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Disclaimer
While all reasonable care has been taken to ensure that the facts stated herein are accurate and that the opinions contained herein are fair and reasonable, this presentation is selective in nature and is intended to provide an overview of the business of the Company. Any opinions expressed in this document are subject to change without notice and neither the Company nor any other person is under any obligation to update or keep current the information contained herein. This presentation may contain forward-looking statements, which include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties, because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that the Companys actual financial condition, results of operations and cash flows, and the development of the industry in which the Company operates, may differ materially from those made in or suggested by forward-looking statements contained in this presentation. No obligation is assumed to update any forward-looking statements.
Agenda
1. The Refining Market & Outlook 2. Strategy & 3YIP 3. Update on Petit Couronne 4. Fourth Quarter 2011 Update 5. 2012 Outlook 6. Liquidity 7. Capital Structure 8. The Way Forward 9. Summary
3
Product cracks
Macro uncertainty in Europe weighing on demand for and prices of petroleum products Weakness in gasoline & naphtha Strength in middle distillates
Refining capacity
New refining capacity has come online, predominantly in Asia Capacity rationalization, mainly in Europe and the U.S., is accelerating due to weak margins
Operating expenses
Increased headwinds from weaker U.S. dollar and higher variable costs (energy, catalysts)
$2.08
$1.81
$1.53
$1.66
The PMI is NOT the Petroplus Margin. Petroplus margin may be better or worse depending on location, configuration, crude diet, specialties, etc. The PMI is a daily indicator to give a flavor of the market conditions/trends. It consists of a basket of 4 crude oils (40% Urals, 35% Forties, 12% CPC, 13% Bonny Light) and is calculated and reported after variable costs.
Source: Platts The data is through November 30, 2011
Urals
(1)
Azeri Light
Ekofisk
CPC
Forties
Saharan Blend
(2)
Q1 2010 Q1 2011
Q2 2010 Q2 2011
Q3 2010 Q3 2011
(3)
(4)
Source: Platts The Q4TD data is through November 30, 2011
Dated Brent
100
90
0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
80
120
0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
(1)
(2)
(3)
(4)
Reduction of Saudi Arabian supply to Europe Fuel oil cracks have been relatively strong, improving Urals economics
(5)
Sources: Platts, PIRA Energy The data is through November 30, 2011
Product cracks have recently shown strength in middle distillates & fuel oil but weakness in naphtha and gasoline
USD/bbl
25
20
15
10
Naphtha
(5)
Gasoline
ULSD
Heating Oil
(10)
(15)
Q1 2010 Q1 2011
Q2 2010 Q2 2011
Q3 2010 Q3 2011
(20)
Source: Bloomberg The Q4TD data is through November 30, 2011
Middle distillate cracks are at their strongest level since 2008 and are expected to stay strong through the end of 2011 due to seasonal demand Middle distillate inventories in the ARA have declined sharply and are at their lowest level since 2008, which should support refining margins German domestic heating oil stocks are about 4 mmbbls lower than last year due to delays in restocking owing to the high price environment and unseasonably warm winter weather Strong inland premiums due to the low water levels on the Rhine Naphtha is very weak but is expected to become seasonally stronger when colder weather arrives, as rising LPG prices provide an incentive for steam crackers to shift to naphtha
2009 2010 2011
mmbbls
28 26 24 22 20 18 Jan
Gasoline is weaker than the seasonal norm due to weak demand and as refineries have been increasing runs due to the strength in middle distillates, which has resulted in increased production of other products such as gasoline
Jul
Aug Sep
10
Several announcements have been made in recent months (0.7 mmbpd on the U.S. East coast, 0.2 mmbpd in Europe) and the low margin environment is expected to accelerate the pace of rationalization
11
2.5
New refinery additions Net refinery expansions Global y-o-y oil demand growth
1.5
0.5
2010
2011
2012
2013
Global oil demand bounced back strongly in 2010 and more than recovered the demand lost during the economic crisis Macroeconomic uncertainty has weighed on demand for petroleum products in 2011 to date Recent announcements are expected to reduce net refining capacity Global GDP growth will set the pace for oil demand growth Emerging markets are expected to drive both oil demand growth and the increase in refining capacity Demand growth is estimated to outpace capacity additions, which should benefit refiners around the world
Source: Wood Mackenzie (demand data from Nov -11, supply data from Dec -11)
12
Agenda
1. The Refining Market & Outlook 2. Strategy & 3YIP 3. Update on Petit Couronne 4. Fourth Quarter 2011 Update 5. 2012 Outlook 6. Liquidity 7. Capital Structure 8. The Way Forward 9. Summary
13
Fix low performers / Asset management Converted Teesside to a terminal Sold Antwerp Processing Facility Reichstett being converted to a terminal, with the intention to sell the site Further actions?
