60 slides from Turkiye Petrol Rafinerileri A.s's investor presentation, November 2018
Slide 1: Investor Presentation November 2018
Investor Presentation November 2018
Slide 2: Disclaimer
Disclaimer This presentation contains forward-looking statements that reflect the Company management’s current views with respect to certain future events. Although it is believed that the expectations reflected in these statements are reasonable, they may be affected by a variety of variables and c
Slide 3: Content
Content • Refining Market Slides 4-10 • Turkish Market Slides 12-15 • Company Overview Slides 16-26 • Operations Slides 27-32 • Key Financials Slides 33-44 • Outlook Slides 45-50 • Appendix Slides 50-58 Investor Presentation www.tupras.com.tr CONTENT 3
Slide 4: Refining Market
REFINING MARKET Azan lle Wiijil wa yy”
Slide 5: Brent Crude Oil Prices ($/bbl)
Brent Crude Oil Prices ($/bbl) Brent 100 90 PROS • OPEC & non OPEC supply cut through 80 2017–mid 2018 • Political instabilities in Middle East 70 69,6 • Future of nuclear agreement • Healthy PMI data in developing countries 60 • Expectation of high global GDP • Potential impact of sanctions 50 40 3
Slide 6: Refinery Capacity Change
Refinery Capacity Change Thousand Barrels/Day 3000 2018 2017 2016 2015 2014 2013 2012 200 1850 420 330 70 244 156 270 417 343 46 76 120 36 0 160 520 510 40 198 105 700 300 0 200 364 390 0 244 530 526 400 63 150 302 305 0 120 0 -5 200 0 -116 -220 -140 -546 -450 -443 -775 -130 -143 -352 -91 -189 -57 N
Slide 7: Middle Distillate Cracks ($/bbl)
Middle Distillate Cracks ($/bbl) 2015 2016 2017 2018 Diesel 20,0 20 Jet Fuel 20 17,8 16 16 14,8 15,9 15,1 15,5 14,4 14,4 14,4 13,9 14,3 14,3 14,1 13,7 13,6 13,7 13,6 11,5 12 13,2 13,3 12 12,5 11,4 12,1 12,2 12,6 10,0 11,9 10,4 9,1 9,5 8 7,6 8 8,0 7,2 6,6 4 4 0 0 Jan Feb Mar Apr May Jun July Aug Sep
Slide 8: Gasoline and High Sulphur Fuel Oil Cracks ($/bbl)
Gasoline and High Sulphur Fuel Oil Cracks ($/bbl) 2015 2016 2017 2018 Gasoline High Sulphur Fuel Oil 24 -4 -4,2 18,6 -7 18 -8,7 -8,3 -8,5 15,7 -9,1 10,4 -10 10,9 -10,2 14,4 12 13,0 13,1 13,4 11,9 -10,9 12,0 12,1 -12,2 -12,5 -11,9 9,8 10,2 10,6 9,7 -14 -13,2 -12,7 -13,0 -13,2 9,6 6 -15,2 5,5 -17 -16,
Slide 9: Quarterly Product Crack Margins ($/bbl)
Quarterly Product Crack Margins ($/bbl) Diesel and jet fuel cracks increased by 11% and 9% respectively; while gasoline and fuel oil cracks were weaker compared to 2017 Q3. Diesel 2015 2016 2017 2018 Jet Fuel 16 16 16 15 15 14 13,8 14 12,3 14,5 14 13,4 13,9 12 12,0 12 13 12 13,3 11 12,4 11 11 11 9,9
Slide 10: Crude Price Differentials ($/bbl)
Crude Price Differentials ($/bbl) Ural differentials narrowed with higher Chinese demand while Heavy Crude differentials narrowed with lower Venezuelan and Iranian crude availability. Ural Differentials Heavy Crude Price Differentials 1 Brent Brent 0 0 -0,6 -0,5 -0,6 -0,9 -0,3 -1,1 -1,1 -2 -1 -1,2 -
Slide 11: Turkish Market
TURKISH MARKET Azan lle Wiijil wa yy”
Slide 12: Turkish Economy Strengths
