naftnaindustrijasrbijej.s.c.. novi...
TRANSCRIPT
Investor day
Naftna industrija Srbije j.s.c.. Novi Sad
17 December 2012Pančevo
Investor Relations
2
Disclaimer
This presentation has been prepared by NIS a.d. Novi Sad (the “Company”), and comprises the slides for a presentation to investorsconcerning the Company. Presentation does not constitute or form part of any offer or invitation, or any solicitation of any offer to sellor purchase or subscribe for, any shares or other securities representing shares in the Company, nor shall it or any part of it nor thefact of its presentation or distribution form the basis of, or be relied on in connection with, any contract or investment decision.
Any viewer of this presentation considering a purchase of such securities is hereby reminded that any such sale or purchase shouldbe made solely on the basis of the information contained in other publicly available documents and will be subject to the restrictionsset out therein. No reliance may be placed for any purposes whatsoever on the information contained in this presentation, or any othermaterial discussed at any presentation or on its completeness, accuracy or fairness. The information in this presentation should not betreated as giving investment advice or recommendation. All reasonable measures are taken to ensure that the facts stated in thispresentation are accurate, and that the opinions expressed are fair and reasonable. However, the contents of this presentation havenot been adopted by the corporate body’s of Company. Accordingly, no representation or warranty, express or implied, is made orgiven by or on behalf of the Company or any of its members, directors, officers or employees or any other person as to the accuracy,completeness or fairness of the information or opinions contained in or discussed at this presentation. None of the Company or any oftheir respective members, directors, officers or employees nor any other person accepts any liability whatsoever for any losshowsoever arising from any use of this presentation or its contents or otherwise arising in connection therewith.
The information in this presentation includes forward-looking statements. These forward-looking statements include all matters thatare not historical facts, statements regarding the Company’s intentions, beliefs or current expectations concerning, among otherthings, the Company’s results of operations, financial condition, liquidity, prospects, growth, strategies, and the industry in which theCompany operates. By their nature, forward-looking statements involve risks and uncertainties, including, without limitation, the risksand uncertainties to be set in other publicly available documents, because they relate to events and depend on circumstances thatmay or may not occur in the future. The Company cautions you that forward looking statements are not guarantees of futureperformance and that its actual results of operations, financial condition and liquidity and the development of the industry in which theCompany operates may differ materially from those made in or suggested by the forward-looking statements contained in thispresentation. In addition, even if the Company’s results of operations, financial condition and liquidity and the development of theindustry in which the Company operates are consistent with the forward-looking statements contained in this presentation, thoseresults or developments may not be indicative of results or developments in future periods. The information and opinions contained inthis presentation are provided as at the date of this presentation and are subject to change without notice.
No person is under any obligation to update or keep current the information contained herein.
By attending the presentation you confirm that you have read and understood foregoing limitations.
About Us
Quick facts about NIS
14
A joint-stock company – 56.15% of shares owned by the Russian Company
Gazprom Neft
An international company:
operating in nine countries worldwide
One of the greatest vertically integrated companies for the
production of oil and gas in the Southeastern Europe
It has about 9,000 employees
The largest tax payer in Serbia
The largest investor in Serbia in 2011
NIS meets more than 2/3 demands of the Serbian
market for petroleum products and approx. 1/5 demands of the Serbian market for natural gas
5
Mission, vision and values of the company
VALUES OF THE COMPANY
MISSION
To give the people of Balkan region energy for movement towards better by responsible
use of natural resources and modern
technology.
VISION
Vertically integrated energy company NIS will become a recognized leader in Balkan
region in its industry by dynamics of sustainable
development and increase of efficiencies, demonstrating high
social and ecological responsibility and modern
standards of customer service.
EXPERTISEgaining up-to-date
knowledge for the goal of constant professional development, and the
ability to implement it in an actual business
processes.
POSITIVISM AND COOPERATION
readiness to participate in multifunctional groups and
projects, eagerness to meet demands of colleagues from other units of the company,
willingness to exchange information, ability to work in
a team.
