Q2 2018 Analyst Teleconference... · 15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 16Q3 16Q4 17Q1 17Q2 17Q3 17Q4...

Q2 2018 Analyst Teleconference

9 August 2018

Q2 2018 Analyst Teleconference www.tupras.com.tr

Aug. 2018

Disclaimer

This presentation contains forward-looking statements that reflect the Company management’s current views with respect to certain future events. Although it is believed that the expectations reflected in these statements are reasonable, they may be affected by a variety of variables and changes in underlying assumptions that could cause actual results to differ materially.

Neither Tüpraş nor any of its directors, managers or employees nor any other person shall have any liability whatsoever for any loss arising from use of this presentation.


Aug. 2018

Q2 2018 Key Market Highlights

3

Stronger Middle Distillate; Weaker Gasoline-Fuel Oil Cracks in Q2 2018

Jet cracks

+39%

Diesel cracks

+29%

High Sulphur Fuel Oil cracks

-79%

Gasoline cracks

-11%

Steep Increase in $/TL

Significant Increase in Crude Oil Price2018 Brent ($/bbl)

Diesel demand growth 12.5%12.6%5.5%

Strong Turkish Market 2018 5M

Jet Fuel demand growth

Gasoline demand growth

Compared to Q2 2017

3,77

4.85

4.56

1.01

.201

8

7.01

.201

8

13.0

1.20

18

19.0

1.20

18

25.0

1.20

18

31.0

1.20

18

6.02

.201

8

12.0

2.20

18

18.0

2.20

18

24.0

2.20

18

2.03

.201

8

8.03

.201

8

14.0

3.20

18

20.0

3.20

18

26.0

3.20

18

1.04

.201

8

7.04

.201

8

13.0

4.20

18

19.0

4.20

18

25.0

4.20

18

1.05

.201

8

7.05

.201

8

13.0

5.20

18

19.0

5.20

18

25.0

5.20

18

31.0

5.20

18

6.06

.201

8

12.0

6.20

18

18.0

6.20

18

24.0

6.20

18

30.0

6.20

18

3.95

Q2 2018 +15.5%

2.01

.201

8

8.01

.201

8

12.0

1.20

18

18.0

1.20

18

24.0

1.20

18

30.0

1.20

18

5.02

.201

8

9.02

.201

8

15.0

2.20

18

21.0

2.20

18

27.0

2.20

18

5.03

.201

8

9.03

.201

8

15.0

3.20

18

21.0

3.20

18

27.0

3.20

18

4.04

.201

8

10.0

4.20

18

16.0

4.20

18

20.0

4.20

18

26.0

4.20

18

2.05

.201

8

9.05

.201

8

15.0

5.20

18

21.0

5.20

18

25.0

5.20

18

1.06

.201

8

7.06

.201

8

13.0

6.20

18

19.0

6.20

18

25.0

6.20

18

29.0

6.20

18

Q2 2018 +16%

77.9

67.066.6

Q1 2018

Q1 2018


Aug. 2018

Q2 2018 Tüpraş Highlights

4

Higher Capacity Utilization

Increase in production (Total 92%) in Q2 2018 compared to Q1 2018 (Total 78%)

Inventory Gain

• Ample amount of cash (1.3 Billion USD) and efficient liquidity management (1.5x Net Debt/Rolling EBITDA)

• No immediate rollover requirement for the rest of the year

Strong Balance Sheet

Highest Q2 Net Refining Margin in Last Decade 12.3 $/bbl driven by production increase and inventory gain

Q2 - Tüpraş Net Refining Margin ($/bbl)

Increase in Middle Distillate Sales 4.4 million tons of domestic jet and diesel sales (+8.5% over Q2 2017)

Domestic Middle Distillate Sales (mn tons)

231.4 million $ inventory gain in Q2 2018 due to 16% increase in Brent price and 15.5% increase in FX

