CHI - Channel Infrastructure Ltd (NZR)

[Deev8]

I like to top up more of NZR but it seems to drop quite a bit lately. It is nearly under $7.A lot of shares have dropped in price lately, here and in international markets. But if you are happy about the company fundamentals and its future prospects that means you can buy at a lower price.

[Seiya]

Thanks Manxman and Deev8 for your comments. I am in a wait and see mode but definitely keen to top up more.

[Steve]

Anyone still following NZR? :)

[scamper]

yep, scamper's still here Steve. bouncy, bouncy, eh?!
buy some, sell some, hold some.
craic still around?
good luck.

[Placebo]

Me too!

When I downsized my portfolio this was the one I held onto. Is a bit of a bumpy ride at present eh!

[craic]

Me too!

When I downsized my portfolio this was the one I held onto. Is a bit of a bumpy ride at present eh!

No, I got out yonks ago.( Sorry, this was meant to be for Scamper but my fat fingers slipped again)

[Steve]

It appears that we have a party of 4 then...

Like Scamper, I try to increase & decrease my holding as the shareprice fluctuates. Still consider NZR to be a core holding of my portfolio.

[lakedaemonian]

I'm still in......the only equity I didn't sell......If the shareprice weakens much...say into the mid-$6's, i'll be buying on weakness.

[Steve]

More of the same bodes well for the future...

Refinery expansion to boost NZR profit (http://www.stuff.co.nz/4495886a13.html)
The main equipment to expand the New Zealand Refining Company refinery capacity by up to 20 per cent arrives next month.

Outgoing NZ Refining Company chairman Ian Farrant says the project will "substantially" improve company profits.

[Placebo]

I remain fairly confident about mid-term prospects but I wonder what others think with the rising price of oil, what this will do to the NZR value?

Given throughput is largely demand-driven, if there is a drop-off in demand due to rising prices this could impact on bottom line. But will there be a drop-off in demand?

[scamper]

nzr have announced a profit expectation of $115-125 m.
in 2007 it was $112 m
2006 was $135 m
and in 2005 it would have been $130 m if the amortisation stuff were eliminated.

this seems a reasonable recovery given all the chaos. the current yield is 8.33% (at sp 600), so it may even rise a little.
are you still in, lakedaemonian? cheers, scamper.

[lakedaemonian]

nzr have announced a profit expectation of $115-125 m.
in 2007 it was $112 m
2006 was $135 m
and in 2005 it would have been $130 m if the amortisation stuff were eliminated.

this seems a reasonable recovery given all the chaos. the current yield is 8.33% (at sp 600), so it may even rise a little.
are you still in, lakedaemonian? cheers, scamper.

I sure am!

It may not set the world on fire in terms of capital gains in the short to medium term......but it does have a nice RELIABLE dividend....as well as represent a domestic monopoly....which is a nice position to have.

It's my only publically traded equity.........and will likely retain that dubious distinction for a while longer! ;)

[scamper]

No sellers, and 76k buyers in line, more than 10k of whom are at or above 650.
all this, and a 10c rise against the grain today.
makes you wonder what people are thinking...
wonder if steve and placebo are still holding. Cheers, scamper

[Placebo]

No sellers, and 76k buyers in line, more than 10k of whom are at or above 650.
all this, and a 10c rise against the grain today.
makes you wonder what people are thinking...
wonder if steve and placebo are still holding. Cheers, scamper

Yes I am still holding. This is my main defensive stock. Only a small holding, mind ;).

[macduffy]

Very quiet on the NZR thread these days but the stock is showing strength in a nice uptrend, presumably on its appeal as an income stock.

Disc: Holding.

[scamper]

Quietly good though...
The March divi for both '07 and '08 was 35 cps, and the announcements 2 March (sp~640) and 21 Feb (sp~740) respectively.
I wonder what and when this year will bring!

[macduffy]

I bought a few NZR several months ago when the SP was well beaten down with a view to holding for its steady imputed divvy. No reason to review that decision so far.
The annual report arrived yesterday and I'd have to say it's one of the most elaborate I've seen for a while, particularly in these days of electronic communications and pressure on corporate overheads. As well as the A/R there is a separate " Our Company Profile" publication, both presented in a solid, oversize cardboard folder.
Oh, and a CD ( which has just fallen out of the folder!)
Now I wonder if this is NZR's normal method of keeping its minority shareholders informed or does it perhaps signal some forthcoming corporate activity? Havn't forgotten that Shell are considering options for disposing of certain NZ assets which may well include their 17.14% holding in NZR.

Any comments from shareholders of longer standing? ( or others?)

[GTM 3442]

They always put out a very nice report document.

[Neon_Spork]

I believe their 2008 Annual Report won some award for listed companies.

[Placebo]

I wonder about the reporting requirements for public companies. Yes they put out a nice report but mine goes straight in the recycling. Rather than invest in the DVDs, could they not just send a link to their website where they could host the same material? Or is it a requirement that paper versions are made and mailed out to shareholders?

[macduffy]

I believe that they are obliged to offer a printed report but it's on the "opt in" basis, ie a shareholder needs to request it rather than opt out of it.
The interesting aspects about NZR is that I don't recall being asked; one would think that they, of all companies given their majority oil co shareholders, would be least interested in fostering relations with small s/holders; they seem to go the extra mile in this regard.
All of which makes me wonder if there is something else in the wind but it seems not, from other responses.

cheers

[GTM 3442]

There seems to be a bit of overseas interest in this. Mobil & Shell both wanting out. Wonder if the local small investors will sell up ?

Would they be wise to do so d'you think ?

[macduffy]

Rumours that Valero Energy might be considering a bid.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10586536&pnum=0

The oil companies hold around 73% with Emerald Capital another 13%. It wouldn't take much from the small shareholders to reach the magic 90% if the big boys take to the idea.

Not sure I'd want to sell out, unless they make me an offer too good to refuse.

;)

[macduffy]

Another view on the possible sale of NZ Refining.

http://www.stuff.co.nz/business/2671693/A-test-of-resolve

[BRICKS]

Another view on the possible sale of NZ Refining.

http://www.stuff.co.nz/business/2671693/A-test-of-resolve

After reading all about the refining and service station situation and some majors
want to leave you then think how small NZ really is you would think it to be the reverse
situation as in the past they wanted all so why the sudden rush to leave it dose make you
THINK..

[Steve]

It would free up some capital for them to invest somewhere with higher returns than a mature retail market that has been receiving hints of pending Government interference...

[macduffy]

It would free up some capital for them to invest somewhere with higher returns than a mature retail market that has been receiving hints of pending Government interference...

Yes, Shell said several months ago that they wanted the capital to invest in upstream activities - exploration and production.
My guess is that they have big plans and expense coming up for their Australian projects, including developing their "coal seam gas to LNG" interests.

[elZorro]

Exxon Mobil might have other reasons for a change in emphasis, have a look at this link on $600m to be invested in biofuel from algae.

http://www.thenational.ae/apps/pbcs.dll/article?AID=/20090715/BUSINESS/707159964/1050

I think there's a lot of merit in this approach. Algae needs light, warmth, CO2 and not much else, and it grows fast. (Perfect for hanging off the back end of power stations). A little bit messy on the extraction side, but it sure beats waiting millions of years for more oil.

-elZorro-

[macduffy]

Disappointing interim result has hit NZR's SP which is down almost 14% today.

http://www.stuff.co.nz/business/2764978/Dividend-off-despite-NZ-Refining-profit

Can't agree with analysts who seem to reckon that the company will pass on a final div as well as the interim. More likely that they will wait to see what total div for the year can be justified, IMO. But maybe I'm just in denial.

:(

[moimoi]

a buying opportunity Mac.

a monopoly infrastructure asset, with minimal debt, very tight share register, potential corporate activity, improving economic outlook, which would never get consent to be built in this country again.

[Dr_Who]

It has breached the support level of $5.50.

Anyone get a valuation on NZR?

:eek:

[macduffy]

a buying opportunity Mac.

a monopoly infrastructure asset, with minimal debt, very tight share register, potential corporate activity, improving economic outlook, which would never get consent to be built in this country again.

That's pretty much why I have a small holding.

But the counter argument is that the oil coy's don't really have any reason to look after the minority public holders; some of them - at least Shell - want to quit the activity; it's a one asset investment. So I won't be selling but not tempted to add.
It's really quite a small holding for me which I have largely for sentimental reasons - the very worst reason for investing - but I worked on the original float, in a very junior capacity, back in the early 60's. Nevertheless, it's been an excellent income stock for most of its history.

:)

[sharer]

... Nevertheless, it's been an excellent income stock for most of its history.
:)

That has been my own reason for holding for some time; but now we have no interim divvy & a bit of a shock. How serious is the possibility of zero div for the full year?

[lakedaemonian]

NZR is the only NZ share I hold...and have held it for a LONG time(relatively speaking).

I'm thinking along the same lines as moimoi and macduffy.

I wonder what Shell does from here?

Possible risk of it drifting lower with that question mark maybe.

But I think it's looking more and more attractive.

[moimoi]

They are not paying a dividend so as to put cash into the expansion...on that basis i am more than happy that they don't pay a divi.

[foodee]

Exxon Mobil might have other reasons for a change in emphasis, have a look at this link on $600m to be invested in biofuel from algae.

http://www.thenational.ae/apps/pbcs.dll/article?AID=/20090715/BUSINESS/707159964/1050

I think there's a lot of merit in this approach. Algae needs light, warmth, CO2 and not much else, and it grows fast. (Perfect for hanging off the back end of power stations). A little bit messy on the extraction side, but it sure beats waiting millions of years for more oil.

-elZorro-


eZ
If you are interested in this renewable biofuel have a look
at Aquaflow from Malbourough NZ. Google will get you there.

cheers

[scamper]

nearly 25% down in three days. seems a bit of an over-reaction to the loss of an interim dividend.
are there other reasons to bail out? Cheers.

[macduffy]

nearly 25% down in three days. seems a bit of an over-reaction to the loss of an interim dividend.
are there other reasons to bail out? Cheers.

I don't know about an over-reaction. NZR is very much regarded as an income stock and held for that reason. I can understand holders taking the view that if there's no div ( at least this time and some analysts are picking there'll be no final div, a bit prematurely IMO ) then the reason to hold NZR disappears.

Also it's a thinly traded stock so price movements tend to be a bit abrupt at times.

[Billy Boy]

Scamper;
Words out, NZR will probably show a loss next year.
Molbil, Shell... Both getting the itches !!
Could well be a bad patch for a bit with such low margins.
I dont hold and was thinking of getting in, now I'm not so sure
cheers BB :)

[Dr_Who]

I am assuming those that bought with expectation of a possible T/O are dumping the stock?

[macduffy]

I am assuming those that bought with expectation of a possible T/O are dumping the stock?

I still reckon it's just as likely to be disappointed "income stock" holders.
After all, there's not much point in holding what was a high yielding stock for the divs if it passes on the interim and throws doubt on paying a final.

[macduffy]

Mobil rumoured to be looking to sell its 19.2% stake in NZR " on market".

http://www.stuff.co.nz/business/2774752/Oil-firms-taking-different-paths

Presumably that doesn't mean they will look to dribble them out via the NZX but will look to place them through brokers.

[moimoi]

Hmmmm...wonder if yesterdays announcement to use up imputation credits suggests that more than Shell's 17% will change hands.....?

