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MarketScreener Homepage  >  Equities  >  NEW ZEALAND STOCK EXCHANGE  >  New Zealand Refining Company Ltd    NZR   NZNZRE0001S9

NEW ZEALAND REFINING COMPANY LTD

(NZR)
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New Zealand Refining : Margin & Throughput Report - July/August 2017

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09/27/2017 | 08:50pm EST

28 September 2017

Announcement to NZX Refining NZ Throughput and Margin Report for July/August 2017 Processing Fee Revenue

Refining NZ achieved a Gross Refinery Margin1) (GRM) of USD 8.87 per barrel for the July/August operating period and captured Processing Fee income of NZD 63.6 million, compared with NZD 41.3 million for the corresponding period last year. Year to date Processing Fee income is NZD 216.1 million which is 38% higher than the NZD 156.4 million earned in the equivalent 2016 period.

Throughput for the July/August operating period was 7.5 million barrels which represents another good operational performance enabled by 100% availability of all major process units and high customer utilisation.

The Singapore Dubai complex margin for the July/August period was USD 4.70 per barrel, almost US$2/bbl higher than the May/June period driven by sustained high demand for refined products and low crude oil prices. Refining NZ's uplift over the Singapore Dubai complex margin remained strong at USD 4.17 per barrel.

The average exchange rate for the July/August period was USD/NZD 0.73. Appendix I shows further information on throughput, margin and refining income. Refinery to Auckland Pipeline Leak

On 18 September 2017 we advised the market that the Company had suffered a leak on the refinery to Auckland pipeline. The impact of this event is not covered in this operating period; it will be reflected in the throughput and margin report for the September/October 2017 operating period.

Historical Analysis

A five year history of Throughput, Margins and Processing Fees is attached as Appendix II and can also be found on the company's website: www.refiningnz.com

1) Refining NZ's Gross Refining Margin is defined as the typical market value of the products produced minus the typical market value of the feedstock used, expressed per barrel of feedstock used. The margin incorporates the cost of the hydrocarbon used for fuel and incurred as process losses.

Appendix I - Year to date: 2017 Throughput, Margin and Refining Income Jan/Feb

Throughput

Barrels (million)

7.16

6.58

Gross Refining Margin

USD (million)

47.1

Gross Refining Margin (excluding Floor/Cap)

USD (million)

47.1

6.58

Interim Cap adjustment

NZD (million)

0.0

Processing Fee (after Floor/Cap)

USD (million)

33.0

4.60

Processing Fee (excluding Floor/Cap)

NZD (million)

45.9

Processing Fee (after Floor/Cap)

NZD (million)

45.9

Total per bbl

Throughput

Barrels (million)

5.14

9.35

Gross Refining Margin

USD (million)

48.1

Gross Refining Margin (excluding Floor/Cap)

USD (million)

48.1

9.35

Interim Cap adjustment

NZD (million)

0.0

Processing Fee (after Floor/Cap)

USD (million)

33.6

6.54

Processing Fee (excluding Floor/Cap)

NZD (million)

48.1

Processing Fee (after Floor/Cap)

NZD (million)

48.1

Mar/Apr

Throughput

Barrels (million)

7.76

7.63

Gross Refining Margin

USD (million)

59.2

Gross Refining Margin (excluding Floor/Cap)

USD (million)

59.2

7.63

Interim Cap adjustment

NZD (million)

0.0

Processing Fee (after Floor/Cap)

USD (million)

41.4

5.34

Processing Fee (excluding Floor/Cap)

NZD (million)

58.4

Processing Fee (after Floor/Cap)

NZD (million)

58.4

May/Jun

Throughput

Barrels (million)

7.51

8.87

Gross Refining Margin

USD (million)

66.6

Gross Refining Margin (excluding Floor/Cap)

USD (million)

66.6

8.87

Interim Cap adjustment

NZD (million)

0.0

Processing Fee (after Floor/Cap)

USD (million)

46.6

6.21

Processing Fee (excluding Floor/Cap)

NZD (million)

63.6

Processing Fee (after Floor/Cap)

NZD (million)

63.6

Jul/Aug

Note: The GRM for a period may be above or below the Cap of USD 9.00 per barrel due to previous year price updates, which are not subject to the Floor/Cap in the current year

Explanatory Note Throughput

Throughput is the volume of feedstock intake, comprising crude oil, residues, natural gas and blendstock, measured in barrels. One barrel equates to approximately 159 litres.

Gross Refining Margin

The Gross Refining Margin is calculated in USD as the difference between the value of products and the cost of feedstock for each refining customer. The value of products use Singapore quoted prices adjusted for New Zealand quality and the cost of importing those products to New Zealand. Feedstocks are valued using the notional market values adjusted for the cost of getting the feedstock to the refinery. The Gross Refining Margin incorporates the cost of hydrocarbon used as fuel and incurred as process losses.

Typically, Refining NZ has an uplift over the Singapore complex margins of around USD 3.00 to 4.00 per barrel. The value of the uplift varies due to fluctuations in freight rates, product quality premia, crude market premia and operational performance. Product quality premia are the cost differentials between products made to New Zealand quality and products made to the quality that applies to quoted prices in Singapore. Crude market premia are the cost differences between the crude types actually processed at Refining NZ and Dubai (used as basis for the Singapore complex margins).