-4

0

4

7

11

14

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

6,1

2,64,9 4,3 3,7 2,6

-0,3

7,55,2

7,8

12,3

6.5Million tons of

Total Processed

$$$7.4

Million tons of Total Sales

2,210Million TL EBITDA

In Q2 2018

12,3

0

1,1

2,2

3,3

4,4

Q2 2017 Q2 2018

4,374,03


Aug. 2018

Enhancing our Trading Capabilities

5

๏ We are opening a trading office in London to

๏ London office is planned to be opened until the end of the year

Closely monitor international market opportunities,

Support import and export operations,

Create additional value from supply chain and sales activities.

Market


Aug. 2018

Mixed Market Conditions in Q2 2018

7

Refining Environment

Healthy Economic Activities

Global Aviation Growth

Infrastructure Spending

Ongoing Maintenances (Apr-

May); Widening Differentials

High Global Capacity

Utilization Rates

Increase in Trade Flows from Other Regions to Med

High Gasoline Stocks in US &

Europe

Decrease in Fuel Oil Demand

Q1’s story of high middle distillate, weak gasoline and fuel oil cracks continued in Q2 2018.


Aug. 2018

Quarterly Crack Margin Comparison ($/bbl) in 2015 - 2018

8

Diesel and jet fuel cracks increased by 29% and 39% respectively; while gasoline and fuel oil cracks declined compared to 2017 Q2.

Gasoline

10

12

14

16

18

20

Q1 Q2 Q3 Q410,912,7

13,314,3

15,0

10,9

15,214,5

10,9

12,813,0

19,4 18,9

13,5

Diesel

6

8

10

12

14

16

Q1 Q2 Q3 Q4

12,313,9

10,5 10,7

13,112,4

7,99,2 8,9

11,2

15,7 15,2 14,6

10,8

2015 2016 2017 2018 Jet Fuel

6

8

10

12

14

16

Q1 Q2 Q3 Q4

13,3 13,8

9,5 9,9

12,4 12,0

7,3 7,7 8

10,2

14,4

11,210,5

9,4

High Sulphur Fuel Oil

-20

-16

-12

-8

-4

Q1 Q2 Q3 Q4

-12,6 -12,4

-9,1-7,0 -6,9

-10,0

-13,2-15

-10,6-9,4-11,6 -12,1

-13,1-15,5


Aug. 2018

Strong Turkish Market, 5M 2018 (Million tons)

9

• Tüpraş is well positioned in a growing, short market. • Diesel and jet fuel consumption in Turkey grew significantly the first 5 months of 2018 driven by infrastructure

projects and aviation growth.

*Bunker excluded Source: EMRA

2018

2017

0 0 1 1 1 2

1,60

1,80

Diesel

+12.6%

Jet Fuel

2018

2017

0 0 0 0 0

0,24

0,19

Fuel Oil*

2018

2017

0 0 0 1 1

0,85

0,90

Gasoline

+12.5%

+5.5% -21.6%

2018

2017

0 2 5 7 10 12

8,91

10,02


Aug. 2018

Crude Price Differentials ($/bbl)

10

Heavy Crude Price Differentials Ural Differentials

Price differential between Brent and select Middle Eastern heavy crudes widened by 0.4 $/bbl on average in Q2 2018 vs Q2 2017, driven mainly by complex refinery maintenances.

-4

-3

-2

-1

0

1

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2012-2017 Min. 2015 2016 2017 2018

-0,6

-2,1-2,3 -2,4

-1,7

-0,9

-10

-8

-6

-4

-2

0

15Q

1

15Q

2

15Q

3

15Q

4

16Q

1

16Q

2

16Q

3

16Q

4

17Q

1

17Q

2

17Q

3

17Q

4

18Q

1

18Q

2

Iran Heavy Kirkuk Kuwait Basra Heavy Arab Heavy

-0,3

-1,2-1,3

-1,6

Brent Brent

Beginning of OPEC cuts

Kirkuk

Iran Heavy

Kuwait

Basra Heavy

Arab Heavy

Operations


Aug. 2018

Capacity Utilization and Quarterly Production Volume

12

*Nameplate capacity calculated by standard 330 days of operations.