I would have thought that IFT was a reluctant seller of its AIA stake..could they maybe having a tilt at more than Shell's holding.?

cheers
Moi

[macduffy]

Yes, it seems a bit premature to make this move just in case one of the other major shareholders were to sell.
Maybe, though, it's a case of making sure that Shell gets its share of the imputation credits while it still has its shareholding? Particularly if the purchase price has already been agreed without any assigning any value to current imputation credits, or possibly agreed on the basis of such credits being utilised by Shell.

Just thinking aloud.

[scamper]

scamper's having a senior moment
how come the price drops ~ 50 cps and it is billed a 3.3% rise?
i didn't think there was any divi.

[macduffy]

scamper's having a senior moment
how come the price drops ~ 50 cps and it is billed a 3.3% rise?
i didn't think there was any divi.

Not sure where you get the ~ 50c drop, scamper.

NZR is up 14.4c today - a 3.3% increase.

Still suffering from the earlier passing of the div though and uncertainty over the future of Shell's shares.

[scamper]

It's been over $5 for the last couple of months according to direct broking charts
Now it's $4.55...

[macduffy]

Hmmm.... a bit of a mystery.

I've just checked yesterday's closing price. $5.14.

A bug in the system?

:confused:

[moimoi]

Scamp,

1 for 6 bonus issue went ex today.

cheers
moi.

[macduffy]

Phew!

Of course!

:)

Thanks, moi.

[scamper]

hell's bells! how did i miss that...
so now i've got nearly a thousand extra shares -- oo la la.
thank you all, cheers.

[peat]

yes I was wondering about the price movement today as well - I hadnt seen anywhere about the bonus issue....


so, where do other people go to get info about ensuing div's ; splits/consolidations ; cash and bonus entitlements etc ?

[Dr_Who]

How much div is NZR paying?

[macduffy]

How much div is NZR paying?

They passed on the interim div and made pessimistic noises about the prospects of a final.

Personally, I havn't given up on that but must admit it's more hope than confidence.

[waikare]

yes I was wondering about the price movement today as well - I hadnt seen anywhere about the bonus issue....


so, where do other people go to get info about ensuing div's ; splits/consolidations ; cash and bonus entitlements etc ?

The news of the bonus was released on the 9 Nov. below is from the NZX site.



Declaration of Taxable Bonus Issue


The Directors of the Company have been considering the implications of a change in major shareholder following the announcement by Shell of its intention to divest its New Zealand downstream operation, including its 17.14% investment in the New Zealand Refining Company Limited.

Taxation issues are one important area, in particular the Company’s imputation credit account balance of $83m. Imputation credits can only be carried forward by the Company if it maintains shareholder continuity of 66% or greater from the time the taxes which gave rise to the imputation credits were paid. If the Shell divestment of its shareholding in the Company was to go ahead, and then one of our other major shareholders was to change, there is a real possibility that these imputation credits could be lost.

The Company is not in a position to pay out a cash dividend to shareholders of a significant size to use up these imputation credits in the near future.

In view of this, the Directors have declared a Taxable Bonus Issue of 78.5 cents per share pro rata to all shareholders amounting to $188.4m with imputation credits attached of 34.6 cents per share totalling $83m. The bonus share issue price will be $4.71 per share which will result in a one for six bonus issue to all shareholders on the share register on the Record Date of 23 November 2009. The bonus shares will be issued fully paid from the Company’s retained earnings on 30 November 2009.



Dennis Martin
Company Secretary

[Dr_Who]

I ve been keeping an eye on NZR for awhile now. One of these days, I would like to own some NZR shares.

The thing that concerns me greatly is the continue drop in refining margins. the average refining margin for sept/oct is only USD1.16 :eek:. That is a very low margin indeed. At these margins, it is better to shut down the refinery than to keep it going.

The margins have dropped from USD6.32 to USD4.83 (Aug) to USD1.16 (Sept/Oct).

The question is, why such a low margin and why does it continue to drop when the crude prices are so strong?

[macduffy]

I hold a few NZR but ashamed to say that I don't know the full story on how the refining margin is set.
:o
One of the major factors is the supply of refined product from other sources, ie plenty of the stuff tends to drop the margin and vice versa.

I bought as an income stock in a quasi monopoly situation and have been caught badly when the div was passed. Not much point in holding an income stock that doesn't pay an income! Not sure I'd be looking to buy more at this stage.

[Jaa]

Dr, there is a worldwide oversupply of refined products at the moment, forcing a portion of production to be stored in floating tankers. A number of US refineries have also been forced to close as a result.

I would assume this would be squeezing the margins though also do not know the exact formula.

Why refinery shutdowns matter
http://ftalphaville.ft.com/blog/2009/11/23/84711/why-refinery-shutdowns-matter/

[sideline]

I ve been keeping an eye on NZR for awhile now. One of these days, I would like to own some NZR shares.

The thing that concerns me greatly is the continue drop in refining margins. the average refining margin for sept/oct is only USD1.16 :eek:. That is a very low margin indeed. At these margins, it is better to shut down the refinery than to keep it going.

The margins have dropped from USD6.32 to USD4.83 (Aug) to USD1.16 (Sept/Oct).

The question is, why such a low margin and why does it continue to drop when the crude prices are so strong?

Refining margin has nothing to do with the price of crude, instead it is determined by the availability of
refinery capacity. There is an overcapacity of this and some more is still under construction.
Just last Friday Valero permanently closed down one of their refineries in Delaware, due to under-utilization. It was specialized on heavy sour crudes, like NZR.
http://www.marketwatch.com/story/valero-shutting-delaware-refinery-employing-550-2009-11-20?siteid=yhoof

[brucey09]

The real problemo is that I think the price of heavy crude is now close to the light crude rates and nzr es set up for heavy crude - so all up it may be cheaper for the end sellers to buy refined product direct from overseas rather than refine in nz..

[macduffy]

Thanks for those articles, Jaa and sideline.

Here's a presentation from NZR (dated June 2009) which describes the business in some detail.

The refining margin is defined as the market value of the products produced, minus the market value of the feedstock processed. The feedstocks are owned by the customers and NZR receives 70% of the refining margin as a "processing fee", subject to a "fee floor and margin cap". Other NZR income accrues from pipeline fees.

NZR calculate that they provide about 68% of NZ's refined product, as at June 2009.

http://www.nzrc.co.nz/media/45832/nzrc%20investor%20briefing%20-%20june%202009.pdf

[GTM 3442]

. . . . so all up it may be cheaper for the end sellers to buy refined product direct from overseas rather than refine in nz..


Um, what would the end sellers do with their refinery in that case ?

[brucey09]

gtm, the current end sellers shell and mobil dont have a majority combined holding in nzr

[GTM 3442]

No, Brucey09, they don't. But they'd be owning some part of a refinery which they weren't using, which doesn't seem to make a lot of sense.

Always thought that vertical integration was partly a device for deciding where to take your profit.

[Pumice]

Hmmmm down to $3.60 (after bonus shares). This seems quite cheap for what is essentially a monopoly and 70% of the shares dont trade. Is this sell off based on fear or somthing else.
Pretty much everything I've read from the board has gone as expected.

Any thoughts?

[macduffy]

Hmmmm down to $3.60 (after bonus shares). This seems quite cheap for what is essentially a monopoly and 70% of the shares dont trade. Is this sell off based on fear or somthing else.
Pretty much everything I've read from the board has gone as expected.

Any thoughts?

The 30% minority shares are held pretty much for their yield which has been, until recently, consistently high.
Now that the interim has been omitted and prospects for a final div look pretty grim, the rationale for holding NZR disappears somewhat.

On the other hand, straw hats in winter and all that, it might be a good time to buy a few.

;)

[Dr_Who]

I ve got both NZR and CTX on my watchlist.

The timing is critical. ;)

[Dr_Who]

Have started accumulation NZR.

The sp at these levels are looking too cheap. CTX in Aussie moving up.

My rationale for buying is recovery in economy and vehicle sales. GM, Toyota and others have upgraded their new vehicle sales for 2010. Buying a recovery story. Lets get out there and start driving your big V8s. There is more reason of it being a T/O target with the sp at these levels?

[macduffy]

I havn't thought about NZR as a takeover target.

Shell - soon to be IFT? - hold 17.14%

Mobil - said to be interested in selling - hold 19.2%

BP 23.66%

Emerald Capital 13.12%

Chevron 12.69%

Any one of these would be able to block a takeover if it didn't suit them. Is it likely that all would be agreeable?

:confused:

[Billy Boy]

Why are the big boys getting out, or want to get out.
Will a time come when it's cheaper to import processed fuel
that process it here (gull).
refining is not a simple task, different types of crude demand
different types of processing. etc etc....
Govt is sticking it's finger all the time. ( not good).....
the AA is sticking it's finger in also ( with Govt assistance) Not good.
the profit margin for the big coy"s is just not there, and the politics
are becomming unbearable. The old story,
capiticial expence / return on investment = percentage markup.
It's not there,... so sell and move on. A bizz decision.
Yea, Yea I know.... what you think
BUT..... scale it all down too our size , what would you do ???
The capitial (buy the big boys) invested, does not add up. SO....
where else can they better use the $$$.
As I said.... some thoughts.....
BB

[macduffy]

The reason usually given is that the "big boys" such as Shell and Exxon Mobil need to free up capital in "downstream activities" to spend on exploration and production.

Who knows if this is so?

:confused:

[Dr_Who]

Here's some interesting articles.

China top refiners to start '10 with record runs

http://uk.reuters.com/article/idUKTOE60704520100108


"The market situation, including refining margins and crude oil prices, has improved slightly," a Seoul-based refiner said. "We may consider higher runs if such conditions continue."

http://uk.reuters.com/article/idUKTOE60405J20100105

[Pumice]

Have started accumulation NZR.

The sp at these levels are looking too cheap. CTX in Aussie moving up.

My rationale for buying is recovery in economy and vehicle sales. GM, Toyota and others have upgraded their new vehicle sales for 2010. Buying a recovery story. Lets get out there and start driving your big V8s. There is more reason of it being a T/O target with the sp at these levels?

Pretty good timing Dr Who. Hopefully they continue going up.

[moimoi]

is that a wee uptrend forming i can see on the chart?? ;-)

[Dr_Who]

A couple of brokers have upgraded NZR.

Maybe they think refining margins have bottomed?

[Vtrader]

Has anyone notices the retail fuel price increases recently?:D

[Dr_Who]

Has NZR announced any restructuring to cut cost?

[Dr_Who]

SINGAPORE - Top oil exporter Saudi Arabia is expected to raise prices of all its crudes heading to Asia for March on healthy fuel oil cracks and improving refining margins, after cuts last month, traders said on Monday.

http://business.maktoob.com/20090000428918/Saudi_to_up_March_crude_prices_to_Asia_poll/Article.htm


disc: sh of NZR

[moimoi]

NZRC Throughput and Margins Report for November/December 2009

Throughput for the two month period was 7.2 million barrels with the plant
operating at near full capacity.

The average Gross Refining Margin (GRM) generated for the November/December
period was USD 1.18 per barrel. At an average exchange rate of USD/NZD 0.72,
the Processing Fee earned for the two month period was NZD 8.2 million.

As previously reported, over-capacity in the global refining industry and
reduced demand for oil products has significantly reduced (and on some
occasions eliminated) refining margins. When combined with a relatively
strong New Zealand dollar, the processing fees that we earned have been very
low.

Markets are showing some signs of a recovery (during late 2009 and early
2010) but supply/demand fundamentals have not yet changed sufficiently to
expect a sustained recovery in refining margins at this stage.

