Analyst Meet
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Essar Oil Limited Corporate Presentation Analysts Meet – May 19, 2009 Disclaimer Essar Refinery View Essar Oil Limited Performance Snapshot Refinery Environment Operation Performance Sales & Marketing updates E &P updates Financial Snapshot Expansion Project Management Team Company Overview Essar Oil Limited at a Glance Ticker (BSE) Number of Shares Promoters' Holding (including GDS) Market Capitalisation (Rs in Crore)* Free Float (Equity Share without GDS) Employees Refinery Capacity Retail Outlets E&P Assets * as on 18th May, 2009 ESSAROIL 1,201,529,604 88.6% 18,263 38.0% 1731 2,80,000 bpd 1276 5 blocks Performance Snapshot Performance Snapshot Q4 (January – March 2009) Crude Throughput for the quarter : 3.31 Million Tonnes Gross Revenue from Operation : Rs. 8041 crore ( USD 1.61 billion) Domestic & Export Ratio : 78% & 22% Gross Refinery Margin : USD 10.92 / bbl Operational EBIDTA : Rs. 1125 crore Operating Cash Profit : Rs. 804 crore Profit after Tax : Rs. 660 crore Bitumen Sales surged to Rs. 233 crore, constitutes 4.5% of Domestic Sales Retail Sales zoomed three fold to Rs. 732 crore as compared to last quarter Highest Quarterly Profit due to stable crude prices , favourable crude mix & enhanced focus on value added products in domestic market Performance Snapshot ( FY08‐09) ( 11 months) Commencement of Commercial Production : May, 2008 Crude Throughput for the Year : 11.95 Million Tonnes Refinery consistently operating at 123% of its name plate capacity Gross Revenue from Operation : Rs. 41856 crore ( USD 8.37 billion) Domestic & Export Ratio : 74% & 26% Gross Refinery Margin : USD 8.89 / bbl Operational EBIDTA : Rs. 1202 crore Operating Cash Profit : Rs. 111 crore Profit after Tax : Negative Rs. 514 crore due to inventory & forex loss Earned cash profit despite unprecedented volatility in Crude Prices & Fluctuation in Foreign Exchange Rates Industry Environment The Year gone by‐ Global Oil Market Dubai Crude Movement 160 11th July 08 $147.27/bbl 140 120 100 80 31 March,09 $49.66/bbl 60 40 19th Dec 08 $32.40 /bbl 20 0 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 2008‐09 showed unprecedented volatility in crude oil prices Crude Oil prices reached a peak of $147/bbl on 11th July 08 and fell sharply to $32.40/bbl on 19th Dec 08 within a period of five months Crude Oil price recovered lost ground in Q4; however long lasting economic crisis & major fall in Oil demand still present Light Heavy Crude Price Differential 140 C rude P rice 120 US$ per barrel 100 80 60 40 20 Ja n -0 8 Ma r-0 8 Ma y-0 8 B o n n y L ig h t Ju l-0 8 Arab L ig h t Se p -0 8 No v-0 8 Arab H eavy Ja n -0 9 Ma r-0 9 M aya Fall in light (Bonny Light) & heavy crude price (Maya) differential is in line with fall in crude prices. Light & Heavy differential continues to be in range of 16% ‐18% of Bonny Light Crude Price Products Cracks Trend Cracks ($/ bbl) Q1 Q2 Q3 Q4 MS/ Gasoline 12 4 2 8 HSD / Gasoil 38 26 18 9 Kerosene 37 29 22 11 (26) (12) (9) (5) Fuel Oil Cracks on all the products have been highly volatile during the year Cracks slumped on all products in Q4 and for all types of refinery configuration, both complex and simple. HSD cracks finally found a floor in March; since then clawed back to $ 11/bbl MS cracks bounced back strongly in Feb,09 after averaging zero in Dec,08 Global Oil