Quarterly Production (Million Tons)

4

5

6

7

8

9

Q1 Q2 Q3 Q4

5,2

6,2

7,1

7,8 7,7

6,36,6 6,7

7,27,4

5,6

6,97,3 7,4

4,5 4,6

5,4 5,5

2014 2015 2016 2017 2018

• Capacity utilization and production decline in Q2 2018 compared to Q2 2017 was due to maintenances in İzmit, İzmir and Kırıkkale refineries.

• Our year-end guidance for capacity utilization and production remains unchanged.

Capacity Utilization* in Q2 (%)

0

27,5

55

82,5

110

Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018

7

8

54

4

85

109

97100

65

Crude Oil Other

69

104 102 117

92


Aug. 2018

More than 50% Middle Distillate Yield Given Favorable Market Conditions

13

Middle Distillates

In order to benefit from significant increase in middle distillate cracks, we produced higher diesel and jet (52.2%) in Q2’18.

16'Q1 16'Q2 16'Q3 16'Q4 17'Q1 17'Q2 17'Q3 17'Q4 18'Q1 18'Q2

52,253,7

47,050,851,151,752,851,651,4

45,4

32,134,3

31,031,934,436,038,534,132,4

29,9

20,119,416,0

18,916,715,814,3

17,519,015,5

Jet Diesel

16'Q1 16'Q2 16'Q3 16'Q4 17'Q1 17'Q2 17'Q3 17'Q4 18'Q1 18'Q2

20,920,4

25,223,2

21,420,921,221,620,7

26,1

3,26,9

6,34,7

6,7

12,2

5,04,75,415,2

14,59,6

16,415,311,7

5,5

13,114,312,6

9,4

3,23,92,53,23,13,23,12,52,71,5

Coke Bitumen Fuel Oil

Black Products(%)(%)


Aug. 2018

Increase in Domestic Sales in Q2 (Million Tons)

14

Total Sales in Q2 Domestic Sales of Key Products in Q2

• We generated 7.4 million tons of total sales in Q2 2018. • Domestic middle distillate sales were 4.4 million tons, 8.5% higher than Q2 2017.

0

2

4

6

8

10

Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018

7,48,17,7

7,3

5,0

0,71,41,31,9

0,9

6,76,66,4

5,4

4,1

Domestic Sales Export

0

1,2

2,4

3,6

4,8

6

Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018

5,95,5

5,4

4,6

3,5

0,90,9

0,9

0,6

0,4

0,60,6

0,50,5

0,5

1,31,21,2

1,3

1,0

3,12,92,72,2

1,7

Diesel Jet Fuel Gasoline Bitumen


Aug. 2018

OPET

15

0

200

400

600

800

1000

1200

1400

1600

1800

2010 2011 2012 2013 2014 2015 2016 2017 2Q 2018

1.5891.5601.504

1.4441.3931.3561.3251.3251.279

446434431

435427418410394394

1.1431.1261.0731.009966938915885830

Opet Sunpet

Opet expanded its retail footprint to 1589 stations in June 2018 from 1560 stations in December 2017.

Market share as of May 2018

White Product

29.9%Black

Product

17.3%

Financials


Aug. 2018

Inventory Effect* Analysis

17

Million USD2018 2017

Crude Product Total Crude Product Total

First Half 118.7 183.1 301.8 7.8 34.3 42.1

2nd Quarter 98.9 132.5 231.4 -17.8 -21.9 -39.7

Apr 12.5 43.3 55.8 6.8 4.8 11.5

May 56.7 49.4 106.1 -8.0 -7.4 -15.4

June 29.6 39.9 69.5 -16.6 -19.3 -35.9

*FX ,hedge effect and crude/product price effect included above calculations

231.4 million $ inventory gain in Q2 2018 due to 16% increase in Brent price, 15.5% increase in FX and high stock level given maintenances.