INITIATIVE AND RESPONSIBILITY
finding and suggesting new solutions both in
the working environment, and in the
sphere of company interests.
COLLECTIVE RESULTS
collective effort in achieving a visible and
meaningful result, a desire to succeed and
provide each other with needed assistance.
Business scheme
6
NISbusiness scheme
Seismics
Exploratory well
Consumers
Production well
Gathering station
Gas refinery
RefineryTransportation
Business Structure Review
NIS j.s.c.
Foreign Representative OfficesExpert Services
Exploration and Production (Upstream)
Refining Oilfield Services Sales & Distribution Energy
7
Modernization of Refinery Units
Hystory of Pancevo Oil Refinery
1968Construction
of the Refinery
1979Capacity
icreased to 4.8 mln. tons per
year
1982Bitumen Production
Unit and Vacuum Distillation Unit
1985The Catalytic Cracking Unit,
FCC
1985 – 1988The Diesel
Hydrotreater Unit, theSulphuric Acid
Alkylation
1990reconstruction of a Two-Stage Thermal Cracking Unit for the
visbreaking process; the following units were put into
operation: the Unit for Extraction of Aromatic
Hydrocarbons, the Unit for Molten Sulphur Production,
truck loading/unloading facility for petroleum products
2009 – 2012Modernization –
construction of theMHC/DHT Unit
November, 1st 2012
9
Фазе модернизације капацитета за прерадунафте
10
First phase – meeting the requirements of modern standards for Euro 5 product quality
• an improvement of motor fuel quality• a higher conversion of high-yield products• advanced indicators of the bottom of the barrel and production of "white" petroleum products.
Second phase – development of the production chain for a wider range of products
• Reconstruction of the Novi Sad Refinery, production of high-quality base oils. • Additional reconstruction of the Pančevo Refinery, the process of heavy residue refining.
Third phase – increased bottom of the barrel
• Reconstruction of Pančevo Refinery so that it could be included in the technological chain of the process of heavy residue refining and optimization of process flows.
Construction of MHC/DHT ComplexEnvironmental ProgrammesFirst Phase of Reconstruction
2009
Quality• Production of petroleum products of EURO 0 quality
standard: • Production of leaded gasoline
Environment• High level of negative influence on the environment • High losses
Efficiency• Low Nelson index • Large percentage of fuel for the Company’s own
needs • Energy efficiency index is the worst in the region• Manpower index is the worst in the region
2012
Quality• Production of motor fuels of EURO 5 quality
standard only
Environment• Reconstruction of the main facilities of pollution (river
jetty, truck loading facility, rail tank car loading facility).
• Transfer to natural gas as fuel for the refineries• Smaller losses
Efficiency• Higher Nelson index• Smaller percentage of fuel for own needs • Higher index of energy efficiency • Higher index of manpower
11
Operation of MHC/DHT complex will enable:
• Increased production of white petroleum products
• Increased bottom of the barrel
• Higher quality of motor fuels
Changed Structure of the Production of Motor FuelsFirst Phase of Reconstruction
EURO5 BMB 95
5%
EURO5 BMB 95
100%
BMB 95; 95%
DIESEL EURO 5;
40%
DIESEL EURO 5;
100%*
DIESELD-2; 60%
PBS
EUROAUTOGAS
EN 589
Before MHC/DHT construction
After MHC/DHT construction
12 *Data for 2014 and 2015
0
1000
2009 2010 2011 2012 2013 2014 2015
Product structure(thousand tons)
Diesel euro 5 Euro BMB95Diesel 10000ppm BMB95Ethyl MB95
0,0
0,5
1,0
1,5
2008 2009 2010 2011 2012
Emission of exhaust gases into the atmosphere (thousand tons)
Environmental Effects
First Phase of Reconstruction
1,54
1,26
0,82 0,78 0,78 0,74 0,7
0,20
0,40
0,60
0,80
1,00
1,20
1,40
1,60
1,80
2008 2009 2010 2011 2012 2013 2014 2015
Non-recurring losses, % of HC feed
13
Reconstruction of Novi Sad Refinery"Production of Base Oils" ProjectSecond Phase of Reconstruction (to be completed in 2015)
Objective
• Maximum effects from purposeful refining of oil of Velebit type and hydrocracking residue from the MHC unit
