New Zealand Refining has reported negative margins for the first time in five years after a major maintenance shut had to be extended last month.
The company, operator of the country’s sole oil refinery at Marsden Point, reported gross margins for May and June of negative 71 US cents a barrel. That is in contrast to the US$6.82 a barrel achieved for March and April, and the US$7.63 reported for May and June last year.
Earnings at Marsden Point have grown strongly in recent years amid record throughput, strong regional margins and a string of process improvements undertaken to improve yields and lower costs.
The firm, 43 percent-owned by the country’s major fuel companies, charges those customers a fee to process their crude based on margins in Singapore. The Singapore Dubai complex margin it uses as a benchmark also fell to US$2.02 barrel in the period, from US$3.75 in the two prior months and US$2.90 a year earlier.
The maintenance shut, originally planned for 61 days from April 20, included the first full site shutdown in 14 years. The $85 million project was expected to reduce net profit by $30 million and trim throughput to 42.3 million barrels, from 42.7 million barrels in 2016. Last year’s throughput was reduced by a 10-day shut on the firm’s main fuel pipeline to Auckland.
But in late May the firm indicated work on the plant’s hydrocracker was more involved than first thought and could impact earnings by another $7 million and reduce throughput by 500,000 barrels. In late June the firm increased the estimated impact on earnings to a total of $40 million and raised the total project cost to as much as $115 million.
Today the company said it processed 3.91 million barrels of crude in May and June, down from 6.96 million in March and April. Volume for the six months was just shy of 17.9 million barrels.
The refinery has been fully operational since July 6.
The shares fell 1.2 percent to $2.49, having declined 4.9 percent so far this year.