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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 : NZR - Throughput and Margin Report September-October 2018

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11/15/2018 | 09:29pm EST

16 November 2018

Announcement to NZX

Refining NZ Throughput and Margin Report for September/October 2018

Processing Fee income for the September/October period was strong at NZD 57.8 million, underpinned by a Gross Refinery Margin3) (GRM) of USD 7.09 per barrel for the period and throughput of 7.64 million barrels - the second-highest in Refining NZ's history.

The Singapore Dubai complex margin for the September/October period was USD 2.47 per barrel, 10 cents lower than the July/August period. Refining NZ's uplift over the Singapore Dubai complex margin was healthy at USD 4.62 per barrel in September/October. Refining NZ's balanced product slate enabled it to achieve a healthy margin notwithstanding current global pressure on gasoline margins. The average exchange rate for the September/October period was USD/NZD 0.66. Appendix I shows further information on throughput, margin and refining income.

Natural Gas supply in the New Zealand market is currently under pressure as a result of unplanned field outages. Due to Refining NZ's ability to use multiple fuel sources, this is not expected, at this stage, to have a material impact on the Company.

The Company is currently undertaking a review, to "Refine its Future"; identifying opportunities to leverage its strategic advantages and core competencies, to deliver improved shareholder returns over the medium and longer term.

The emergence of multiple technical pathways to carbon neutral transportation fuels, including electric vehicles, hydrogen and biofuels could open up new opportunities for Refining NZ. The potential opportunities, including adjacencies, will be further explored over the coming months. An update on the insights arising from the review, including details of the longer term strategy, will be provided to the market in due course.

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

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.

  • 3. 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: 2018

Throughput, Margin and Refining Income

Totalper bblJan/Feb

Throughput

Barrels (million)

Gross Refining Margin

USD (million)

Gross Refining Margin (excluding Floor/Cap) Interim Cap adjustment

USD (million)

NZD (million)

Processing Fee (after Floor/Cap) Processing Fee (excluding Floor/Cap) Processing Fee (after Floor/Cap)

USD (million)

NZD (million)

NZD (million)

7.01

52.8

52.8

0.0

37.0

50.8

50.8

7.54 7.54 5.28

Mar/Apr

Throughput

Barrels (million)

Gross Refining Margin

USD (million)

Gross Refining Margin (excluding Floor/Cap) Interim Cap adjustment

USD (million)

NZD (million)

Processing Fee (after Floor/Cap) Processing Fee (excluding Floor/Cap) Processing Fee (after Floor/Cap)

USD (million)

NZD (million)

NZD (million)

6.96

47.5

47.5

0.0

33.2

45.8

45.8

6.82 6.82 4.77

May/Jun

Throughput

Barrels (million)

Gross Refining Margin

USD (million)

Gross Refining Margin (excluding Floor/Cap) Interim Cap adjustment

USD (million)

NZD (million)

Processing Fee (after Floor/Cap) Processing Fee (excluding Floor/Cap) Processing Fee (after Floor/Cap)

USD (million)

NZD (million)

NZD (million)

3.91

0.7

0.7

0.0

0.5

0.7

0.7

0.18 0.18 0.13

Jul/Aug

Throughput

Barrels (million)

Gross Refining Margin

USD (million)

Gross Refining Margin (excluding Floor/Cap) Interim Cap adjustment

USD (million)

NZD (million)

Processing Fee (after Floor/Cap) Processing Fee (excluding Floor/Cap) Processing Fee (after Floor/Cap)

USD (million)

NZD (million)

NZD (million)

7.62

52.2

52.2

0.0

36.6

54.3

54.3

6.86 6.86 4.80

Sep/Oct

Throughput

Barrels (million)

Gross Refining Margin

USD (million)

Gross Refining Margin (excluding Floor/Cap) Interim Cap adjustment

USD (million)

NZD (million)

Processing Fee (after Floor/Cap) Processing Fee (excluding Floor/Cap) Processing Fee (after Floor/Cap)

USD (million)

NZD (million)

NZD (million)

7.64

54.2

54.2

0.0

37.9

57.8

57.8

7.09 7.09 4.97

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 premium, crude market premium and operational performance. Product quality premium 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 premium 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 134 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.

