Neste total refining margin

Neste uses a per barrel unit measure, quoted in US dollars, to express the difference between the value of the petroleum products produced by its Porvoo refinery that the company sells in any given period and the cost of the crude oil and other feedstocks used to produce the products in question, as well as other direct refining costs, such as energy and transportation (‘Total Refining Margin’).

The company has historically calculated its total refining margin for a given period by first calculating its current cost sales margin which is the euro amount equal to net sales for the period, less the cost, at average price levels, of feedstocks consumed to produce products sold during the period, less the other direct costs of refining, including energy and transportation.

This current cost of sales margin is then translated into US dollars using the average foreign exchange rate for the applicable period and is then reduced to a per barrel measure by dividing it by the sales volumes of Neste's refinery from its own production (currently assuming a standard refinery yield of 94.8% of petroleum product volumes from feedstock volumes and an average of refined petroleum products in barrels per ton of 7.30). This may be expressed as:

R = (AxE)/(B/CxD)

where:

A = current cost sales margin, expressed in millions of euro B = refined sales volume, expressed in millions of tons C = standard refinery yield, expressed in percent and assumed to be 94.8 percent D = standard barrels per ton, expressed in barrels and assumed to be 7.30 E = average euro/US dollar exchange rate for the period R = Total Refining Margin, expressed in US dollars per barrel

The strength of Neste’s refining margins depends to a critical extent on the company’s ability to maximise its use of lower-cost feedstocks and the availability of its advanced refineries to produce the optimal mix of higher-value products.