34 slides from Mol Hungarian Oil & Gas Plc Class A's earnings presentation, May 6, 2016
Slide 1: First Quarter 2016 Results
FIRST QUARTER 2016 RESULTS 6 MAY 2016
Slide 2: Disclaimer
DISCLAIMER "THIS PRESENTATION AND THE ASSOCIATED SLIDES AND DISCUSSION CONTAIN FORWARD-LOOKING STATEMENTS. THESE STATEMENTS ARE NATURALLY SUBJECT TO UNCERTAINTY AND CHANGES IN CIRCUMSTANCES. THOSE FORWARD-LOOKING STATEMENTS MAY INCLUDE, BUT ARE NOT LIMITED TO, THOSE REGARDING CAPITAL EMPLOYED, CAPIT
Slide 3: Agenda
AGENDA 1 HIGHLIGHTS OF THE QUARTER 2 KEY GROUP QUARTERLY FINANCIALS 3 DOWNSTREAM QUARTERLY RESULTS 4 UPSTREAM QUARTERLY RESULTS 5 GROUP OUTLOOK 6 SUPPORTING SLIDES 3
Slide 4: Highlights of the Quarter
HIGHLIGHTS OF THE QUARTER
Slide 5: 17% Rise Expected in DPS in 2016
17% RISE EXPECTED IN DPS IN 2016 2% SHARE CANCELLATION IMPROVES TOTAL SHAREHOLDER RETURN MOL was one of the very few integrated oil companies, which not only sustained but even increased dividend in 2016.... ...and which is able to comfortably cover dividends and capex from cash flows even at USD 35
Slide 6: Eurobond Issued with Best Ever Conditions
EUROBOND ISSUED WITH BEST EVER CONDITIONS REDUCING FUNDING COSTS BY APPROX. USD 20 MN HIGHLIGHTS MOL & MAGNOLIA BONDS EUR 750mn Eurobond increases financial CORPORATE BONDS OUTSTANDING COUPON headroom to above 3bn EUR Magnolia* – perpetual EUR 610m Euribor + 5.5% With a 7-year tenor average maturity
Slide 7: On Track to Deliver
ON TRACK TO DELIVER WITH THE ESSENTIAL FUNDAMENTAL BUILDING BLOCKS 2015 YTD 2016 Target GROUP CLEAN USD 2.5 BN USD 510 MN USD 2 BN+ CCS EBITDA RESILIENT INTEGRATED BUSINESS MODEL GROUP CAPEX USD 1.3 BN USD 185 MN UP TO USD 1.3 BN (ORGANIC) FCF FINANCIAL USD 1,040 MN USD 217 MN POSITIVE GENERATION* D
Slide 8: Solid EBITDA Generation in Q1
SOLID EBITDA GENERATION IN Q1 ON TRACK TO DELIVER 2016 TARGETS FINANCIAL HIGHLIGHTS Robust Clean CCS EBITDA of HUF 144bn (USD 510m) in Q1 2016, implying that MOL is well on track to deliver on its USD 2bn+ annual guidance Downstream EBITDA growth offset the decline in Upstream profits year-on-year N
Slide 9: Key Quarterly Financials
KEY QUARTERLY FINANCIALS
Slide 10: Integrated Business Model Continues to Work
INTEGRATED BUSINESS MODEL CONTINUES TO WORK RECORD-HIGH DOWNSTREAM EBITDA OFFSETS UPSTREAM PROFIT DECLINE KEY GROUP FINANCIALS (HUF bn) SEGMENT CLEAN CCS EBITDA (HUF bn) +31% -56% -8% -5% +164% -8% -5% 157 152 144 177 205 77 59 78 179 152 29 157 144 147 44 60 42 106 93 76 18 19 19 3 -17 -10 -434 CCS
Slide 11: Downstream Strength Offset Weaker E&P
DOWNSTREAM STRENGTH OFFSET WEAKER E&P SEASONALITY AFFECTS PROFITABILITY QOQ GROUP EBITDA QoQ (HUF bn) COMMENTS 151.5 1.9 Downstream Seasonally weaker in Q1 Yet once again a record-high 144.3 contribution for this period of 12.8 1.5 8.7 the year... …driven by the petchem 0.3 strength... ...and offset
Slide 12: Very Strong Reported Net Income, EPS
VERY STRONG REPORTED NET INCOME, EPS SUPPORTED BY NON-RECURRING FINANCIAL AND TAX ITEMS Q1 2016 EARNINGS (HUF bn) Other 9 -16 0 -71 Downstream 93 5 129 12 -1 3 77 58 60 Upstream 42 Clean CCS CCS EBITDA excl. Special items DD&A and Profit from Total financial Income from Profit before Income tax Non-
Slide 13: Capex Further Down YoY
