Q3 Investor Call. September 2016

Transcription

1 Q3 Investor Call September 2016

2 Disclaimer This presentation has been prepared by Corral Petroleum Holdings AB (publ) and/or its subsidiaries and affiliates ( Corral ). The information contained in this presentation is for information purposes only. Among other things, this presentation is intended to be used in connection with a scheduled international conference call for investors and analysts to be held on December 5, 2016 at 4:00 pm CET. The callin number is and the meeting code is Preem. The conference call will also be available for replay for a limited time beginning on December 6, 2016 with access information to be posted via the "Press and Notices" heading of the Corral investors section of Preem's website at The information contained in this presentation is not intended to be used as the basis for making an investment decision. You are solely responsible for seeking independent professional advice in relation to the information. This presentation is not and does not constitute an offer to sell or the solicitation, invitation or recommendation to purchase any securities in the United States or any other jurisdiction. Securities may not be offered or sold in the United States absent registration under the Securities Act of 1933 (the Securities Act ) or an exemption from registration. This presentation may not be reproduced, disseminated, quoted or referred to, in whole or in part. This presentation speaks as of the date of this presentation. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. Neither the shareholders of Corral nor any directors, officers, employees, agents or representatives of Corral, provide, grant or state, any representation, warranty, guarantee, undertaking or obligation, whether express or implied and whether by operation of law or otherwise, regarding or in relation to the completeness or the accuracy of the information contained in this presentation, and they are under no obligation to update or keep current the information contained in this presentation, to correct any inaccuracies which may become apparent, or to publicly announce the result of any revision to the statements made herein except where they would be required to do so under applicable law, and any opinions expressed in this presentation are subject to change without notice. No liability whatsoever for any loss, howsoever arising, from any use of this presentation or its contents is accepted by any such person in relation to such information. Certain financial data included in the presentation are non-ifrs financial measures. These non-ifrs financial measures may not be comparable to similarly titled measures presented by other entities, nor should they be construed as an alternative to other financial measures determined in accordance with International Financial Reporting Standards ( IFRS ). Although Corral believes these non-ifrs financial measures provide useful information to users in measuring the financial performance and condition of its business, users are cautioned not to place undue reliance on any non-ifrs financial measures and ratios included in this presentation. This presentation contains forward-looking statements. Examples of these forward-looking statements include, but are not limited to statements of plans, objectives or goals and statements of assumptions underlying those statements. Words such as may, will, expect, intend, plan, estimate, anticipate, believe, continue, probability, risk and other similar words are intended to identify forward-looking statements but are not the exclusive means of identifying those statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that such predictions, forecasts, projections and other forward-looking statements will not be achieved. A number of important factors could cause our actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. Past performance of Corral cannot be relied on as a guide to future performance. Forward-looking statements speak only as at the date of this presentation. Corral, its agents and advisors and all of their employees expressly disclaim any obligations or undertaking to release any update of, or revisions to, any forward-looking statements in this presentation. No statement in this presentation is intended to be a profit forecast. As such, undue influence should not be placed on any forwardlooking statement. By attending this presentation or by reading the presentation slides, you are agreeing to be bound by the foregoing limitations and restrictions and, in particular, will be deemed to have represented, warranted and undertaken that you have read and agree to comply with the contents of this disclaimer. 2

3 Highlights Weighted refining margin for the third quarter of 2016 was 3.25 $/bbl compared to 7.95 $/bbl in the third quarter of The global inventory levels remain on high levels and continue to keep the diesel margin under pressure. Stable results from the Marketing division where higher diesel margins are due to high profitability from HVO Cash flow from operating activities for the third quarter of 2016 was 747 MSEK compared to 560 MSEK in the third quarter of 2015 On November 28, 2016 Preem performed the calculations necessary under Preem s Credit Facility to upstream excess cash to Corral Petroleum Holdings with respect to the upcoming January 1, 2017 interest payment on the Notes, including the minimum liquidity test. The calculation showed an outcome that was satisfactory VDU project and investment according to plan Norway up and running with a depot in Sandefjord, still a minor operation with limited financial impact Beowulf environmental permit application is planned to be submitted in the last quarter of

4 Market Outlook Brent Crude Comments Supply/Demand XXXXXXXXXX Oil markets had been in a bearish mood for two main YYYYYYYYYYY reasons : ZZZZZZZZZ Excess physical supply weighing down on benchmarks -- higher Opec output and lower China crude oil demand. Source: Nasdaq Market actors looking for positive signals -- however, the recently reported Opec deal could provide enough positive sentiment to support prices until the market naturally rebalances later in 2017 Surplus stocks reduced by an average of 0.7 MBD in 2Q and 3Q 16 Surplus stocks expected to be gone by the end of 2Q thereafter the global markets are expected to face a supply deficit Source: PIRA 4

