Slide 1: Analyst Briefing
REFINING NZ ANALYST PRESENTATION ANALYST BRIEFING 22 FEBRUARY 2019
Slide 2: Disclaimer
REFINING NZ ANALYST PRESENTATION 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 a
Slide 3: Agenda
REFINING NZ ANALYST PRESENTATION AGENDA OUR CUSTOMER PROMISE OUR OUR PERFORMANCE VISION OUR COMMITMENT
Slide 4: Our Performance
REFINING NZ ANALYST PRESENTATION AGENDA OUR PERFORMANCE NPAT $30m impacted by first full refinery planned shutdown in 14 years OUR CUSTOMER PROMISE Second half, post shutdown, turns profit: – strong operational performance OUR COMMITMENT – highest ever throughput OUR VISION – refining margins toward
Slide 5: Results Impacted by the Shutdown
RESULTS IMPACTED BY THE SHUTDOWN REFINING NZ ANALYST PRESENTATION FY 17 FY 18 Personal LTIF [1,2] 0.26 0.48 Tier 1 (>US$25k) [2] 0 2 Process EBITDA Tier 2 (>US$2.5k) [2] 4 3 Gross Refining Margin 6.31 153 Releases outside consent 4 5 PER USD BARREL NZD M 8.02 per barrel in FY17 220m in FY17 Throughp
Slide 6: Strong Second Half Turns Profit
STRONG SECOND HALF TURNS PROFIT REFINING NZ Resulting in 4.5 cps fully imputed final dividend ANALYST PRESENTATION NZ$M 80 70 60 50 40 30 SHUTDOWN EXCHANGE MARGIN DISTRIBUTION & OPERATING 20 IMPACT RATE OTHER INCOME* COSTS ** 10 79 (43) 6 (12) 3 (3) 30 0 NPAT NPAT 2017 2018 * Excludes insurance reco
Slide 7: Strong Underlying Market Fundamentals
STRONG UNDERLYING MARKET FUNDAMENTALS Refining margin adjusted for shutdown at US$7.33 per barrel REFINING NZ ANALYST PRESENTATION US$/BARREL 10 UPLIFT 2017 2018 Delta 8.02 US$/BARREL 8 7.33 Freight 1.79 1.93 0.14 1.02 6 6.31 REFINING NZ MARGIN 4.27 Product quality 1.08 0.99 (0.09) 3.61 4 3.74 2.70
Slide 8: Looking Ahead
LOOKING AHEAD Asian demand growth expected to outstrip capacity additions (at least until 2025) Global weakness in gasoline prices likely to continue in H1 2019 (caveat Chinese exports) Jet fuel and diesel demand expected to grow RNZ expects margin benefit from IMO market disruption Source:
Slide 9: Asian Demand Growth Expected to Outstrip Capacity Additions
ASIAN DEMAND GROWTH EXPECTED TO Forecast supports refinery utilisation and margins – OUTSTRIP CAPACITY ADDITIONS with caveats for IMO and Chinese exports REFINING NZ ANALYST PRESENTATION kb/d 1,400 90% 1,200 88% 1,000 800 86% 600 400 84% 200 82% 0 -200 80% -400 -600 78% 2010 2011 2012 2013 2014 2015
Slide 10: Forecast Demand Versus Capacity Additions
FORECAST DEMAND VERSUS CAPACITY ADDITIONS RNZ has a processing bias to diesel/jet fuel REFINING NZ ANALYST PRESENTATION Diesel/Jet fuel Petrol kb/d 2,500 Supply 2,000 IMO transition, Demand impact increasing 1,500 from Q4 2019 Gap 1,000 500 0 -500 -1,000 -1,500 2019 2020 2019 2020 FGE expects change
Slide 11: IMO Price Forecasts: Diesel Increase, Fuel Oil Fall
IMO PRICE FORECASTS: DIESEL Expect disruption, but overall product cracks remain INCREASE, FUEL OIL FALL supported REFINING NZ ANALYST PRESENTATION Singapore product prices vs Dubai crude DIESEL / FUEL OIL (product cracks) US$/bbl 30 Price differential expected to widen 20 Diesel, 0.05% S Benefits r
Slide 12: MARPOL – Our Strategies Include
MARPOL – OUR STRATEGIES INCLUDE REFINING NZ ANALYST PRESENTATION Produce 0.5% Increase bitumen sulphur marine production by fuel oil debottlenecking existing plant Expand our crude Improve logistics of diet HSFO exports 12
Slide 13: 2019 Profit Matrix
2019 PROFIT MATRIX REFINING NZ ANALYST PRESENTATION US$ EXCHANGE RATE 0.60 0.65 0.70 0.75 2019 HIGHLIGHTS GRM US$ (34) (46) (56) (65) No planned shutdowns 4.00 326 342 356 369 Higher volumes (~44 million barrels planned) 4 (10) (23) (34) 5.00 273 293 311 326 Operating costs include: 43 25 10 (3) - r
Slide 14: Long Term Capital and Asset Management Plan Progressing
LONG TERM CAPITAL AND ASSET MANAGEMENT PLAN PROGRESSING Capital efficiency via new technology and innovation REFINING NZ ANALYST PRESENTATION Engaged - structured approach to long term strategic asset ROBOTIC WELDING TANK 13 management plan - aligned to ISO 55000:2014 Shutdown and tank maintenance s