Consumption 88.50 88.3 mbpd 88.00 87.50 87.1 87 87.00 86.7 86.50 86.00 85.50 2 Q 2008 3 Q 2008 4 Q 2008 1 Q 2009 Source : IEA Economic Downturn resulted in demand destruction of 1.3 MMb/d against an increase in demand forecast at more than 1.5 MMb/d made for 2008. Global Refinery Capacity Utilization Refinery Runs Europe North America Asia‐Pacific 92 90 88 Refinery Run 86 84 82 80 78 76 74 72 Jan‐08 Feb‐08 Mar‐08 Apr‐08 May‐08 Jun‐08 Jul‐08 Aug‐08 Period Sep‐08 Oct‐08 Nov‐08 Dec‐08 Jan‐09 Feb‐09 Source - IEA Asia‐Pacific refineries have demonstrated better capacity utilization Global Oil Market Continued Delay in Capacity Additions Cost Inflation, regulatory hurdles, economic & financing are resulting in delays kbpd Due to financial crisis, companies have resorted to major cuts in their capex spending. Petro Products Consumption Growth Rate in India Petro Product Consumption Growth HSD 12% 8% 6.66% 7% 6% 11.1% 10% 6.79% 8.4% 8% 6.9% 5% 3.60% 4% 3% 3.68% 6% 3.45% 3.48% 2% 4% 2% 1.42% 1% 0.3% 1.2% 2002‐03 2003‐04 2004‐05 2005‐06 2006‐07 2007‐08 2008‐09 2002‐03 2003‐04 2004‐05 2005‐06 2006‐07 2007‐08 2008‐09 12% 11.3% MS 9.0% 8.0% 4.5% 4.8% 19% 17.60% 15.60% 15% 4.3% BITUMEN 20% 10% 6% 1.4% 0% 0% 8% 6.7% 13% 7.4% 10% 5.10% 4% 5% 2% 9.20% ‐1% 0% 0% 2002‐03 2003‐04 2004‐05 2005‐06 2006‐07 2007‐08 2008‐09 2002‐03 2003‐04 2004‐05 2005‐06 2006‐07 2007‐08 2008‐09 ‐5% Petro Products Consumption mainly MS & HSD & Bitumen are expected to grow at healthy rate Source : PPAC Operational Performance Capacity Utilization 135% 130% 130% 126% 125% 121% 120% 115% 131% 129% 123% 121% 129% 123% 118% 114% 110% 105% 100% 10.5 MMTPA May‐08 Jun‐08 Jul‐08 Aug‐08 Sep‐08 Oct‐08 Nov‐08 Dec‐08 Jan‐09 Feb‐09 Mar‐09 Consistently operating above 12.5 MMTPA (123% capacity utilisation) in first year of commercial operation Capacity Utilization ( 2008 ‐ 2009 ) % Utilization 150 130 123 122 120 104 103 97 97 92 RIL CPCL BRPL 90 60 30 0 MRPL EOL HPCL IOC BPCL Source - PPAC Capacity Utilization one of the Highest in the Industry in first year of Commercial Production Crude Diet Crude Utilization Q1 Q2 Q3 Q4 Light & Sweet Crude 40% 36% 31% 30% Sour & Tough Crude 60% 64% 69% 70% Total 100% 100% 100% 100% Consistent optimization of Crude Basket during last 4 Quarters. Processed more than 20 types of crudes during the year Avg. API : 32, Avg. Sulphur : 1.5 and Avg. TAN : 0.50 Optimized Crude Mix to reduce Average Crude Cost Product Profile Product Slate Q1 Q2 Q3 Q4 Light Distillates 23.7% 20.4% 19.6% 21.7% Middle Distillates 42.9% 44.9% 46.4% 45.7% Heavy Distillates 33.3% 34.7% 34.0% 32.6% Total 100% 100% 100% 100% Optimized Production of Middle Distillates – High Margin Segment Naphtha replaced with profitable middle distillates Plant capable of producing high margin Bitumen Consistent optimization of Product Basket based on market dynamics & Refinery configuration Product Profile Butane & Lighter 90”-220” F % for FY 2008‐09 SGU/LMU • LPG – 3.70% NHT/CCR • MS – 17.4% Naphtha Crude 11.95 MT 220-315” F Gasoline Distillation Tower (Crude Unit) KMU/DHDS 315-450” F • ATF/SKO – 4.5% Kerosene DHDS 450-650” F • HSD – 40.70% Light Gas Oil Furnace Vacuum Unit 650-800” F Heavy Gas Oil FCCU • Bitumen – 1.00% • FO ‐ 32.7% 800+ “ F Residue Fuel Oil VBU Sales & Marketing Sales Analysis Qty in Tonnes 400,000 2,000,000 PSUs Sales 1,800,000 350,000 Direct Sales 1,600,000 300,000 1,400,000 1,200,000 Retail