5 Products Gasoline crack spread Diesel crack spread HS Fuel oil crack spread $/bbl Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec $/bbl Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec $/bbl Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec yr Range ( ) yr Average ( ) 5 yr Range ( ) yr Average ( ) 5 yr Range ( ) yr Average ( ) Source: Platts

6 Refining Margin and Production (+ LTM 2016) Refining margin Production $/bbl 000's bbls 8, ,0 6,0 5,0 4,0 10 yr: 4,65 $/bbl LTM Q3-16: 4,01 $/bbl 5 yr: 4,55 $/bbl yr: 110,017 10yr: 109,041 LTM Q , , Refining margin ($/bbl) 10 year average 5 year average Production 10 year average 5 year average

7 Q3 Financial Summary September 2016

8 Group Q3 16 Results Revenue (MSEK) (a) Revenue Change LTM: (26)%, Q3: (18)% Comments Revenue The impact of decreasing crude oil prices main reason behind the decreased revenues Lower throughput (approximately 8% lower in Q compared to Q3 2015), driven by Lysekil Iso-cracker maintenance in 2016 and lower margins Q3 LTM Q3 Adjusted EBITDA Adj EBITDA (a) change LTM: (48)%, Q2: (69)% Adjusted EBITDA (a) Refining margin for the third quarter of 2016 was 3.25 $/bbl compared to 7.95 $/bbl in the third quarter of Lower diesel and gasoline crack main reason behind the lower margin Adj EBITDA margin (% of revenue) Q3 Q3 15: 11.1% LTM 15: 7.7% LTM Q3 Q3 16: 4.2% LTM 16: 5.4% (a) As defined in the Corral Petroleum Holdings AB (publ) report for the third quarter ended 30 September

9 Supply & Refining Segment Throughput (000 bbls) (8)% (4)% Q3 15 Q3 16 LTM Q3 15 LTM Q3 16 Average Brent Crude Price ($/bbl) (a) (11)% (30)% 50,47 60,60 44,89 42,25 Comments Throughput Maintenance of the Lysekil Iso-cracker reduced throughput in Q3 2016, combined with lower margins. Given high utilization levels throughout 2015, a greater focus on deferred maintenance in LTM Q Average Brent Crude Price (a) During the third quarter of 2016, the price of Dated Brent initially trended downwards to a low of 40 $/bbl in the beginning of August before climbing to almost 50 $/bbl. The quarter ended at 48 $/bbl Data showing reduced crude oil production in the non-opec countries and increased demand supported the crude oil price Q3 15 Q3 16 LTM Q3 15 LTM Q3 16 Refining Margin($/bbl) (a) (59)% (42)% 7,95 6,90 3,25 4,01 Refining Margin The decrease in operating profit was mainly due to weak margins, especially driven by the diesel crack. The global inventory levels remain on high levels and continue to keep the diesel margin under pressure. (a) Q3 15 Q3 16 LTM Q3 15 LTM Q3 16 Please see the Appendix for definitions 9

10 Marketing Segment Revenue (MSEK) (9)% (14)% Q3 15 Q3 16 LTM Q3 15 LTM Q3 16 Marketing EBITDA (MSEK) (a) 47% 9% Comments Revenue Sales volumes increased 1% quarter over quarter while crude oil and refined product prices reduced over the period Marketing EBITDA (a) Q3: Quarterly Marketing EBITDA was higher due to higher product margins (especially diesel) and slightly increasing volumes LTM Q3: Increased earnings is attributable to higher diesel margins mainly due to high profitability from HVO (hydrogenated vegetable oil). HVO is tax exempt in Sweden and currently the profitability on HVO products is relatively high within the Swedish market, the effect YTD 2016 is 160 MSEK, vs 60 MSEK YTD 2015 Sales volumes +2% in the LTM Q3 period Adj EBITDA margin (% of revenue) Q3 15 Q3 16 LTM Q3 15 LTM Q % 5.0% 3.2% 4.1% (a) Please see the Appendix for definition 10

11 Cash Flow (MSEK) Q3 15 Q3 16 LTM Q3 15 LTM Q3 16 Profit before taxes Adjustments for items not included in cash flow Tax paid Decrease(+)/Increase(-) in inventories Decrease(+)/Increase(-) in operating receivables Decrease(-)/Increase(+) in operating liabilities Changes in working capital Cash flow from operating activities Cash flow used in investing activities Amortization/Raising of loans Loan expenditure Cash flow used in financing activities Comments Adjustments not included in cash flow are primarily deprecation and unrealized FX effects and write downs of inventory (or reversals) Crude oil prices are the main driver of the change in working capital. Additionally, inventory volumes as at September 2016 totalled 2.5 million m 3 vs 2.2 million m 3 in Q Isolated Q3 2016, the increased inventory value is offset by the liabilities. Capex development is detailed on page 12 The loan expenditures of 679 MSEK relates to the refinancing of both Preem AB and Corral Petroleum Holdings which was completed in May Cash flow used in financing activities is mainly attributable to scheduled repayment of loans as well as (net) repayment of loans under Preem s revolving credit facility Cash flow for the period

