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Refinery shares jump 10% on margin recovery

Tuesday 16th March 2010

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Shares in New Zealand Refining Company jumped 10.3% after this morning's announcement refining margins recovered to US$6.85 per barrel in the first two months of the calendar year.

The share price rose to $3.75 on news that refining margins were up from rock-bottom lows of US$1, though barely half the peaks of around US$11 a barrel reached in 2008.  The shares are still 41.7% below their high point over the last year.

"Refinery margins started to show some recovery in December 2009 and January/February 2010 has shown further significant improvement," the company said in a statement to the NZX. "However, in our opinion, it would be premature to believe this signals the start of a sustained recovery in refining margins and further volatility can be expected in the coming months."

At an average exchange rate of US71.2 cents to the New Zealand dollar, the processing fee earned at the refinery for the two-month period was NZ$47.2 million.

An Infratil-led consortium involving the New Zealand Super Fund is close to finalising purchase of Shell New Zealand's 17.1% stake in the refinery on April 1, although some material matters are outstanding.

Infratil chief executive Marko Bogoievski said last week that one advantage of the purchase was that it was occurring at the bottom of the cycle for refining margins.

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