RNZ Operational Update – March-April 2020

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22 May 2020
Refining NZ Operational Update for March/April 2020



















COMMENTARY
Refining NZ agreed with its customers in March to change the way it operated the refinery in response to the
unprecedented fuel demand reduction, which was caused by global COVID-19 travel and transport restrictions.
The refinery’s processing facilities have been operated on a rotating basis through April to enable production at
substantially lower rates.
New Zealand refined fuel demand fell to approximately 20% of pre-lockdown levels during Alert Level 4 COVID-
19 travel and transport restrictions. Gasoline and diesel demand recovered during Alert Level 3 and then further
into Alert Level 2 to be circa 60% and 80% of pre-lockdown demand respectively at the date of this Update.
However, jet fuel demand remains low at approximately 25% of pre-lockdown levels. Refining NZ has adopted
strategies aimed at minimising jet fuel production while meeting gasoline and diesel requirements.

HIGHLIGHTS
• The Company operated on a cash neutral basis during the COVID-19 lockdown and continues to
plan to run cash neutral through FY20.
• Refining NZ responded quickly to the COVID-19 situation to agree arrangements with customers
to operate the refinery on a rotating basis in response to significant fuel demand reductions.
• COVID-19 customer arrangements have been extended to the end of August 2020.
• Gross Refining Margin (GRM) was USD 0.67 per barrel and Processing Fee revenue was NZD 23.7
million, predominantly Fee Floor payments of NZD 20.1 million.
• Refinery throughput for March/April was 4.7 million barrels (33% lower than January/February).
Refinery to Auckland Pipeline (RAP) throughput for March/April was 2.0 million barrels (44%
lower than January/February).
• Process and personal safety performance remained excellent with no Tier 1 or Tier 2 process
safety events or recordable injuries.
• Refining NZ deferred all non-essential activity due to the current environment. Capex estimates
for 2020 reduced from $70 million to $40 million, including deferral of the maintenance
turnaround of the main crude distiller and the gasoline manufacturing unit until March 2021
(from May 2020).
• Refining NZ net debt was $252 million as at the end April reflecting cash neutral operations at
the Fee Floor since moving to operate the refinery on a rotating basis.
• Refining NZ extended and expanded its bank facilities in March and its total available debt
funding facilities amount to $400 million (including the Company’s $75 million subordinated
notes on issue) with no significant maturities until March 2022.
• Workstreams for the major Strategic Review are ongoing and proceeding to schedule. Refining
NZ expects to provide an update on the Strategic Review process in June 2020.

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The COVID-19 mode of operating has been extended to the end of August. This includes several weeks in July
and August when all the processing units will be put on standby to balance fuel supply across the country.
The refinery throughput was 4.7 million barrels during March/April. The GRM was low at USD 0.67 per barrel,
reflecting a weak Singapore Dubai complex margin of USD 0.19 per barrel and the impact of the rotating mode
of operation. The Company’s Processing Fee revenue was NZD 23.7 million, predominantly made up of Fee Floor
payments of NZD 20.1 million.
During the Level 4 lockdown period, Refinery to Auckland Pipeline (RAP) throughput was less than 30% of pre-
lockdown levels. RAP throughput during Level 2 restrictions has recovered to approximately 60% of
pre-lockdown levels.
As part of the Company’s response to COVID-19, all major maintenance was suspended, except where required
to maintain Refining NZ’s uncompromising focus on health and safety. The main change has been the deferral
of the main crude distiller and gasoline manufacturing unit maintenance turnaround, which is now scheduled to
occur in March 2021. Meanwhile, a partial catalyst change on the hydrocracking facility was completed as
planned in March and other critical maintenance activities were completed in April, to enable the continued
safe operation of plant until the rescheduled turnaround date.
As a result, capex guidance for the year has been reduced from $70 million to $40 million. The Company
operated on a cash neutral basis during the COVID-19 lockdown and continues to plan to operate cash neutral
through the year, when factoring in the Processing Fee Floor and reduced RAP income. Net debt was $252
million at the end of April. Refining NZ extended and expanded its bank facilities in March and its total
available debt funding facilities amount to $400 million (including the Company’s $75 million subordinated
notes on issue) with no significant maturities until March 2022.
The refinery continued to operate as an essential service throughout COVID Alert Levels 3 and 4. Refining NZ
established a Co-ordinated Incident Management System structure to implement business continuity plans
during this time and this continues at Level 2.
Refining NZ’s excellent health, safety and environment performance continued in March and April, with no Tier
1 or Tier 2 process safety events. There were again no recordable injuries and the recordable injury frequency
is 0.28 per 200,000 work hours.
Workstreams for the major Strategic Review announced to the market on 15 April 2020 are ongoing and
proceeding to schedule. Refining NZ expects to provide an update on the Strategic Review process in June
2020.


