petroplus ingolstadt analyst day presentation final
TRANSCRIPT
PetroplusAnalyst Day
Ingolstadt, December 8, 2011
2
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 Company’s 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.
3
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
Agenda
4
• Crude oil & differentials- Global oil demand driven by non-OECD countries
- Supply concerns driven by the turmoil in the MENA region
- Macro uncertainty in Europe resulting in volatile crude price
- Supply disruptions (e.g. Libya, Syria & the North Sea)
- Strong premiums for light sweet barrels
- Narrow differentials for sour barrels
• 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)
2011 – a very difficult year for European refining
(3)
(2)
(1)
0
1
2
3
4
5
6
7
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
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.
European refining margins remain depressed
Source: PlattsThe data is through November 30, 2011
$2.08
USD/bbl
$1.81
2011 Quarterly average
20102011
$1.53 $1.66
5
Petroplus Market Indicator
(4)
(3)
(2)
(1)
0
1
2
3
4
5
Urals Azeri Light Ekofisk CPC Forties Saharan Blend
Q1 2010 Q2 2010 Q3 2010 Q4 2010
Q1 2011 Q2 2011 Q3 2011 Q4TD 2011
6
Crude differentials: Everything more expensiveSignificant increases in 2011 driven by the lost crude supply from Libya
Source: PlattsThe Q4TD data is through November 30, 2011
USD/bbl
6
Differentials to Dated Brent
80
90
100
110
120
130
140
0
1
2
3
4
5
6
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
Azeri light Diff
Ekofisk Diff
Dated Brent
7
Lost Libyan crude production……has had a major impact on crude price and light sweet differentials in 2011
Source: PlattsThe data is through November 30, 2011
7
Dat
ed B
rent
($/b
bl)
Dif
fere
ntia
ls to
Dat
ed B
rent
($/b
bl)
Libyan crude starts to return to the
market
Libyan crisis starts
(5)
(4)
(3)
(2)
(1)
0
1
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
8
Urals has strengthened significantly in H2 2011
Sources: Platts, PIRA EnergyThe data is through November 30, 2011
Differential to Dated BrentUSD/bbl
8
• Russian crude production reached post-Soviet highs, however high domestic refinery run rates limited exports
• Linefill requirements for two new pipelines
• Reduction of Saudi Arabian supply to Europe
• Fuel oil cracks have been relatively strong, improving Urals economics
Reasons for the narrow Brent-Urals differential:
Increased supply of Saudi Arabian sour barrels to replace lost Libyan
production
(20)
(15)
(10)
(5)
0
5
10
15
20
25
Naphtha Gasoline ULSD Heating Oil 3.5% Fuel oil
Q1 2010 Q2 2010 Q3 2010 Q4 2010
Q1 2011 Q2 2011 Q3 2011 Q4TD 2011
9
Product cracks have recently shown strength in middle distillates & fuel oil…
…but weakness in naphtha and gasoline
Source: BloombergThe Q4TD data is through November 30, 2011
Differentials to Dated BrentUSD/bbl
9
18
20
22
24
26
28
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
200920102011
100
110
120
130
140
150
160
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
200920102011
10
European market environmentmmbbls German Domestic Heating Oil Stocks
•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
•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
Source: PIRA Energy
mmbbls ARA Middle Distillate Inventory
Refining capacity in Europe (mmbpd)
Possible sales/closures 0.7Confirmed closures 0.9Capacity reduction/Temp shutdown 0.2
1111
The rationalization of European refining capacity continues 15 European refineries closed, up for sale or under strategic review
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