For the full year 37.9 million barrels of crude were processed by the
refinery which was in line with the company''s target. The Gross margin for
the year was USD 4.16 and the average exchange rate was 0.58. Total
processing fees generated for the year were approximately NZD 188.6 million.

Couple of queries maybe someone can help me with..

If margins are so low why operate the plant at full capacity.?

Why if the market is in over supply would you not cut back on production.? (should i assume that full capacity is the most efficient method of operating such a facility)

Since the customers are also the owners why would they import product thereby afffecting their asset...and if they are, would it suggest that they are not particularly strong supporters of the NZR asset.?

Why the silence on the Shell sale.?

$3.55 looking like support for now.

[macduffy]

Yes, it's a pretty complex matter, moimoi, and I don't pretend to have the answers. But I suspect that its to do with all the factors you mention. There's a big capital investment by the oil co's here so they can't afford to leave it down too much, too long; at the same time they want the cost advantage of buying refined product at the best price when they can; the flexibility of more than one source of supply; and so it goes.

As for the IFT/Shell deal, I imagine it's taking its course through all the legal niceties involved. Wouldn't surprise if the other oilys have a pre-emptive right to buy each other out in these circumstances and probably have 'x' period of time to exercise such right.

But I, too, would like to hear from someone with a more intimate knowledge of these matters.

;)

[Dr_Who]

Interesting points you guys are making.

I will have to do some sniffing around.

[POSSUM THE CAT]

Dr Who does it not need large capital expenditure in the near future? is it worth spending the money on. Why did Shell Sell out?

[moimoi]

Possum...the answer to your question re Shell is here....

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article7015767.ece

[POSSUM THE CAT]

MOIMOI Just as I thought it goes WOOF WOOF

[Deev8]

I see that the company has reported that the average Gross Refinery Margin for January and February was US $6.85 per barrel. That's a significant improvement over the US $1 per barrel margin they were getting at the end of last year - on the other hand it is still a long way short of the US $12 per barrel margin early last year.

They say:
... refinery margins started to show some recovery in December 2009 and January/February 2010 has shown further significant improvement. 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.

Throughput and margin report for January-February 2010 (http://www.nzx.com/markets/NZSX/NZR/announcements/3456401/Throughput-and-margin-report-for-January-February-2010)

[Dr_Who]

Up 7.4% this morning... WOOT! :D

[Pumice]

Hopefully this performance can be sustained!
The share price has been hammered lately, I wish I had waited a bit longer before jumping on board.

[Dr_Who]

The chart is looking good :)

[Dr_Who]

ANALYSIS-Asia refiners see 3 mln bpd Q2 shutdowns, down on yr

http://www.forexyard.com/en/news/ANALYSIS-Asia-refiners-see-3-mln-bpd-Q2-shutdowns-down-on-yr-2010-03-22T042154Z

[Pumice]

ANALYSIS-Asia refiners see 3 mln bpd Q2 shutdowns, down on yr

http://www.forexyard.com/en/news/ANALYSIS-Asia-refiners-see-3-mln-bpd-Q2-shutdowns-down-on-yr-2010-03-22T042154Z

Sweet.
I think NZR have completed most of their maintenance.
And I believe NZR is set up to process heavier sour crude’s as apposed to a lot of the newer refineries that have been set up.

[Dr_Who]

NZR sp $4.10 bid .. WOW! Sp have gone up over 28% in a week.

This stock is going mental like ELD.

[Pumice]

$3.25 to $4.20 in less than a month. Only 7 posts ago, this stock was classed as a dog.....
What has changed so significantly?
Would the return to solid margins have this much affect?

[brucey09]

Senor
Margins / quantity tolled, and $US / Kiwi all affect profit / share price.

[macduffy]

Quite so!

NZR's profitability is all about the refining margin. Well, almost, because the exchange rate and throughput volume are also important but the RM is the biggie. In the last couple of years this has dropped from almost record highs to almost record lows. So it all depends on the recent improvement being maintained.

[macduffy]

What do shareholders of NZR think about Mr Bryan Halliwell's motion which is to be put at the forthcoming AGM requesting directors to commission Hale and Twomey Ltd to carry out a study on the Refinery Processing Agreements?

Is the recent poor profitability of the company solely a result of industry conditions or is Mr Halliwell correct in contending that oil company shareholders have an unfairly favourable deal from NZR?

Probably rather academic questions given that majority shareholding oil companies will almost certainly vote against the proposal.

[brucey09]

Senor,
For what is at stake an extra enquirey cost is probably justified - we vote yes amigo.

[sharer]

What do shareholders of NZR think about Mr Bryan Halliwell's motion which is to be put at the forthcoming AGM requesting directors to commission Hale and Twomey Ltd to carry out a study on the Refinery Processing Agreements?

Is the recent poor profitability of the company solely a result of industry conditions or is Mr Halliwell correct in contending that oil company shareholders have an unfairly favourable deal from NZR?

Probably rather academic questions given that majority shareholding oil companies will almost certainly vote against the proposal.

I'm still inclined to vote for the Halliwell resolution. Might help remind the big boys of their legal obligations to Company & all shareholders equally.
And to notice the pigs flying past the windows maybe.

[Silverlight]

BP oil spill in the gulf of Mexico, will probably push up the price of oil in the 6 month view, additionally the cost to BP is pushing it's share price lower meaning potentially a takeover target.

If Royal Dutch or CNPC or Petro Brasil decide to take a crack and buy it on the cheap NZ BP changes ownership, NZR may get sold off, or even the retail end of the business, like what happened with Shell..

Potentially higher profit margins for NZR, and with NZR at quite a depressed price, may be a good time to accumulate.

[macduffy]

In mid May NZR described the current refining margin as "healthy" although output is being affected by regular maintenance requirements.

http://www.nzrc.co.nz/media/52761/mar-apr%202010%20margin%20announcement.pdf

I don't see BP's GoM problems, nor any potential issues from that, impacting on NZR's profitability. What did you have in mind, Silverlight?

[Silverlight]

On a micro level I can't quantify the impact, however on a macro level I think this will increase NZR's profitability due to the increase in oil price, which should in turn increase the margins NZR earn on refining.

It's loss in the 2nd half of 09 has depressed the price, however the future for NZR is bright and margins will return, as will the high (45 cent last year) dividends. As we touch $3.30 for a second time in the past 3 or 4 months, I think now would be a good time to accumulate.

[macduffy]

$3.30 certainly seems to be a support level for NZR but the "public" shareholders have, in the past, regarded it as an income stock.

Not good for an income stock to pass its dividend so I wouldn't expect much SP-wise until signs of resuming payments appear.

[moimoi]

Hmmm....NZR had a weak finish last week and today a reasonably large trade of 176k shares. Support @ 3.20-3.30 broken.

The last announcement stated the hydrocracker (unit 2) was to be shutdown through the month of May. No announcement to say it is back online.?

Is this a reason for weakness or are we seeing BP reducing its stake to raise cash with the high exchange rate.?

cheers
Moi.

[Bilo]

Some firmer buying today. What did long term watchers make of the tolling margin between USD4 and USD6 and output performance? Was that 2 months 6.4M barrels effectively for one month as May was shutdown?

[moimoi]

Bilo the March April throughput was 6.8M barrels so seemingly not alot of difference between the 2 periods....the reduced fee between the periods is maybe partly explained by the companys statement..

""The shutdown is scheduled to run through to the end of May and
will result in a reduced refinery intake (circa 20%) for the month.
Margins will also be impacted as a result of the hydro-cracker being
off-line, since this limits the company''s ability to upgrade lower cost
feedstock into high value products.""

cheers
Moi

[Pumice]

Does'nt seem to be much interest in NZR, given that it has rallied aggressively.
Even more so since todays statement.


2010 Net Profit Forecast

Gross Refining Margins earned during the 2010 year-to-date have been relatively healthy and ahead of Company expectations. The average refining margin earned for the ten months ended 31 October 2010 was USD 6.03 and, since that time, margins have continued to track in the USD 6.00 to USD 7.50 range.

Following a review of financial results to date, the Directors advise that Net Profit After Tax for the year ended 31 December 2010, is expected to be within the $55 million to $65 million range.

The Company has continued to repay Point Forward Project debt from the healthier cash flows, and this will enable management to consider future growth opportunities in line with the Company’s strategic plan.


D Jensen
Chief Financial Officer / Company Secretary
17th December 2010
Marsden Point

[macduffy]

Still interested in NZR, you're just a bit quick for the rest of us, Pumice!

I would think that the recent firming in the SP - to an eight month high as reported in the DomPost today - has been in anticipation of refining margins having remained "healthy", allowing resumption of dividend payments as was foreshadowed in the interim report.

I wonder what these "future growth opportunities" might be?

[Pumice]

I'm young enough to not worry about divies, but I thought the stock was excessively sold off when they did stop paying them out. (I guess due to NZ demographics, people target divies)
Am very curious about any future prospects they are looking at though.

I’m sticking with my oil and old people investment philosophy, so far so good.

[macduffy]

NZR has been regarded as an income stock in the past. A reliable payer of divs - until recently - but, as a "toll taker" not likely to have great growth prospects. Plus, there's always been the suspicion, justified or not, that the company was run for the benefit of the big oil company shareholders and that if it ever became an issue, their interests were likely to take precedence over those of the smaller shareholders. Which was only to be expected with the oil co's holding the majority of the shares and of the board seats.

I've been holding as an income stock and by rights should have quit them when they passed the div. Not much point in holding an income stock which doesn't pay an income!

[macduffy]

From Infratil's monthly operational report for December.

"A number of brokers also upgraded their forecasts for the short and medium term profitability of the New Zealand Refining Company.

New Zealand's integrated refining-distribution-retailing industry very efficient and ensures reliable supply of the right fuels for New Zealand's needs. The price of this refining is set from international refining margin benchmarks and ensures that the Refinery operates at near 100% capacity.

In 2009 refining margins fell sharply but have subsequently risen and are forecast to rise further. While this will increase the cost of fuel, the agreement between Greenstone (and the other major fuel companies) and the NZ Refining Company means that the increase is not as dramatic as it would have been were more of New Zealand's fuel needs imported already refined. The arrangement also ensures New Zealand has certainty of refinery capacity tailored to provide the particular fuel needs of the Country."

[Pumice]

Nice trending stock.
I assume Vol is always fairly light given that 80% is in the hands of the big oil companies.
Does that have much of an impact with regards to TA?

[Pumice]

$4.88 52 week high.

gotta be happy if you've been holding this stock

[Phaedrus]

Low volumes tend to increase the spread and volatility. With an average daily turnover of about $160,000, NZR is not too bad though and TA works just fine. The clue to the answer of your question lies in your phrase "nice trending stock". Any stock that you can say that about is an ideal TA candidate - and an ideal "buy and hold" candidate as well, just so long as you monitor the uptrend. That's where the TA comes in.

[Pumice]

Breaking the $5.00 mark must be of some significance?
Even if it’s just psychological.

I’m guessing from a TA point of view, higher highs and higher lows is always a good thing.

Happy to be holding anyway.

[Pumice]

$5.15 loving these higher highs.
I suspect if they have a good result (17th Feb) and declare a dividend, this will continue its solid trend.

[macduffy]

It's been pretty well telegraphed that NZR is going to post an improved profit and declare a dividend. The question will be - How good?

The trend's good but there is always the possibility that the market has over-anticipated, as was the case with MFT yesterday.