3.
14
$0.40 - $0.55 $0.10 - $0.15 $0.35 - $0.45 $0.05 - $0.10 $0.90 - $1.25
15
+15 G&A
(100)
(200)
* Operating clean cash flow is defined as clean net income/loss plus depreciation and amortization, less capital expenditures
16
17
%
450 400 350 300 250 200 150 100 50 0
Source: Platts Please note that the Teesside and Reichstett sites are excluded from the data displayed above.
19
20
Key accomplishments Cogen plant Antwerp (improving energy efficiency & operational reliability) Increased natural gas utilization & new heat exchanger at Coryton Initiatives to improve boiler operations, intensified exchanger cleaning, etc.
85 2009 2010 9M 2011 2012 Target 90 95
22
+10
180 160
(5)
+65
(150)
+35
Gross Margin
Energy efficiency
Opex
240
260
24
Please note that the Teesside and Reichstett sites are excluded from the data displayed above.
+24% +4%
$k/mt
140 120 100 80 60 40 20 0 Jan-10 Apr-10
EUR/USD
GBP/USD
CHF/USD
Natural gas prices have risen in 2011 due to the increase in crude price, however there is still an economic incentive to burn natural gas and recover LPGs (benefit in gross margin) Limited export quotas of rare earth (used in the FCC catalyst) from China since July 2010 have increased prices from below $10k/mt to $101k/mt on average in 2011 to date We are pursuing alternative catalysts with lower rare-earth content in order to reduce catalyst expense going forward The weak USD has negatively impacted operating and G&A expenses in 2011; Q4 to date the USD has strengthened slightly against our local currencies, but we remain subject to this variability
Jul-10
Oct-10
Jan-11 Apr-11
Jul-11
Oct-11
25
3YIP: G&A
To reduce overhead costs Key initiatives Systems enhancement Improvement of functional work processes Reduction of contractors and external consultants More effective resource management
26
9M 2009 G&A
9M 2011 G&A
(20)
(40)
(60)
(80)
(100)
(120)
(140)
(160)
27
Mechanical availability*
96
94
92
90
Coryton 88 2008
Antwerp 2009
Cressier
Ingolstadt 9M 2011
2010 Solomon survey results validate significant improvements at most of our refineries
Sources: Solomon, Company data *A measure of a refinerys reliability excluding production slowdowns and including unit outages related to non-turnaround maintenance work and annualized turnaround maintenance
28
Improvement 9M 2011
Demonstrated improvement Further improvements to reliability and centralized procurement program will drive additional achievements Will it be enough?