• A wider range of products and start of the production of new high-quality products
Result
• a higher profit margin, as compared to the basic variant, due to a purposeful refining of the Velebit type oil and the hydrocracking residue, in case of a variant including oil production;
• an additional profit margin due to the development of production of finished oils
• additional possibilities of potential development of other directions of business within the refinery: production of bitumen, technical liquids, lubricants, etc.;
• maximum utilization of the current fixed assets of Novi Sad Refinery, NIS j.s.c. storage, rail tank car and truck loading/unloading facility for petroleum products, river jetty for fuel bunkering;
• concentration of the entire oil business at one place will enable savings of production and logistics costs
14
• Solving problems of "bottom necks" and optimization of production of petroleum products in order to meetmarket demands
• Liquidation or minimization of production of heavy fuel oil and other black petroleum products
• The quality of motor oils and mixture of propane and butane should meet the Euro standards (minimum EN-228, EN 590, EN 589);
• Meeting the EU environmental standards (including the standards related to СО2 emissions)
Optimization of Refining in Pančevo Oil Refinery (RNP)Bottom of the BarrelThird Phase of Reconstruction (to be completed in 2016)
An objective of the project
Optimization of oil refining, including refining of oil residues in NIS Refinery in Pančevo, taking intoaccount the possible interaction with production units of the Refinery in Novi Sad
15
Business plan2013 - 2015
Basic Directions of Development
Exploration and Production→ Development of the projects in Serbia, Hungary, Romania and Bosnia and Herzegovina
Sales and Distribution→ Further modernization of Pančevo Refinery – bottom of the barrel project→ Production of base oils→ Development of the markets in the Balkan region
Energy→ Development of energy in the area of renewable energy sources→ Gas monetization
17
Sales
Western Romania
South Hungary
Bosnia and Herzegovina
Construction/Reconstruction
Existing objects
End2012
38
14
24
Current status
24
9
15
Bulgaria, the number of retail sites
Ret
ail
Who
lesa
le
Completed transaction by acquiring depot Kostin Brod in Sofia
Purchased land for the construction of depot Timisoara
Exploration and production
Implemented 3 transactions "farm-in", signed documents on JOA. The role of the operator assigned to NIS in the largest project - East West (85% operator). Initiated 2D seismic on the project Moesia (share of NIS 50%) not the
operator of NIS. Negotiations with the owners of the remaining blocks (Zeta).
Drilling was started on the project RAG. Negotiations on greater cooperation with the company. The deal with Falcon runs expertise in the Ministry of
Finance of Hungary
Jadran-Naftagaz: End of data processing and interpretation of 2D seismic survey for the year 2012. Development of the project (by October) is to drill the first exploration wells.
Romania, the number of retail sites Bosnia, the number of retail sites30
29
125
25
36**
28
8
8
26
*Including completed or partial reconstructed objects in accordance with invest.projects** Without a possible exchange with Zarubezhneft stations
Construction/Reconstruction
Existing objects
Construction/Reconstruction
Existing objects
End2012
Current status End2012
Current status
Regional development projects status: NIS is becoming regional company with PS network in 4 countries
Exploration and Production (UPS) – Priorities of Development
19
A higher level of production and greater resource base.
The leader in the region in the area of reduction of hydrocarbon production costs.
High level of operational efficiency.
State-of-the-art technologies and methods for oil and gas production.
Emphasis on the basic aspect of business operations (oil and gas production).
A wider scope of business operations due to the grants (share of production due to grants minimum 30% of the total production).