[moimoi]

Possibly may not be a dividend...depends on how heavily one is supposed to rely on the following statement from the 17 December update....or am i just being silly?

""The Company has continued to repay Point Forward Project debt from the healthier cash flows, and this will enable management to consider future growth opportunities in line with the Company’s strategic plan. ""

[macduffy]

The expected improved performance from NZR.

NPAT $57.6m - up 146%.

Final div 10cps.

Considering further investment to increase output from the refinery.

[macduffy]

And NZR follow up on their improved performance by reporting that the average gross refinery margin for the Jan-Feb,2011 period was USD6.75.

The final gross margin for the year to 31/12/2010 was USD6.17, more than the USD6.06 signalled to the market last month.

[Pumice]

Global refining margins are set to surge post Japan earthquake as well (Bloomberg).

[scamper]

weeeelll...
who knows what about this stock? I can't understand its recent stagnation and then slide.
is it just a big seller...?
I thought the fundies and world trends were positive for nzr...

[macduffy]

That's a tough one, scamper.

Around 57% is held by the oil companies for strategic reasons. I can't see any of them selling down by dribbling shares out on the market. A complete sell off by one or more is possible but they would surely look to do that via a placement.

Emerald Capital has about 13%. I've never understood this, unless there is some connection with Gull?

That leaves 30% in the hands of other instos and retail investors. NZR was regarded as a pretty reliable income stock until it had to pass dividends a year or so back. Although it has resumed payments it has also warned that it could be on the lookout for "future growth opportunites" which, by implication, might affect it's future payouts. Perhaps we're seeing a reappraisal from "income conscious" shareholders?

[scamper]

And another 10% gone since our posts above, macduffy.
Perhaps the rise from last August to this March is the anomaly, not the recent slide?
Agree the 'income conscious' shareholders may have had enough -- under 3% ain't much for a good kiwi company.

[Pumice]

The NZD sitting around 82c isnt helping. its probably cheaper to import refined product than do it here.

[macduffy]

And another 10% gone since our posts above, macduffy.
Perhaps the rise from last August to this March is the anomaly, not the recent slide?
Agree the 'income conscious' shareholders may have had enough -- under 3% ain't much for a good kiwi company.

I still think it's largely a matter of lack of interest until NZR re-establishes itself as a reliable dividend payer. The involvement by the oil companies rules out any corporate activity in the stock IMO, other than what may follow if another player decides to follow Shell in quitting retailing in NZ. And then, the NZR shareholding would likely follow the buyer of that business to protect supplies, as it did with Shell/Greenstone.

[sharer]

I agree with Macduffy's viewpoint. You're right too scamper, 2.84% yield isn't much encouragement when p/e is about 20.5x, & bank current deposits pay 3%-ish.
To become attractive again we need to see rising dividends and a lengthening record of reliable uninterrupted payouts, which of course might take years to rebuild reputation for some investors.
Major capital changes seem unlikely for reasons outlined by MacD, & i add the thought that the majority tightly held by the major oil companies may eventually stifle this business, or tempt some other big player to startup an outright competitor refinery (somewhere far south maybe, if another big oil find succeeds). Any future attempt by NZR to raise public capital may similarly be stifled, at least until they can show longterm rising yields.
Meantime, perhaps the price needs to fall into the low to middle 300s to revive yields and restore a previous pattern of gradual accumulation by long-holders.
While the business seems very sound and well maintained (updated) the monopoly days are long past. NZR is now bypassed in both directions; fuel is imported for public sale by some, and others export large amounts of crude for refining elsewhere. The interests of ordinary shareholders never dominate, and trustees or other long term investors must increasingly argue about whether they should put the money into TEL or something else instead.
Hmm .. time for a nice cuppa & a snooze.

[moimoi]

I suspect the $400 - $500M they are pondering spending on a "growth project" maybe part of it.

[Pumice]

REL: 1451 HRS The New Zealand Refining Company Limited

MONTHLY: NZR: Throughput and Margin Report March-April 2011

NZRC Throughput and Margins Report for March-April 2011

The Processing Fee for March-April 2011 of NZD 39.6 million was generated
from a record throughput of 7.3 million barrels for the two-month period.

The average Gross Refinery Margin (GRM) generated for the two month period
was USD 5.98 per barrel. The margin was impacted by a 10 day outage of the
hydro-cracker, as emerging maintenance was carried out on the hydrogen
manufacturing unit. This limited the Company's ability to upgrade lower cost
feedstock's into high value products during the period of the outage. All
processing units are back online and operating at near full capacity.

The average exchange rate for the two month period was USD/NZD 0.77.

Year to date:

The Gross Refining Margin 1), on a year to date basis, averages USD 6.22 per
barrel and the exchange rate USD/NZD 0.77. Margins are currently tracking in
the USD 5.50- USD 7.00 range.

Historic Analysis:

Five years history of Throughput, Margins and Processing Fees is attached as
Appendix II and can also be found on the company's website www.nzrc.co.nz.

1) Gross Refining Margin is defined as the typical market value of the
products produced minus the typical market value of the feedstock used,
expressed per barrel of feedstock used. The margin incorporates the cost of
the hydrocarbon used for fuel and incurred as process losses. This may not
be compatible with margins expressed by some parties in which the fuel and
loss is excluded.

[macduffy]

A steady result from NZR with NPAT up 7.5%, interim dividend increased from 2c to 3cps.

Doesn't do a lot though to restore NZR's previous status as a steady high yield income stock, particularly when so many other NZ companies are showing good yields at present. CEO Ken Rivers highlighted the fact that NZR's profits remain hostage to the USD/NZD exchange rate and the impossibility of predicting future movements. This will continue to weigh on the SP, IMO.

[BIRMANBOY]

Putting money into this is a classic case of wasted opportunity..I've emailed them on several occasions with questions ..never replied and the dividend is pathetic.. Whats to like?

[gonzo56]

NZR is a chartist's dream. :)

Could you elaborate please. =)
Will todays move as a result of CD shock the SP into action and help continue its move north? Or not, what trendline-break price do you have?


3552

[BIRMANBOY]

Such a sunny upbeat disposition...nice to see. :-) Thats the thing about traders they are eternal optimists.
NZR is a chartist's dream. :)

[scamper]

nzr charts always give clear signals, but more than two are needed....
If today's 6% rise holds, the sp will nudge/poke through the 30-day MA -- which it hasn't done in the last 6 months!
Divi increase from 2 to 3 cps is a good increase -- no stuffing around with 0.5 cents or less.
Rivers (and macduffy) being openly realistic about the unknowable exchange rate
Birmanboy, i agree it's disturbing that they don't have a public relations person on the ball, but if i had spare cash, i think now would be a good time.
Do your own research! Cheers

[BIRMANBOY]

Like I said its nice to see a silver lining in every cloud. Any self respecting business will /should have foreign currency hedging mechanisms in place to protect it from foreign currency losses so I dont have your optimism regards its prospects. There are plenty of other companies much more deserving of "spare cash" rather than this "mates own" business. The only thing going for it is the slight chance that the share price could give some capital gain if enough traders believe it and get with the program. Show some belief Scamper and buy some ..it could be the start of the rally!
nzr charts always give clear signals, but more than two are needed....
If today's 6% rise holds, the sp will nudge/poke through the 30-day MA -- which it hasn't done in the last 6 months!
Divi increase from 2 to 3 cps is a good increase -- no stuffing around with 0.5 cents or less.
Rivers (and macduffy) being openly realistic about the unknowable exchange rate
Birmanboy, i agree it's disturbing that they don't have a public relations person on the ball, but if i had spare cash, i think now would be a good time.
Do your own research! Cheers

[Hoop]

NZR is a chartist's dream. :)
Hmmm...wouldn't call it a chartist dream just yet Belg...but it does have my attention.

My freebee chart sadly only has up to last Friday's data so I don't know if the TA indicators buy signals have fired or not..

However the S&R and trend lines are firing attention buy signals as they are breaking ...but not yet confirmed enough for a more conservative investor to take a punt.

NZR is a strange share...It was an investor haven during the last Bear Market Cycle...However if you bought in at the beginning of the latest Bull Market you would now have lost half of that capital.

We may be entering another NZX Bear market Cycle.... is it possible that NZR could once again be another haven....time will tell.

http://www.imageurlhost.com/images/cxd9mssv0ujjaazp6nt7.png

[moimoi]

The bizarre aspect of this share is that it last traded down in the low 3's when the refining margin collapsed to $1. The average margin for the past 6 months has been $6.56 and the share just doesn't seem to have been able to get out of its own way.

A push to the $3.75 area could be on the cards which is where most of the volume has occurred over the past year.

Company could do with updating the top twenty on its website too :-(

[sharer]

A steady result from NZR with NPAT up 7.5%, interim dividend increased from 2c to 3cps.

Doesn't do a lot though to restore NZR's previous status as a steady high yield income stock, particularly when so many other NZ companies are showing good yields at present. CEO Ken Rivers highlighted the fact that NZR's profits remain hostage to the USD/NZD exchange rate and the impossibility of predicting future movements. This will continue to weigh on the SP, IMO.

Again i agree. Last time my small enterprise considered allocating spare cash to this holding we were right to avoid it, & would do the same today. Like Hoop, we are watching carefully, but the falling trend dominates the picture. So we're looking at other candidates for our capital. (Last time it favoured TEL, which turned out well from a trustees point of view, & might do so again ...)

[macduffy]

Company could do with updating the top twenty on its website too :-(

I don't think it matters much.

We all know that the oil companies hold the majority of the shares - and that the Infratil/NZ Super Fund JV have bought Shell's shares.

Surprising though, because in the past NZR have won awards for communication with shareholders and for the quality and extent of information in their reports.

Not on my buying list at present.

[macduffy]

I saw NZR's CEO on TVOne Business this morning extolling the virtues of his company.It seems the 50th anniversary looms and the company will mark the ocassion with a name change - from NZ Refining to "Refining NZ" - whooppee!

Hints there also of some further corporate moves with possibilities of other big oil co's selling down or out but I guess no surprises there if/when it happens.

A general softening up of shareholders in expectation of more major expansion/modernisation expenditure to increase the throughput of refined product and reduce NZ's dependence on importing refined fuels.

[macduffy]

FWIW, Macquarie Equities rates NZR as "Outperform".

"New Zealand Refining Company NZR Outperform

Margins weaken; high unusual costs

NZR has provided FY11 NPAT guidance of $43-48m – 22% and 16% lower than Macq. and consensus ($58m and $54m respectively).
FY11-13 EPS downgrades of -21%, -16% and -25% resp on lower gross margin, higher operating and fuel cost forecasts. Price Target lowered to $4.05 ($4.42).
The current share price is now consistent with a LT margin of around US$4.80/bbl (NZD/USD 0.7), which is around 17% lower than the long term average. "

[POSSUM THE CAT]

Macduffy A question how many do Macquarie equities want to sell. or is this just my suspicious Mind. Why are the oil companies wanting to sell out.

[macduffy]

No answers from me, possum, but Macquarie seem to base their recommendations on the relationship between their valuation (Price Target - however they arrive at it ) and current market price. Seems to lead to a lot of "Outperforms" when SP's are weak and vice versa of course! I don't place a lot of importance on brokers' recs but it's probably useful to know what they are thinking - or at least saying, publicly.

[POSSUM THE CAT]

Macduffy Would not touch with a barge pole from time SHELL wanted to sell out

[Pumice]

FWIW, Macquarie Equities rates NZR as "Outperform".

