Mol Hungarian Oil & Gas Plc Class A · BET:MOL
Mol Hungarian Oil & Gas Plc Class A — MOL Group — Investor Day (November 2012)
88 slides from Mol Hungarian Oil & Gas Plc Class A's investor day presentation, Nov 15, 2012
Slide 1: MOL Group Investor Days 15-16 November 2012
MOL GROUP INVESTOR DAYS 15-16 NOVEMBER 2012
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: Key Challenges and Actions
KEY CHALLENGES AND ACTIONS József Molnár Chief Executive Officer of MOL Group MOL Group Investor Day 15 November 2012, Budapest 1
Slide 4: Six challenges MOL faces
SIX CHALLENGES MOL FACES # 1 – MATURING PORTFOLIO, DECLINING PRODUCTION # 2 – NEED OF CONTINUOUS EXPLORATION PORTFOLIO RENEWAL # 3 – MONETIZE COMPANY MAKER STORY IN KURDISTAN # 4 – CHANGED EXTERNAL ENVIRONMENT IN DOWNSTREAM # 5 – LONG-LASTING ECONOMIC CRISIS # 6 – MANAGING A COMPLEX INTERNATIONAL, I
Slide 5: Action #1 – De-risk 1.6 bboe resource potential
ACTION # 1 – DE-RISK 1.6 BBOE RESOURCE POTENTIAL To reach 180 thboepd production by 2018 Expected production*, 2012-2020 • Plateau around 170-180 mboepd 7-8% Exploration CAGR upside (risked) Undeveloped Developed * Without any Syrian contribution *Entitlement based production forecast, excluding Syr
Slide 6: Action #2 – More active portfolio management to renew the asset mix
ACTION # 2 – MORE ACTIVE PORTFOLIO MANAGEMENT TO RENEW THE ASSET MIX Add new high impact elements and potential early harvests Value creation over volumes Grow in core, experienced regions as operator and take minority shares in new frontier regions ”High risk – high reward” projects (e.g. Oman, Kaz
Slide 7: Action #3 – Reach Kurdistan peak production around 55-62 mboepd by 2017
ACTION # 3 – REACH EXP. PEAK PRODUCTION AROUND 55-62 MBOEPD BY 2017 Intensified appraisal & early development program Le gend " cities Wells MOL present in 2+2 blocks DRN_G001 Contract_Blocks_poly <all other values> Total recoverable resource CON_STATUS potential 725 MMboe Development Discovery Prod
Slide 8: Action #4 – Reach 500-550 mn efficiency improvement by 2014
ACTION # 4 – REACH 500-550 MN EFFICIENCY IMPROVEMENT BY 2014 Initiation of New Downstream Program Regain top quartile position in Europe by increasing the efficiency and profitability of MOL Group Downstream $ 500-550 million EBITDA improvement* TARGET Cost decrease Revenue increase USD 370-400 mn U
Slide 9: Action #5 – Balancing cash flow and capital expenditure
ACTION # 5 – BALANCING CASH FLOW AND CAPITAL EXPENDITURE As solid balance sheet has top priority 3,5 EBITDA (in bn USD) Limit of net debt to EBITDA Net debt to EBITDA 3,0 3 2,5 2,4 2,5 2,2 2,0 1) In general CAPEX should be financed 2 from operating cash flow 1,5 1 0,5 0 2008 2009 2010 2011 Q3 2012 2
Slide 10: Action #6 – Reorganize group and flagship operation
ACTION # 6 – REORGANIZE GROUP AND FLAGSHIP OPERATION Create a more international headquarters with flexible decision-making Separate tasks and responsibilities between the group and the local levels New international HQ focusing on strategic decisions and overall control. Flagship companies like INA
Slide 11: Upstream Portfolio Overview: Mid- and Long-Term Outlook
UPSTREAM PORTFOLIO OVERVIEW MID- AND LONG-TERM OUTLOOK József Molnár Chief Executive Officer of MOL Group MOL Group Investor Day 15 November 2012, Budapest 1
Slide 12: Upstream portfolio in a snapshot
