New Zealand Refining : Refining NZ Operational Update for November/December 2020

NZX Announcement

22 January 2021

Operational Update for November/December 2020 - corrected version

HIGHLIGHTS

• • Excellent health and safety performance continued during the period, with no Tier I or Tier II process safety events or recordable injuries.

• • Processing Fee revenue remained at the Fee Floor due to continuing negative international refining margins.

• • Refinery and Refinery to Auckland pipeline throughput continue to be impacted by low jet fuel demand due to COVID-19 travel restrictions.

• • The year end net debt position closed at $231 million, $10 million lower than FY19.

• • Preparations for simplified operations were completed, ready for transition from January 2021.

• • Import terminal negotiations are continuing with all customers.

COMMENTARY

Refining NZ's excellent health and safety performance continued with no Tier I or Tier II process safety events, and no recordable cases in 2020. Refining NZ acted promptly to address causes of two minor releases outside consent during the period.

New Zealand gasoline and diesel demand was at normal seasonal levels for the November/December period, while jet fuel demand continued to be significantly impacted by COVID-19 travel restrictions. Refining NZ continued to adopt strategies that minimised jet fuel production while meeting gasoline and diesel requirements.

Refining throughput was 6.5 Mbbls, slightly less than the 6.8 Mbbls in the same period last year. RAP throughputs were c70% compared to the same period last year due to the depressed jet fuel demand at Auckland International Airport.

The Gross Refining Margin (GRM) remained below Fee Floor levels during November/December due to weak global refining margins which continue to be impacted by reduced demand due to COVID-19. The Singapore Dubai complex margin for the period was weak at US$ -1.54 per barrel reflecting a surplus of refining capacity globally and an operating environment of low utilisation and low margins.

Refining NZ's November/December uplift over the Singapore Dubai complex margin was strong at US$ 4.78 per barrel due to the Middle Eastern crudes processed by the refinery trading at a discount to Dubai crude. GRM for the two months was US$ 3.24 per barrel. Processing Fee revenue for the two months was NZ$ 24.6 million, including NZ$ 3.6 million of Fee Floor payments by our customers.

The year end net debt position closed at $231 million, $10 million below 31 December 2019. This reflects the impact of resetting the 2020 cost base, the proceeds of asset sales and simplification restructuring costs.

Preparation is complete for the planned four week maintenance turnaround, commencing in late February 2021. The turnaround includes the first statutory inspection for the CCR Platformer (Te Mahi Hou Project commissioned in 2015) and routine inspection and maintenance for the crude distillation unit and associated plant. During the turnaround, all other processing units not undergoing maintenance will be temporarily shut down, with customers importing refined products during this time.

Preparations for simplified refining operations, which will enable Refining NZ to continue to safely operate the refinery in 2021 in a low margin environment, were completed ready for transition from January 2021 with workforce reductions occuring through Q4 2020 and Q1 2021. Refining NZ has worked positively and collaboratively with Government and Northland regional agencies on a planned transition to help manage the impact of changes on the refinery's workforce.

Import terminal discussions are continuing with all customers. Refining NZ anticipates providing an update to the market regarding potential import terminal conversion prior to full year results. 1

Authorised by:

Chris Bougen

General Counsel and Company Secretary Refining NZ

For further information: Ellie Martel

Government and External Affairs [e-mail] [phone]

1 Any proposal in relation to the terminal will be a matter for consultation with the relevant unions and union members at the appropriate time.