Aug. 2018

Tüpraş Net Margin and Med Complex Margin Comparison ($/bbl)

18

•Excluding the 3.3 $/bbl inventory effect in Q2 2018, Tüpraş Clean Net Margin was 9.0 $/bbl.

•Thanks to difference in product mix and crude slate, Tüpraş Clean Net Margin was 4.6 $/bbl higher than the Med Margin.

Effect of hedging operations excluded from above calculations.

Tüpraş’ 12.3 $/bbl Net Refining Margin in 2018 Q2 is significantly higher than 4.4 $/bbl Med Complex Margin mainly due to high inventory gain and increase in production.

Q2 2015 Q2 2016 Q2 2017 Q2 2018

4,4

5,8

3,2

4,9

12,3

7,8

5,2

7,5

Tüpraş Net Med Complex


Aug. 2018

Income Statement (In TL)

19

Tüpraş generated 2,210 mn TL EBITDA in Q2 2018. Q2 2018 Q2 2017 % 6M 2018 6M 2017 %

Net Sales 20,081 12,631 59.0 33,502 25,000 34.0

Gross Profit 2,221 1,595 39.2 3,290 3,204 2.7

Operating Expenses -277 -258 -7.4 -545 -497 -9.7

Income/Loss from other operations -877 140 -988 83

Operating Profit 1,066 1,478 -27.9 1,756 2,790 -37.1

Income/Loss from equity investment 86 49 75.5 138 107 29.0

Operating Profit Before Fin. Income/Loss 1,152 1,526 -24.5 1,894 2,897 -34.6

Net Financial Income /Expense -227 -92 -497 -410 -21

Profit Before Tax 925 1,435 -35.5 1,397 2,487 -43.8

Net Profit (including minority interest) 1,035 1,464 -29.3 1,422 2,339 -39.2

EBITDA* (mn.TL) 2,210 1,542 43 3,243 3,117 4

EBITDA* (mn. TL) CCS 1,194 1,681 -29 1,960 2,950 -34

* On CMB reports, EBIT includes extra items such as FX impacts of trade receivables and payables. In our EBITDA calculation, these are excluded from EBIT as customary in international practices.


Aug. 2018

Q2 Profit Before Tax Bridge (2017-2018)

20

Decline in profit before tax was driven by FX loss and decrease in production, partially offset by inventory gain.

Million TL

1.434,8925,2

1.166,8

65,0

148,7143,1

365,9

1.083,7

2017 Stok Effect Crack Margins Crude OilDifferentials

Production FX Other 2018

FX Impact+360

Inventory gain

1.166,8

Inventory Gain


Aug. 2018

Financial Highlights (Million $)

21

Net Debt- Net Debt/ Rolling EBITDA

EBITDA

0

500

1.000

1.500

2.000

2.500

3.000

2012

_R

2013

2014

H1

2014

9M

2014

2015

H1

2015

9M

2015

2016

H1

2016

9M

2016

2017

Q1

2017

H1

2017

9M

2017

2018

Q1

2018

H1

1.957

2.331

1.657

1.240

1.6801.5551.7291.751

2.3912.370

2.7482.577

1.6631.5981.869

1.340

551

Net Debt.

Tüpraş Net Debt/Rolling EBITDA was 1.5x as of June 30, 2018.

