Oil price rises make for more urgency

AUCKLAND: Z Energy is accelerating work on new services and costsaving initiatives in the face of a ‘‘very tricky’’ crude oil market.

The company had been ‘‘caught short’’ by the rapid jump in oil prices and the fall in the New Zealand dollar during the six months through September, chief executive Mike Bennetts said yesterday.

While those effects and an unplanned extension of a shutdown at the Marsden Point oil refinery were beyond its control, risks in the crude market could persist and the company needed to move faster on projects it already had under way, Mr Bennetts said.

‘‘The world is a very tricky place right now,’’ he said, adding oil prices could rise rapidly or fall away.

‘‘We want to be good for all seasons,’’ he said. The company needed to ‘‘up the pace’’ on customer experience and productivity initiatives.

Z Energy shares fell as much as 7.7% yesterday after the firm cut its fullyear earnings guidance for the second time in five months and delivered a lowerthanexpected firsthalf dividend.

Mr Bennetts told analysts and journalists the company had known it would face a high crude oil price environment at some time but had thought it would most likely be in 2020. New international marine fuel standards from January that year may limit fuel oil use and could increase global demand for lowsulphur diesel.

The company had been aiming to roll out a series of new services and initiatives during the remainder of this year and next to be ready for that, he said. These include Fastlane — whereby a customer can pull into a service station, fill up with petrol and just drive off, with onsite cameras picking up the vehicle registration number and sorting out the payment automatically.

The company yesterday cited the roughly $180 million a year it spent on ‘‘reasonably blunt’’ discounts and loyalty benefits. Targeting that spending where it would be most effective for different types of customers could save more than $10 million a year by not ‘‘overrewarding’’ some customers for their loyalty.

Last year, Z launched a range of initiatives under its Strategy 3.0 banner aimed at delivering $15 million to

$19 million of earnings improvement in the current period. About $5 million of that was achieved in the first half and Mr Bennetts said the company was on track to deliver $16 million

$18 million for the 12 months.

The company is also working on the potential to take more fuel oil from the Marsden Point refinery after the 2020 marine fuel changes. Fuel oil might have very little value by then but may offer Z an opportunity given it has a bitumen business that may be able to absorb some of that product.

Z Energy chief financial officer Chris Day said he expected increased gains from its strategy projects, the new supply arrangement it had with supermarket chain Foodstuffs and the fact no maintenance was planned at the Marsden Point oil refinery this year.

The company also expects to sell $40 million of property to help fund its other capital activities.

But the forecast assumes Brent oil prices of $US80 a barrel and a New Zealand dollar exchange rate of US65c for the rest of the period and neither of those are fixed. The kiwi was recently at US65.47c while December Brent was trading at $US75.46 a barrel. — BusinessDesk