Sources: Press, Company reports
Possible sales/closuresConfirmed closureCapacity reduction/Temporary shutdown
0
0.5
1
1.5
2
2.5
3
12
Global oil demand expected to outpace new capacity
Source: Wood Mackenzie (demand data from Nov -11, supply data from Dec -11)
• 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
mmbpd
2010 2011 2012 2013
New refinery additionsNet refinery expansionsGlobal y-o-y oil demand growth
13
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
Agenda
14
Strategic Action Plan
1. Extract maximum value from existing portfolio of assets: 3YIP• Establish best practices in diverse portfolio• Improve competitiveness through targeted
enhancement program• Ongoing focus on Petit Couronne
2. 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. Pursue opportunities to upgrade portfolio• Disciplined approach• Strict criteria
Gross Margin $0.40 - $0.55 $100M
Energy Efficiency $0.10 - $0.15 $25M
OPEX $0.35 - $0.45 $80M
G&A $0.05 - $0.10 $15M
Total Improvement $0.90 - $1.25 $220M
2012 Goal ($/bbl)
2012 Goal ($M)
15
3YIP: Original Goal for 2012
Goals set up in early 2010 with 2009 as the baseline
(300)
(200)
(100)
0
16
3YIP: Cash neutral or better in trough-cycle market conditions
MUSD
2009 Operating clean cash flow*
Fix low performers
Gross margin
Energy efficiency
Opex
G&A
(300) +80
+100
+25
+80
+15
Original 2012 goal: CF neutral or better at 2009
market conditions
* Operating clean cash flow is defined as clean net income/loss plus depreciation and amortization, less capital expenditures
17
3YIP: Gross Margin Capture
• To maximize the capture of market opportunities
• Key initiatives- Business Unit Manager structure / day-to-day
optimization- Raw material diversification (widening crude &
feedstock basket)- Product value upgrade- Capacity utilization (catalyst run length
& turnaround cycle strategies)
• Original targeted 2012 improvement = $100M
18
3YIP Status 9M 2011: Gross Margin Capture• Key accomplishments
1. Product yield upgrade- Product upgrade (e.g. increased processing
of vacuum residue)- Feedstock optimization (e.g. Ingolstadt => Cressier,
Coryton => Antwerp)- LPG recovery project (Coryton)- Improved middle distillate yield with new
catalyst strategy (Coryton, Ingolstadt)
2. Improved raw material selection- Widening crude & feedstock basket (e.g. crudes
from Canada & Bolivia) mitigating the impact ofthe Libyan crude supply disruption
- Improved crude processing constraints
• Total 9M 2011 improvement = $80M
Gross Margin Improvements
Product yield upgradeRaw material selection
0
50
100
150
200
250
300
350
400
450
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Q1 -09 Q2 -09 Q3 -09 Q4 -09 Q1 -10 Q2 -10 Q3 -10 Q4 -10 Q1 -11 Q2 -11 Q3 -11
PMI ($/bbl) Capture rate (%) Linear (Capture rate (%))
19
3YIP: Improved Clean Gross Margin Capture
Source: PlattsPlease note that the Teesside and Reichstett sites are excluded from the data displayed above.
$/bbl %
20
3YIP: Energy Efficiency
• To reduce & optimize the amount of energy required to operate the refineries
• Key initiatives- Reduction of fuel gas and electricity consumption- Burning less expensive fuels - Optimize steam consumption- Increased focus on efficient furnace and boiler
operations- Optimized utilization vs. energy consumption
• Original targeted 2012 improvement = $25M
85
90
95
100
105
2009 2010 9M 2011 2012 Target
21
3YIP Status 9M 2011: Energy Efficiency
• KPI: Energy Intensity Index (EII) - 2009 Baseline – 103*- 2011 YTD 9 months – 95 - 2012 Goal – 91 (targeting a 12% reduction)
• 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.
