2014 Full Year Result 20 February 2015

Transcription

1 2014 Full Year Result 20 February

2 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 and uncertainties associated with the refining environment, including price and foreign currency fluctuations, production results, demand for Refining NZ s services and other conditions. Forward looking statements are based on management s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward looking statements include among other things, statements concerning the potential exposure of Refining NZ to market risk and statements expressing management s expectations, beliefs, estimates, forecasts, projections and assumptions. Forward looking statements are identified by the use of terms and phrases such as anticipate, believe, could, estimate, expect, goals, intend, may, objectives, outlook, plan, probably, project, risks, seek, should, target, will and similar terms and phrases. Readers should not place undue reliance on forward looking statements. In light of these risks, results could differ materially from those stated, implied or inferred from the forward looking statements contained in this announcement. Each forward looking statement speaks only as of the date of this announcement, 20 February Disclaimer for IHS Energy information IHS Energy disclaims any and all liability associated with any proprietary IHS Energy information used in this presentation. The IHS Energy information herein are for presentation purposes only. Attendees are advised to use their own judgment and due diligence to verify such information. 2

3 Overview Results Looking forward 2015/16 3

4 Overview Results Looking forward 2015/16 4

5 Improving safety performance Personal Safety 2014 Process Safety 2014 Frequency per million man hours worked* LTIF 1.75 TRCF LTIF 1.23 TRCF 7.39 LTIF 0.96 NZ Peer Group ** TRCF 4.31 Frequency per million man hours worked* Tier Tier Total 1.68 Tier Total 1.85 Tier Tier Tier Benchmark (2013 Concawe) Total 1.44 * Frequency Rates include all hours worked including contractor staff ** Source: Business Leaders Health & Safety Forum Benchmarking Report 5

6 2014 was a game of two halves H1 H2 Gross Refinery Margin Operational availability 88.4% 98.7% Operational cash flow* ($m) (19.1) 70.3 Crude price (USD/bbl) Exchange rate (USD) * Operational cash flow pre fee floor payment and BAU CAPEX 6

7 2 nd Half margins, Growth Initiatives and Cost Savings lead to a positive NPAT result NPAT 2013 to 2014 NZ$ million (5) Shutdown (15) External market - 1H External market - 2H Initiatives 13 Costs 5 One offs DFT 8 (8) Net Loss After Tax 2013 (45) 57 FACTS AT A GLANCE FY 14 FY 13 Intake (million barrels) 39,676 40,602 GRM (US$/barrel) Exchange rate (US$/NZ$) Net Profit After Tax

8 Jan/Feb Mar/Apr May/Jun Jul/Aug Sep/Oct Nov/Dec Jan/Feb Mar/Apr May/Jun Jul/Aug Sep/Oct Nov/Dec Dubai margins driven by good product demand and low crude prices PRODUCT SPREADS VS. DUBAI US$/barrel 25 Mogas 95 Jet AGO 50 FO Product spreads are holding up Good gasoline and diesel demand Product prices lag crude Fuel oil more competitive vs. alternatives Dynamics are improving margins Lower cost of fuel (5% fuel at $50/bbl = $2.50/bbl margin) Fuel oil strength driving up hydroskimming margin 8

9 Excess (light) crude driving our crude costs versus Dubai Jan/Feb Jan/Feb Mar/Apr Mar/Apr May/Jun May/Jun Jul/Aug Jul/Aug Sep/Oct Sep/Oct Nov/Dec Nov/Dec Jan/Feb Jan/Feb Mar/Apr Mar/Apr May/Jun May/Jun Jul/Aug Jul/Aug Sep/Oct Sep/Oct Nov/Dec Nov/Dec CRUDE DIFFERENTIALS VS. DUBAI US$/barrel Arab Light Brent Murban Brent Dubai spread and crude premiums under pressure CRUDE BASKET VS. DUBAI US$/barrel ~US$4.50/bbl leading to lower cost of RNZ s crude basket versus Dubai ~40% of RNZ crude prices off Brent

10 All planets aligned in the second half RNZ crude versus Dubai 0.68 margin initiatives 0.40 residue de-stocking US$3-4/bbl US$5.90/bbl 0.60 lower fuel and loss 0.50 product lag 10

