Refining NZ Operational Update for September/October 2020

HIGHLIGHTS ? Refining NZ's excellent health and safety performance continued during the period. ? Processing Fee revenue remained at the Fee Floor due to continuing negative international refining margins. o RAP throughputs were 16% higher than the July/August operating period, reflecting COVID-19 travel restrictions lifting following the imposition of Auckland's Coronavirus Level 3 lockdown. o Net debt was reduced by $17m to $232m as at the end of October, due to savings realised from the six-week temporary refinery shutdown in July/August and proceeds of asset sales. o Good progress has been made on the implementation of the refinery simplification plans which will enable the company to extend cash neutral operations at the Fee Floor into 2021. o Import Terminal discussions continue with customers. COMMENTARY Refining NZ's excellent health and safety performance continued through September and October, with no Tier 1 or Tier 2 process safety events or recordable injuries. Refining NZ's E Tu Tangata safety programme was recognized at the New Zealand Workplace Health and Safety 2020 Awards, winning the Engagement category. In September, the refinery completed a safe restart after a six-week shutdown to help rebalance stocks across the country, due to the COVID-19 impacts on New Zealand fuel demand. All processing units have continued to operate at reduced rates as a result of the continuing impact of COVID-19 travel restrictions on jet fuel demand. RAP throughputs were 16% higher than the previous period, reflecting COVID-19 travel restrictions lifting following the imposition of Auckland Coronavirus Level 3 lockdown. Global refining margins remained weak during September/October, with product demand reduced due to on-going COVID-19 impacts. In response to weak margins, refiners globally have lowered runs, brought forward maintenance plans and implemented some temporary or permanent closures. Although global oil demand recovered considerably from May to September, the recovery in demand slowed in October due to a resurgence of COVID-19 infections globally. Refining NZ's September/October uplift over the Singapore Dubai complex margin was US$2.79 per barrel. The Singapore Dubai complex margin for the September/October period was weak at US$-1.64 per barrel. Processing Fee revenue was NZ$23.3 million, including NZ$15.8 million of Fee Floor payments by our customers. GRM for the two months was US$1.15 per barrel reflecting the low global refining margins and reduced refinery throughput. Processing Fee Floor payments now total NZ$86.2 million in the year to date. Net debt was NZ$232 million at the end of October, which is NZ$17 million lower than the last update at the end of August. The reduced debt levels reflect savings from the temporary shutdown of the refinery in July/August and c. $13 million realised from asset sales, which will be used in part to fund restructuring costs associated with the refinery simplification plans. Good progress is being made on the implementation of the refinery simplification plans which will enable the company to extend cash neutral operations at the Fee Floor into 2021. Employee consultation has been completed and approximately 90 of the Company's employees, whose roles are impacted by simplification, will depart between November and Q1 2021. Discussions regarding the potential conversion to an Import Terminal continue with customers, including Exxon Mobil, who has paused its dispute in relation to the refinery's simplification plans. Front End Engineering and Design (FEED) has now commenced to further develop and refine Import Terminal conversion plans, including estimated costs of conversion and timing. Further updates will be provided as this work is progressed. For further information: Ellie Martel Government and External Affairs Manager Ellie.Martel@refiningnz.com +64 (0)20 4174 7226 End CA:00363480 For:NZR Type:MKTUPDTE Time:2020-11-19 08:31:17