UPSTREAM PORTFOLIO IN A SNAPSHOT Good basis for increasing mid-term EBITDA generation of the Group Strong pillar MOL IS AN UPSTREAM DRIVEN COMPANY Growth over the last years: Increased EBITDA level and investments Attractive, improving profitabilty compared to peers Good bases for sizable long-term
Slide 13: MOL is an upstream driven company
MOL IS AN UPSTREAM DRIVEN COMPANY With increasing capital expenditure EBITDA generation CAPEX breakdown Additional share purchase in INA (an upstream driven company) Bn HUF Bn HUF Upstream Downstream Gas Midstream Upstream Downstream Gas Midstream Corporate & Other 3
Slide 14: Improving profitability over the years
IMPROVING PROFITABILITY OVER THE YEARS …even compared to peers Upstream unit EBITDA, USD/boe EBITDA generation change 4
Slide 15: Exploration successes are the basis of long-term growth
EXPLORATION SUCCESSES ARE THE BASIS OF LONG-TERM GROWTH Outstanding, over 60% exploration success rate in the last 3 years Oil discoveries in Matjushkinsky block and (latest in 2011) sizeable reserve Several billion additions, – 63 barrel Shaikan MMboe (2011) discovery (20%) – mainly Baitugan 2009 a
Slide 16: Production could reach 170-180 mboepd by 2017-2020
PRODUCTION COULD REACH 170-180 MBOEPD BY 2017-2020 Sustain production level from existing reserve base and step further on huge exploration upside Expected long-term production* • Plateau around 170-180 mboepd • Lower, ~110 mboepd production in 2013 • Only gradual increase in 2014/15 Exploration ups
Slide 17: Transition years to come due to a gap in our portfolio
TRANSITION YEARS TO COME DUE TO A GAP IN OUR PORTFOLIO Mitigate decline rate and accelerate development Life-cycle based mixed portfolio: MATURING CEE REGION + HIGH POTENTIAL FIELDS STEP IN ONLY MID-TERM Challenge: 7-10% natural decline of CEE-onshore Slower than expected increase from production in
Slide 18: Slight production decline continues in 2013 to ~110 mboepd
SLIGHT PRODUCTION DECLINE CONTINUES IN 2013 TO ~110 MBOEPD …but gradual increase thereafter: 110-120 mboepd in 2014/15 Production outlook* ~115 mboepd ~110 mboepd Other Pakistan Russia mboepd Croatia Hungary *excluding Syrian contribution 8
Slide 19: Good reserve base, but even greater potentials
GOOD RESERVE BASE, BUT EVEN GREATER POTENTIALS Resource potential could be the basis of 100% reserve replacement in 3y average Proved and probable reserves 1.6 800 Bn boe Working interest 700 based unrisked recoverable 600 resource potential 500 MM Boe 400 0.7 bn boe 300 reserves: 10 years proved re
Slide 20: Accelerate key international projects to derisk upside
ACCELERATE KEY INTERNATIONAL PROJECTS TO DERISK UPSIDE… Key project timeline till 2018 Exploration Appraisal Development Production Unrisked Country Assets W.I. 2012 2013 2014 2015 2016 2017 2018 RRP POS MMboe Kurdistan Region Akri-Bijeel 80% High of Iraq 725 Kurdistan Region 100 Shaikan 20% of Iraq
Slide 21: Sizeable resource potential will be tested in 2013
…SIZEABLE RESOURCE POTENTIAL WILL ALREADY BE TESTED IN 2013 Operational milestones in Q4 2012 and 2013 Q4 2012 Start up 10 production wells in the Matjushkinsky block in Russia Testing of Bakrman and Gulak exploration wells in Akri-Bijeel block, Kurdistan Q1 2013 Region of Iraq Testing the 1st explo
Slide 22: Up to USD 1-1.5 bn capex per year with international focus