For further information:
Ellie Martel
Government and External Affairs Manager
Ellie.Martel@refiningnz.com
+64 (0)20 4174 7226

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OPERATIONAL DATA

Mar/AprMar/AprYTDFY
2020201920202019
Health, Safety & Environment
LTI
#
0001
LTIF
#/200,000hrs
--
0.140.13
TRC
#
0002
TRCF
#/200,000hrs
--
0.280.27
Tier I Process Safety Events
#
0000
Tier II Process Safety Events
#
0000
Releases outside of consent
#
0001
Refining
Brent Crude Oil Price
US$/bbl
25.268.742.364.4
Exchange Rate
US$/NZ$
0.600.680.630.66
Operational availability
%
91.699.995.699.7
Unplanned process downtime
%
16.30.78.21.6
Refining throughput
Mbbl
4.667.3111.5642.69
Gross Refining Margin
US$/bbl
0.676.630.895.34
Gross Refining Margin
US$M
20.448.541.7227.9
(including Fee Floor/Margin Cap)
Processing Fee (including Fee Floor/Margin Cap)
US$M
14.334.029.2159.5
Processing fee (including Fee Floor/Margin Cap)
NZ$M
23.750.146.7242.0
Distribution
RAP throughput
Mbbl
2.03.55.620.8


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.

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HISTORICAL INFORMATION - REFINING

20162017201820192020
Ja n/Fe bBa rre l s 000's6,8267,1607,0116,9636,909
RNZ USD GRM pe r ba rre l
1)
7.966.587.544.881.04
Si nga pore Duba i Compl e x GRM4.953.423.37-0.32-1.58
Upl i ft vs . Si nga pore Duba i Compl e x
3)
3.013.164.175.202.62
NZD Proce s s i ng Fe e (mi l l i on)
2)
57.045.950.834.923.0
Ma r/AprBa rre l s 000's7,4715,1406,9587,3124,656
RNZ USD GRM pe r ba rre l
1)
1.849.356.826.630.67
Si nga pore Duba i Compl e x GRM3.183.023.750.750.19
Upl i ft vs . Si nga pore Duba i Compl e x
3)
-1.346.333.075.880.48
NZD Proce s s i ng Fe e (mi l l i on)
2)
14.848.145.850.123.7
Ma y/JunBa rre l s 000's6,8377,7553,9106,945
RNZ USD GRM pe r ba rre l
1)
6.267.630.184.36
Si nga pore Duba i Compl e x GRM2.132.902.020.17
Upl i ft vs . Si nga pore Duba i Compl e x
3)
4.134.73-1.844.19
NZD Proce s s i ng Fe e (mi l l i on)
2); 5)
43.358.40.732.2
Jul /AugBa rre l s 000's6,8337,5117,6157,419
RNZ USD GRM pe r ba rre l
1)
6.208.876.867.10
Si nga pore Duba i Compl e x GRM1.864.702.573.23
Upl i ft vs . Si nga pore Duba i Compl e x
3)
4.344.174.293.87
NZD Proce s s i ng Fe e (mi l l i on)
2)
41.363.654.356.2
Se pt/OctBa rre l s 000's7,2516,8167,6397,245
RNZ USD GRM pe r ba rre l
1)
7.499.317.096.16
Si nga pore Duba i Compl e x GRM3.184.732.473.55
Upl i ft vs . Si nga pore Duba i Compl e x
3)
4.314.584.622.61
NZD Proce s s i ng Fe e (mi l l i on)
2)
52.562.257.849.3
Nov/De cBa rre l s 000's7,4477,3427,3076,803
RNZ USD GRM pe r ba rre l
1)
9.206.836.532.62
Si nga pore Duba i Compl e x GRM4.193.671.80-1.55
Upl i ft vs . Si nga pore Duba i Compl e x
3)
5.013.164.734.16
NZD Proce s s i ng Fe e (mi l l i on)
2)
67.650.749.219.2
TotalBarrels 000's42,66541,72440,44042,68711,565
USD GRM per barrel
1)
6.478.026.315.340.89
NZD Processing Fee (million)
2)
276.6328.9258.7242.046.7
YTD Cap adjustment
NZD Processing Fee (million)
1)
1) Excl ude s Fe e Fl oor/Ca p a djus tme nt
2) I ncl ude s Fe e Fl oor/Ca p a djus tme nt
3) RNZ upl i ft vs . Si nga pore Duba i Compl e x GRM i s i n USD pe r ba rre l