Net Income*

Return of Average Equity

0

0

0

0

0

1

2011

2012

2013

2014

2015

2016

Q1

2016

H1

2016

9M

2016

2017

Q1

2017

H1

2017

9M

2017

2018

Q1

2018

H1

%31

%17

%41

%49%55

%45

%22%16

%11%4

%35

%26%24

%32%30 31%

-50

200

450

700

950

1200

2012 2013 2014 2015 2016 2017 2018

123

256

285

9147271

283

197

268175435309

244

405

113273

171

7575

992352711223172161

1.046

594

938

667629817

-50

242

533

825

1117

1408

1700

2012 2013 2014 2015 2016 2017 2018

321

480

422

-11

89106

435

294

410

226315361

522431

237415

-27

78153 271427

11415015079951st Q2nd Q3rd Q4th Q715

560338

1.397

1.125

1.614

*Excluding minority interest

793344

1.957

0,8

2,4

3,5 3,6

4,9

3,32,8

1,7 2,01,6 1,5

1,1 1,0 0,7 1,01,6 1,5

Net Debt/R. EBITDA


Aug. 2018

Balance Sheet Analysis (Billion $)

22

0,4

0,8

1,2

1,6

2,0

Mar

.14

Jun.

14

Sep.

14

Dec

.14

Mar

.15

Jun.

15

Sep.

15

Dec

.15

Mar

.16

Jun.

16

Sep.

16

Dec

.16

Mar

.17

Jun.

17

Sep.

17

Dec

.17

Mar

.18

Jun.

18

1,521,421,361,57

1,151,090,91

0,750,91

0,700,88

1,07

0,66

0,200,09

0,510,520,71

0

1

2

3

4

Mar

.14

Jun.

14

Sep.

14

Dec

.14

Mar

.15

Jun.

15

Sep.

15

Dec

.15

Mar

-16

Jun-

16

Sep-

16

Dec

.16

Mar

.17

Jun.

17

Sep.

17

Dec

.17

Mar

.18

Jun.

18

2,75

2,192,18

2,68

2,172,181,991,961,67

1,211,331,581,691,72

2,42

3,033,26

2,91

0,0

0,7

1,4

2,1

2,9

3,6

4,3

5,0

Mar

.14

2014

1h

2014

9M

Dec

14

Mar

.15

Jun.

15

Sep.

15

Dec

.15

Mar

-16

Jun-

16

Sep-

16

Dec

.16

Mar

.17

Jun.

17

Sep.

17

Dec

.17

Mar

.18

Jun.

18

3,2

4,04,03,43,3

3,53,4

4,24,03,93,43,63,63,7

3,33,23,23,7

0,81,61,41,31,1

0,60,61,11,21,00,60,60,50,4

0,30,30,30,9

2,52,42,62,12,1

3,02,93,12,82,92,83,03,13,33,02,92,92,8

LT Loans ST Loans

Given our strong liquidity management and cash generation capabilities, our financial loans decreased to 3.2 Billion $ ex-dividend.

Cash & Cash Equivalents Trade Receivables

Trade PayablesFinancial Loans

0,0

0,6

1,2

1,8

2,4

3,0

Mar

.14

Jun.

14

Sep.

14

Dec

.14

Mar

.15

Jun.

15

Sep.

15

Dec

.15

Mar

.16

Jun.

16

Sep.

16

Dec

.16

Mar

.17

Jun.

17

Sep.

17

Dec

.17

Mar

.18

Jun.

18

1,3

1,7

2,32,2

1,6

2,01,7

2,5

1,61,6

1,00,8

1,01,2

1,71,61,3

1,71,29

1,52

2,753,2


Aug. 2018

FX Exposure Management (30 June 2018)

23

* Cash flow hedge accounting : 1,119 mn $

Consolidated Assets

Consolidated Liabilities

Cash1,006

Receivables & other assets

56

Stock1,651

Forward & CFH2,447

Payables2,326

ST Financial 479

• RUP : 249• Other: 230

LT Financial 2,301

• RUP : 856• Eurobond 700• Other Loans : 745

+54 mn $

Million $

Thanks to strict FX policies of Tüpraş, our foreign exchange exposure was 54 million dollars long, as of June 30, 2018.


