Empresa Nacional del Petróleo Q3 2015 Investor Presentation Santiago, November 2015
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 & Power 1.4 Exploration & Production 2. Investment Highlights 3. Relevant Financial Metrics 3
ENAP in a Nutshell CHILE direct ownership ENAP Aa3 (Stable) AA- (Stable) A+ (Stable) 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 3,000 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: 133 MM boe (2) Oil production: ~ 38,000 bbl (3) per day Gas production: ~ 19,000 boe per day Gas and Power (G&P) Created in Aug-14 to drive the development of the LNG business and power energy projects. (1) O&G Production as of Sep 30, 2015 / Developed and undeveloped reserves as of Jun 30, 2015. (2) (3) boe: Barrel of Oil equivalent / bbl: Oil barrel (US barrel) Q3 2015 EBITDA by Business Unit Q3 2015 Revenue by Business Unit Downstream Upstream 3% 26% 5% 9% Refining and Marketing (R&M) Exploration and Production (E&P) 71% E&P R&M G&P 86% E&P R&M G&P Gas and Power (G&P) EBITDA Q3 2015 US$ 664,9 MM Revenues Q3 2015 US $ 4,965.8 MM 4
ENAP in a Nutshell Government support evidenced by Relationship with the owner Capital injections US$ 250 MM capital increase in 2008. In May, 2014 President Bachelet announced an Energy Agenda for the country that considered a capital increase of US$ 400 MM for ENAP. This capital injection will be made in conjunction with a Corporate Governance law for the company. The law is expected to be sent for discussion in Congress no later than Q1 2016. Corporate Governance Integration A new Corporate Governance law is in development, in order to give more stability to the company in terms of long-term plans, following best practice of private side. 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. Máximo (Mr. Máximo Pacheco) Pacheco) Dividends The government has has waived its its right right to receive to receive any any dividends dividends for the for past the six past years, six years, strengthening strengthening ENAP s ENAP s capital 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 2015 from CLP 31,999 MM (2014) to CLP 54,115 MM (approx. US$ 90 MM). 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 & Power 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 (%) Q3 2015 - Sales by client (m 3 ) Q3 2015- Sales by refined product (m 3 ) 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 2 Refining capacity Aconcagua Refinery 43% Products Gregorio Refinery 7% Gasoline Fuel Oil Natural Gas Diesel Kerosene Others Biobío Refinery 49% Refining capacity: ~ 230,000 bbl / day 76% 71% 75% 74% 76% 16% 14% 47% 10% 8% 3% 3% 39% 3 Storage Refineries, facilities and oil and gas pipelines 23% 37% 4 Main customers 2011 2012 2013 2014 Q3'15 Copec Petrobras Enex Others Gasoline Diesel Fuel Oil Kerosene LPG Others 7
Undisputed Leadership in the Chilean Market Key strategic asset for Chile ENAP has a dominant position in the domestic refining market, representing up to approximately 40% of Chile s energy matrix and 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. Almost 40% of Chile s energy matrix is supplied by ENAP Refined products Natural Gas Coal Hydroelectricity Firewood and others ENAP s share (Oil + Gas) 14% 14% 15% 12% 15% 15% 15% 17% 18% 19% 12% 13% 12% 9% 5% 7% 15% 13% 13% 12% 13% 16% 17% 19% 13% 13% 12% 11% 47% 48% 40% 38% 33% 32% 31% 47% 49% 47% 46% 43% 43% 43% 2007 2008 2009 2010 2011 2012 2013 Refined oil products market share 100% 100% 100% 100% 47% 43% 71% 67% 71% 66% 62% 58% 19% 16% Diesel Gasoline LPG Fuel Oil Kerosene Other Average sep-14 sep-15 8
Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 US$/bbl US$/bbl Supply and Production Crude Oil Supply by Country [Mm3] Crude Oil Volume Processed (Mm 3 ) Ecuador 37% Brasil 61% 2,810 3,580 3,299 2,886 Angola 2% 1,618 962 1,533 1,456 Total Crude Oil Purchases: 46,555,000 bbl (Q3 2015) / 11 different suppliers ENAP s Refining Margin ( Margen Primo ) (1) Light Medium Heavy Other gross inputs sep-14 sep-15 Refined Products Production (Mm 3 ) 160 140 120 100 80 60 40 20 32 27 22 17 12 7 2,846 2,797 2,688 2,893 457 415 1,023 922 732 673 1,252 1,080 ENAP's Refining Margin ENAP's Oil Cost ENAP's Product Prices Brent Diesel Gasoline LPG Fuel Oil Kerosene Others sep-14 sep-15 (1) 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 & Power 1.4 Exploration & Production 2. Investment Highlights 3. Relevant Financial Metrics 10