• Total 9M 2011 improvement = $30M
Energy Intensity Index (EII®)
* Restated due to the decision to convert Reichstett to a terminal
22
3YIP: Operating Cost Reduction
• To reduce the costs of operating the refineries
• Key initiatives- Reduce personnel expenses- Increase maintenance efficiency (both contract
labor and materials)- Optimized procurement strategy & skills - Improved fuel flexibility
• Original targeted 2012 improvement = $80M
23
3YIP Status 9M 2011: Operating Cost Reduction
• Key accomplishments
- Reduction in personnel expenses (e.g. Coryton pension scheme)
- Staffing level reduction – both own employees and contractors
- Maintenance contract labor efficiencies (all sites)
- Efforts to mitigate the impact of increased rare earth prices by reducing content in catalysts (Coryton, Ingolstadt, Petit Couronne)
- Procurement efforts in the areas of: - utilities- technical equipment- chemicals and additives- catalysts- refinery services
• Total 9M 2011 improvement = $50M
60
80
100
120
140
160
180
200
220
240
260
24
3YIP: Structural improvements have been made…9M 2009
Clean R&M EBITDA
240
+10
(5)
(15)
$M
+30
(150)
+15
260
+35
…but we have also faced sizeable new external headwinds
+65
9M 2011 Clean R&M
EBITDA
+30
+50
(35)
(20)
+10
Gross Margin Energy efficiency Opex
Please note that the Teesside and Reichstett sites are excluded from the data displayed above.
0
20
40
60
80
100
120
140
Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11
0.8
1.0
1.2
1.4
1.6
1.8
EUR/USD GBP/USD CHF/USD
200920109M 2011
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Jan Mar May Jul Sep Nov
200920102011
25
3YIP: Addressing the Headwinds
Sources: ICIS Heren, Asian Metal, ECB
• 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
$k/mtRare Earth Prices
Foreign Exchange Impact*Natural Gas PricesGBP/th
-5%
+2%
-1%+4%
+4%
+24%
* Percentage change vs. 2009
26
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
• Original targeted 2012 improvement = $15M
(160)
(140)
(120)
(100)
(80)
(60)
(40)
(20)
0
3YIP: Structural improvements have been made to G&A…
27
9M 2009 G&A
(110)
+5(20) +5
$M
+10
9M 2011 G&A
(120)
(10)
* As a result of the conversion of the Teesside refinery into a terminal in 2009
…but we have also faced sizeable new external headwinds
Total 9M 2011 improvement = $20M
88
90
92
94
96
98
2008 2009 2010 9M 2011
Coryton Antwerp Petit Couronne Cressier Ingolstadt
28
3YIP Operational Reliability: “The Foundation”
Mechanical availability*%
Sources: Solomon, Company data*A measure of a refinery’s reliability excluding production slowdowns and including unit outages related to non-turnaround maintenance work and annualizedturnaround maintenance
2010 Solomon survey results validate significant improvements at most of our refineries
Reliability continues to improve due to the 3YIP, with one exception
Gross Margin $100M $80M $125M
Energy Efficiency $25M $30M $45M
OPEX $80M $50M $80M
G&A $15M $20M $25M
Total Improvement $220M $180M $275M
Original 2012 Goal
Improvement 9M 2011
New 2012 Goal
29
3YIP: New Goal for 2012
• Demonstrated improvement
• Further improvements to reliability and centralized procurement program will drive additional achievements
• Will it be enough?
(200)
(150)
(100)
(50)
0
30
Closing the gap
MUSD
9M 2011 Operating clean
cash flow
(155)
+15
G&A*+5
Gross margin*
+45
Energy efficiency*
Opex*+30
Q4 2011 results
?