Sales 250,000 200,000 1,000,000 Export Sales 800,000 150,000 600,000 100,000 400,000 50,000 200,000 ‐ ‐ Q1 Q2 Q3 Q4 Company is aiming to increase presence in domestic market by increasing Retail & Direct Sales Sales Analysis Domestic Export 90% 78% 80% 78% Products 71% 70% 70% 60% Revenue Realized (%) LPG 4.0% Naphtha 0.3% 50% 40% 30% 29% 30% 22% 22% Motor Spirit 20% 10% ATF / SKO 19.6% 5.8% 0% Q1 Q2 Q3 PSUs 100% 93.6% Bulk Sales 92.7% Q4 Diesel 53.5% Fuel Oil 15.7% Bitumen 0.7% Sulphur/VGO 0.3% Retail Sales 89.5% 90% 74.7% 80% 70% 60% 50% 40% 30% 20% 10% Total 7% 6% 0% 0% Q1 As % of Domestic Sales value 7% 4% 0% Q2 11% Q3 Q4 14% 100% Marketing Developments Firm arrangements with HPCL, BPCL & IOC for product offtake of 7 million tonnes and infrastructure sharing provides strong foothold in domestic market. Bitumen Sales touched 108 TMT during the quarter, within 4 month of its production, the company has captured 10% of Indian Market Multiple Infrastructure Capabilities to deliver products by Road, Rail & Coastal transportation. Retail Sales jumped to 14% of Domestic Sales in Q4 as compared to 4% in last Quarter primarily due to reactivation of Retail Outlets and increase in Retail Sales of MS & HSD. Retail Sales increased to Rs. 732 crore in Q4 from as compared to Rs. 214 crore in Q3 due to maintenance of RSP at PSU level. Retail Outlets Pan India Presence with 1,276 retail Outlets 46 y First private company in India to enter petro retailing sector (2003) through a franchisee model 8 8 53 1 y 1184 are operational as on 31st March, 2009 199 25 2 1 34 173 78 72 y Present revenue from retail is about Rs. 240 crores per month (Avg of Q4) 1 39 1 29 106 61 Flexible Model to optimize profit both in short and long term 4 4 31 101 y Positive Gross Margin on MS and HSD 22 191 1 3 Exploration & Production Updates E&P Assets Assam ● Part interest in 2 exploration blocks Gujarat ● 70% operatorship interest in Mehsana block CB‐ON/3 ● Certified 2P Reserves of 2.7 mmbbl of oil in one discovery alone West Bengal Ratna ● 50% joint operators interest in Ratna & R series blocks ● 100% interest in RG(East)‐ CBM‐2001/1 block in Durgapur, WB Exploration & Production Updates Raniganj RG(E)‐CBM‐2001/1 • Raniganj block has high prospects of recoverable reserves • Deployment of Innovative & Cost effective technique for drilling of Production Test Wells. • Estimated CBM production per well is more than 5000 SCMD. • Identification of Consumers & Markets are underway. • Infrastructure for the collection and compression of gas is being set up. • Sizeable CBM production in commercial quantities expected to start shortly Ratna & R‐Series block – PSC is yet to be executed by Govt. of India Other Blocks are at exploratory stage only Financial Snapshot Financial Performance Rs. In Crore Particular May ‐ Dec 08 Q1+Q2+Q3 (Jan ‐ March 09) Cumulative Q4 Full Year Gross Sales / Income from operation 33,814 8,041 41,856 Less : Excise duty & Taxes 3,052 1,247 4,300 Net Income from operation 30,763 6,793 37,556 Other Income 103 40 144 Total Income 30,866 6,833 37,700 Cost of Goods Sold 28,733 5,469 34,203 Operating Expenditure 700 334 1,033 Forex Loss 1,356 (95) 1,261 Operational EBIDTA 77 1,125 1,202 Interest & Finance Charges 770 321 1,091 Operational Cash Profit (693) 804 111 Depreciation 480 175 655 PBT (1,172) 629 (544) Tax 1 (31) (30) PAT (1,174) 660 (514) GRM (USD/bbl) 6.41 