Slide 15: Shutdown Lookahead
SHUTDOWN LOOKAHEAD REFINING NZ ANALYST PRESENTATION 2019 • No shutdowns 2020 • Crude Distillation Unit (CDU1) • Hydrocracker Unit Top Bed Skim • CCR Platformer 2021 CDU1 • Hydrocracker CDU2 • Crude Distillation Unit (CDU2) HDS3 Hydrocracker CCR 2022 • Hydrocracker Unit Top Bed Skim[1] [1] Potential
Slide 16: Our Customer Promise
REFINING NZ ANALYST PRESENTATION AGENDA OUR PERFORMANCE Short pay back projects delivering OUR CUSTOMER Investing to support Auckland jet fuel resilience PROMISE New opportunity to potentially lift RAP capacity a further 15% OUR COMMITMENT Commissioning sulphur forming project in 2019 Dredging conse
Slide 17: Delivering Value: Short Payback Projects, Jet Fuel Import Facility
DELIVERING VALUE REFINING NZ ANALYST PRESENTATION GRM SHORT PAYBACK PROJECTS uplift JET FUEL IMPORT FACILITY USc/bbl 2017/2018 Completed Projects 2018 Completed Projects Hydrogen optimisation 6 First tank conversion, import line, filtering and dosing Additional nitrogen storage 0.5 2019/2020 Project
Slide 18: Delivering Value: Pipeline, Sulphur Forming
DELIVERING VALUE REFINING NZ ANALYST PRESENTATION PIPELINE SULPHUR FORMING Capacity Facility under construction Stages I and II delivered Commissioning Q4 2019 Trialling drag reducing agent (DRA) in Q3 DRA could increase pipeline capacity by around 15% Resilience LIDAR Mobile truck loading skids EXA
Slide 19: Dredging Consented
DREDGING CONSENTED REFINING NZ A major milestone for this margin enhancing initiative ANALYST PRESENTATION Appeal to the Environment Court resolved Conditions agreed by all parties 12 months of baseline water quality monitoring Reviewing phasing of tank maintenance to accelerate dredging Current Fin
Slide 20: Sustainability and Community
REFINING NZ ANALYST PRESENTATION AGENDA SUSTAINABILITY AND COMMUNITY OUR PERFORMANCE History of investment that also improves our environmental OUR CUSTOMER footprint PROMISE • Carbon intensity reduced by ~20% since 2008 OUR COMMITMENT • Reduction in on-site SO2 emissions by ~19% since 2006 OUR VISI
Slide 21: A Focus on Our Environmental Footprint
OUR ENVIRONMENT REFINING NZ ANALYST PRESENTATION CO2 intensity 2008 2018 250 200 20% A FOCUS ON OUR REDUCED TO ENVIRONMENTAL ~ ~ FOOTPRINT KG CO2 / T PRODUCT HMU Continued reductions in CO2 and SO2 emissions Tramp Air H2 Reduction Te Mahi system 2018 APC BRU Reduced carbon content of our sources of
Slide 22: Our People – Safety and Wellbeing
OUR PEOPLE – SAFETY AND REFINING NZ WELLBEING ANALYST PRESENTATION 609 Highly skilled workforce Improved health and safety performance in second half of 2018 Our H&S metrics compare well in a NZ context, but we aspire to continue to improve [1] Implementation of DuPont process safety audit recommend
Slide 23: Our Community
OUR COMMUNITY REFINING NZ ANALYST PRESENTATION COMMUNITY SUPPORT RNZ contributes Lifted community almost engagement – Safety Case SUPPORTING NEW LEARNING presented to community Initiated $120K in scholarship program for local STEM students 7 %per annum of Northland's GDP [1] Increase from ~4.5% in 2
Slide 24: Our Vision
REFINING NZ ANALYST PRESENTATION AGENDA OUR PERFORMANCE RNZ brings substantial capability to NZ’s 2050 renewable energy and growth agenda: OUR CUSTOMER – safe, reliable and efficient infrastructure PROMISE – deep scientific and technical capability OUR COMMITMENT – robust balance sheet OUR VISION –
Slide 25: Strategic Direction
REFINING NZ ANALYST PRESENTATION Our new realistic strategy will: STRATEGIC DIRECTION - retain profitable refining at the core - harness natural resources - leverage existing capabilities and assets - confirm our role in energy transition - remain committed to commercial return and shareholder value
Slide 26: Appendix 1: Glossary
REFINING NZ ANALYST PRESENTATION APPENDIX 1 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
Slide 27: Analyst Briefing
REFINING NZ ANALYST PRESENTATION ANALYST BRIEFING 22 FEBRUARY 2019