+60Remaining
gap
Organic improvements not enough in the current environment
More structural changes needed, particularly at Petit Couronne
* New 2012 goals vs. 9M 2011 improvement
31
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
Agenda
32
Rationale Behind the Petit Couronne Reconfiguration• The refinery
- Ongoing issues with reliability
- Complex refinery structure and operations
- High cost structure
• 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
33
Operating and Financial Impact…
Operating impact:• Simpler, more streamlined operations
• Improved operational reliability
• Streamlined crude slate
• Reduced fuel & loss
• Lower throughput
• Lower inventories
…of the proposed reconfiguration
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
Timelinea. Potential reconfiguration announced
b. Further studies to improve competitiveness being performed
Jan 2012
Q4 2011
Oct 20, 2011
a
H1 2012
b c d
c. Formal meetings with the Works Council start
d. Works Council required to provide their opinion about the project, following which a final decision can be made
Estimated to positively impact overall cash flow by approximately $50 million in 2012
34
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
Agenda
(7)
(6)
(5)
(4)
(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
35
Q4 to date vs. Q3 2011 Market Environment
Sources: Platts, BloombergThe Q4TD data is through November 30, 2011
$/bb
lcha
nge
Q4
to d
ate
vs. Q
3 20
11
Product Cracks Crude differentialsMarket Indicator
• Throughput
- Coryton: 140 – 150 mbpd (previously 170 – 180 mbpd)
- Total Petroplus: 460 – 510 mbpd (previously 490 – 540 mbpd)
• Financial expenses
- RCF waiver consent fee
• Cash flow
- German MOT
- New receivables securitization program
36
Q4 2011 Guidance
37
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
Agenda
38
2012 Crude market expectations
38
• The pressure on oil prices and sweet crude differentials is expected to ease as Libyan barrels continue to return to market in 2012
• Availability of heavy sour grades is expected to decrease in Europe as a result of:
• Sanctions on
- Syria
- Iran
• Saudi Arabian crude supply could mitigate these impacts
• 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
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
Q4 -10 Q1 -11 Q2 -11 Q3 -11 Q4 -11 Q1 -12 Q2 -12 Q3 -12 Q4 -12
Jun -11 estimate Nov -11 estimate
39
Libyan production outpaces forecast…… and is expected to ease sweet differentials
Sources: IEA, Wood Mackenzie
Libyan crude oil capacity outlookmmbpd
39
Pre-civil war destinations for Libyan crude oil
EuropeLibya
U.S.Asia
40
Updated Outlook 2012
(1) 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.
(2) General & administrative expenses consist of non-refining personnel costs and other administrative expenses, excluding incentive compensation.(3) Subject to refining margin environment and foreign currency fluctuation.(4) 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.
(in millions of dollars)ESTIMATED EXPENSE(4)
Group capital expenditures 335
Refining & marketing operating expenses (1) 710
General & administrative expenses (excluding incentive compensation) (2) 135
Depreciation & amortization 315
Effective interest expense on long term debt (weighted average rate on long term debt) (%) 7.2%
Group effective tax rate (3) (%) 10%
41
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
Agenda
0
20
40
60
80
100
120
140
0
200
400
600
800
1,000
1,200
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Net working capital Dated Brent
Sources: Platts, Company reportsPlease note that the Teesside, PRA/B and Reichstett sites are included in the data displayed above for the applicable periods.
42
Continued focus on working capital management…
Higher working capital burden at
year end due to the prepayment of German MOT
2008 2009 2010 2011
$M $/bbl
…has reduced the working capital burden despite higher crude price
43
Liquidity FundamentalsLiquidity 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
Collateral is made up of• Inventory• Accounts receivable• Cash
Our collateral fits our credit needs
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
1 2
2.0
1.1
1.0
1.3
$BN
44
Liquidity Management
RCF Credit Lines & Current Assets*
Committed linesUncommitted lines Trade receivables
CashInventory
* At Sept 30, 2011
Sizeable collateral available to meet liquidity requirements
0.2Why the Revolving Credit Facility (RCF)?