11 Delivered $3m more cost savings than the $7m promise 11

12 Focus on organisational effectiveness Lean Strategic alliances Talent management Coaching and mentoring 12 12

13 Our competitive position improved markedly.. GRM (US$/bbl) Nov/Dec $9.00 $8.00 Sep/Oct $7.00 $6.00 $5.00 Competitive Jul/Aug 2013 $4.00 $3.00 Not competitive Mar/Apr Jan/Feb May/Jun $30 $40 $50 $60 $70 $80 $90 $100 $110 $120 Crude price (Dubai, US$/bbl) (realised GRM excluding Floor & Shutdown effects) [+/- Days stock] 30% * Y == WACC * X * 30 + $1.10 [Customer] 365 [+/- Product freight] 13

14 No final dividend payable Prudent in the current volatile environment to return gearing from end of year 33% to target range Dividend policy The declaration and amount of any dividend is at the sole discretion of the Directors at that time and is dependent on many factors including debt levels relative to Refining NZ s targeted 10-20% gearing (D/(D+E)) ratio, profitability, cash flow requirements, financial conditions and tax imputation credits. The aspiration is to pay top quartile NZX50 dividend returns over the investment cycle, specifically: During periods leading up to and including major capital expenditure the dividend pay-out expressed as a percentage of NPAT will be in the 40-60% range unless otherwise advised by the Directors. During periods of modest capital expenditure and optimum debt levels, the dividend pay-out percentage will be above 60% unless otherwise advised by the Directors. 14

15 Overview Results Looking forward 2015/16 15

16 Fracking drives a new dynamic More immediate response to price signal undermines OPEC s price setting capability [1] 3 Mbbl/day of oil production is looking for a home [2] US rig count dropping in response to oil price decline Source: IHS Energy [3] Fracking costs vary and cost innovation will push the curve down Source: Baker-Hughes [4] 3-6 month non-opec well development with 2-3 year well life expectation will drive new price dynamic Source: Goldman Sachs 16

17 Assuming a $50/bbl 2015 Positive Lower fuel cost ($2.50/bbl) Lower Brent-Dubai premium ($1.00/bbl) Fuel oil competitiveness Refinery capex squeeze and delays Negative TMH Reactor Product lag played out TMH uplift down to $ /bbl ECA sulphur specifications NZ$ exchange rate 800 kbbl/d new ME refinery capacity but we live in an extremely volatile world 17

18 TMH to plan and robust in today s world Excellent progress continues Commission as planned (Dec 2015) On budget (spend to date ~$303m) Economics robust TMH Reactor Market: Reference (2016/25 ave) Today Crude price (US$/bbl) Gasoline - Dubai (US$/bbl) NZ$ vs US$ (2015+) 0.77 > > 0.66 Outcomes: Pre-TMH GRM (US$/bbl) TMH GRM uplift (US$/bbl) Operating cash flow (NZ$m/a) - Pre-TMH GRM uplift - TMH GRM uplift ~60 ~75 ~52 For more details and sensitivities please refer to 2012 Notice of Meeting Explanatory Notes at 18

19 Growth going forward Business enhancing initiatives continue in 2015/16 Activity Margin uplift (USD bbl) Delivering from HCU Ammoniation Process unit initiatives CO 2 facility (BOC) not in GRM 2015 TMH More natural gas H2 Bigger crude cargoes Post TMH initiatives (being developed) /17 19

20 2015 matrix NPAT and borrowings USD Exchange Rate GRM USD (27) (27) (27) (27) (27) (25) (27) (27) (27) (27) (2) (10) (17) (23) NPAT, $m Borrowings, $m (pre dividend) Throughput (Mbbl) Capex ex TMH ($m) Shutdowns PFU/CDU1 HCU TBS* - Units - Timing Q2 Q1 - Duration ~3 ~2 (weeks) *Hydrocracker unit top bed skim Production: (Barrels ('000's) 63 Non Processing Fee Revenue, $m 70 Depreciation, $m 20

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22 Appendix I Reconciliation of Non-GAAP information Costs used to measure the delivering of our cost promise represent total cash operating costs incurred by the Parent Company. This is reconciled to the audited financial statements as follows: $000 $000 $000 Operating costs for promise Allowance for structural cost increases * (5) - - Other operating losses 3-1 Depreciation and disposal costs Finance costs Total costs - Parent Company Audited Financial Statements (note 3) * As described in August 2013 analyst briefing 22

23 Appendix 2 Reconciliation of Non-GAAP information Cash generated from operations relates to the Parent company, prior to adjustments for the floor. This is reconciled to the financial statements as follows: H1 H2 Full Yr $000 $000 $000 Cash generated from operations (19,152) 70,300 51,148 Floor payments Parent company cash generated from operations 31,468 12,316 (31,468) 38, ,148 Consolidated entries (658) 1,670 1,012 Group cash generated from operations 11,658 40,502 52,160 23

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