"New Zealand Refining Company NZR Outperform

Margins weaken; high unusual costs

NZR has provided FY11 NPAT guidance of $43-48m – 22% and 16% lower than Macq. and consensus ($58m and $54m respectively).
FY11-13 EPS downgrades of -21%, -16% and -25% resp on lower gross margin, higher operating and fuel cost forecasts. Price Target lowered to $4.05 ($4.42).
The current share price is now consistent with a LT margin of around US$4.80/bbl (NZD/USD 0.7), which is around 17% lower than the long term average. "

Well they were well short of thier guidence at $34.4m, but the dividend is starting to look a bit more respectable. I'm not sure about the $425m growth project.
I see the share price is up sharply this morning. (anyone know why?)
Here in Aus, there is talk of a few refiners closing down, is that likely to benefit NZR?

[scamper]

volume of 41 k is not "very low" for nzr.
can someone post a link for the full address please?
thank you.

[Hoop]

volume of 41 k is not "very low" for nzr.
can someone post a link for the full address please?
thank you.

Scamper try this link https://www.nzx.com/companies/NZR/announcements/219858

Share price rise???
My two cents worth (probably wrong)
FA.....Mr Market suddenly sees increased rate of growth...so corrects the market by increasing the all ready high PE Ratio a notch higher.
TA....Investor perception that the price may have bottomed out for now and some sort of correctional rally with relief buying.

[Pumice]

Scamper try this link https://www.nzx.com/companies/NZR/announcements/219858

Share price rise???
My two cents worth (probably wrong)
FA.....Mr Market suddenly sees increased rate of growth...so corrects the market by increasing the all ready high PE Ratio a notch higher.
TA....Investor perception that the price may have bottomed out for now and some sort of correctional rally with relief buying.

Yes a rise in the share price, up 10% today.
Theres an anyst report out today too.
http://www.refiningnz.com/our-investors/reports--releases/analysts-reports/analyst-presentation---february-2012.aspx

[macduffy]

Volume traded so far today (152,000) is just about the highest for a year! I wonder who's buying - and selling - and why?

Perhaps the SP jump is a reaction to news that shareholders won't be asked to stump up any more cash for the refinery expansion. It can hardly be because NZR has suddenly recovered its former status as a high income stock, although the continuation of resumed dividends will be welcome to many shareholders.

Incidentally, the company's "analysts report" is peculiarly named. Written by the company - or its PR people - it is for analysts perhaps but not by them. OK, I'm just being picky!

:D

[winner69]

To be honest I know little about how refineries make their money but Caltex seem to be doing it tough .... and maybe the other refineries in Austral as well
http://www.businessspectator.com.au/bs.nsf/Article/Caltex-oil-refinery-value-Kurnell-Lytton-Shell-Che-pd20120227-RV8R2?OpenDocument&src=sph

Is NZR a far superior operation or can these sort of troubles cause them some issues in the future

[winner69]

To be honest I know little about how refineries make their money but Caltex seem to be doing it tough .... and maybe the other refineries in Austral as well
http://www.businessspectator.com.au/bs.nsf/Article/Caltex-oil-refinery-value-Kurnell-Lytton-Shell-Che-pd20120227-RV8R2?OpenDocument&src=sph

Is NZR a far superior operation or can these sort of troubles cause them some issues in the future

And some calling for government intervention to protect Oz fuel interests
http://www.businessspectator.com.au/bs.nsf/Article/refineries-liquid-fuel-caltex-australia-kurnell-ly-pd20120227-RUVD7?OpenDocument&src=sph

[macduffy]

NZR shareholders approve expenditure for the refinery upgrade. But who are the two substantial (oil co) companies who voted against the proposal? "Someone" with their own refineries elsewhere, so obviously not Greenstone (Z).

Market seems to approve too, although it's likely to mean smaller dividends in the near future.

Disc: Holding a few NZR.

[Pumice]

I read it was most likely Mobil and Chevron (given thier combined %)

Should be good for the company in the LT though.

Also hold a few.

[scamper]

Quite a drop since the late April posts above when sp around 270--280, but now 230.
Is the div (c. 5.25%) good enough to happily hold?
Because I've held these for years and years, my profit is still terrific, but am beginning to feel I should be out.
However, I still feel this company is in a profitable long-term business, and is doing it well. Thoughts? Cheers.

[moimoi]

Scamper, do you think they can continue paying a dividend at the level you mention while doing the refinery upgrade?

I expect the dividend will reduce due to the large capital spend and i think the company may have even confirmed that at some stage recently.

And i am only guessing but I suspect that some of the holdings that were distributed to beneficiaries of Mr Gardiner's estate have been released onto market of late...

[crighton100]

Quite a drop since the late April posts above when sp around 270--280, but now 230.
Is the div (c. 5.25%) good enough to happily hold?
Because I've held these for years and years, my profit is still terrific, but am beginning to feel I should be out.
However, I still feel this company is in a profitable long-term business, and is doing it well. Thoughts? Cheers.

I sold all my shares in NZR when they dropped below $3 as I read that if the proposed up grade was approved [which it has] then the likelyhood of dividends in the next couple of years was negligable.It would appear that many people who rely on dividends as a source of income have taken heed & sold down their stake if you look at the downward trend in the stocks price.I think there is a good chance they will continue down in the short term,but as a long term investment,they will again rise.

[scamper]

Gosh! It's six months later and still looking shonky.
The independent review of processing fees looks fine -- will the people who sold down today be regretting the sale?
At this price, even the 4.55% divi looks not too bad.

[Pumice]

Gosh! It's six months later and still looking shonky.
The independent review of processing fees looks fine -- will the people who sold down today be regretting the sale?
At this price, even the 4.55% divi looks not too bad.

I read they dropped out of the NZX50?, so possible that institutional investors are dropping the stock.

Is NZR starting to look cheap?

[sharer]

I read they dropped out of the NZX50?, so possible that institutional investors are dropping the stock.
Is NZR starting to look cheap?

I'm thinking about it.
But we need to try guessing how the figures may look after completion of the current upgrade(s).
It can only be a guess & gamble, so resorting to TA to try guesstimate where the sp low might be.

[moimoi]

Nothing stopping AIRNZ building its own storage facilities.

IMO zero impact on NZR. (well done on bailing without hesitation tho Sparky :-) )

[Vaygor1]

I read they dropped out of the NZX50?, so possible that institutional investors are dropping the stock.

Is NZR starting to look cheap?

My advice (pun intended) is to leave well alone.

The formula for calculating refining margins is extremely complicated. So complicated in fact that it requires an entire panel of independent analysts to review it from time to time (really only to re-understand it in my view). It is this complexity in-part that makes NZR shares historically volatile with relatively significant components of it relying on the Singapore Standard and the USD/NZD exchange rate. By the way, the refining margin does have a floor and a cap otherwise volatile would be an understatement.

I bought NZR around May 2006 and sold all my holding around July 2007.
Made 23% total in capital gain with fully imputed dividends (equating to 19.7% per annum) and have not bought any since.

The reason for buying was two-fold:
1) At the time the world-wide bottle-neck on oil supply was refining capacity. There was no trouble getting enough crude out of the ground and a few huge mega-refineries that would really change the game (ie eliminate the bottle-neck) were still under construction. In the meantime, this mean't nice high refining margins.
2) NZR had completed its Future Fuels plant enabling it to (i) be one of the 1st in the world (honestly) to produce low sulphur diesel and low benzene petrol - ie short term monopoly - and (ii) accept lower cost high sulphur/sour crude oils - ie cheap 'raw material'.

The reasons for selling:
(1) The mega-refineries came on-line and the bottleneck shifted from refining-capacity to getting the stuff out of the ground.
(2) As required by global agreements, many other refineries completed their upgrades to produce low sulphur products (ie NZR lost its monopoly)
(3) NZR announced a change in its dividend policy to reduced dividends in the lead-up to, and during, large capital expenditure.
(4) NZR announced the go-ahead of the 'Point Forward' project (which required large capital expenditure).

I have 4 points to make:
1. In my humble view, world-wide refining capacity will never ever be the bottle-neck again.
2. In the oil biz, you need to know your stuff.
3. In the oil biz, you need time to keep a close eye on the world news and the business you invest in.
4. Since selling in 2007, I don't think NZR has stopped spending large amounts on capital, and if so, then not for long.

Volatility aside, it is points 1 & 4 above that prevent me from buying... but mainly point 1.

[sharer]

I'm also reluctant to invest in NZR at least until we see results & how things are going after completion of present major upgrade works. There will be plenty of time to recheck & reassess the situation, & nobody expects any rapid return to earlier high dividend yields.
Several good points made above by Vaygor1 seem valid to me.
The recent warning of (hypothetical) risks quoted by Sparky are also relevant in this respect.
As well, as i mentioned myself way back there somewhere on this thread, since we are inevitably looking at long time periods here, what happens when someone decides the time has come to justify building a new refinery some place else? (Taranaki region produces all our NZ oil so far commercialised, so must be something they review periodically. And if the long anticipated major discovery in the Great South Basin ever actually happens all bets will be off.)
Meanwhile, by investing in Z Energy bonds (Greenstone) we already have another significant indirect interest in the fortunes of NZR, so could argue that is another reason to avoid further direct investment at this time.
Looking even further out, i'm hoping to see opportunities arise in the small operators already quietly producing 'algal oil' below the radar :)

[moimoi]

How is this coming along....?? (from the announcement back in August last year)

""At the same time as announcing the review of depreciation policy, the Board
highlighted its intention to carry out a review on the optimal capital
structure of the company and future dividend policy. This work is
progressing and the Directors will advise the market once the review has been
completed.""

[macduffy]

Probably just a generic term as in "Profit and Loss".

;)

But I seem to remember reading somewhere that refining margins have been improving in recent months. Sorry, I don't recall where - but someone may be able to verify or correct this.

[moimoi]

I'm not very familiar with this company, but have noticed it has risen nearly 15% in the last month. Can anyone shed some light as to what's going on? I imagine some of the gains (maybe half) are due to improving currency conditions, but is something esle going on, or were they just a bit oversold?

Cheers

Turmeric...the potential carrot of an "optimal capital structure review" was announced back in August last year.. Maybe its got to the top of the Chief Executive's in-tray....

[brucey09]

Snr. Snapiti
Please keep to waiting. New plant will make profits and increase fee refining. After then giving capital to shares holders.

[macduffy]

I gave up on NZR a few months ago, sold and took my lumps. The writing was really on the wall when it passed its divvy a few years ago and ceased to be a high yielding income stock. Just that I didn't take the hint at the time.

:(

[BlackPeter]

Looked into this stock due to FB putting it into the group of top 5 performers for 2014.

Looks like other analysts are reasonable upbeat as well:

Reuters outperform;
Financial Times : http://markets.ft.com/research/Markets/Tearsheets/Forecasts?s=NZR:NZC

However - I seem to miss what all these analysts are seeing - performance over the last 5 years or so looks quite tired and predicted P/E for 2013 financial year (we will see ...): 28.6; Even if they get their new refinery in budget and time - where is the growth coming from? Anybody who can give me a clue why this stock is poised to rise as the analysts seem to think?

Discl: Not holding

[Billy Boy]

Looked into this stock due to FB putting it into the group of top 5 performers for 2014.