• Availability- traditional trade finance structure- large bank community
• 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
• Pricing- cost-effective
Petroplus maintains strong, positive relationships with our RCF lenders, but all parties recognize that the current environment presents challenges to the existing structure
45
RCF considerations in the current environment
Availability
• Increasingly limited due to the European banking industry exposure to the Euro zone turmoil, limitations regarding USD funding and looming Basel III capital requirements
Flexibility
• Declining, as the banking sector has restricted capacity to increase credit lines
Pricing• Increased fees and pricing are making it less competitive
Covenant Package• Creating constraints and uncertainty
Despite good ongoing relationships with our RCF banks, we need to consider:
46
Terms
• Waiver of Clean Group EBITDA to Net Interest Expense ratio
• Reset of Consolidated Tangible Net Worth to $1.0B
• Reset of Current Ratio to 1.0
• Addition of Free Cash Flow Covenant
(before working capital changes) cannot be more negative than minus $150 million for the period starting October 1, 2011 and ending March 31, 2012
Fees & Pricing
• One-time consent fee of $6.3 million plus increased usage costs (remain at levels following Q2 2011 waiver)
Period
• Valid until reporting of Q2 results in August 2012
RCF Waiver & Amendment
Waiver provides sufficient time to address the refinancing of the RCF. Expect to have new liquidity facilities in place in spring 2012.
0.0
0.2
0.4
0.6
0.8
1.0
1.2
Committed lines Uncommitted lines Receivables factoring Receivablessecuritization
Type Amount ($M)** Utilization Term Maturity
RCF $1,050 LC/Cash Committed Oct 2012
RCF $1,045 LC/Cash Uncommitted Oct 2012
Receivables factoring* $280 Cash Uncommitted Evergreen
Receivables securitization* $200 Cash Uncommitted Nov 2017
Total $2,575
47
Current Liquidity Facilities
47
$BN
* 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.
New facility in Q4 2011
Basic structure
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
Costs
• Minimal one-time fees, with lower pricing than cash borrowings under the current RCF
Provides liquidity onlyif commercial paper is
not sufficient
48
Receivables Securitization Program
Sold toPetroplus
UK receivables BankCompany
Purchasing ReceivablesCash
Bank
Issues commercial paper backed by the
assets acquired
49
Refinance current RCF
• Implement new alternative liquidity facilities- potential crude supply arrangements
• Implement a new RCF as needed – expect facility to be- smaller size- with shorter tenure- more workable covenant package
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)
Liquidity Action Plan
50
Possible crude supply agreement structure
Crude Supply Product Off-take
• Petroplus could choose a crude oil supplier to buy a refinery’s 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
• 2-3 year agreement possible
• Covenant-light
3rd party crude supplier
Petroplus traditional customers
Virtually no LC requirements to supply the refinery. Limited paid inventories. Receivables still available as collateral for borrowing bases or Factoring/Securitization facilities
51
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
Agenda
600
150
600
400
0
100
200
300
400
500
600
2011 2012 2013 2014 2015 2016 2017 2018 2019
52
Capital Structure: No Near-Term Debt Maturities
MUSD
High Yield 600M 6.75% 2014High Yield 600M 7.00% 2017High Yield 400M 9.375% 2019Convertible Bond 150M 4.00% 2015Total 1,750M 7.2%
Type Amount ($) Interest Maturity
Maturity Profile
High Yield Notes Convertible Bond
53
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
Agenda
54
Potential for growth through acquisition…
Why grow?
• Refining is our business
• Clear economies of scale in this industry
• Embedded in the company DNA
• Contrarian strategy in a weak refining environment
Any acquisition must meet strict criteria:
• Good strategic fit
• Sizeable
• Meaningfully accretive to earnings
• Lower our break-even point
• Cash flow positive
• Improve financial flexibility
• Target must be a clear survivor in our industry
…in today’s “buyer’s market”
Still considered a viable opportunity
55
Navigating in rough seas
What if margins remain depressed in 2012 and Petroplus generates negative cash flowfrom operations?
- despite the expected slow recovery of refining margins
- despite the 3YIP
- despite capex and cost reductions
Petroplus will take all the steps necessary:
- to reduce the negative cash flow
- to operate a competitive portfolio of refineries
56
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
Agenda
57
Market improvement
$1/bbl $200M $180M = EPS $1.89pre-tax after tax
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