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Refinery cuts 25% off profit forecast

Thursday 19th January 2012

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The operating company for New Zealand’s only oil refinery suffered its lowest margins on oil processing in November and December since the first half of 2010, and has carved some 25 percent off the earnings outlook for the current financial year.

Shares in New Zealand Refining fell 2.9 percent to $2.94 after an announcement to the NZX that after-tax profit for the year to Dec. 31 will be in the range of $32 million to $36 million after average refining margins fell to US$4.67 a barrel in November and December.

The margin stood at US$6.96 a barrel in the previous two months, when the company gave guidance to expect a profit of between NZ$43 million and $48 million. Refining margins peaked in 2011 in May and June, at US$7.03 a barrel, although their peak in the last five years was $11.43 a barrel, in July/August 2007.

The last time they were under $5 was in May/June last year, when average refining margins were US$3.73.

The average gross refining margin across the whole of 2011 was US$6.11, some 33 US cents less per barrel than anticipated when the last profit update was given, NZ Refining said in a statement to the NZX, on record throughput of 41.2 million barrels.  Its full year result is due for reporting on Feb. 21.

Refining margins were volatile in the last two months of last year, and fallen by around US$5 a barrel in Singapore.

“While margins improved later in December, the recovery was much less and far slower than expected,” the company statement said.  The US$4.67 a barrel average for the two months was “relatively healthy” compared with Singaporean refiners’ experience.


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