10.92 8.89 EOL’s GRM v/s Singapore Cracking USD/bbl GRM Singapore Cracking EOL's GRM 14.00 12.54 12.00 10.92 10.00 8.17 8.00 6.59 6.00 5.81 4.00 2.00 5.48 3.78 2.26 ‐ Q1 Q2 Q3 Q4 Sourece : Platts Company is set to create a platform to improve the performance for next year After recovering from forex and Inventory losses in third quarter. Tax Benefits Income Tax Benefit 100% income‐tax exemption on refinery profits for 7 years u/s 80‐IB Sales Tax/ VAT Deferral Benefit Sales Tax Deferment benefit of Rs. 9100 cr. Huge benefits in terms of NPV & Cash flow availability. Deferment upto August 2020 or exhaustion of limit, whichever is earlier. Repayment will be in 6 equal annual installments thereafter Gujarat High Court has given a decision in favour of company for deferment of sales tax. Gujarat Government preferred appeal before Supreme Court against High Court Order Presently, the Company is availing the deferment benefit Expansion Project Ramping up Capacity to 34 MMTPA with complexity 12.8 Period Planned Today Dec, 2010 Dec, 2011 Particular Base Refinery Existing Refinery Phase ‐I Phase ‐II 000000000000000 000000000000000 000000000000000 00 Refinery Details 6.1 complexity 10.5 MMTPA 12.8 complexity 34 MMTPA 11.8 complexity 16 MMTPA 6.1 complexity 14 MMTPA API (Density) Avg. 35.5 31.5 24.8 24 Sulphur % Avg. 2% 2% 3% 3% Product Grade Upto Euro III Upto Euro III/IV EURO IV/V EURO V/US spec /CARBS Upgradation & Expansion Project ‐ Implementation Phase – I to debottleneck & upgrade the base refinery by 31/12/2010, which will take the capacity to 16 MMTPA in addition to increase in complexity. Considering the impact of global macro economic development, the completion schedule of Phase – II of the Project (18 MMTPA) has been reviewed to ensure the expansion in capacity matches with global demand revival. Now, it is expected to be commissioned by 31/12/2011. Expanding to 16 MMTPA with higher complexity • Conversion of entire negative margin FO into high value products & Pet Coke. • Enhancing ability to process Tough & Sour Crude • Build flexibility between light & middle distillates • Flexibility to produce petrochemical feed stock (complexity : 6.1) (complexity : 11.8) • 62% of Gasoline & HSD will be compatible to EURO IV/V Substantial Increase in Gross Refinery Margin Note: Products as % of total Production Refinery Debottlenecking & upgradation - Configuration Major Units Crude Distillation Unit (CDU) Vacuum Distillatin Unit (VDU) Visbreaker Unit (VBU) Vacuum Gasoil Hydrotreater (VGO HDT) Fluid Catalytic Cracker Unit (FCCU) Naphtha HydroTreater (NHT) Delayed Coker Unit (DCU) Continuous Catalytic Reformer (CCR) Diesel Hydrodesulphurisation (DHDS) Diesel Hydrotreater (DHDT) Isomerisation Unit (ISOM) Sulphur Recovery Unit (SRU) (TPD) ATF Hydrotreater Amine Regeneration Unit (ARU) Sour Water Stripper (SWS) Hydrogen Manufacturing Unit (HMU) Train I Existing Units New Units 16.00 9.70 2.20 6.20 3.50 1.75 5.70 1.00 4.50 3.80 0.70 440.00 675.00 1.00 11.30 3.05 (1x130,000 + Licensor / Basic Engg. Provider Open Art (ABB) / Open Art (UOP) Open Art (ABB) / Open Art (UOP) Axens, France UOP Stone & Webster / UOP Axens/ UOP ABB Axens/ UOP Axens/ UOP UOP UOP Jacobs UOP UOP UOP Haldor Topsoe 1x10,000) NM3/Hr World Renowned Technology and Process Licensors New Units addition increase the complexity from 6.1 to 11.8 Implementation Schedule Refinery Debottlenecking & Upgradation ‐ 16 MMTPA Activity Debottlenecking & Upgradation Basic Engineering Detailed Engineering Procurement ‐ Long lead items Procurement ‐ General Items Construction / Erection Mechanical completion Oil In Stabilisation & Trial Run Start Commercial Production Q1 2007 Q2 Q3 Q4 Q1 2008 Q2 Q3 Q4 Q1 2009 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 2011 Q1 Debottlenecking & Upgradation Project – 16 MMTPA Project Status as on 31/03/2009 Parameters Debottlenecking & Upgradation Project Basic Engineering 100.00% Detailed Engineering 68.53% Procurement 47.78% Construction 13.85% Overall 32.84% Project Cost & Proposed Financing Plan Project Cost Land Plant and Machinery Rs. Crores 93 5,602 Miscellaneous Fixed Assets 989 Pre‐Operative Expenses 126 Interest During Construction 610 Contingency 390 Total Cost 7,810 Total Cost $ 1562 mn Means of Finance Rs. Crores Equity 2,000 Internal Accruals 1,210 Total Equity 3,210 Debt 4,600 Total Source 7,810 Equity ‐ $ 642 mn & Debt – $ 920 mn USD 100 million disbursed and Capex LC worth of Rs. 1600 crore already opened. Promoters infused $ 300 million as towards equity Essar Oil envisions to be a fully integrated energy company with global footprint Setup Indian retail network of 5,000 outlets and establish footprint in important export markets Significant Presence throughout hydrocarbon value-chain Crude Oil ‐ 30% of Target refining capacity – 1 million bpd* with state of the art technology * 705000 bpd at Vadinar & balance outside India refining capacity Gas – 100% of group feed stock requirement Refinery Business: Set to Deliver Strong Value Strategic Location, Proximity to Strategic Location, Proximity to Materials, Access to End Materials, Access to End Markets Markets India Emerging as a Global India Emerging as a Global Refining Hub Refining Hub Leverage Existing Project Leverage Existing Project Execution Capabilities and Execution Capabilities and Infrastructure Infrastructure Refining Industry Outlook Refining Industry Outlook Remains Strong Remains Strong One of the Largest Single One of the Largest Single Location Refineries Globally – Location Refineries Globally – Economies of Scale Benefits Economies of Scale Benefits High Complexity, Cost High Complexity, Cost Competitiveness, Competitiveness, Product Flexibility and High Product Flexibility and High GRM Potential GRM Potential Building an Environmental Friendly “Green Refinery” Thank you Management Team Experienced Management Team Naresh K Nayyar P Sampath S. R. Agrawal Managing Director & CEO Director – Finance Director & CEO of E&P division Chartered Accountant and IIM, Ahmedabad Cost Accountant and Company Chartered Accountant with over Alumnus Secretary 31 years experience in oil & gas 34 years of experience in Oil & Gas sector Over 30 years of experience in areas industry including heading E&P including development of multi billion dollar of Corporate Finance, M&A, Investors operation, Finance, Accounts & project, new markets and global operations Relations and Management Commercial activities in Oil & Gas Industry Accounting in diverse industries Was on the Board of reputed companies like Was MD of GHCL Ltd and Group CFO With Essar Group since 1986 IOC, ONGC, IBP, and Petronet LNG of RPG Enterprise Ltd Naren Vachharajani CEO – Operations & IST B.Sc, PG Diploma (Marketing Management) from Centre for Management Studies Over 