CAPEX FURTHER DOWN YOY PRIMARILY REFLECTING UPSTREAM REBALANCING TOTAL GROUP CAPEX (HUF bn) UPSTREAM vs DOWNSTREAM (HUF bn) 53 Inorganic 181 Organic 10 -39% -52% 147 34 1 32 109 95 8 87 4 0 2 44 17 18 32 52 0 53 33 0 2 18 18 54 45 15 33 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q1 2015 Q1 2016
Slide 14: Sustained Strong Cash Generation
SUSTAINED STRONG CASH GENERATION COMFORTABLY COVERING ORGANIC CAPEX OPERATING CASH FLOW YTD (HUF bn) 8 8 114 30 71 7 78 60 52 Profit Before Tax DD&A Net FX (gain)/loss Other Operating CF Change in WC Income tax paid Operating CF Organic CAPEX before WC COMMENTS Operating Cash Flow before Working Cap
Slide 15: Balance Sheet Reflects Magnolia Transaction
BALANCE SHEET REFLECTS MAGNOLIA TRANSACTION GEARING AND DEBT LEVEL WELL WITHIN COMFORT ZONE NET DEBT TO EBITDA (x) GEARING (%) 2.5 40 36 35 33 2.0 1.96 31 1.72 30 28 28 1.66 25 1.44 25 1.5 1.38 1.31 20 21 20 1.05 16 1.0 15 0.79 0.73 10 0.5 5 0 2008 2009 2010 2011 2012 2013 2014 2015 Q1 2016 2008 200
Slide 16: Downstream Q1 2016 Results
DOWNSTREAM Q1 2016 RESULTS
Slide 17: Another All-Time High Quarterly Result
ANOTHER ALL-TIME HIGH QUARTERLY RESULT PETCHEM IN THE DRIVING SEAT IN Q1 2016 QUARTERLY CLEAN CCS EBITDA (HUF bn) YTD CLEAN CCS EBITDA (HUF bn) +21.9% -12.1% +22% Retail R&M 147 93 Petchem Petchem 127 R&M Retail 76 106 34 12 93 74 76 13 42 10 38 24 45 45 55 24 42 34 10 13 Q4 2014 Q1 2015 Q2 2015 Q3
Slide 18: Clean CCS EBITDA Grew by 22% in Q1 YoY
CLEAN CCS EBITDA GREW BY 22% IN Q1 YOY ON STRONGER PETCHEMS AND RETAIL CLEAN CCS EBITDA YoY (HUF bn) COMMENTS 3 93 Substantially higher 11 2 22 13 15 petchem margin (+191 EUR/t 76 78 1 IM margin) 10 Higher petchem and retail 24 45 volumes Weaker R&M complex 42 margin and lower refinery 34 throughput
Slide 19: Downstream: Benign Macro; Petchem Upside
DOWNSTREAM: BENIGN MACRO; PETCHEM UPSIDE TURNAROUND ACTIVITIES IN 2016 Petchem: integrated margins remained very supportive in 2016 ytd, holding upside risk for the year Refining: diesel cracks depressed ytd, but mostly offset thus far by low oil prices, wider crude differentials and decent gasoline
Slide 20: Upstream Q1 2016 Results
UPSTREAM Q1 2016 RESULTS
Slide 21: EBITDA Held Up Well in Q1 2016
EBITDA HELD UP WELL IN Q1 2016 DESPITE OIL PRICES AVERAGING AT A 12-YEAR LOW QUARTERLY EBITDA (HUF bn) REALISED HYDROCARBON PRICES -30% -4% 130 65 60 120 108.2 109.6 54 110 101.8 43 44 42 100 89.9 91.4 90 86.2 80 76.3 70 61.9 60 63.0 53.9 52.6 49.2 50.3 44.4 46.0 50 43.1 43.5 43.7 Q4 2014 Q1 2015 Q2
Slide 22: Volumes, Costs Partly Offset Price Impact
VOLUMES, COSTS PARTLY OFFSET PRICE IMPACT US EBITDA QoQ (HUF bn) COMMENTS 44 6 42 Higher volumes (Hungary, UK) 12 Lower exploration expenses 3 33 on reduced activty 1 2 Lower direct lifting costs 9 EBITDA ex- Prices FX Volumes Exploration Other EBITDA ex- Depreciation EBIT ex-oneoff oneoff Q4 15 Exp
Slide 23: CEE, UK Drive Volumes Growth
CEE, UK DRIVE VOLUMES GROWTH CEE PRODUCTION OPTIMISATION IN FOCUS QUARTERLY PRODUCTION BY COUNTRY COMMENTS +9% +4% Q1 2016 vs. Q4 2015 (+3.5%) 112.1 ~112.0 Hungary: +2 mboepd qoq on 108.3 3.3 production optimization Other 103.5 103.3 103.7 3.3 2.8 3.2 3.3 3.4 100.5 3.9 UK: +4 mboepd qoq on KRI 2.7 1
Slide 24: CEE: Production Intensification Yields More