Gas & Power Strategy In August, 2014 ENAP created a third business unit, called Gas & Power (G&P), in order to lead initiatives and projects that are going to promote the use of Natural Gas (NG) in the Chilean Energy Matrix, in line with the objectives that were proposed in the Energy Agenda presented on May 2014 by the Government. The two main goals of the G&P division are: Increase the use of NG in power generation, industrial and domestic use. Promote the development of power generation projects, bringing new projects and actors into the power generation market, in order to increase competition and lower energy prices. G&P is organized in three areas : Gas: Its main objectives are to develop the NG market in Chile through the marketing of LNG or natural gas volumes to customers in the industrial, thermoelectric and distribution markets. Power: Its main objectives are to promote and participate in new electricity generation projects; and to support the other two business units on their energy requirements. Projects: Its main objectives are project definition, direction, control, planning, construction overseeing and implementation until completion. ENAP has two different ways to distribute LNG/NG: By pipeline: The LNG that we receive from GNL Quintero is injected as NG to the Electrogas gas pipeline and transported to the Aconcagua Refinery and to other customers. By Virtual pipeline (trucks): Using a 25 trucks fleet, with a capacity of 21 tons each, we can transport daily LNG from Concón to Pemuco (535 kms). ENAP has a 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. GNL Quintero & SRP in Pemuco 535 km G&P in figures Q3 2015 Q3 2015 Revenues and EBITDA 15 MM m3/day 25 Trucks fleet 21 Tons of LNG (per truck) 650 M m3/day Q3 2015 Revenues by client type As of Sep-15 US$ million Revenues 226 21% EBITDA 20,1 EBITDA margin 9% 17% 62% Power Generators Distributors Others 11
Table of Contents 1. ENAP Overview 1.1 ENAP in a Nutshell 1.2 Refining & Marketing 1.3 Gas & Power 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 reached US$ 238.9 MM during Q3 2015 Total crude oil production from ENAP s E&P division represents approximately 15% of the crude oil required by ENAP s refineries Ecuador PBH (100%) MDC (100%) PBHI (100%) Block 3J (100%) Block 28 Chile Magallanes Chile (100%) Egypt East Ras Qattara (50.5%) Argentina Area 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) 29 3 3 28 2 4 Oil 37 38 35 33 3 3 2 2 7 9 11 12 27 Gas 20 21 18 18 19 Argentina 28% Egypt 8% Chile 43% 14 13 14 13 12 13 22 17 15 12 11 13 10 9 10 11 10 10 2010 2011 2012 2013 2014 3Q'15 5 3 6 7 7 6 2010 2011 2012 2013 2014 3Q'15 (1) Developed and Undeveloped reserves Ecuador 21% Jun-15: 132.9 MM boe 13
Table of Contents 1. ENAP Overview 1.1 ENAP in a Nutshell 1.2 Refining & Marketing 1.3 Gas & Power 1.4 Exploration & Production 2. Investment Highlights 3. Relevant Financial Metrics 14
E&P G&P 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 Crude oil storage facilities with an aggregate storage capacity of 1.1 MMm3 LNG Terminal 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$ 188.8 MM during 3Q 2015 Oil reserves of 6.3 MMbbl and gas reserves of 8.4 MMm3 as of Jun-15 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$ 22.8 MM during 3Q 2015 Oil reserves of 15.5 MMbbl and gas reserves of 3.7 MMm3 as of Jun-15 3 blocks in development, 2 blocks in exploration phase Investments of US$ 20.7 MM during 3Q 2015 Oil reserves of 28.8 MMbbl as of Jun-15 Operates under Service Contracts 2 blocks under development and 2 under exploration phase Investments of US$ 6.7 MM during 3Q 2015 Oil reserves of 11.1 MMbbl as of Jun-15 1 block under exploration / development 15
US$/bbl US$/bbl International Market Prices 160 140 Basket 6:2:3:1 vs. ICE Brent (US$/bbl) Basket 6:2:3:1 (US$/bbl) ICE Brent (US$/bbl) 25 20 ENAP is making better use of its refineries given refining margins in the current market and the estimated demand of the contracts in place with our clients. 120 100 15 10 Despite oil price volatility, several factors have helped ENAP s efficiency and operations: Advanced and capable refineries 80 5 Import parity pricing mechanism 60 40 0-5 Active Hedging policy Dominant market share in Chile High-value and quality products 35 25 15 5-5 -15-25 ULSD USGC(US$/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$/bbl) 16