OPERATIONAL DATA

Nov/Dec	Nov/Dec	FY	FY
2020	2019	2020	2019
Health, Safety & Environment
LTI	#	0	0	0	1
LTIF	#/200,000hrs	-	-	0.00	0.13
TRC	#	0	0	0	2
TRCF	#/200,000hrs	-	-	0.00	0.27
Tier I Process Safety Events	#	0	0	0	0
Tier II Process Safety Events	#	0	0	0	0
Releases outside of consent	#	2	0	5	1
Refining
Brent Crude Oil Price	US$/bbl	46.3	65.0	41.7	64.4
Exchange Rate	US$/NZ$	0.70	0.65	0.65	0.66
Operational availability	%	99.6	99.7	98.2	99.7
Unplanned process downtime	%	1.7	3.5	23.2	1.6
Refining throughput	Mbbl	6.46	6.80	29.88	42.69
Gross Refining Margin	US$/bbl	3.24	2.62	1.63	5.34
Gross Refining Margin	US$M	24.5	17.8	131.6	227.9
(including Fee Floor/Margin Cap)
Processing Fee (including Fee Floor/Margin Cap)	US$M	17.2	12.5	92.1	159.5
Processing fee (including Fee Floor/Margin Cap)	NZ$M	24.6	19.2	141.6	242.0
Distribution
RAP throughput	Mbbl	2.6	3.8	14.7	20.8
Notes:

• 1. The information provided in this announcement excludes Revenue from other activities.

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

• 3. A five-year history of Throughput, Margins and Processing Fees is attached below.

• 4. Refer to the explanatory notes/glossary for a definition of terms.

HISTORICAL INFORMATION - REFINING

Appendix II 2020

2016	2017	2018	2019	2020
Jan/Feb	Barrels 000's	6,826	7,160	7,011	6,963	6,909
RNZ USD GRM per barrel 1)	7.96	6.58	7.54	4.88	1.04
Singapore Dubai Complex GRM	4.95	3.42	3.37	-0.32	-1.58
Uplift vs. Singapore Dubai Complex 3)	3.01	3.16	4.17	5.20	2.62
NZD Processing Fee (million) 2)	57.0	45.9	50.8	34.9	23.0
Mar/Apr	Barrels 000's	7,471	5,140	6,958	7,312	4,656
RNZ USD GRM per barrel 1)	1.84	9.35	6.82	6.63	0.67
Singapore Dubai Complex GRM	3.18	3.02	3.75	0.75	0.19
Uplift vs. Singapore Dubai Complex 3)	-1.34	6.33	3.07	5.88	0.48
NZD Processing Fee (million) 2)	14.8	48.1	45.8	50.1	23.7
May/Jun	Barrels 000's	6,837	7,755	3,910	6,945	3,867
RNZ USD GRM per barrel 1)	6.26	7.63	0.18	4.36	4.59
Singapore Dubai Complex GRM	2.13	2.90	2.02	0.17	-3.78
Uplift vs. Singapore Dubai Complex 3)	4.13	4.73	-1.84	4.19	8.37
NZD Processing Fee (million) 2)	43.3	58.4	0.7	32.2	23.3
Jul/Aug	Barrels 000's	6,833	7,511	7,615	7,419	1,766
RNZ USD GRM per barrel 1)	6.20	8.87	6.86	7.10	-4.18
Singapore Dubai Complex GRM	1.86	4.70	2.57	3.23	-2.46
Uplift vs. Singapore Dubai Complex 3)	4.34	4.17	4.29	3.87	-1.73
NZD Processing Fee (million) 2)	41.3	63.6	54.3	56.2	23.7
Sept/Oct	Barrels 000's	7,251	6,816	7,639	7,245	6,219
RNZ USD GRM per barrel 1)	7.49	9.31	7.09	6.16	1.15
Singapore Dubai Complex GRM	3.18	4.73	2.47	3.55	-1.64
Uplift vs. Singapore Dubai Complex 3)	4.31	4.58	4.62	2.61	2.79
NZD Processing Fee (million) 2)	52.5	62.2	57.8	49.3	23.3
Nov/Dec	Barrels 000's	7,447	7,342	7,307	6,803	6,459
RNZ USD GRM per barrel 1)	9.20	6.83	6.53	2.62	3.24
Singapore Dubai Complex GRM	4.19	3.67	1.80	-1.55	-1.54
Uplift vs. Singapore Dubai Complex 3)	5.01	3.16	4.73	4.16	4.78
NZD Processing Fee (million) 2)	67.6	50.7	49.2	19.2	24.6
Total	Barrels 000's	42,665	41,724	40,440	42,687	29,876
USD GRM per barrel 1)	6.47	8.02	6.31	5.34	1.63
NZD Processing Fee (million) 2)	276.6	328.9	258.7	242.0	141.6

• 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