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EXPLANATORY NOTES/GLOSSARY
LTI (Lost time injuries) and LTIF (Lost time injury frequency)
Lost time injuries refer to fatalities, permanent disabilities or time lost from work.
Lost time injury frequency refers to the number of lost time injuries over a rolling 12-month period, per
200,000 hours worked.
TRC (Total recordable cases) and TRCF (Total recordable case frequency)
Total recordable cases refer to lost time injuries, medical treatment and restricted work cases.
Total recordable case frequency refers to the number of recordable injuries over a rolling 12-month
period, per 200,000 hours worked.
Tier 1 Process Safety Event (API 754)
A tier 1 Process Safety Event (PSE) is an unplanned or uncontrolled release of any material, including
non-toxic and non-flammable, from a process which results in one or more of the following: A LTI
and/or fatality; a fire or explosion resulting in greater than or equal to $25,000 of direct cost to the
company; a release of material greater than the threshold quantities given in Table 1 of API 754 in any
one-hour period; an officially declared community evacuation or community shelter-in-place.
Tier 2 Process Safety Event (API 754)
A tier 2 Process Safety Event (PSE) is an unplanned or uncontrolled release of any material, including
non-toxic and non-flammable, from a process which results in one or more of the following: A
recordable injury; a fire or explosion resulting in greater than or equal to $2,500 of direct cost to the
company; a release of material greater than the threshold quantities given in Table 2 of API 754 in any
one-hour period.
Operational availability
Operational availability is the percent of time available for manufacturing after subtracting maintenance
and regulatory/process downtimes.
Unplanned process downtime
A unit downtime is “planned” if the refinery is aware of and has scheduled that unit outage in the
previous year. Unplanned process downtime is the weighted average of unplanned downtime across
all process units.
Refining throughput
Refining 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.

Turnaround
A scheduled outage of one or more process units, planned well in advance and typically occurring in
cycles of 2 years or more, for the purpose of significant mechanical inspection and repair.

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Gross Refining Margin (excluding Fee Floor/Margin Cap)
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). Refining
NZ’s crude diet comprises of crudes that price off Dubai as well as crudes that price off different
markers such as Brent. The fluctuations of these price markers relative to each other impact the uplift.
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 140.0 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.
Processing Fee (after Fee Floor/Margin Cap)
The Processing Fee is 70% of the Gross Refining Margin after any adjustment for the Margin Cap or Fee
Floor. The Processing Fee is paid by our customers in NZD.
RAP throughput
RAP throughput is the volume of refined products, comprising gasoline, jet fuel and diesel that are
delivered via the Refinery to Auckland Pipeline (RAP) to the Wiri oil terminal.