Refining NZ to take $220m hit due to Covid-19 slump

Refining NZ's Marsden Point Oil Refinery is suffering from a slump in demand. Photo / Northern Advocate.

Refining NZ today said it will take a non-cash impairment charge of about $220 million, before tax, in its six month accounts due to disruption arising from the Covid-19 pandemic.

After tax, the charge comes to $158m.

The impairment charge is primarily because of revised refining margin assumptions, reflecting the excess refining capacity in the Asia-Pacific region and the effects of the Covid-19 pandemic on transport fuel demand, particularly jet demand.

Refining NZ sets its long-term refining margin assumptions based on independent energy analyst forecasts.

The company, which operates New Zealand's only oil refinery, said it would remain comfortably within the 45 per cent senior debt gearing covenant under its facility agreements at 27 per cent after the impairment.

Refining NZ will release its 2020 half-year results on August 17.

In an update issued late last month, Refining NZ said that over May and June the refinery was in "cyclic" mode to produce a substantially lower output.

"The company continued with strategies aimed at minimising jet fuel production while meeting gasoline and diesel requirements, and refinery throughput was constrained by the jet fuel demand destruction," it said then.

Refinery throughput was 3.9 million barrels during May/June, down about half compared with the same period last year.

Before the pandemic, Refining NZ was responsibile for meeting 58 per cent of New Zealand's petrol demand, around 85 per cent of New Zealand Jet fuel demand and around 67 per cent of its diesel demand.

Refining NZ shares last traded at $0.71, having fallen by 66 per cent or $1.42 over the past 12 months.