Table of Contents 1. ENAP Overview 1.1 ENAP in a Nutshell 1.2 Refining & Marketing 1.3 Gas & Power 1.4 Exploration & Production 2. Investment Highlights 3. Relevant Financial Metrics 17
Financial Summary Income Statement 2011 2012 2013 2014 2014 2015 Period ended in Dec-11 Dec-12 Dec-13 Dec-14 Sep-14 Sep-15 Summary Income Statement Sales 10,835 11,612 11,211 9,837 7,693 4,966 % growth 32% 7% (3%) (12%) (10%) (35%) COGS (10,663) (11,778) (10,638) (9,358) (7,338) (4,382) Gross profit 172 (166) 573 479 354 584 % margin 2% (1%) 5% 5% 5% 12% SG&A and Distribution cost (85) (88) (270) (247) (181) (211) EBIT 88 (254) 303 231 173 373 % margin 1% (2%) 3% 2% 2% 8% Other income (expense) 16 130 23 97 53 6 D&A 256 292 331 373 192 289 EBITDA 372 57 678 621 468 665 % margin 3% 0% 6% 6% 6% 13% EBITDA (LTM) 372 57 678 621 548 818 Interest expense (171) (195) (192) (172) (127) (139) Net income (67) (319) 134 157 100 240 18
Financial Summary Balance Sheet 2011 2012 2013 2014 2014 2015 Period ended in Dec-11 Dec-12 Dec-13 Dec-14 Sep-14 Sep-15 Summary Balance Sheet Total current assets 2,919 2,778 2,832 1,924 2,409 1,678 Cash & equivalents 284 181 469 154 174 283 Accounts Receivables 852 909 996 702 829 573 Inventories 1,487 1,498 1,301 741 1,229 656 Total non-current assets 3,284 3,534 3,442 3,733 3,532 3,860 Net PP&E 2,672 2,648 2,637 2,753 2,586 2,812 Total assets 6,203 6,312 6,274 5,657 5,941 5,539 Total current liabilities 2,516 2,906 2,239 1,392 1,767 1,091 Short-term debt 1,052 1,142 486 459 461 482 Total non-current liabilities 3,306 3,324 3,804 3,719 3,630 3,660 Long-term debt 2,985 3,013 3,416 3,372 3,295 3,330 Total liabilities 5,822 6,230 6,043 5,112 5,397 4,751 Shareholders' equity 368 70 218 533 531 776 Minority interest 13 13 13 12 13 12 Total equity 381 83 231 546 544 788 19
Financial Summary : Key Financial Ratios Key Financial Ratios (US$ MM) Dec-11 Dec-12 Dec-13 Dec-14 Sep-14 Sep-15 Total debt 4,037 4,155 3,902 3,831 3,756 3,812 Total net debt 3,753 3,974 3,433 3,678 3,582 3,529 EBITDA (LTM) 372 57 678 621 548 818 Interest expense (net) 171 195 192 172 127 139 Income before Taxes -113-488 208 69 23 219 Taxes 46 169-74 87 76 22 Net Profit -67-319 134 157 100 240 Total net debt / EBITDA (LTM) 10.1x 69.6x 5.1x 5.9x 6.5x 4.3x Total net debt / Equity 9.9x 48.1x 14.9x 6.7x 6.6x 4.5x EBITDA / Interest expense 2.2x 0.3x 3.5x 3.6x 3.7x 4.8x Total net debt / EBITDA (LTM) Total net debt / Equity EBITDA / Interest expense 69.6x 48.1x 4.8x 3.5x 3.6x 10.1x 5.1x 5.9x 4.3x Dec-11 Dec-12 Dec-13 Dec-14 Sep-15 14.9x 9.9x 6.7x 6.6x Dec-11 Dec-12 Dec-13 Dec-14 Sep-15 2.2x 0.3x Dec-11 Dec-12 Dec-13 Dec-14 Sep-15 20
Financial Summary: Debt Profile Financial Debt and Supplier Credit (1) (US$ in millions) 4,779 4,998 4,731 742 843 829 4,119 287 3,854 46 4,037 4,155 3,902 3,832 3,808 dec-11 dec-12 dec-13 dec-14 sep-15 Total Financial Debt Supplier's Credit (1) Does not consider MtM (Mark to Market) of derivatives (as of Sep 30, 2015) Maturity profile (US$ in millions) Projects International Bonds Local Bonds ST Bank Debt LT Bank Debt 702 41 600 551 504 300 44 410 367 43 279 39 600 40 500 500 300 73 221 354 145-21 167 21 67 107 145-7 7 4 - - - - 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2033 75% 25% Banks Bonds 21
Relevant Financial Metrics EBITDA and EBITDA margin (US$ in millions) Capital Expenditure (1) (US$ in millions) 402 4.9% Total assets (US$ in millions) 372 3.4% 57 678 621 6.0% 6.3% 665 13.4% 0.5% 2010 2011 2012 2013 2014 Q3'15 EBITDA EBITDA margin 16,0% 14,0% 12,0% 10,0% 8,0% 6,0% 4,0% 2,0% 0,0% 320 286 264 225 243 248 2010 2011 2012 2013 2014 Q3'15 (1) Including only investments in new projects (Maintenance CAPEX is not considered in this chart) Equity (US$ in millions) 6,203 6,312 6,274 5,733 5,657 5,539 2010 2011 2012 2013 2014 Q3'15 788 456 546 381 231 83 2010 2011 2012 2013 2014 Q3'15 22
Highlights 100% State owned, the second largest Chilean state-owned company (in terms of revenues) Q3 2015 Revenues and EBITDA of US$ 4,966 MM and US$ 665 MM, respectively A key strategic asset for Chile and the only refiner in the country Represents approximately 40% of 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