Looks like other analysts are reasonable upbeat as well:

Reuters outperform;
Financial Times : http://markets.ft.com/research/Markets/Tearsheets/Forecasts?s=NZR:NZC

However - I seem to miss what all these analysts are seeing - performance over the last 5 years or so looks quite tired and predicted P/E for 2013 financial year (we will see ...): 28.6; Even if they get their new refinery in budget and time - where is the growth coming from? Anybody who can give me a clue why this stock is poised to rise as the analysts seem to think?

Discl: Not holding
I,m with you here, I cant figure it either.
On the plus side... when finished the update rebuild, they should be able to refine the TAMPIS oils.
Wether this give them a greater profit margin i'm not sure. Maybe transportation is in play bigtime.
On the negative.... World oil prices are being held coz of the up surge in gas.
I did Email the coy re the issue, No Reply.
BB

[macduffy]

The prospect of better refining margins, perhaps?

http://www.arabnews.com/news/522851

"Refining margins are slowly recovering as well, with the profit from processing a barrel of Dubai crude at a complex refinery in Singapore at $6.92, up from January’s average $6.41 and above the 365-moving average of $6.34."

[BlackPeter]

Whats going on? Annual results due today, but still no announcement; SP dropping like a stone (7cts down, though admittedly quite light trading); Hardly any bidders left ...

[BlackPeter]

5.27pm: the directors show up with their tails between the legs (must be a new late for a "profit announcement"):

revenue down 20% compared to last year;
last years profit (2012) of 30 M$ turned into a 5M$ loss this year;
expecting a difficult year to come, but believe company is capable of weathering what lies ahead"
no profit - no final dividend (makes sense);

Just in case you don't remember - this is one of FoBar's five darlings for the year ... looks like my earlier hunch (post #444) was right;

[BlackPeter]

Announced capital raising, managed to place already $48 Million and offering existing shareholders as well a piece of the cake (@ $1.68 per share)

https://www.nzx.com/companies/NZR/announcements/247723

Interesting (and in my view clever) move. Mr. Market seems to like it as well. Their balance sheet looked o.k. prior to the capital raising, but still healthier after - and this gives them the backing for the predicted difficult year to come.

Two big expansion projects expected to deliver in 2014 and 2015; Lower NZ dollar (or actually higher US) as well as an increasing fuel demand (economic cycle still pointing upwards) should bring them back to making money.

Discl: Now holding ...

[macduffy]

Required reading for NZR shareholders.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11252520

I gave up on this company - for which I had a sentimental attachment dating back to the 1960's IPO! - some time ago.

[Goldstein]

Required reading for NZR shareholders.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11252520

I gave up on this company - for which I had a sentimental attachment dating back to the 1960's IPO! - some time ago.

Don't think I'd go near it with a barge pole after reading that. It raises some interesting questions though. IF NZR wasn't offering cheap refining to the main 'shareholders' what would happen to the price at the pump in NZ?

[macduffy]

Don't think I'd go near it with a barge pole after reading that. It raises some interesting questions though. IF NZR wasn't offering cheap refining to the main 'shareholders' what would happen to the price at the pump in NZ?

Would it make much difference though if the result was less refining in NZ and more refined product being imported? The refining business is highly competitive internationally - eg, Z Energy, for one, currently sources much of its fuel from Singapore. Perhaps its more a case of higher NZ refining costs requiring a "subsidy" in favour of the fuel retailers to justify continuing refining in NZ. That, and the security of supply question.

[BlackPeter]

Amazing - just received my voting pack in the mail and realized that returning my voting instructions by return mail is already too late (needs to be back by Tuesday - unlikely with NZ Post). No Internet voting option and no email option - and I have no access to an old fashioned fax machine.

Scanned the voting paper and send them with an email, but not too hopeful they will accept this delivery - shall see.

Are there any legal requirements on them how much time they need to give shareholders to vote?

Anybody else in a similar position - i.e. was it NZ Refining sending the pack out late, or was it NZ Post delivering them late to my address?

[Goldstein]

Would it make much difference though if the result was less refining in NZ and more refined product being imported? The refining business is highly competitive internationally - eg, Z Energy, for one, currently sources much of its fuel from Singapore. Perhaps its more a case of higher NZ refining costs requiring a "subsidy" in favour of the fuel retailers to justify continuing refining in NZ. That, and the security of supply question.

Who should be paying the 'subsidy' though? Currently it seems as though the non-oil-cartel shareholders of NZR are footing the bill through lost earnings.

Your right about the security of supply. As the demand for crude goes up there is usually a squeeze on global refining capacity.

[Vaygor1]

Who should be paying the 'subsidy' though? Currently it seems as though the non-oil-cartel shareholders of NZR are footing the bill through lost earnings.

Your right about the security of supply. As the demand for crude goes up there is usually a squeeze on global refining capacity.

Historically you are correct about the bottleneck on global refining capacity Goldstein, but from here on in I would be surprised if we ever encounter this bottleneck again as detailed in my post 16 months ago here:
http://www.sharetrader.co.nz/showthread.php?468-NZR&p=389620&highlight=#post389620

Regarding the 'subsidy' issue I don't see any of it making too much difference:
Cheap refining equals bad for NZR shareholders & good for NZR customers
Expensive refining equals good for NZR shareholders & bad for NZR customers.
But NZR primary shareholders are also NZR's primary customers… the one and the same.

So if you boil it down to very simple terms these dual shareholders/customers by-and-large come out the same whatever the refining margin. At the same time the setup provides a lovely mechanism for them to 'dial a profit'… and while they are allowed to continue doing that, they will keep the refinery open for business.

Disc: Do not hold. Sold out at $7.99 a long time back.

[Under Surveillance]

Amazing - just received my voting pack in the mail and realized that returning my voting instructions by return mail is already too late (needs to be back by Tuesday - unlikely with NZ Post). No Internet voting option and no email option - and I have no access to an old fashioned fax machine.

Scanned the voting paper and send them with an email, but not too hopeful they will accept this delivery - shall see.

Are there any legal requirements on them how much time they need to give shareholders to vote?

Anybody else in a similar position - i.e. was it NZ Refining sending the pack out late, or was it NZ Post delivering them late to my address?

The notice of meeting was lodged with NZX on 1 May 2014: https://www.nzx.com/companies/NZR/announcements/250005
A curiosity is that the notice gives the time of the meeting as 2.00 pm, and tells the punters a light lunch will follow. The material attached to it says they'll get afternoon tea. Contradictions like that don't give confidence that the front office would be on the ball with the mailing.
I don't hold, and would not touch. I see the 2 independent directors oppose Halliwell's motion, in a contemptuous manner. I don't know whether they are or were people of substance; one can see that independent directors on the RAK board who were once respected, Mogridge and Irvine, continue to go along down the slide with the Robinsons. If Halliwell's arguments have anything to them the Shareholder's Association will presumably get behind him.

[BlackPeter]

why would you bother voting when NZ refining is majority owned by self serving cartels.

True ... though to be honest, even for other companies without majority shareholders (or "self-serving" cartels in the majority) it seems to be nearly impossible for small shareholders to get rid of unloved directors or to get an election result not supported by the board.

However - it is normally possible to give the board at least a signal, but NZR does not even seem interested to give shareholders a realistic chance to exercise their legal rights to vote.

[macduffy]

Historically you are correct about the bottleneck on global refining capacity Goldstein, but from here on in I would be surprised if we ever encounter this bottleneck again as detailed in my post 16 months ago here:
http://www.sharetrader.co.nz/showthread.php?468-NZR&p=389620&highlight=#post389620

Regarding the 'subsidy' issue I don't see any of it making too much difference:
Cheap refining equals bad for NZR shareholders & good for NZR customers
Expensive refining equals good for NZR shareholders & bad for NZR customers.
But NZR primary shareholders are also NZR's primary customers… the one and the same.

So if you boil it down to very simple terms these dual shareholders/customers by-and-large come out the same whatever the refining margin. At the same time the setup provides a lovely mechanism for them to 'dial a profit'… and while they are allowed to continue doing that, they will keep the refinery open for business.

Disc: Do not hold. Sold out at $7.99 a long time back.

I'd agree with most of that, Vaygor, except that the "cartel" shareholders' motivations for owning shares in a refinery have started to splinter a bit since Shell sold its retailing business to Z Energy. Unlike the others, Z doesn't have any upstream production to feed the refinery and will be more inclined to buy its refined product at the best price - offshore, if the economics so dictate.

[BlackPeter]

Amazing - just received my voting pack in the mail and realized that returning my voting instructions by return mail is already too late (needs to be back by Tuesday - unlikely with NZ Post). No Internet voting option and no email option - and I have no access to an old fashioned fax machine.

Scanned the voting paper and send them with an email, but not too hopeful they will accept this delivery - shall see.


just for the record: just received confirmation from NZR that they did accept my scanned and emailed postal voting paper - so this seems to be a way to avoid long mail delivery times, even if they officially don't offer them.

[Beagle]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11252520

What an absolutly diabolical situation. No way I'd own the shares with such a blatant an ongoing conflict of interest. Maybe minority shareholders should be allowed to get access to specially priced fuel as a way to resolve this heinous situation ?

[peng]

The oil company owners only utilise the refinery to the extent that it is competitive with imported finished products. If it was to change the propertion of the toll received by it versus the proportion received by the customers, the customers would simply shift to importing more until their profits are restored. Net result: NZR receives a larger % of the margin on fewer barrels, and is net worse off.

[BlackPeter]

NZR diversifying and selling their surplus CO2: https://www.nzx.com/companies/NZR/announcements/252076;

Not sure, how much money is in it for them, but every dollar counts ... and hey, at least we see recently some more positive announcements from them.

On a different note - as sad as it is, but the current situation in Iraq can only be good for NZR as well - can it?
There is not a lot of spare refinery capacity around the globe, and when some of the big refineries in Iraq are under threat (or already shut down), than I guess the refinery margin for the rest is bound to go upwards.

Discl: cautiously optimistic, holding and waiting for better days.

[moimoi]

There is significant surplus refining capacity in the market, particularly in the Asia Pacfic Region. This is why processing margins are so low. As a read of the NZR AR will highlight.

Hard to know if news such as the below of a law change in the USA to allow export of unrefined condensates helps NZR either....

http://www.marketwatch.com/story/us-set-to-allow-first-shipments-of-unrefined-oil-overseas-2014-06-24

[BlackPeter]

May / June numbers are out: https://www.nzx.com/files/attachments/198135.pdf

Production coming back to more normal numbers (and should continue to improve), Refining margin still very low (half of what it used to be last year), but at least better than the months before.

Improved margins (due to recent and ongoing projects) and (hopefully) further falling NZD should help.

Discl: Holding

[BlackPeter]

Juli /August numbers are out:

Quite upbeat report and back to healthy margins (mainly thanks to their recent improvements), despite international industry margins staying quite low:

https://www.nzx.com/files/attachments/200848.pdf

Markets seem to like the report as well - first time for a while that I've seen on this stock more bidders than sellers - and SP up by 6 cents this morning.

Discl: Quite glad I didn't follow my brokers recommendations to sell out :)

[bunter]

Did a quick check - forecast eps (NPAT basis) is 20cps if current ex rate and margin are sustained.
http://www.refiningnz.com/media/92331/analyst_presentation_full_year_results_2013.pdf

http://www.refiningnz.com/media/92658/annual_report_2013.pdf
"TMH is key to the Company’s future and after commissioning late 2015, will deliver a structural uplift in processing fee revenue of circa $70 million per annum"

That's another 20cps.