Margin Cap/Fee Floor Adjustment

The processing agreements with our customers contain both Floor and Margin Cap clauses, both effective over a full calendar year.

The Fee Floor is the minimum Processing Fee due, for a calendar year, up to a current maximum of NZD 131 million. If the year-to-date Processing Fee is below the pro-rata Fee Floor, then an interim pro-rata Fee Floor payment is made by the Customers. Should the Processing Fee exceed the Fee Floor in future months any pro-rata Fee Floor payments that have been made are repaid to the Customers.

The Margin Cap limits the Gross Refining Margin for each customer to a maximum of USD 9.00 per barrel over the calendar year. Should the Gross Refining Margin fall below the Cap in future months any pro-rata Cap reductions that have been made are repaid by the Customers.

The Cap and the Floor are subject to year-to-date adjustments.

Any balance remaining at the end of the year cannot be carried over to the next year.

Gross Refining Margin after Cap/Floor

The Gross Refining Margin adjusted for any impacts of the Cap or Floor.

Processing Fee

The Processing Fee is 70% of the Gross Refining Margin after any adjustment for the Cap or Floor. The Processing Fee is paid by our customers in NZD.

Notes:

  1. The information provided in this announcement relates to refining operations only. Revenue from pipeline or other activities is not included.

  2. The Processing Fee results reported in this announcement are subject to change due to post announcement price updates and independent audit.

Appendix II - Historical Analysis Intake/Production, Gross Refining Margin and Processing Fee

2013

2014

2015

2016

2017

Jan/Feb

Barrels 000's

6,786

6,740

7,056

6,826

7,160

RNZ USD GRM per barrel 1)

4.18

3.86

9.91

7.96

6.58

Singapore Dubai Complex GRM

3.45

0.70

5.40

4.95

3.42

Uplift vs. Singapore Dubai Complex 3)

0.73

3.16

4.51

3.01

3.16

NZD Processing Fee (million) 2) 4)

23.7

22.0

59.6

57.0

45.9

Mar/Apr

Barrels 000's

7,151

6,146

7,411

7,471

5,140

RNZ USD GRM per barrel 1)

5.03

-2.84

8.77

1.84

9.35

Singapore Dubai Complex GRM

2.73

1.36

4.82

3.18

3.02

Uplift vs. Singapore Dubai Complex 3)

2.30

-4.20

3.95

-1.34

6.33

NZD Processing Fee (million) 2)

30.0

20.7

62.3

14.8

48.1

May/Jun

Barrels 000's

7,048

6,976

6,416

6,837

7,755

RNZ USD GRM per barrel 1)

6.84

3.48

8.55

6.26

7.63

Singapore Dubai Complex GRM

2.92

0.10

4.24

2.13

2.90

Uplift vs. Singapore Dubai Complex 3)

3.92

3.38

4.31

4.13

4.73

NZD Processing Fee (million) 2)

41.8

21.1

48.9

43.3

58.4

Jul/Aug

Barrels 000's

7,194

6,298

7,519

6,833

7,511

RNZ USD GRM per barrel 1)

6.05

6.75

7.66

6.20

8.87

Singapore Dubai Complex GRM

2.42

-0.55

2.52

1.86

4.70

Uplift vs. Singapore Dubai Complex 3)

3.63

7.30

5.14

4.34

4.17

NZD Processing Fee (million) 2)

38.5

21.3

63.5

41.3

63.6

Sept/Oct

Barrels 000's

6,730

6,388

7,221

7,251

RNZ USD GRM per barrel 1)

2.95

7.54

9.47

7.49

Singapore Dubai Complex GRM

-1.58

2.54

5.12

3.18

Uplift vs. Singapore Dubai Complex 3)

4.53

5.00

4.35

4.31

NZD Processing Fee (million) 2)

16.8

21.0

71.8

52.5

Nov/Dec

Barrels 000's

5,693

7,127

7,017

7,447

RNZ USD GRM per barrel 1)

1.82

9.98

10.82

9.20

Singapore Dubai Complex GRM

-0.22

4.48

6.37

4.19

Uplift vs. Singapore Dubai Complex 3)

2.04

5.50

4.45

5.01

NZD Processing Fee (million) 2)

8.8

62.4

73.0

67.6

Total

Barrels 000's

40,602

39,676

42,639

42,665

27,566

USD GRM per barrel 1)

4.58

4.96

9.20

6.47

8.01

NZD Processing Fee (million) 2)

159.7

168.4

379.2

276.6

216.1

YTD Cap adjustment

NZD Processing Fee (million) 1)

14.4

  1. Excludes Fee Floor/Cap adjustment

  2. Includes Fee Floor/Cap adjustment

  3. RNZ uplift vs. Singapore Dubai Complex GRM i s in USD per barrel

  4. Jan/Feb 2017 excludes a prior period adjustment of ($1.5m)

The New Zealand Refining Company Limited published this content on 28 September 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 28 September 2017 00:49:02 UTC.

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