Increased investment efficiency (LC reduction, GTM optimization, application of new technologies, etc)
Greater resource base in Serbia and abroad
• The greatest international companies compensate a drop in the production in traditional regions of business with the help of CIS and the Near East.
• Smaller resource bases and more complex geological conditions of hydrocarbon deposits, higher unconventional supplies.
• Higher Lifting costs and other costs of exploration and production.
• Outsourcing of non-core business operations.
MARKET TRENDS NIS PRIORITIES
11
44
22
33
55
66
77
88
Exploration and Production (UPS) – Higher Scope of Production
Realized and planned scope of NIS production in the period from 2009 to 2015 .
• A further increase in trend of domestic production, but with the smaller rates of increase as compared to the previous years
• Increased production by way of active development of new fields and projects abroad.
• Increased production of natural gas by way of exploration and development of unconventional resources.
OIL AND GAS PRODUCTION, million conditional tons
20
0
1
2
3
2009 2010 2011 2012 (E) 2013 (E) 2014 (E) 2015 (E)
Domestic oil and gas Oil and gas from abroad
Projects at Pannonian basin and wider logisticallyavailable zone considered – potential projects ensure2020 goals achievement, after 2020 downfall is expected
Slovakia
Austria
Slovenia
Hungary*
Romania
Bulgaria
Croatia
Bosnia
Ukraine
Serbia
Czech Republic
Ascent and Dual Ex
Key prioritization of regional development projects - synergy with NIS refining and easiness ofmonetization. 2 options are planned - purchase of shares of small- and medium sized players andJVs with large companies in the region (Romania, Hungary, Bulgaria, Montenegro)
Priority 1. Pannonian basin
Priority 2. Development area allowingaccess to NIS refineries (self monetization)
Priorities of regional development:
Aspect andJKX
NIS and RAGNIS andFalcon
NIS andAscent
NIS andMoesia
NIS andMOL/expert*
NIS and East West Petroleum
NIS andNeftgazinkor
NIS and Zeta
Pannonian basin:Hungary: MOL is controlling company‟s interest in other parts of Hungary and it is not interested in cooperation, except the cooperation in terms of Expert project discussion. Negotiations are ongoing. Next license round is planned in Hungary for 2013Adriatic's:Studies were made, as well as concession negotiations held in Croatia, Montenegro and Albania.Expansion possibility study, relating to the North Africa and Mediterranean.
Considered assets/projects at Pannonian basin
MOL and Expert Petroleum
Rompetrol and Winstar
Universal Petroleum
RAG and ADX Energy
Clara Petroleum
Refining (REF) – Priorities of Development
Realization of modernization and reconstruction progremme.
Decreasing of losses and own consumption.
Increase of refining margins.
Improved quality of products (Euro-5, white derivatives, refining level) .
Operative improvements.
11
22
33
• Oversupply of Refining Capacities in the region.
• Lower refining margins.
• Increased competition on oil derivatives market.
• Constant changes of legislative and convergence to legislation and technical regulations in the EU.
• Required minimum share of biofuels in the EU.
• Market liberalization in RS.
MARKET TRENDS NIS’ PRIORITIES
44
55
22
Internal Efficiency> External Synergies and Factors>
– Sales and Trading efficiency – volume, margins, quality, standards, working capital/stocks, seasonality, etc.
– Cooperation with HIP Petrohemija.
– Energy and steam supply and cooperation with NIS Energy&Gas business unit.
– Bio-fuels – production at RNS/blending
– HSE Legislation and Technical requirements..
– Configuration of RNS and RNP;
– Feedstock crude;
– In-bound crude logistics;
– Out-bound product logistics;
– Utilization;
– Special Product Units (including bitumen, base oils, etc);
– Energy Efficiency;
– Integrity and Maintenance;
– Personnel and Efficiency;
– Infrastructure;
– OPEX efficiency, etc.