My model says it's worth about $3.20.
Bought this morning at 1.67 (and watching the price fall).

[BlackPeter]

Did a quick check - forecast eps (NPAT basis) is 20cps if current ex rate and margin are sustained.
http://www.refiningnz.com/media/92331/analyst_presentation_full_year_results_2013.pdf

http://www.refiningnz.com/media/92658/annual_report_2013.pdf
Bought this morning at 1.67 (and watching the price fall).

Still think that in a year or two you might be quite pleased with your buy - in price. Its not a stock for day-trading.

Discl: DYOR ... my crystal ball is cloudy

[Vaygor1]

have been interested in taking a stake for a while but the trend is your friend and today's strike announcement is not for striking oil and really bad news.

I used to own shares in NZR. Sold them all between June-December 2007 in the $7.30 to $8.00 price bracket.
Also, I used to contract to and work for NZR once upon time.
If you are thinking of buying, then I invite you to read my Jan-2013 post below as part of your research.
Since the Jan-2013 post, NZR have still not stopped spending (or maybe only just recently stopped spending?), I still don't see any dividend forthcoming, and the world situation on oil has not substantially changed.

http://www.sharetrader.co.nz/showthread.php?468-NZR&p=389620&viewfull=1#post389620

I do smile a bit (sorry) at their announcement about the strike as I am sure quite a few of the shop-floor lads I know would still be there.
But the funny part is that in NZR's Announcement to Shareholders they say they are "making their customers aware" of the union's notice to strike. But NZR's primary shareholders are their customers… however it appears NZR pretends otherwise.

[BlackPeter]

have been interested in taking a stake for a while but the trend is your friend and today's strike announcement is not for striking oil...... really bad news.

agreed - the striking announcement is unfortunate and demonstrates a politicised and stupid union leadership. Why would you want to destroy a company which is the only employer in the neighbourhood and after diminishing returns just showed first positive signs of a potential turnaround?

I guess this shows that the unions don't care about the livelihood's of their members, they only care about the salaries of their overpaid leaders ... and obviously about making a political point.

Striking against NZR is like the strike of the pilots against Ansett New Zealand - 15 years ago. The unions successfully managed to kill off Ansett, lets hope their current members are not as stupid as the Ansett pilots.

One of my neighbours used to work for Ansett (proud pilot and union member). He never got another chance in the job market after killing off his company due to his and his unions greed. Lives now off casual farm jobs (if you want to call that living). Food for thought.

[BlackPeter]

Looks like the market likes Fridays after market announcement about NZR coming to an agreement with the unions. At this stage four times as many buyers than sellers (at for NZR reasonable volume, though the sellers are quite reluctant to come forward), and SP slowly climbing.

Not a chartist, but in my view this looks like some sort of upturn.

Given all the new projects which should now come to fruition and given that the NZD is still more likely to fall than to climb - do I see (at the current SP) potential in the stock and am holding.

However - DYOR, I disclosed already earlier the sorry state of my crystal ball;)!

[BlackPeter]

NZR is probably too boring to talk about, but it feels like they managed to pass rock bottom. SP broke 6 weeks ago through the MA 30 and is keeping to crawl up with reasonable volumes going through.

Analysts predictions (ft.com) range from 195 to 278 (with a median of 224). If they are right, than there is plenty of room for growth.

Discl: holding - i.e. I must be optimistic. On the other hand ... I filled up to the brim (reaching my personal investment limit for any one stock) ... i.e. lots of shares left for other people to buy!

[bunter]

In a 50/200 downtrend still, but I bought some more today at 1.77 all the same.

If you trade using Donchian breakouts, there are reasons to buy - it's at a 120 day high.

09/14 report shows margin up to $6.85 per barrel; annualised after tax EPS of 20cps, given NZD/USD ex rate of 0.80.
Refinery upgrade effect due in 2015 = 22 cps - so 42c eps for 2016.

The current manager - an engineer, from memory, seems to have looked at all their processes and has made lots of changes to improve efficiency - some of which are working better than expected.

Worth $3?

Latest share price action suggests the price might be heading somewhere. There are reasons for it to go up.

Second most undervalued share on the main board, IMO.

6465

[traineeinvestor]

Second most undervalued share on the main board, IMO.

6465

Agree it looks cheap (although quite a lot of debt to contend with if they hit any more speed bumps).

Interested to hear what you consider to be the most undervalued share on the main board?

Cheers
traineeinvestor

[BlackPeter]

Agree it looks cheap (although quite a lot of debt to contend with if they hit any more speed bumps).



Why would you think that their indebtedness might turn into a problem? I would have thought that their balance sheet looks quite healthy - liabilities to asset ratio was 45.5% in the recent half year report. Not too bad after investing a huge amount of money into new projects and improvements.

[BlackPeter]

Interested to hear what you consider to be the most undervalued share on the main board?



If the coal price keeps rising, this might be Bathurst Resources - BRL ;)?

[BlackPeter]

Back to healthy margins & cost saving targets (over-)achieved :t_up:

September / October processing report is out and looking good:


"The Gross Refinery Margin1) (GRM) for the period was USD 7.54 per barrel. Singapore complex margins
averaged USD 2.60 per barrel during the period.
Refining NZ’s margin uplift over Singapore complex margins of USD 5.00 per barrel was again higher than
the normal range of USD 3 - 4 per barrel, largely driven by the 2014 margin initiatives (USD 0.67 per
barrel) and favourable crude prices reflected in a narrow Brent-Dubai spread (USD 0.88 per barrel).
Processing Fee income for the period was NZD 42.3 million, enabling another NZD 21.3 million payback
of the Fee Floor2) to customers. This brings the total floor repayment during the second half of Refining
NZ’s financial year to NZD 34.8 million, leaving the outstanding Fee Floor amount at NZD 1.5 million.
The Company also expects to deliver on its promise of cost savings in 2014; total costs are expected to
close at around $150 million for the year, some $8 million lower than originally promised."


https://www.nzx.com/files/attachments/203841.pdf

[traineeinvestor]

Why would you think that their indebtedness might turn into a problem? I would have thought that their balance sheet looks quite healthy - liabilities to asset ratio was 45.5% in the recent half year report. Not too bad after investing a huge amount of money into new projects and improvements.

Well, that was embarrassing .... I managed to swap the debt and market cap figures in my spreadsheet. :ohmy:

NZR looks very cheap and I added it to the portfolio yesterday hoping it does as well as it's Australian equivalent (CTX).

[golden city]

nzr looks bright ahead.., the trend is starting to turn.., can't resist ..but to add to my portfoilo.., so long after THL.., it is my second heavy weight stock

[BlackPeter]

nzr looks bright ahead.., the trend is starting to turn.., can't resist ..but to add to my portfoilo.., so long after THL.., it is my second heavy weight stock

6488

"the trend is starting to turn" - sounds a bit like the understatement of the year ;). But yes, I believe there is still plenty of grunt left in the upleg, i.e. you probably could currently buy worse than NZR. Low petrol prices, somewhat weaker NZD and improved refinery performance all helps to make this stock looking attractive again.

Discl: holding (lots) and quite pleased with this stock. However - DYOR & check my signature ...

[golden city]

looks so good.., got in on time.., it is cracking..

[BlackPeter]

looks so good.., got in on time.., it is cracking..

Psst - don't tell the crowds ... they are so busy on the PEB, OHE and ATM threads that they don't notice where the money is :sleep:

[cdonald]

With NZD/USD running at 79c average for the month and Singapore Complex margins at around $5 USD is would be safe to assume a pretty healthy profit for the month being that NZR margins are running on average $5 ahead of Singapore so maybe the return to $10 margins at a greatly improved exchange rate. And with them actually exceeding their cost cutting targets its all looking good. Touch wood!

[moimoi]

It surely has been a remarkable turnaround in the last 2 weeks after 8 months of struggling to maintain $1.70.

Interesting the collapse of the share price in the 2 days prior to the announcement of the cap raise @ $1.68 wasn't looked into.....

[BFG]

Wonder how NZR will benefit from this? The next big thing for Next Big Thing?

http://mobile.reuters.com/article/idUSKCN0JA0O320141127?irpc=932

[Schrodinger]

Wonder how NZR will benefit from this? The next big thing for Next Big Thing?

http://mobile.reuters.com/article/idUSKCN0JA0O320141127?irpc=932

I guess it depends on how long the powers that be decide to wage economic warfare on Russia.

Oil at 65 means good times for NZR and AIR. Interesting to see how the geopolitical situation pans out. I would be watching all press releases from Russia and USA over Ukraine and then make some judgements.

[cdonald]

I guess it depends on how long the powers that be decide to wage economic warfare on Russia.

Oil at 65 means good times for NZR and AIR. Interesting to see how the geopolitical situation pans out. I would be watching all press releases from Russia and USA over Ukraine and then make some judgements.

Oil at $65 doesn't mean good times for NZR. NZR fee is based on the difference in price between oil and products. If products trend down too then the price of oil is actually irrelevant. NZR was actually making its best margins when the price of oil was high. At the moment the singapore margins are holding up so it looks good. As the price of petrol goes down, consumption increases (as does the road toll). The exchange rate being at 78 is a lot bigger factor on profitability rather than the price of oil though. Every 1c decrease roughly puts 3m onto the bottom line.

[Schrodinger]

Oil at $65 doesn't mean good times for NZR. NZR fee is based on the difference in price between oil and products. If products trend down too then the price of oil is actually irrelevant. NZR was actually making its best margins when the price of oil was high. At the moment the singapore margins are holding up so it looks good. As the price of petrol goes down, consumption increases (as does the road toll). The exchange rate being at 78 is a lot bigger factor on profitability rather than the price of oil though. Every 1c decrease roughly puts 3m onto the bottom line.

"Crude prices declined from around USD 105 per barrel earlier in the year to around USD 85 per barrel by
the end of October. Lower crude pricing improves Refining NZ’s competitiveness against imported
product due to lower inventory costs for its customers. At the current crude price of around USD 80 per
barrel, Refining NZ is competitive at a GRM of USD 5.50 per barrel or better."

NZR seems to think it does

[cdonald]

"Crude prices declined from around USD 105 per barrel earlier in the year to around USD 85 per barrel by
the end of October. Lower crude pricing improves Refining NZ’s competitiveness against imported
product due to lower inventory costs for its customers. At the current crude price of around USD 80 per
barrel, Refining NZ is competitive at a GRM of USD 5.50 per barrel or better."

NZR seems to think it does

Yes, I understand that they have said this. I dont understand why they find it relevant though. I think they were using it as an argument for their processing fee calculations etc. Truth be known, if you have a look back thru all of the thruput releases over the last few years the refinery is running at approx 100,000 barrels of oil a day regardless of the price of oil so I struggle to see the "competitiveness" argument.

[BlackPeter]

Looks like the share price is after a brief pause ready for the third upwards-leg in a row ... and I need soon start thinking whether I really want to allow NZR to outgrow 10% of my portfolio (one of my investment rules is to have under no circumstances more than 10% of any one stock in my portfolio). Ah well, here comes the weekend to have a sleep over it ...

[bohemian]

I can't imagine why you have a 10% rule. My RYM grew to 38% while the remaining shares also grew. Now switching to FPH and will let it run indefinitely till I have conviction to change.