Turkish Economy Strengths Population (mn) GDP (%) 10 83 9,2 2002-2014 4.9% 1.4% growth in last 5 yrs 7,5 8,8 2010-2014 5.4% 82 0-40 yrs >65% 7,4 81 5 80 82 4,2 4,0 79 81 81 2,5 80 3,0 2,9 78 79 2,1 77 0 2016 2017 2018 2019 2020 2010 2011 2012 2013 2014 2015 2016 2017 Diesel Consumption (mn ton) Car
Slide 13: Turkish Consumption (Million tons) 2015-2017
Turkish Consumption (Million tons) 2015-2017 Diesel Jet Fuel 2017 24,17 2017 4,52 +2.7% +8.3% 2016 22,31 2016 4,40 -4% +8.5% 2015 4,58 2015 20,56 10 14 17 21 24 Gasoline Fuel Oil* 2017 2,30 2017 0,49 -15.7% +3.1% 2016 2,23 2016 0,58 -3.5% +6.5% 2015 2,10 2015 0,60 Source: EMRA *Bunker excluded. 0 0
Slide 14: Strong Turkish Market, 8M 2018 (Million tons)
Strong Turkish Market, 8M 2018 (Million tons) • Tüpraş is well positioned in a growing, short market. • Diesel and jet fuel consumption in Turkey grew significantly the first 8 months of 2018 driven by infrastructure projects and aviation growth. Diesel Jet Fuel +8.0% +12.3% 2018 16,92 2018 3,38 201
Slide 15: Turkey's Import / Export Balance (Net)
Turkey’s Import / Export Balance (Net) (Million Tons) 4 Export 2,4 3 1,0 1 0,0 0 0 -4 -3,1 -3 -8 Import -12 -12,0 -13 2013 2014 2015 2016 2017 -16 LPG Gasoline Diesel Fuel Oil Jet Source EMRA Investor Presentation www.tupras.com.tr REFINING INDUSTRY 15
Slide 16: Company Overview
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Slide 17: Tüpraş Shareholder Structure
Tüpraş Shareholder Structure *Distribution of Domestic/ Foreign Ownership of Tüpraş Energy Investments Inc. (SPV) Shares Domestic Ownership 18% Free Float 83% Foreign Ownership *As of December 31th, 2017 Investor Presentation www.tupras.com.tr COMPANY OVERVIEW 17
Slide 18: Tüpraş Refining Assets & Distribution Network
Tüpraş Refining Assets & Distribution Network Turkey Storage Capacity Tüpraş : 58% Opet : 9% Other Companies : 33% Total Capacity : 28.1 mn ton Nelson Complexity : 9.5 Tüpraş Storage Cap. : 7.2 mn m3 OPET Storage Cap. : 1.1 mn m3 İzmir İzmit Kırıkkale Batman • 11.0 MT Capacity • 5.0 MT Capacity • 11
Slide 19: High Complexity (Nelson Complexity of Refining Companies)
High Complexity (Nelson Complexity of Refining Companies) İzmit After RUP 20 14,5 Tüpraş After RUP Tüpraş 15 Before RUP 14,5 9,5 13,0 12,6 11,8 11,6 11,5 10 11,0 10,4 7,3 9,9 9,8 9,6 9,5 9,4 9,2 9,2 9,0 8,8 8,7 8,4 8,0 7,3 7,1 7,1 7,1 7,1 6,8 6,5 5 5,9 5,8 5,8 0 Tüpraş-2015 Lukoil Essar SHELL BCP CP
Slide 20: Crude Suppliers of TÜPRAŞ (Million Tons)
Crude Suppliers of TÜPRAŞ (Million Tons) In 2017, Tüpraş purchased 25 different types of crude oil from 14 countries, with gravities ranging between 18-47 API. Africa America Europe CIS Middle East 90 80 79 76 70 71 65 67 60 63 50 40 Crude Type 2017 5,3% 30 36% 20 58,8 17 10 % 10 6 12 6 1315 13 11 1
Slide 21: Sales By Customer (9M 2018)
Sales By Customer (9M 2018) Customer Groups Sales to Distributors OTHER Bitumen; Military; 1% AKPET 8% 11% 4% POAŞ TP 26% 1% Export; 13% BP 13% Dist.; 50% Other; 6% LPG; 3% SHELL Jet; 6% 17% OPET THY Opet; 31% 11% Total : 22.3 mn tons Distributors : 11.1 mn tons Investor Presentation www.tupras.com.