RefineryMargin
Possibilities of Improvement
Key factors, contributing to refinery cash margin
Capacity use at the level of 4.5 mln tons per year.
Crude oiltransportation
costs‟ decrease
Deep conversion
HIPP utilization Net refining margin
increase
Base oils
Key factors, ensuring the marginal revenue increase at the RNP – deep conversion, base oils and cooperation with HIP Petrohemija
-3%3%
10% 7% 9% 9%4%
2% 2% 2%7%
7% 8% 7%
18%14% 13% 13%
3%
2% 2% 2%
18%
2% 2% 1%
13%
33% 33% 33%
6% 12% 12% 12%
19%17% 16% 16%
4%4% 3% 3%
2012 (E) 2013 (E) 2014 (E) 2015 (E)
Gas, Propylene
Gasoline + Gasolinecomponents for export
Naphtha
Euro diesel
Diesel fuel (D-2 and fuel oil)
Kerosine
Heavy fuel oil
Bitumen
Raffinates and other
Fuel for own consumption andlosses
Cng. in inventory ofsemiproducts
9%
24
Base oils
44% 10%Refining and processing volumeIn .000t
• Oil refining and production ofpetroleum products is planned onlyfor Pančevo Oil Refinery in 2013and 2014, due to the shut-down ofthe Novi Sad Oil Refinery for thepurpose of reconstruction.
• Higher production of motorgasolines and middle distillate fuels.
• In 2014 and 2015 the scope ofproduction will increase, and thestructure of fuel production inPančevo Oil Refinery will remainunchanged;
• a unit for the production of base oilsis expected to be commissioned inNovi Sad Refinery in 2015.
Structure of Production of Petroleum Products
Refining Pursuant to the Expected Market Demands
2.372 3.409 3.766 4.105
Sales and Distribution (PRO) – Priorities ofDevelopment
Development of PS network (including capital construction and regional development).
Provision of a stable share in the market for basic types of fuel by developing powerful brands.
Development of production portfolio.
Increase in the wholesale market.
Development of a logistic network in the new markets
Economic efficiency as well as themaintenance and development of competitive advantages.
• Programme• Lease of the petrol stations with
low/no cost-effectiveness
• Maintaining the high appeal of premium channel of sales and great competitiveness.
• Market liberalization (free-of-charge import of gasoline), although not many a participants in the market have the required infrastructure.
• Branded PSs are still a guarantee for fuel quality.
• The growing market is expected to make the competition between the participants be based on different positioning of company brands.
• Changes in the competitor requirements:• Additional requirement for bid
differentiation;• Increase in yields from the
accompanying goods and services;
MARKET TRENDS NIS PRIORITIES
11
22
33
44
55
66
25
MARKET ACCESS TO NEARBY COUNTRIES HAS LIMITATIONS,WHILE IN MOST COUNTRIES PRICING IS BASED ON IMPORTPARITY
*All these costs do not include the cost of obligatory stock and biological components
*
Import parity. INA has about 90% marketshare. Access is further complicated by
geopolitical factors
Import parity. MOL has about 90% of themarket and the pipeline system. Access
complicated.
Import parity. The market is dividedbetween the leading retailers and
integrated players. NIS is competitive inthe western part of the country..
Import parity. The market is dividedbetween the leading retailers and
integrated players. NIS is competitive inthe eastern and northern parts of the
country.
Import parity. Themain market on thecoast. logistically,
NIS is not competitivewith Kotor (Hellenic).
Import parity.The main market on the coast.
Logistically, NIS is not competitive withimporters.
60
Danube to theBlack Sea
Import parity. NIS isnot competitive withthe Octa company
and with the importerHellenic Petroleum.
Import parity. The marketis divided between theleading retailers and
integrated players. NIS iscompetitive in thewestern part of the
country.
