Equity 1 March 2010, 8:51am

Hungary MOL sets strategy for 2010-12, aims at USD 4.1 bn EBITDA

Portfolio

MOL has on Monday published its financial and volumetric expectations for 2010-12. It said it already sees signs of a slow recovery, after it was affected by a difficult economic environment in late 2008 and well into 2009, with economic woes coupled with a broader financial crisis. MOL expects slightly increasing oil prices for the coming years reaching 90 USD/bbl level till 2012. MOL expects improving diesel crack spreads and weakening gasoline crack spreads in line with the economic recovery (140 USD/t and 60 USD/t in 2012 respectively) and slightly strengthening HUF versus USD.

MOL’s updated investor presentation is available on the company’s website .

“As a result of our last year’s strategy that equipped the Group for the tougher climate, MOL has established a strong position for the upturn period. MOL Group’s main goal for the coming years is to keep its financial stability, improve the efficiency and maximise the value of its existing portfolio. Based on the above mentioned macro assumptions MOL Group’s EBITDA ambition is USD 4.1 bn for 2012 on its existing asset portfolio."

“MOL is committed to keep its strong financial position and finance fully its CAPEX from the operating cash flow of the Group during the period of 2010-12. MOL Group dedicated USD 6.2 bn total CAPEX for the normal operation for 2010-12. MOL continuously monitors the macro environment and is ready to grab further growth projects depending on its cash flow generation."

“In addition, MOL published an overview of its exploration and production portfolio, the key achievements of 2009 and main projects of the company. MOL Group’s upstream portfolio is a solid basis for further growth with sizeable production in 7 countries, and further exploration potential in 15 countries."

“For the Group, the main task for the coming years is to maximise the value of the existing upstream portfolio. Key focus is on high return early cash generation development projects in CEE, Syria, Pakistan, Kurdistan and Russia to increase the production level and contribute significantly to Group-level EBITDA, while extending MOL’s outstanding efficiency to the whole upstream portfolio and carry out extensive exploration to further increase reserve base."

“MOL Group’s total 2P reserves estimations according to SPE guidelines were 662 MMboe as of 31, December 2009. The reserves estimates at this stage are considered to be as preliminary, subject to final approval. Final data will be published in the company’s 2009 Annual Report."

“Regarding the downstream business MOL Group’s main goal is to become the premium refinery group in Europe by 2012. The Group is committed to elevate newly consolidated assets to MOL standard with investments targeting product quality and yield improvement. MOL is focusing on joint optimisation of 5 refineries and 2 petrochemical units and is committed to extend its outstanding operational excellence to the whole group."

The key point in the strategy is the EBITDA objective, which appears to be rather ambitious in view of analysts’ expectations. The consensus estimate for MOL’s EBITDA is only USD 3.34 bn for 2012, against the company’s USD 4.2 bn target. The market does not expect EBITDA to be this high even in 2014.