[golden city]

rules is to keep profit running.., not limiting it.., i hold THL 50% of my porfolio nzr 25% of it.., i have no problem with it..., it is pumping profits

[golden city]

nzr is breaking new grounds at the moment..,will keep going for a little while

[BlackPeter]

I can't imagine why you have a 10% rule. My RYM grew to 38% while the remaining shares also grew. Now switching to FPH and will let it run indefinitely till I have conviction to change.

Well, I guess the obvious reason is diversification .. never put too many eggs into one basket. While it is obviously always possible to find examples where this strategy (all eggs into one basket) did work ... there are as well plenty where it did brake people .. and hey, not enough high rise buildings in NZ to jump out ...

Agree however, that such a rule has as well its flipsides - I certainly sold some of my RYM (while you mention this stock) too early, same with e.g. WYN (while they still had been on the upleg).

The real question is in my view however not whether a rule to enforce diversification is sensible (I think, it is) ... it is more whether the arbitrary 10% limit is the right one (or too tight).

Probably one of these cases where the right answer is "it depends" ... on the macro environment, on the reminder of my portfolio and on what impact a sudden drop of this one basket (not that I expect that anytime soon) would have on my overall financial situation.

Reckon however that I might be in this case a bit lenient with myself in applying my own rules ;).

[cdonald]

I think it should continue the trend for a bit. I am guessing a processing fee for Nov/Dec of around 58m if the Singapore Complex Margin continues at its current levels. A lot of the information that I read on the future trends of the margins looks like it should be hanging around those levels for a while. Nothing like reduced costs and increased income to make shareholders happy. Also would expect to see increased consumption from motorists due to cheaper prices which means that the pipeline must be running flat stick at the moment too.

[golden city]

at leas 2.60 looking at the current trends...adding more

[Schrodinger]

Did I see somewhere that oil was $65??!

[golden city]

has breakout the 2.20... it will fly soon

[cdonald]

has breakout the 2.20... it will fly soon

I am thinking $3 by end of Feb

[golden city]

could well be

[traineeinvestor]

I am thinking $3 by end of Feb

Given current market for their products and FX rates, I think they are worth north of $3.00 .... just don't know how long it will take to get there.

Added more to my portfolio today.

[golden city]

i think after full year profit annoument and a future profit forcast will path the way

[golden city]

slowly building up momentum

[golden city]

looking good...

[bull....]

the crack spread must look a lot better after last night

[golden city]

nice slow recovery curve creating a break point soon., once cross 2.30...it will keep going to 3 bucks

[Derain]

So what's our feel about this year? With the oil price continuing their slump

[BlackPeter]

So what's our feel about this year? With the oil price continuing their slump

Short term: IMHO SP likely to bounce on the MA30 ... and to get another good push when the operational data Nov/Dec and the full year report are out (late February?)

Mid term: difficult to say ... the longer the oil price is down, the better for NZR (all these gas guzzling vehicles people buy now will increase the volume for NZR for many years to come). Good for NZR, unfortunately bad for the environment.

My best guess: I think they will return in 2015 to paying dividends and the SP will find its new band somewhere between 2.50 and 3.00 - unless something unexpected is going to happen (it always does ...).

DYOR

[Derain]

Short term: IMHO SP likely to bounce on the MA30 ... and to get another good push when the operational data Nov/Dec and the full year report are out (late February?)

Mid term: difficult to say ... the longer the oil price is down, the better for NZR (all these gas guzzling vehicles people buy now will increase the volume for NZR for many years to come). Good for NZR, unfortunately bad for the environment.

My best guess: I think they will return in 2015 to paying dividends and the SP will find its new band somewhere between 2.50 and 3.00 - unless something unexpected is going to happen (it always does ...).

DYOR

Thank you very much BlackPeter, always appreciate thoughts from other members of this forum :)

[bull....]

lower oil good for nzr if the price of oil falls quickier than the pump price which is the case, also more importing and refining will be done in nz, negative is the over supply in asia look at the price of caltex in australia they going gang busters

[Joshuatree]

ZEL here in NZ has done well since listing (i hold) .They own a chunk of NZR as well.

[dodgy]

Hi all
I am very bullish on NZR for the following reasons.
1. Oil down helps NZR income
2. Very smart new CEO - probably the best in the last 10 or so years - implementing ways to actually make more money - e.g Platinum catalyst lease contract.
3. Te Pahi expansion/upgrade project - as much as +15% volume through put this year/next with lower running costs e.g. platformer chemical replacement
4. Sulphur use project and co2 product sales.
5. More efficiencies in energy use and low cost/grade crude.

So, I hold and will continue to do so into the future - divs reinstated again this year at 1/2 year result and and share price north of $3 next March - 2016

[cdonald]

Hi all
I am very bullish on NZR for the following reasons.
1. Oil down helps NZR income
2. Very smart new CEO - probably the best in the last 10 or so years - implementing ways to actually make more money - e.g Platinum catalyst lease contract.
3. Te Pahi expansion/upgrade project - as much as +15% volume through put this year/next with lower running costs e.g. platformer chemical replacement
4. Sulphur use project and co2 product sales.
5. More efficiencies in energy use and low cost/grade crude.

So, I hold and will continue to do so into the future - divs reinstated again this year at 1/2 year result and and share price north of $3 next March - 2016

The New CEO isn't very popular with the staff at NZR and this year was the closest time the place has come to going on strike for a long time. The cost cutting has been impressive but staff moral is at rock bottom from what I hear. In saying that, 90% of NZR's profitability is outside of its control and is a factor of exchange rates and commodity valuations. I see the last couple of months for refinery revenue as being very good (lots of information out there on this with the Sing Complex margin averaging about $6USD for the last 2 months) and the refinery adding about $4 or $5 on top of that.

[dodgy]

The New CEO isn't very popular with the staff at NZR and this year was the closest time the place has come to going on strike for a long time. The cost cutting has been impressive but staff moral is at rock bottom from what I hear. In saying that, 90% of NZR's profitability is outside of its control and is a factor of exchange rates and commodity valuations. I see the last couple of months for
refinery revenue as being very good (lots of information out there on this with the Sing Complex margin averaging about $6USD for the last 2 months) and the refinery adding about $4 or $5 on top of that.

Hi CD
I wasn"t alluding to the cost cutting but thinking of profit expansion by innovation. Staff are very very important, and universally tend to negative react to change. NZR is and can remain internationally competitive which is good for shareholder, staff security and the local and broader economy. I omitted the exchange rate as you say, with all signs indicating a resurgent US $, the currency of NZRs income, at least within the projection time frame I guessed.
On balance all upside and except for a national disaster limited downside within this period. This was a $6 plus stock.

[macduffy]

This was a $6 plus stock.

Yes, it was a $19 stock back in 2002 and paid a 100cps interim dividend in that year. But that was then..........

[dodgy]

Yes, it was a $19 stock back in 2002 and paid a 100cps interim dividend in that year. But that was then..........

Agreed Macd
But I don't know the relative surrounding metrics of the day. And of course we have had a 1:10 stock split since then. Lets just see how it unfolds - I am still underwater but the most confident in years having owned since the beginning and traded in between.

[dodgy]

agree with what you are saying except the company has indicated a willingness to pay down debt before ramping up divies.

Hi Snaps
Agreed , that is why I thought I would extend the probable div out too half year result in Aug - pay Sept? Originally the directors were going for a capital return to improve the company balance sheet - how and why I can never understand . I think most upgrade costs / finacing are now crystalised in budgets and any upswing in net income (watch late Feb.), and again in June year may just provide encouragement.

[Joshuatree]

The New CEO isn't very popular with the staff at NZR and this year was the closest time the place has come to going on strike for a long time. The cost cutting has been impressive but staff moral is at rock bottom from what I hear. In saying that, 90% of NZR's profitability is outside of its control and is a factor of exchange rates and commodity valuations. I see the last couple of months for refinery revenue as being very good (lots of information out there on this with the Sing Complex margin averaging about $6USD for the last 2 months) and the refinery adding about $4 or $5 on top of that.

Yes i heard staff morale was terrible and know a young tech whizz who has left because of it and been chosen from 100's of applicants for a very high paying job in the arabian states.
happy to stick to Z less risk better profits with bonus holding in NZR if it recovers fully,

[golden city]

it is going to the right direction.., looking good medium and long term

[bull....]

http://www.smh.com.au/environment/energy-smart/australian-oil-refineries-are-closing-but-vitol-believes-it-can-defy-the-trend-20150109-12kx67.html

note the margins have been very good in the 2nd half of last yr

[golden city]

well supported at current level.., looking good

[golden city]

the encumbered sellers has be cleared.., it is going for a free ride

[janner]

agree with what you are saying except the company has indicated a willingness to pay down debt before ramping up divies.

Do not follow NZR that closely ..

What is wrong with paying down debt.. Before divies ??

Must make the company more attractive financially in the longer term .. ..

[golden city]

anyone know when is the next news comming for nzr

[cdonald]

anyone know when is the next news comming for nzr

Nov/Dec margin and thruput is generally around 2nd week of Feb. In saying that, the Singapore Complex margin is public information that is easily obtainable by doing a bit of google work $6USD/bbl, the average USD/NZD is roughly 79c for the 2 month period so the only missing information is thruput and margin uplift over the period. So if you take the production this time last year (6.4MBbls) and the uplift that they have been achieving you will end up with a figure of roughly 62.4m for the 2 month period. This is assuming that there were no unit shut downs during the month. If you look at their website there is an analyst briefing report with a useful table in it on Pg24. My guess is that the average margin for the 2nd half of the year will be sitting in the $8 range with exchange rate sitting about 80 cents so according to that table, NPAT will be around $4m.

[bull....]

margins were signicantly higher in november/december throughout asia I believe and yes report comes out feb

[bunter]

Nov/Dec margin and thruput is generally around 2nd week of Feb. In saying that, the Singapore Complex margin is public information that is easily obtainable by doing a bit of google work $6USD/bbl, the average USD/NZD is roughly 79c for the 2 month period so the only missing information is thruput and margin uplift over the period. So if you take the production this time last year (6.4MBbls) and the uplift that they have been achieving you will end up with a figure of roughly 62.4m for the 2 month period. This is assuming that there were no unit shut downs during the month. If you look at their website there is an analyst briefing report with a useful table in it on Pg24. My guess is that the average margin for the 2nd half of the year will be sitting in the $8 range with exchange rate sitting about 80 cents so according to that table, NPAT will be around $4m.

Thanks!

My eps matrix seems to indicate 33cps NPAT.
Add to that the impact of Te Mahi Hou, and all the improvements that seem to be happening under the new management.

Good recovery story (some, but not all of which has already been accounted for in the share price).





ex rate

EPS matrix


margin$/bbl
70
75
80
85


4
0
0
0
0


5
10
6.7
4.5
0


6
19
16
13
10


7
28
24
21
17


8
39
38
33
29


9
47
42
37
32

[Schrodinger]

Yeah there is still a while to run for these guys yet. Should be heading towards $3

[cdonald]

Thanks!

My eps matrix seems to indicate 33cps NPAT.
Add to that the impact of Te Mahi Hou, and all the improvements that seem to be happening under the new management.

Good recovery story (some, but not all of which has already been accounted for in the share price).





ex rate

EPS matrix


margin$/bbl
70
75
80
85


4
0
0
0
0


5
10
6.7
4.5
0


6
19
16
13
10


7
28
24
21
17


8
39
38
33
29


9
47
42
37
32




Hi, sorry not too sure how you have calculated your EPS. The $8/bbl and exchange rate is only for the last 6 months of the year. The first part of the year ran at a loss due to major planned shutdown and poor margins.