Black SeaFOB MED + / -FOB-MED/CIF
differentialCore region in accordancewith the approved Conceptof Regional Development
Legend:
26
Increased Scope of Sales and Distribution
Retail Market in Serbia
VOLUME OF NIS’ RETAIL MARKET IN SERBIA PER PETROLEUM PRODUCTS (in thousand tons)
VOLUME OF RETAIL MARKET OF MOTOR FUELS IN SERBIA(in thousand tons)
• After a drop in consumption in the market in 2013 ascompared to 2012, a gradual recovery of the market isenvisaged to occur in 2014.
• A part of quantities will be transferred from wholesale toretail channel of the corporate clients.
0
1.000
2.000
2012 (П) 2013 (П) 2014 (П) 2015 (П)
ТНГ аутогас Бензини Дизели ЕЛ
1.614 1.597 1.616 1.629
0
1.000
2012 (П) 2013 (П) 2014 (П) 2015 (П)
ТНГ аутогас Бензини Дизел (укљ. ЕЛ) Евродизел
585 637 666739
• Modernization of the retail network in Serbia• Transfer to the products of the EU quality standard
27
LPG auto gas Gasoline Diesel EL LPG auto gas Gasoline Diesel (incl. EL) Euro diesel
Oil Field Services (OFS) – Priorities of Development
• Increased efficiency of services.
• Increase in staff of Oil Field Services.
• Increased business revenue from the third parties.
• Meeting of internal production needs of the NIS in the area of Oil Field Services.
• Placement at the international market in order to maximize utilization of production capacities and to implement projects with a high profit marginpotential.
11
2233
• Specializing companies in specific types of services and establishing companies which are specialized in Oil Field Services.
• Regional competitiveness usually includes local, i.e. former state-owned companies with a variable level of quality and services.
• Relatively low technical level of services proposed by the regional service companies.
• Increased quality of services.
MARKET TRENDS NIS PRIORITIES
44
55
28
Energy (ENR) – Priorities of Development
Implementation of projects of electric power generation based on utilization of the Company's own natural gas.
Participation in the projects in the area of alternative energy under the condition of a given Governmental support.
Optimization of utilization of thermal and electric energy, increased energy efficiency of the business.
Diverse ways of implementation of natural gas.
• Great possibility of increase in prices of electric power.
• Liberalization of market of electric power and natural gas.
• The need to compensate СО2 ratio.
• Increased share of renewable energy.
• Developed support to utilization of renewable energy sources in the region.
MARKET TRENDS NIS PRIORITIES
11
22
33
44
29
2012 – first steps in implementation of strategy
First and second level priorities
CHP Novi SadIn the consortium NIS won the tender, terms of project implementation are currently under negotiation process.
GTE in SerbiaIdentified locations for the projects, on the first of them wells were tested.
CHP PancevoBasic engineering design and approval procedure with regulatory authorities of Serbia have been started.
Small cogeneration11 potential location for projects development were identified, tenders for 2 facilities building are completed.
Wind farm in SerbiaApproval of the transactions conducted in accordance with corporate procedures, the closing of the transaction by the end of 2012.
Wind farm in RomaniaThe most perspective projects in Romania were chosen, the deal is in the process of approval by BoD of NIS.
TPP KovinPermission for geological research was obtained, reserves of coal are being estimated, technical-commercial offer was submitted by EPC contractor
30
0%
25%
50%
75%
100%
2012 (П) 2013 (П) 2014 (П) 2015 (П)
Head office (STS)
Energy
Oilfield Services (OFS)
Sales&Distribution (PRO)Refining (REF)
Upstream (UPS)
Financial Indicators
Expectations
31
Sales (without excise tax)(billion RSD)
DISTRIBUTION OF CAPEX PER PROFILE BLOCKS (billion RSD)
48 59 5066
0
200
400
2012 (П) 2013 (П) 2014 (П) 2015 (П)
32
Dynamics of share capital and book value per share
in b
illio
n R
SD
RSD/share
33
NIS a.d. Novi SadInvestor Relations Sector
Narodnog fronta 1221000 Novi Sad, Serbia
e-mail: [email protected]