Slide 22: Competitive Advantages of Tüpraş
Competitive Advantages of Tüpraş Investor Presentation www.tupras.com.tr COMPANY OVERVIEW 22
Slide 23: OPET
OPET Opet expanded its retail footprint from 1.560 stations in December 2017 to 1.605 stations in September 2018. 1800 Opet Sunpet 1.605 1.560 1600 1.504 Market share as of 1.444 1400 1.325 1.356 1.393 434 455 August 2018 1.325 1.279 431 1200 435 418 427 410 394 1000 394 17.85% 32.26% 800 White Blac
Slide 24: DİTAŞ, Marine Transport
DİTAŞ, Marine Transport -Tüpraş Share 79.98% 11 tugboats 3 Crude Oil Tanker :479.765 DWT 8 mooring boats 1 Crude Oil - Product Tanker : 51.532 DWT 2 service boats 7 Product Tanker : 90.534 DWT 1 pilot boat • One of the biggest Turkish marine transportation companies of crude oil and petroleum produc
Slide 25: Körfez Ulaştırma A.Ş.
Körfez Ulaştırma A.Ş.- Tüpraş Share 100% Körfez Ulaştırma A.Ş. Turkey's First Private Railway Operator • On June 16th, Freight Train Operator Certificate, • On September 20th, Safety Management Certificate received • Operates with 491 cistern wagons and 5 diesel • locomotives 2,5 mn tons/year tran 2
Slide 26: Enhancing our Trading Capabilities
Enhancing our Trading Capabilities ๏ We are opening a trading office in London to Closely monitor Support import and Create additional value international market export operations, from supply chain and sales opportunities, activities. ๏ London office is planned to be opened until the end of the yea
Slide 27: Operations
Slide 28: Capacity Utilization and Quarterly Production Volume on Track in Q3
Capacity Utilization and Quarterly Production Volume on Track in Q3 Capacity utilization reached 115% in Q3. Quarterly Production (Million Tons) Capacity Utilization* (%) Crude Oil Semi Product Feedstock 9 2014 2015 2016 2017 2018 9M 2018 CUR: 95% 8 7,8 7,7 7,7 108 115 7,4 103 105 7,3 7,3 4,4 6,7 7,
Slide 29: Q3 2018 Product Yields
Q3 2018 Product Yields 2017 2018 LPG LPG Bitumen 3% Bitumen 4% 15% 13% Gasoline Gasoline 19% 19% Fuel Oil Fuel Oil 7% 5% Black Light Black Light Coke Prod. Distil. Coke Prod. Distil. 3% 23,2 24,2 Naphtha 3% 23,1 24,2 Naphtha Other % % 2% Other % % 1% Other Other 2% 1,7% 2% 1,9% Mid. Mid. Distil. Dis
Slide 30: 9M 2018 Product Yields
9M 2018 Product Yields 2017 2018 LPG LPG Bitumen 4% Bitumen 4% 11% 13% Gasoline Gasoline Fuel Oil 20% 20% Fuel Oil 8% 6% Coke Black Light Coke Black Light 3% Prod. Distil. 3% Prod. Distil. Other 21,9 Other 21,6 25,0 Naphtha 24,5 Naphtha 2% Other% % 2% Other% % 1% 1% 1,9% 1,8% Mid. Mid. Distil. Disti
Slide 31: Domestic Sales (Million Tons)
Domestic Sales (Million Tons) We generated 22.3 million tons of total sales in 9M 2018. Jet fuel and diesel sales increased by 8.5% and 6.7% compared to last 9M 2017 respectively. Total Sales in 9M Domestic Sales of Key Products in 9M Domestic Sales Export Diesel Jet Fuel Gasoline Bitumen 24,2 22,6
Slide 32: Investments (Million $)
Investments (Million $) • 9.5 Nelson complexity • High white product yield • Process more heavier and sour crudes • Run all refineries with 100% capacity utilization Ongoing Projects Avg. 943 mn$ 1.213 974 959 • Revamp of Crude Unit • FCC Modernization • New Sulphur Units Avg. 278 mn$ Avg. 247 mn$ •
Slide 33: 9M 2018 Results
9M 2018 Results Brent Price ($/bbl) Capacity Utilisation (%) Axis Title Brent ($/bbl) Tüpraş Expectation Min Tüpraş Expectation Max 2015 9M 99 • 95% Total Capacity 80 • 72.1 $/bbl Brent Price average in 9M 2016 9M 104 Utilization in 9M 75 2017 9M 113 70 77 79 2018 9M 95 65 74 74 72 73 69 60 65 66 55
Slide 34: Key Financials
Slide 35: Margin Environment ($/bbl)
Margin Environment ($/bbl) Tüpraş’ 13.5 $/bbl Net Refining Margin in Q3 2018 was higher than 8.4 $/bbl Med Complex margin. 12 Med Complex Month Premium to the benchmark Mediterranean 10 Annual peers’ refining margin due to: 8 5,54 5,30 4,83 6 3,97 4,21 2,89 4,4 • Refined products deficit characteris