12 Capital Expenditures Capex by Purpose (MSEK) (a) Comments Specific Projects A new Vacuum Distillation Unit at Preemraff Lysekil 129 MSEK LTM Q3 2016, project is on-going GHT (Green Hydro Treater) project in Gothenburg 255 MSEK LTM Q Incremental Improvements ERP (Enterprise Resource Planning) implementation 104 MSEK LTM Q3 2016, three steps sequential planned go-live during 2017 and Q3 15 Q3 16 LTM Q3 15 LTM Q3 16 Recurring maintenance Incremental improvements Specific projects Recurring maintenance A replacement of the subheader HPU (Hydrogen Production Unit) Preemraff Lysekil (107 MSEK) Recurring maintenance in the station network (17 MSEK) Future investments In November the Preem Board approved a 635 MSEK investment in a Hydrogen Production Unit at the Gothenburg refinery. This attractive profitability investment, which we expect will be mechanically complete by the end of 2018, is designed to further increase the refinery s desulphurization capacity and allow increased production of renewable diesel in Gothenburg (a) Shown on a gross basis. 12

13 Simplified capital structure Current Cap Structure at the end of Q3 16 Term Loan - Fully Paid MSEK $M USD (a) x Adjusted EBITDA (b) Cash (88) (10) (0.0)x RCF 5, x TLA 0.0x Overdraft facility & Other interest bearing liabilities Total net debt at Preem x 5, x 2021 Corral Notes 5, x Cash (445) (53) (0.2)x Total 3rd party debt (c) 11,223 1, x (a) Based on period end 30 September 2016 exchange rate of 8.62 SEK/USD (b) Based on LTM Q Adjusted EBITDA of $329m (2,834 MSEK) (c) Excludes deeply subordinated debt held by our ultimate shareholder Q1 16 Q2 16 Q

14 Liquidity Reserves $M USD LTM Q3 16 Drawdown RCF Availability and Cash The Minimum Liquidity Test was successfully performed in November 2016, showing 30 day average liquidity at $364 million and liquidity on the Confirmation Date at $453 million (please see appendix for definitions) The upstream of cash to Corral is expected to be 43.2 MEUR and 39.5 MSEK respectively The segregated accounts in Corral at September 30, 2016 amounted to EUR account 41.5 MEUR and the SEK account 51.9 MSEK Note: Drawndown and availability figures are not IFRS measures and are based on month end values averaged over the course of the year. In part, these values are internal calculations based on variables that are subjectively determined and which may not be comparable in approach to similar calculations of other companies 14

15 QUESTIONS?

16 Definitions Definitions Average Brent crude prices means the average daily spot prices as quoted by for the indicated financial quarter and last trailing twelve month period. (Corporate) Adjusted EBITDA is not an IFRS measure and consists of corporate staff and overhead costs, excluding depreciation Listing Prospectus means the prospectus of Corral Petroleum Holdings AB (publ) dated May 31, 2016, relating to Corral's 570 million % / % Senior PIK Toggle Notes due 2021 and SEK 500 million % / % Senior PIK Toggle Notes due 2021, which as filed and viewable on the website of the Luxembourg Stock Exchange. Marketing EBITDA is not an IFRS measure and consists of the EBITDA of our Marketing % Sales segment which includes the operating profit and the depreciation of our Marketing & Sales segment, as described in Note 4 to our consolidated financial statements. Minimum Liquidity Test refers to a test required under Preem's revolving credit facility before cash may be upstreamed to Corral Petroleum Holdings. The Minimum Liquidity Test is to be performed at a confirmation date 32 days prior to the proposed upstreaming of cash and requires that, pro forma for the proposed upstreaming of cash, Preem has more than $100 million of minimum liquidity in cash, cash equivalents and/or certain drawings available under the RCF for an average of 30 days prior to, and on, the confirmation date. For more details of the relevant permitted payment mechanisms under Preem's revolving credit facility, please see the section of the Listing Prospectus titled "Description of Other Financing Arrangements A&R Credit Facility Restrictions on Upstreaming of Cash." RCF or revolving credit facility means Preem's Amended and Restated Credit Facility as currently in effect at the date of this presentation. Refining margin as used in this presentation is a weighted average that measures the ability of a refinery to cover the variable refining costs of its refining process in addition to the cost of crude oil purchases. Variable refining costs consist of volume-related costs, such as the cost of energy, catalysts, chemicals and additives. Supply & Trading EBITDA is not an IFRS measure and consists of the of the EBITDA of our Supply and Refining Segment, and the trade of crude oil and refined products both to our Marketing & Sales segment as well as to third parties and also includes costs for our depot storage network 16