Aug. 2018

Tüpraş: Growing, Resilient, Profitable

24

Tüpraş is a compelling investment case with strong sales growth, resilient and profitable operational and financial structure.

• Operating in a diesel short market (supplies 45% of the market) , along with strong jet growth

• Well poised to capture future opportunities including IMO 2020 with its output complexity

• Continuous investment in logistics, infrastructure and trading capabilities

• Strong balance sheet with no immediate rollover requirement for the rest of the year

• Secure receivables portfolio, tight working capital management

• Pricing mechanism in place to address commodity and FX fluctuations

• Benefits from full system optimization given high complexity, procurement and logistics flexibility

• Prudent hedging practices to ensure stable earnings outlook

• High dividend pay-out ratio annually

Growing Resilient Profitable

Outlook for 2018


Aug. 2018

2018 Refinery Maintenance Schedule & Capacity Utilization

26

Our year end total capacity utilization target has not changed. We expect full year-end total capacity utilization.

Unit Quarter Duration (weeks) Reason

İzmir

*Plt 7000 Crude Oil Unit Q4 ’17 - Q2’ 18 17 in 2018 Revamp

*Hydrocracker Q1 3Periodic Maintenance

*Plt 4000 FCC Q2 7

İzmit

Plt 2 Crude Oil & Vacuum Unit Q4 2 in 2018

Periodic Maintenance

*Plt 5 Crude Oil & Vacuum Unit Q2 8.5

Plt 25 Crude Oil & Vacuum Unit Q4 5-6

*Plt 47 Hydrocracker Complex Q2 11

Plt 63 CCR & DHP Q4 5-6

Kırıkkale *All Units Q1- Q2 10 Battery Shutdown

Batman *Plt. 100/Crude Oil & Vacuum Q1 4-5 Periodic Maintenance

2018 Crude Capacity Utilization 26.8 mn tons 95.4%2018 Total Capacity Utilization Full

* Completed Maintenances


Aug. 2018

2018 Expectations vs H1 2018 Results

27

Refining Margins ($/bbl)

Brent Price ($/bbl)

55

60

65

70

75

80

J-18 F-18 M-18 A-18 M-18 J-18

Brent ($/bbl) Tüpraş Expectation Min Tüpraş Expectation Max

74,376,971,8

65,965,269,2

0

2

4

6

8

10

4,2

8,9

Tüpraş Net Margin Med Margin

15'H1

16'H1

17'H1

18'H1

0 20 40 60 80 100 120 140

85

111

101

94

Capacity Utilisation (%)

Production

Sales

0 4 8 12 16

13,6

11,4

2018 Operational (mn ton)

Capex (mn $)

2016

2017

H1 2018

0 50 100 150 200 250

92,6

185,0

213,0

• 70-75 $/bbl Average Brent Price Expectation • 70.6 $/bbl Brent Price average in H1

• 7.5-8 $/bbl Expected Net Refining Margin • 8.9 $/bbl Net Refining Margin in H1

• Full Capacity Utilization target

• 85% Total Capacity Utilization in H1

• 28.3 m tons of production and 31 m tons of sales target

• 11.4 mn tons of production and 13.6 mn tons of sales in H1

• 250 mn $ CAPEX target • 92.6 mn $ CAPEX in H1


Aug. 2018

Future Expectations

28

Average Brent price expectation in 2018 is revised to 70 - 75 $/bbl per barrel

Med Complex margin expectation is 4.75 - 5.00 $/bbl in 2018

Net Tüpraş refinery margin is expected to be in the region of 7.50 - 8.00 $/bbl

• Full Total Capacity Utilization using imported semi-products such as ASRFO and HVGO • Production: approximately 28.3 million tons • Total sales: 31.0 million tons

Refining investments is expected to be around 250 Million $

Brent Price Estimation

Med Complex Margin

Tüpraş Net Margin

Operations

Investment

We only updated our average Brent Price expectation. The rest of our expectations remain the same as before.

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