Refining NZ’s full maintenance shutdown has significantly impacted net profit after tax (NPAT), down 62% to $29.6 million for its full year results 2018.
Its previous year’s NPAT was $78.5m for the 12 months to December 31. Revenue was down 13% to $359.6m compared to $411.7m the previous year.
The Marsden Point-based company started the shutdown in late April last year with major work on refinery processing units and related equipment. It was the first full shutdown of the plant in 14 years.
Refining NZ chief executive Mike Fuge says the impact on earnings was partially mitigated in the second half by healthy refining margins, a weakening exchange rate and a strong operational performance.
“While the NPAT result was impacted by the planned maintenance shutdown in April-June the reliable running on processing units for the remainder of the year saw refinery throughput for the second half of 2018 at its highest ever, which allowed the company to capitalise on healthy refining margins,” he says.
The gross refining margin averaged US$6.31 for the year (compared to US$8.02 per barrel in 2017) or US$7.33 when normalised for the 2018 shutdown. This is at the top of its historical US$4 to US$6 per barrel range.
Refining margins have softened since the beginning of 2019. Fuge says.
The full refinery shutdown took longer than expected to complete due refurbishment of key units. Problems were reported at the time with the hydrocracker unit following a weld failure on a newly installed OEM isolation valve. There was also an incident involving leaks from the unit.
Fuge says there were a lot of learnings which the shutdown team can apply to any future maintenance shutdowns. The major refurbishing of the refinery’s hydrogen manufacturing unit was a major achievement, he says.
“As New Zealand’s largest producer of pure hydrogen this refurbishment underpins the refinery’s role in the fuels supply chain and presents the exciting possibility of developing further hydrogen infrastructure which is critical to our low carbon economy, and to New Zealand continuing to meet its climate change obligations,” Fuge says.
The next smaller scale maintenance shutdown is planned for 2020. The company expects to lift operational performance further and achieve a throughput of around 44 million barrels for the 2019 year.
The Refining NZ board has been working on the capital structure of the business and recently issued $75m corporate bond offer for a term of 15 years.
The offer was fully subscribed, and the net proceeds have been applied to repaying a portion of the company’s existing bank debt.
Refining NZ is the country’s only oil refinery and produces around 70% of the petrol, diesel and jet fuel used in New Zealand. It is 43% owned by Z Energy, BP and Mobil, and charges those customers processing fees based on refining margins in Singapore.