35 years of rich experience including 18 years with IPCL 13 year of experience with Essar Group K Govindarajan Nasir Iftikhar Executive Director ‐ Strategy & Business CEO– Refinery Expansion Development Graduate Chemical Engineering ■ Graduate (Chemistry), PGD Marketing, Over 25 years experience in Senior Executive Program, Stanford refinery projects, operations, ■ 20 years of experience in British maintenance & supervision Petroleum Worked with Indian Oil ■ 1 years in Essar. Corporation Ltd. as Executive Director ‐ Petrochemicals S. Thangapandian CEO ‐ Marketing Over 26 years of experience in the Oil and Gas industry in Sales & Marketing Previously wokred with HPCL, Gulf Oil, Petro Fina, RPL. With Essar since 2004 D.K.Jha C Manoharan Head‐ EPS Head ‐ Refinery ■ Graduate in Chemical Engineering MBA from IIPM, Gurgaon & B.Tech (Chemical), IIT Kanpur ■ Over 30 years of experience in Refinery Operations and also has rich Over 25 years of experience including with Reliance experience in commissioning various Industries, UOP at NNPC Nigeria process units including FCCU and and IOC, Barauni Refinery Hydro Cracker Experienced Management Team K V Radhamohan Sheikh Shaffi Company Secretary Head ‐ IST Over 31 years of experience in Legal, B.Tech – Chemical Engineer Secretarial, compliances, Capital Issues 23 years of experience in International and Corporate Goverence trading, Supply & operations with IOC With Essar Group since last 13 years & Reliance Industry. Raahil Burhaani Head – IT ( CIO) B.E. (Electronics) from Bombay University 18 years of rich experience with 1.5 years with British Gas prior to Essar, Tata Teleservices, Enron, Bharat Bijlee, Piramal, CMS Shailesh Sawa Kaustubh Sonalkar CFO – Refinery Expansion Head – HR ■ Chartered Accountant & Cost Post Graduate program in Marketing & Accountant Human Resources at Texas School of ■ Over 25 years of experience in Management, USA Corporate Finance, having worked with Gujarat Ambuja Cements, Modern Over 14 years experience in HR and Woollens Ltd. and SEBI. Business Strategy, Compensation & ■ With Essar since 1994 & has worked in Benefits, HR Operation & Marketing various positions Robert Kuiperi Sr. Vice President ‐ Commercial ■ Master of Law from University of Leiden,Holland ■ 30 years of experience with ABB Lummus Global where he was Director for the Commercial & Legal department D.K.Shukla Head – Project Review ■ PG Diploma MBA from I.I.sc., Bangalore and B.Tech( Chemical), Kanpur ■ Over 31 years of experience & worked with Reliance Ind. as a Sr. VP leading the process engineering team. ■ Worked earlier with Engineers India Ltd.., MW Kellogg ( Houston), BOC Gases ( USA), BOC Process Plants( U.K.) & IOC( Delhi) S. Stalin Project Director, Essar PMC Ltd ■ B.E( Chem). & Diploma in Management from AIMA ■ Over 35 year of experience in Technical Leadership, Project Management, General Management, Evaluation of Investment and Marketing of fertilizers & agro chemicals ■ Worked with SPIC, Chambal Fertilizers, Chemicals Ltd, Paradeep Phosphates & Nagarjuna Fertilizers & Chemical Ltd Bharat Gala President‐ Hydrocarbons & PetChem ■ MS – Chemical Engineering 1985 from Mississippi State University USA ■ Work Experience of 26 Years with Chemtex International in Wilmington, Fluor Daniel in Sugarland Texas, Intergraph – Huntsville Alabama and KBR in Mobile Alabama. 1.2 years of experience with Essar Group