Appendix II - Historical Analysis

Intake/Production, Gross Refining Margin and Processing Fee

2014

2015

2016

2017

2018

Jan/Feb

Barrels 000's

6,740

7,056

6,826

7,160

7,011

RNZ USD GRM per barrel 1)

3.86

9.91

7.96

6.58

7.54

Singapore Dubai Complex GRM

0.70

5.40

4.95

3.42

3.37

Uplift vs. Singapore Dubai Complex 3)

3.16

4.51

3.01

3.16

4.17

NZD Processing Fee (million) 2)

22.0

59.6

57.0

45.9

50.8

Mar/Apr

Barrels 000's

6,146

7,411

7,471

5,140

6,958

RNZ USD GRM per barrel 1)

-2.84

8.77

1.84

9.35

6.82

Singapore Dubai Complex GRM

1.36

4.82

3.18

3.02

3.75

Uplift vs. Singapore Dubai Complex 3)

-4.20

3.95

-1.34

6.33

3.07

NZD Processing Fee (million) 2)

20.7

62.3

14.8

48.1

45.8

May/Jun

Barrels 000's

6,976

6,416

6,837

7,755

3,910

RNZ USD GRM per barrel 1)

3.48

8.55

6.26

7.63

0.18

Singapore Dubai Complex GRM

0.10

4.24

2.13

2.90

2.02

Uplift vs. Singapore Dubai Complex 3)

3.38

4.31

4.13

4.73

-1.84

NZD Processing Fee (million) 2); 5)

21.1

48.9

43.3

58.4

0.7

Jul/Aug

Barrels 000's

6,298

7,519

6,833

7,511

7,615

RNZ USD GRM per barrel 1)

6.75

7.66

6.20

8.87

6.86

Singapore Dubai Complex GRM

-0.55

2.52

1.86

4.70

2.57

Uplift vs. Singapore Dubai Complex 3)

7.30

5.14

4.34

4.17

4.29

NZD Processing Fee (million) 2)

21.3

63.5

41.3

63.6

54.3

Sept/Oct

Barrels 000's

6,388

7,221

7,251

6,816

7,639

RNZ USD GRM per barrel 1)

7.54

9.47

7.49

9.31

7.09

Singapore Dubai Complex GRM

2.54

5.12

3.18

4.73

2.47

Uplift vs. Singapore Dubai Complex 3)

5.00

4.35

4.31

4.58

4.62

NZD Processing Fee (million) 2)

21.0

71.8

52.5

62.2

57.8

Nov/Dec

Barrels 000's

7,127

7,017

7,447

7,342

RNZ USD GRM per barrel 1)

9.98

10.82

9.20

6.83

Singapore Dubai Complex GRM

4.48

6.37

4.19

3.67

Uplift vs. Singapore Dubai Complex 3)

5.50

4.45

5.01

3.16

NZD Processing Fee (million) 2)

62.4

73.0

67.6

50.7

Total

Barrels 000's

39,676

42,639

42,665

41,724

33,133

USD GRM per barrel 1)

4.96

9.20

6.47

8.02

6.26

NZD Processing Fee (million) 2)

168.4

379.2

276.6

328.9

209.5

YTD Cap adjustment

14.4

NZD Processing Fee (million) 1)

  • 1) Excludes Fee Floor/Cap adjustment

  • 2) Includes Fee Floor/Cap adjustment

  • 3) RNZ uplift vs. Singapore Dubai Complex GRM is in USD per barrel

Disclaimer

The New Zealand Refining Company Limited published this content on 16 November 2018 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 16 November 2018 02:28:07 UTC

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