RNZ Operational Update – March-April 2020

HIGHLIGHTS o The Company operated on a cash neutral basis during the COVID-19 lockdown and continues to plan to run cash neutral through FY20. o 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. o COVID-19 customer arrangements have been extended to the end of August 2020. o 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. o 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). o Process and personal safety performance remained excellent with no Tier 1 or Tier 2 process safety events or recordable injuries. o 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). o 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. o 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. o 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. 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. 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 End CA:00353536 For:NZR Type:MKTUPDTE Time:2020-05-22 09:33:55