conservative approach ENAP expects to promote the development of power generation projects, bringing new projects and actors into the power generation market, in order to increase competition Important presence in LNG and NG Significant interest in LNG terminal and pipeline Physical pipeline: The LNG that ENAP receives from GNL Quintero (which has regasification capacity of 15MM m3/day ) is injected as NG to the Electrogas gas pipeline and transported to the Aconcagua Refinery and to other customers Gas & Energy Unique virtual pipeline Gas Develop the NG market in Chile through the marketing of LNG or NG volumes to customers in the industrial, thermoelectric and distribution markets Q2 2017 Revenues by client (1) 31% 24% Power Promote and participate in new electricity generation projects; and to support the other two business units on their energy requirements 45% Virtual pipeline (trucks): 25 trucks fleet, with a capacity of 21 tons each, ENAP can transport daily LNG from Concón to Pemuco (535 kms) Important LNG supplier for the south of Chile 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 Power Generators Distributors Others (1) YTD 11
Table of Contents 1. ENAP Overview 1.1 ENAP in a Nutshell 1.2 Refining & Marketing 1.3 Gas & Energy 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 totaled US$ 148.7 MM as of June 30 st 2017 Crude oil production from E&P division represents approximately 15% of the total crude oil required by ENAP s refineries Ecuador PBH (100%) MDC (100%) PBHI (100%) Block 28 (42%) Chile Magallanes Chile (100%) Egypt East Ras Qattara (50.5%) Argentina Área 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) Oil 33 35 37 37 34 3 3 33 2 2 3 3 7 11 12 9 10 8 14 13 12 13 13 15 10 11 10 10 8 7 2012 2013 2014 2015 2016 Q2'17 Argentina Ecuador Egypt Chile Gas 21 22 23 20 18 18 15 12 11 13 16 17 6 7 7 6 6 6 2012 2013 2014 2015 2016 Q2'17 Argentina Chile 29% 38% 7% 26% Argentina Ecuador Egypt Chile Jun-17: 145.6 MM boe (1) Developed and Undeveloped reserves 13
Table of Contents 1. ENAP Overview 1.1 ENAP in a Nutshell 1.2 Refining & Marketing 1.3 Gas & Energy 1.4 Exploration & Production 2. Investment Highlights 3. Relevant Financial Metrics 14
E&P G&E 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 LNG Terminal Crude oil storage facilities with an aggregate storage capacity of 1.1 MMm3 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$ 46.5 MM during the period January-June 2017 Oil reserves of 4.9MMbbl and gas reserves of 37.8 MMboe as of June-17 3 blocks in exploitation / development and 5 blocks under exploration Exploration of new gas reserves in unconventional reservoirs as well as conventional oil and gas reserves Investments of US$ 82.3 MM during the period January-June 2017 Oil reserves of 24.7 MMbbl and gas reserves of 30.1 MMboe as of June-17 3 blocks in development, 2 blocks in exploration phase Investments of US$ 19.3 MM during the period January--June 2017 Oil reserves of 38.5 MMbbl as of June-17 Operates under Service Contracts 2 blocks under development and 2 under exploration phase Investments of US$ 0.6 MM during the period January-June 2017 Oil reserves of 9.7 MMbbl as of June-17 1 block under exploration / development 15
US$/bbl US$/bbl US$/bbl International Market Prices 160 140 120 100 80 60 40 20 0 Basket 7:3:3:1 vs. ICE Brent (US$/bbl) Basket 7:3:3:1 (US$/bbl) ICE Brent (US$/bbl) 25 20 15 10 5 0-5 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. Despite oil price volatility, several factors have helped ENAP s efficiency and operations: Advanced and capable refineries Import parity pricing mechanism Active Hedging policy 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 & Energy 1.4 Exploration & Production 2. Investment Highlights 3. Relevant Financial Metrics 17