29
(50)
+5 G&A*
(100)
+30 Opex*
Q4 2011 results
30
Agenda
1. The Refining Market & Outlook 2. Strategy & 3YIP 3. Update on Petit Couronne 4. Fourth Quarter 2011 Update 5. 2012 Outlook 6. Liquidity 7. Capital Structure 8. The Way Forward 9. Summary
31
Base oil complex Weaker margins & declining demand for Group 1 base oils in Europe (-1.5% p.a.) High fuel & loss Lack of competitiveness as costs overwhelm high gross margin Lack of economies of scale and poor performance
Future capex requirements Turnaround of the base oil complex required in 2012 Strict allocation of capex
Working capital High working capital needs despite smaller part of the refinery operations
The reconfiguration will transform the refinery into a smaller but more efficient site
32
b
Q4 2011
c
Jan 2012
d
H1 2012
Timeline
a. b. Potential reconfiguration announced Further studies to improve competitiveness being performed c. d. Formal meetings with the Works Council start Works Council required to provide their opinion about the project, following which a final decision can be made
Operating impact:
Simpler, more streamlined operations Improved operational reliability Streamlined crude slate Reduced fuel & loss Lower throughput Lower inventories
Financial impact:
Improved gross margin capture Reduction in personnel expenses (approx. 120 positions) Reduction in operating expenses Liquidation of net working capital Reduction of future capex Employee severance costs Asset impairment
Estimated to positively impact overall cash flow by approximately $50 million in 2012
33
Agenda
1. The Refining Market & Outlook 2. Strategy & 3YIP 3. Update on Petit Couronne 4. Fourth Quarter 2011 Update 5. 2012 Outlook 6. Liquidity 7. Capital Structure 8. The Way Forward 9. Summary
34
Product Cracks
Crude differentials
3 2 1 0 (1) (2) (3) (4) (5) (6) (7) PMI Naphtha Gasoline Heating Oil ULSD 3.5% Fuel Oil Urals Azeri Light Ekofisk
Sources: Platts, Bloomberg The Q4TD data is through November 30, 2011
35
Q4 2011 Guidance
Throughput Coryton: 140 150 mbpd (previously 170 180 mbpd) Total Petroplus: 460 510 mbpd (previously 490 540 mbpd)
36
Agenda
1. The Refining Market & Outlook 2. Strategy & 3YIP 3. Update on Petit Couronne 4. Fourth Quarter 2011 Update 5. 2012 Outlook 6. Liquidity 7. Capital Structure 8. The Way Forward 9. Summary
37
As a result of limited sour and increased sweet crude supply, the sweet/sour spread is likely to narrow Further rationalization of refining capacity is expected to reduce demand for light sweet crudes
38
mmbpd
1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Q4 -10 Q1 -11
Q2 -11
Q3 -11
Q4 -11
Q1 -12
Q2 -12
Q3 -12
Q4 -12
39
Group capital expenditures Refining & marketing operating expenses (1) General & administrative expenses (excluding incentive compensation) (2) Depreciation & amortization Effective interest expense on long term debt (weighted average rate on long term debt) (%) Group effective tax rate (3) (%)
Refining & marketing operating expenses include refining personnel, operating and other administrative expenses that pertain to the processing of crude oil and feed-/blendstocks into refined products for the five refineries. General & administrative expenses consist of non-refining personnel costs and other administrative expenses, excluding incentive compensation. Subject to refining margin environment and foreign currency fluctuation. Does not include the impact of the proposed reconfiguration of Petit Couronne. Exchange rates: EUR/USD 1.30, GBP/USD 1.55, CHF/USD 1.05.
40
Agenda
1. The Refining Market & Outlook 2. Strategy & 3YIP 3. Update on Petit Couronne 4. Fourth Quarter 2011 Update 5. 2012 Outlook 6. Liquidity 7. Capital Structure 8. The Way Forward 9. Summary
41
$/bbl
140
1,000
800
Higher working capital burden at year end due to the prepayment of German MOT
120
100
20
2008
2009
2010
2011
Sources: Platts, Company reports Please note that the Teesside, PRA/B and Reichstett sites are included in the data displayed above for the applicable periods.