Slide 36: Income Statement
Income Statement Strong EBITDA generation continued in Q3 2018 Million TL Q3 2018 Q3 2017 % 9M 2018 9M 2017 % Million $ Q3 2018 Q3 2017 % 9M 2018 9M 2017 % Net Sales 30.247 14.344 111 63.749 39.344 62 Net Sales 5,672 4,068 39 13,868 10,946 27 Gross Profit 3.910 1.610 143 7.200 4.813 50 Gross Profit
Slide 37: Financial Highlights (Million $)
Financial Highlights (Million $) Tüpraş achieved 734 mn USD EBITDA in Q3 2018 with high capacity utilization and inventory gain. EBITDA Net Income 1.614 1200 1.527 1.046 1.397 321 938 1408 734 950 123 422 817 1.125 285 283 1117 435 629 667 700 271 480 594 825 715 410 47 91 268 560 431 4th Q 309 435
Slide 38: Balance Sheet Analysis (Billion $)
Balance Sheet Analysis (Billion $) Strong operational FCF generation and tight working capital management led to an increase in our cash position. Cash & Cash Equivalents Trade Receivables 3,0 2,5 2,0 2,3 2,4 2,2 1,57 1.57 2,0 1,52 1,57 1,5 1,36 1,42 1,8 1,7 1,6 1,7 1,6 1,6 1,7 1,7 1.6 1,7 1,6 1,07
Slide 39: Q3 Profit Before Tax Bridge (2017-2018)
Q3 Profit Before Tax Bridge (2017-2018) Decline in profit before tax was mostly driven by FX loss, partially offset by inventory gain. Million TL Investor Presentation www.tupras.com.tr KEY FINANCIALS 39
Slide 40: Dividend (TL)
Dividend (TL) 16 Earings per Share Gross Dividend Total Payout 4000 15,22 14 One of the highest dividend 13,60 12 yield in BIST 3000 10 10,18 8 2000 7,16 6 6,50 6,20 5,83 4,96 4,78 4 1000 3,93 3,85 3,24 2,94 2,98 2 2,31 2,50 1,73 1,58 0,00 0,00 0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2
Slide 41: Tüpraş Balance Sheet
Tüpraş Balance Sheet Million $ 31.12.2017 30.09.2018 Difference % Million TL 31.12.2017 30.09.2018 Difference % Current Assets 5,399 5,050 -349 49 Current Assets 20,366 30,250 9,884 430 Cash & C. Equivalents 2,334 1,662 -671 -29 Cash & C. Equivalents 8,802 9,958 1,156 13 Receivables 1,333 1,556 223
Slide 42: Creating Competitive & Sustainable Shareholder Value
Creating Competitive & Sustainable Shareholder Value Tüpraş has one of the highest Corporate Governance Ratings Foreign Currency Long Term Board 92,9 Tüpraş BB+(Neg.) Ba2 (Negative) Türkiye BB (Neg.) Ba3 (Negative) B+ (Stable) Stakeholders 99,5 Koç Holding Ba2 (Negative) BB- (Stable) Transparency 94
Slide 43: Financial Policy
Financial Policy Financial Discipline: Risk management policies focusing on areas such as leverage, liquidity, counter party risk, interest rate, commodity and currency exposure • Net financial debt/EBITDA • Net foreign currency position/shareholders' equity Threshold • Inventory and crack margin ex
Slide 44: Inventory & Crack Margin Hedge
Inventory & Crack Margin Hedge Operational Hedge: • Maintaining minimum amount of stock required for the refining activities Inventory • Forward Pricing: Purchasing crude oil through forward-priced contracts Hedging Financial Hedge: Proxy Hedging (both crude oil and refined product inventories) Poli
Slide 45: FX Exposure Management (30 September 2018)
FX Exposure Management (30 September 2018) Active management of FX exposure kept Consolidated Consolidated the risk level within our limits. Assets Liabilities Million $ • A significant portion of the Group's crude oil and refined Cash Payables product purchases are denominated in US Dollars. In 1,4
Slide 46: Tüpraş: Growing, Resilient, Profitable
Tüpraş: Growing, Resilient, Profitable Tüpraş is a compelling investment case with strong sales growth, resilient and profitable operational and financial structure. Growing Resilient Profitable • Operating in a diesel short market • Strong balance sheet with no • Benefits from full system optimizat
