CHANNEL INFRASTRUCTURE NZ LIMITED 17 May 2016
Announcement to NZX Refining NZ Throughput and Margin Report for March/April 2016The planned shutdown of the hydrocracker and related units to perform maintenance was completed successfully in April. This includes repair work on the unit, failure of which led to a "margin update" to the market on 24 March 2016. All units are now fully back in operation. Te Mahi Hou continued to operate well throughout the period.
The Gross Refinery Margin1) (GRM) for the period was USD 5.72 per barrel excluding the shutdown (USD
2.88 per barrel impact) and repair work (USD 1.00 per barrel impact). The net GRM for the period, including the shutdown and repair work, was USD 1.84 per barrel. This compares favourably with the minus USD 2.84 per barrel during the previous hydrocracker shutdown in 2014. This resulted in a Processing Fee income of NZD 14.8 million, including a Margin Cap2) recovery of NZD 0.7 million.
Throughput for the period was 7.5 million barrels, reflecting good operational performance outside the shutdown period.
The Singapore Dubai complex margin for the period remained strong at an average of USD 3.18 per barrel, supported by strong gasoline price spreads. The margin uplift continues to be affected by a weaker freight uplift and higher market premia for light crudes which are priced off Brent instead of Dubai as benchmark.
The average exchange rate for the period was USD/NZD 0.68.
Appendix I shows further information on throughput, margin and refining income.
Performance Update PresentationAttached is a presentation pack with further commentary on the Company's year to date performance.
Historical AnalysisA 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
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.
The Margin Cap limits the Processing Fee to a maximum Gross Refining Margin of 9 USD per barrel for over a calendar year. The Margin Cap applies to each Customer severally (see Explanatory Notes for more detail).
Throughput | Barrels (million) | 6.83 | 7.86 |
Gross Refining Margin | USD (million) | 53.7 | |
Gross Refining Margin (excluding Floor/Cap) | USD (million) | 54.3 | 7.96 |
Interim Cap adjustment | NZD (million) | 0.7 | |
Processing Fee (after Floor/Cap) | USD (million) | 37.6 | 5.50 |
Processing Fee (excluding Floor/Cap) | NZD (million) | 57.7 | |
Processing Fee (after Floor/Cap) | NZD (million) | 57.0 |
YTD Cap adjustment NZD (million) 0.7
Throughput | Barrels (million) | 7.47 | 1.93 |
Gross Refining Margin | USD (million) | 14.4 | |
Gross Refining Margin (excluding Floor/Cap) | USD (million) | 13.8 | 1.84 |
Interim Cap adjustment | NZD (million) | -0.7 | |
Processing Fee (after Floor/Cap) | USD (million) | 10.1 | 1.35 |
Processing Fee (excluding Floor/Cap) | NZD (million) | 14.1 | |
Processing Fee (after Floor/Cap) | NZD (million) | 14.8 |
YTD Cap adjustment NZD (million) 0.0
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 ThroughputThroughput 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 MarginThe 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 AdjustmentThe 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 126 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/FloorThe Gross Refining Margin adjusted for any impacts of the Cap or Floor.
Processing FeeThe 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:
The information provided in this announcement relates to refining operations only. Revenue from pipeline or other activities is not included.
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 Fee2012
2013
2014
2015
2016
Jan/Feb
Barrels 000's
7,285
6,786
6,740
7,056
6,826
USD GRM per barrel 1)
4.16
4.18
3.86
9.91
7.96
NZD Processing Fee (million) 2)
25.9
23.7
22.0
59.6
57.0
Mar/Apr
Barrels 000's
6,635
7,151
6,146
7,411
7,471
USD GRM per barrel 1)
3.97
5.03
-2.84
8.77
1.84
NZD Processing Fee (million) 2)
22.5
30.0
20.7
62.3
14.8
May/Jun
Barrels 000's
6,602
7,048
6,976
6,416
USD GRM per barrel 1)
4.84
6.84
3.48
8.55
NZD Processing Fee (million) 2)
28.8
41.8
21.1
48.9
Jul/Aug
Barrels 000's
7,296
7,194
6,298
7,519
USD GRM per barrel 1)
6.07
6.05
6.75
7.66
NZD Processing Fee (million) 2)
38.6
38.5
21.3
63.5
Sept/Oct
Barrels 000's
7,400
6,730
6,388
7,221
USD GRM per barrel 1)
7.56
2.95
7.54
9.47
NZD Processing Fee (million) 2)
47.8
16.8
21.0
71.8
Nov/Dec
Barrels 000's
6,898
5,693
7,127
7,017
USD GRM per barrel 1)
7.88
1.82
9.98
10.88
NZD Processing Fee (million) 2)
46.1
8.8
62.4
73.0
Total
Barrels 000's
42,116
40,602
39,676
42,639
14,297
USD GRM per barrel 1)
5.77
4.58
4.96
9.20
4.76
NZD Processing Fee (million) 2)
209.7
159.7
168.4
379.2
71.8
YTD Cap adjustment
14.4
0.0
NZD Processing Fee (million) 1)
71.8
Excludes Fee Floor/Cap adjustment
Includes Fee Floor/Cap adjustment
The New Zealand Refining Company Limited published this content on 17 May 2016 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 16 May 2016 22:37:02 UTC.
Original documenthttp://www.refiningnz.com/media/105629/announcement_to_nzx_for_mar-apr_2016.pdf
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