42
Liquidity Fundamentals
Liquidity needs Hydrocarbon purchases (approx. 16 mmbbls per month) Short-term cash borrowings (driven by periodic tax (e.g. VAT) payments)
Required amounts Size of LC requirements depends on throughput, crude price & availability of open credit Short-term cash requirements primarily depend on size of tax payments
Liquidity Management
Sizeable collateral available to meet liquidity requirements
RCF Credit Lines & Current Assets*
$BN 3.5 0.2
Why the Revolving Credit Facility (RCF)? Availability traditional trade finance structure large bank community
3.0
2.5
1.3
2.0
Flexibility can be used as needed for letters of credit and short-term cash borrowings size can be adjusted in line with changing needs, e.g. due to change in crude price
1.0
1.5
1.0
2.0
0.5
1.1
Pricing cost-effective
0.0 1 2 Uncommitted lines Trade receivables Committed lines Inventory * At Sept 30, 2011 Cash
44
Flexibility Pricing Increased fees and pricing are making it less competitive Declining, as the banking sector has restricted capacity to increase credit lines
Petroplus maintains strong, positive relationships with our RCF lenders, but all parties recognize that the current environment presents challenges to the existing structure
45
Period Valid until reporting of Q2 results in August 2012 Waiver provides sufficient time to address the refinancing of the RCF. Expect to have new liquidity facilities in place in spring 2012.
46
1.0
0.8
0.6
0.4
0.2
* Receivables factoring and receivables securitization facilities are up to GBP 180M and GBP 130M respectively. ** Values at September 30, 2011, except for receivables securitization entered into in Q4 2011.
47
Petroplus UK receivables
Cash
Bank
Advantages Monetizing some of our sizeable, very high-quality current assets Timing and size of cash infusion means it can be used for the Q4 2011 German MOT prepayment Liquidity source extending beyond the normal European banking community Expandable
Bank
Costs Minimal one-time fees, with lower pricing than cash borrowings under the current RCF
48
Utilize excess collateral by expanding Receivables securitization program and/or Receivables factoring
Monetization of other assets Some even have zero Balance Sheet value (e.g. CO2 emission credits)
49
Petroplus could choose a crude oil supplier to buy a refinerys crude oil requirement. That supplier would own the crude in the refinery tanks. Title would pass to Petroplus as the crude enters the processing units Petroplus would own the products in the refinery tanks and would offer them as collateral to the crude supplier to secure its credit exposure Petroplus would continue to use its marketing organization to sell the products to its traditional customers 3 categories of potential CSA counterparties Oil majors Investment banks Large oil traders
Virtually no LC requirements to supply the refinery. Limited paid inventories. Receivables still available as collateral for borrowing bases or Factoring/Securitization facilities
50
Agenda
1. The Refining Market & Outlook 2. Strategy & 3YIP 3. Update on Petit Couronne 4. Fourth Quarter 2011 Update 5. 2012 Outlook 6. Liquidity 7. Capital Structure 8. The Way Forward 9. Summary
51
Amount ($)
600M 600M 400M 150M 1,750M
Interest
6.75% 7.00% 9.375% 4.00% 7.2%
Maturity
2014 2017 2019 2015
MUSD
600 500 400 300 200 100 0 2011 2012 2013
Maturity Profile
600 600
400
150
2014
2015
2016
2017
2018
2019
Convertible Bond
52
Agenda
1. The Refining Market & Outlook 2. Strategy & 3YIP 3. Update on Petit Couronne 4. Fourth Quarter 2011 Update 5. 2012 Outlook 6. Liquidity 7. Capital Structure 8. The Way Forward 9. Summary
53
55
Agenda
1. The Refining Market & Outlook 2. Strategy & 3YIP 3. Update on Petit Couronne 4. Fourth Quarter 2011 Update 5. 2012 Outlook 6. Liquidity 7. Capital Structure 8. The Way Forward 9. Summary
56
Summary
Tougher market than expected in 2011 on the back of crude supply disruptions and the Euro zone crisis Petroplus is more resilient to weak market conditions: improved Clean R&M EBITDA 9M 2011 vs. 2009 despite significantly weaker market Continue to execute on the 3YIP, but recognize that more needs to be done On-going review of current portfolio performance Petit Couronne reconfiguration Liquidity action plan in place to provide more stable structure Further actions possible A new cash contributor in a depressed environment still welcome Operational leverage to improving refining margins
$1/bbl
Market improvement
$200M
pre-tax