CEE: PRODUCTION INTENSIFICATION YIELDS MORE ONSHORE CEE PRODUCTION UP 5% YOY AND 3% QOQ History of onshore production Total onshore hydrocarbon Oil production (mbpd) since the acquisition of INA production (mboepd) Crude oil Total +6% +4% +14% +5% 60 50 15 50 40 40 10 30 Hungary 30 20 20 5 10 10 0 0
Slide 25: Cost-Side Adjustment Continues
COST-SIDE ADJUSTMENT CONTINUES CAPEX BY REGION AND TYPE IN Q1 2016 (HUF bn) UNIT OPEX 2013 TO DATE (USD/boe) HUN CRO KRI RUS PAK UK NOR OTHER TOTAL 10.0 9.5 EXP 1.2 0.2 0.0 0.0 1.7 0.1 0.6 3.2 6.9 9.0 DEV 4.1 3.9 0.1 1.0 0.4 12.9 0.0 1.4 23.8 8.5 8.0 -10% 0.3 1.4 0.2 0.0 0.0 0.0 0.0 0.0 2.0 7.5 7.3
Slide 26: On Track Towards Self-Funding Operations
ON TRACK TOWARDS SELF-FUNDING OPERATIONS AT USD 35/BBL OIL PRICE - NEW UPSTREAM PROGRAM IN PROGRESS 2016 YTD TARGET Visible CEE onshore PRODUCTION growth on production Mboepd 105-110 112 optimization Higher UK volumes USD 80-100 mn opex UNIT OPEX reduction targeted 6-7 6.3 USD/boe Unit opex benefits
Slide 27: Group Level Outlook
GROUP LEVEL OUTLOOK
Slide 28: 2016 Group Level Outlook Reiterated
2016 GROUP LEVEL OUTLOOK REITERATED SUSTAINABLE FCF GENERATION, STRONG B/S EXTERNAL ENVIRONMENT (2016) EBITDA, CAPEX (2016) Oil price: USD 35-50/bbl At least USD 2bn EBITDA at our planning Downstream: above mid-cycle, below 2015 assumptions peaks Capex cut to „up to USD 1.3bn” (from „up to Refinery
Slide 29: Supporting Slides
SUPPORTING SLIDES
Slide 30: Financials: Sources and Uses of Cash
FINANCIALS: SOURCES AND USES OF CASH SOURCES AND USES OF CASH (2010-TO DATE, HUF bn) 3.600 136 39 204 3.400 3.200 281 3.000 2.800 2.600 2.400 2.200 1.865 2.000 1.800 3.205 1.600 1.400 1.210 1.200 1.000 390 261 800 600 170 282 400 179 200 106 Beginning Pre-Tax OP CF Sales & Other Net Interest Cash Ta
Slide 31: Upstream: Operational Update Highlights
UPSTREAM: OPERATIONAL UPDATE HIGHLIGHTS Hungary United Kingdom Continuation of production intensification campaign Cladhan: Production commenced in December 2015 and production rates show natural decline in line with Hungarian production reached 44.7 mboepd in Q1 expectations 2016 (4% QoQ, 6% YoY),
Slide 32: Upstream: Operational Update Highlights
UPSTREAM: OPERATIONAL UPDATE HIGHLIGHTS Kurdistan OMAN Shaikan: Production was temporarily reduced in Q1 The second exploration well was spudded in March 2016 as a result of the closure of the Kirkuk-Ceyhan in Block 66. The well will be drilled and tested in Q2. export pipeline from 16 February unti
Slide 33: Gas Midstream: Key Financials
GAS MIDSTREAM: KEY FINANCIALS EBITDA CAPEX +6% +1% 3.9 18.9 19.2 18.0 14.6 12.3 10.3 1.4 1.5 0.3 0.1 0.1 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 KEY FINANCIALS (HUF bn) COMMENTS Q4 2015 Q1 2016 Q1 2015 YoY FY 2015 Q1 2016 EBITDA rose 6% YoY due to favourable winter we
Slide 34: Macro Indicators
MACRO INDICATORS BRENT REFINERY MARGINS HUF / USD 150 10 300 MOL Group 8 Complex 100 250 6 50 4 200 2 0 0 150 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q1 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q1 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4Q1 12 12 13 13 14 14 15 15 16 12 12 13 13 14 14 15 15 16 12 12 13 13 14 14 15 15 16 BRENT URAL SPREAD PETCHEM MAR