Financial Summary Income Statement 2012 2013 2014 2015 2016 2016 2017 Period ended in Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Jun-16 Jun-17 Summary Income Statement (US$ million) Sales 11,612 11,211 9,837 6,351 5,217 2,460 3,103 % growth 7% (3%) (12%) (35%) (18%) (27%) 26% COGS (11,778) (10,638) (9,358) (5,708) (4,670) (2,140) (2,870) Gross profit (166) 573 479 643 547 320 234 % margin (1%) 5% 5% 10% 10% 13% 8% SG&A and Distribution cost (88) (270) (247) (292) (307) (147) (159) Other income (expense) (44) (34) (3) (77) (39) (21) (3) Operational Result (298) 269 228 274 201 152 72 % margin (3%) 2% 2% 4% 4% 6% 2% D&A 292 331 373 392 392 195 222 Others* 63 78 20 76 84 20 28 EBITDA 57 678 621 742 678 368 322 % margin 0% 6% 6% 12% 13% 15% 10% EBITDA (LTM) 57 678 621 742 678 677 633 Interest expense (195) (192) (172) (185) (180) (95) (91) Net income (319) 134 157 170 183 79 40 *Dry exploration and abandonment wells, Exploration Costs, Geological Studies and others. 18
Financial Summary Balance Sheet 2012 2013 2014 2015 2016 2016 2017 Period ended in Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Jun-16 Jun-17 Summary Balance Sheet (US$ million) Total current assets 2,778 2,832 1,924 1,525 1,664 1,636 1,727 Cash & equivalents 181 469 154 114 66 212 115 Accounts Receivables 909 996 702 632 644 570 47 Inventories 1,498 1,301 741 566 728 656 752 Total non-current assets 3,534 3,442 3,733 3,929 4,179 3,924 4,393 Net PP&E 2,648 2,637 2,753 2,798 3,138 2,832 3,225 Total assets 6,312 6,274 5,657 5,454 5,843 5,560 6,120 Total current liabilities 2,906 2,239 1,392 1,095 1,603 1,250 1,431 Short-term debt 1,142 486 459 492 868 596 651 Total non-current liabilities 3,324 3,804 3,719 3,658 3,432 3,581 3,766 Long-term debt 3,013 3,416 3,372 3,310 3,140 3,249 3,411 Total liabilities 6,230 6,043 5,112 4,753 5,036 4,832 5,197 Shareholders' equity 70 218 533 688 798 719 916 Minority interest 13 13 12 12 9 10 8 Total equity 83 231 546 701 807 729 924 Total liabilities + SHE 6,312 6,274 5,657 5,454 5,843 5,560 6,120 19
Financial Summary Key Financial Ratios Key Financial Ratios (US$ MM) Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Jun-16 Jun-17 Total debt 4,155 3,902 3,831 3,802 4,007 3,845 4,062 Total net debt 3,974 3,433 3,678 3,688 3,941 3,633 3,947 EBITDA (LTM) 57 678 621 742 678 677 633 Interest expense (net) -195-192 -172-185 -180-95 -91 Income before Taxes -488 208 69 93 127 59 4 Taxes 169-74 87 78 55 19 36 Net Profit -319 134 157 170 183 78 40 Total net debt / EBITDA (LTM) 69.7x 5.1x 5.9x 5.0x 5.8x 5.4x 6.2x Total net debt / Equity 48.1x 14.9x 6.7x 5.3x 4.9x 5.0x 4.3x EBITDA / Interest expense 0.3x 3.5x 3.6x 4.0x 3.8x 3.9x 3.5x Total net debt / EBITDA (LTM) Total net debt / Equity EBITDA / Interest expense 69.7 x 48.1 x 3.5 x 3.6 x 4.0 x 3.8 x 3.5 x 14.9 x 5.1 x 5.9 x 5.0 x 5.8 x 6.2 x 6.7 x 5.3 x 4.9 x 4.3x 0.3 x Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Jun-17 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Jun-17 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Jun-17 20
Financial Summary Debt Profile Financial Debt and Supplier Credit (US$ in million) Supplier's Credit Total Financial Debt 4,998 843 4,731 829 4,119 287 4,199 3,802 4,098 91 137 0 4,155 3,902 3,832 3,802 4,007 4,062 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Jun-17 Maturity profile (US$ in million) Projects International Bonds Local Bonds ST Bank Debt LT Bank Debt 700 22% 613 600 520 41 78% 115 463 39 401 19 224 80 284 700 600 260 390 44 410 100 159 240 174 260 157 5 159 62 66 66 52 5 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2033 Bank Bond 21
Relevant Financial Metrics EBITDA (LTM) and EBITDA (LTM) margin (US$ in million) 742 678 621 678 633 13.0% 11.7% 11.0% 6.0% 6.3% 57 0.5% 2012 2013 2014 2015 2016 Q2'17 EBITDA EBITDA margin Capital Expenditure* (US$ in million) 754 635 187 191 384 400 323 283 141 152 98 566 444 106 225 243 248 177 2012 2013 2014 2015 2016 Q2'17 Capex - New projects Capex - Initiatives * Initiatives includes Maintenance CAPEX. Total assets (US$ in million) Equity (US$ in million) 6,312 6,274 5,657 5,454 5,843 6,120 546 701 807 924 2012 2013 2014 2015 2016 Q2'17 83 231 2012 2013 2014 2015 2016 Q2'17 22
Highlights 100% State owned, the second largest Chilean state-owned company (in terms of revenues) Q2 2017 Revenues and EBITDA of US$ 3,103.3 MM and US$ 322.4 MM, respectively A key strategic asset for Chile and the only refiner in the country Relevant participation in 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