Slide 47: Outlook
OUTLOOK
Slide 48: 2018 Refinery Maintenance Schedule & Capacity Utilization
2018 Refinery Maintenance Schedule & Capacity Utilization • We are completing our 2018 maintenance schedule with only two remaining maintenances in Q4 • We are planning maintenance in RUP unit in the 1H 2019. We will provide more details in the beginning of 2019. Unit Quarter Duration (weeks) Reason
Slide 49: Future Expectations
Future Expectations Slight revision to our 2018 targets. Brent Price Average Brent price expectation in 2018 is unchanged at 70 - 75 $/bbl Estimation Med Complex Med Complex margin expectation is revised to 4.25 – 4.75 $/bbl in 2018 Margin Tüpraş Net Tüpraş refinery margin expectation is revised to
Slide 50: Competition # 1 (SOCAR-STAR Refinery)
Competition # 1 (SOCAR-STAR Refinery) STAR Refinery (Total Cap. 10 mn ton) Production 2019 mn ton Turkish Balance • Goldman Sachs has acquired a 13 percent stake in SOCAR Turkey for $1.3 billion. Tüpraş Star Total Demand • Goldman Sachs has the right to resell 10 percent of its stakes to Socar, and
Slide 51: Competition # 2 (Regional Competition)
Competition # 2 (Regional Competition) • Tüpraş is competing with 71 refineries in the Mediterranean and Black Sea markets. • Mediterranean regional product balance is also affected from Middle East, North West Europe and Asia. Mediterranean Black Sea 54 Refineries 17 Refineries 7.8mn bpd 1.8mn bpd
Slide 52: Marine Bunker Specification Changes and Its Effects
Marine Bunker Specification Changes and Its Effects IMO, at the meeting held in October 2016, lowered the sulphur emission cap from marine bunkers from 3.5% to 0.5% (5000ppm): effective from 1 January 2020. %2 switch %5 Other to LNG %19 Install Scrubber %74 Buy Low Sulphur Fuel 2016 2020 2022 Ship O
Slide 53: Appendix
Appendix
Slide 54: Crack Margin Effect on Tüpraş in Q3 (FOB Italy Prices)
Crack Margin Effect on Tüpraş in Q3 (FOB Italy Prices) Weighted average of crack margin difference in Q3 2018 over Q3 2017 indicates a -1.3 $/bbl, yielding - 425.2 million TL crack margin impact. Product Price, $/ton Tüpraş Crack Margin, $/bbl 2018 Production 2018 2017 2018 2017 Yields LPG 567 399 3
Slide 55: High Complexity (Resid Upgrading Units Production)
High Complexity (Resid Upgrading Units Production-(Thousand Tons) Raw Materials Products Doğal Gaz 246 Vakum Resid 1,214 Total Production 4,250 Atm. Dip 3,036 Total Feed 4,496 Investor Presentation www.tupras.com.tr APPENDİX 55
Slide 56: Flexibility & Reliability; Multiple routes to maximum capacity
Flexibility & Reliability; Multiple routes to maksimum capacity • Increased conversion capacity • Strong integration among refineries Investor Presentation www.tupras.com.tr APPENDİX 56
Slide 57: Competition (European Pump Price Comparison)
Competition (European Pump Price Comparison) Gasoline (Krş / Lt) Diesel 10 (Krş / Lt) Pump No Tax Distr. Marg. Tax 1200 1200 1250 1400 1.134 1.145 1100 1.048 1.034 1.051 1.077 984 1.008 1.030 1200 1000 942 1000 1.000 1000 924 897 900 854 1000 800 800 686 715 729 494 585 633 621 750 637 663 700 509 6
Slide 58: Tüpraş HSE KPI: Loss Time Incident Frequency and Severity
Tüpraş HSE KPI: Loss Time Incident Frequency and Severity Frequency Ratios loss time incident freaquency rate =number of incident *1000000/man hours loss severity frequency rate = loss time*1000000/man hours Investor Presentation www.tupras.com.tr APPENDİX 58
Slide 59: Koç Holding
Koç Holding Turkey’s Leading Investment Holding Company Turkey’s largest industrial and services group in terms of revenues, exports, employees, taxes paid and market capitalization. Turkey’s Leading Investment Holding Company Combined Revenues / GDP 7% • The only Turkish company in Fortuna 5001 Tot
Slide 60: CTupras
CTupras GO Koc