Refining NZ Operational Update for July/August 2019

HIGHLIGHTS o The Company earned NZD 56.2 million in Processing Fees for July/August, NZD 24 million more than the May/June period. o Refinery throughput was 7.42 million barrels, the highest for 2019 which was achieved due to good utilisation by our customers and excellent refinery availability. o Refining NZ's Gross Refining Margin (GRM) was strong at USD 7.10 per barrel which represents a healthy uplift over the Singapore Dubai complex margin. o Global refining margins were stronger in July/August as gasoline cracks recovered and middle distillate cracks rose strongly. o Lloyd's Register has issued an upgraded Refinery to Auckland pipeline certificate of fitness for an 82 bar gauge maximum operating pressure. The RAP is now delivering greater flow rates and providing increased resilience of supply to Auckland. o Process and personal safety performance remained excellent: o No Tier 1 or Tier 2 process safety events in the July/August period; and o The lost time injury frequency is currently 0.27 per 200,000 work hours COMMENTARY Refining - Margins and throughput The refinery achieved throughput of 7.42 million barrels due to good utilisation by our customers and excellent refinery availability. This throughput, coupled with a GRM of USD 7.10 per barrel, has earned the Company NZD 56.2 million Processing Fee revenue in the July/August period. Revenue showed an increase of NZD 24 million compared to the May/June period. The refinery achieved excellent Operational Availability of 99.8% during the July/August period. Global refining margins Global refining margins recovered in July across the barrel. Gasoline margins recovered to a 10-month high of USD 8.50 per barrel due to the permanent shutdown of a key USA refinery and unplanned Asian refinery outages. As a result, Singapore inventories fell well below the five-year average. Middle distillates reached a year high as a result of strong demand and subdued Chinese exports. Fuel oil margins recovered strongly by USD 6.00 per barrel due to tight supplies and sustained demand. August was a mixed month with the gasoline margin losing some of its gains and diesel rising further to above USD 16 per barrel due to outages in key exporting countries. Fuel oil fell strongly by USD 8 per barrel, likely driven by sentiment as supplies remained tight. Uplift over Singapore Dubai complex margin Refining NZ's July/August uplift over the Singapore Dubai complex margin was healthy at USD 3.87 per barrel enabled by a balanced product slate, locational advantage and stable operations but negatively impacted a modest recovery in the naphtha margin. The Singapore Dubai complex margin for the July/August period was USD 3.23 per barrel. Exchange rate The average exchange rate for the July/August period was USD/NZD 0.66. Natural gas Natural gas supplies returned to more normal levels in July/August as the Pohokura offshore natural gas field production performance improved and Refining NZ was able to access its portfolio of additional 2019 gas supply. Natural gas prices fell more than ten percent compared to the May/June period. Distribution - Refinery to Auckland Pipeline (RAP) Operational availability on the pipeline was high and the volume of product delivered through the pipeline remained strong. Lloyd's Register has issued an upgraded RAP certificate of fitness for an 82 bar gauge maximum operating pressure. The RAP is now operating at the increased pressure, delivering greater flow rates and providing increased resilience of supply to Auckland. Government Pipeline Inquiry Refining NZ welcomed the publication of the Government Inquiry report into the September 2017 pipeline outage and the resilience of the fuel supply to Auckland. It is pleased that the Inquiry concluded that Refining NZ maintained and operated the RAP properly and in keeping with all legal requirements and standard industry practice and that the response of our staff and contractors to the pipeline rupture was of a high standard. We are also pleased that the Inquiry has noted that Refining NZ is working to make timely investment decisions and that we have a clear goal of having new infrastructure in place shortly before it is needed to meet demand. Health, safety and environment Process safety performance was again outstanding with no Tier 1 or Tier 2 process safety events in the July/August period. The lost time injury frequency is currently 0.27 per 200,000 work hours. We continue to see record engagement in our hauora korero (safety talks) which, combined with the hauora hikoi (safety walks) and E Tu Tangata (stand up people) initiatives, underpins our continued improvement in safety performance. Costs Overall operating have been tightly controlled with the ongoing pressure from higher electricity prices. End CA:00341151 For:NZR Type:MKTUPDTE Time:2019-09-18 11:09:56