UP TO USD 1-1.5 BN CAPEX PER YEAR WITH INTERNATIONAL FOCUS …to finance reserve booking and growing production Major International Upstream projects and their CAPEX (2013-2015) expected resource allocation 80 Bubble size represents CAPEX allocation for 2013-15 Kurdistan Region of Iraq 60 Peak product
Slide 23: Hungary remains a core country
HUNGARY REMAINS A CORE COUNTRY Our aim is to mitigate the natural decline rate to below 5% HUNGARY (171 MMboe reserve) 75 years E&P experience with more than 40 years EOR/EGR technological knowledge Extensive surface infrastructure Low production and exploration costs Fast development provides quick
Slide 24: Croatia: continuing recent exploration successes
CROATIA: CONTINUING RECENT EXPLORATION SUCCESSES Aiming to maintain production on 2013 level in the coming years CROATIA (234 MMboe) Three oil discoveries in 2011-2012 proved our good geological knowledge Enhanced Oil/Gas Recovery projects and remaining offshore exploration potential Committed to ha
Slide 25: Russia: continuous production increase to ~40 mboepd
RUSSIA: CONTINUOUS PRODUCTION INCREASE TO ~40 MBOEPD Reserves and sizeable exploration upside create mid-/long-term growth potential RUSSIA (186 MMboe) Diversified Russian portfolio Good reserve base to boost production 230 MMboe undrilled exploration upside 50 WORK PROGRAM – PRODUCTION OUTLOOK 40 P
Slide 26: Pakistan: higher profit from oil/condensate discoveries
PAKISTAN: HIGHER PROFIT FROM OIL/CONDENSATE DISCOVERIES Gradual production growth to 12-14 mboepd PAKISTAN (11 MMboe) Operatorship experience: major project with ca. 100.000 boe daily production potential (100%) Ongoing capacity extention to handle increasing condensate production Oil-condensate dis
Slide 27: Kazakhstan: new core country for mid-term growth
KAZAKHSTAN: NEW CORE COUNTRY FOR MID-TERM GROWTH Federovskoye peak production is expected to be around 12-13 MMboe KAZAKHSTAN (37 Mmboe) Significant discovery in recent years (gross field size ~ 200 Mmboe reserves) New block acquired (49%) in 2012 in the vicinity with significant recoverable resourc
Slide 28: Kurdistan Region of Iraq: key source of growth
KURDISTAN REGION OF IRAQ: KEY SOURCE OF GROWTH Promising test results from Bakrman exploration well underline upside potential KURDISTAN REGION OF IRAQ Two successful discoveries (Bijell, Shaikan) + one well with very promising results (Bakrman) Derisk 725 MMboe recoverable resource potential (WI) i
Slide 29: More active portfolio management to renew the asset mix
MORE ACTIVE PORTFOLIO MANAGEMENT TO RENEW THE ASSET MIX Exploration-led focus: add new high impact elements and potential early harvests RD Renew, extend PT S Potential early value exploration portfolio KS Development realizations – after value KZ High risk high reward PA Appraisal A creation with p
Slide 30: Kurdistan Region of Iraq could be the company-maker
KURDISTAN REGION OF IRAQ COULD BE THE COMPANY-MAKER Strong CEE base, expanding in CIS and Kurdistan: sources of sustainable growth Relatively stable unit profitability based on current premises Expected long term production* Kurdistan (unrisked upside) Middle East and Africa 7-8% CAGR CIS and Pakist
Slide 31: Operational update of our projects in Kurdistan Region of Iraq
OPERATIONAL UPDATE OF OUR PROJECTS IN KURDISTAN REGION OF IRAQ Attila Fogarasi, PhD Head of International Asset Management Middle East and Africa Region MOL Group Investor Day 15 November 2012, Budapest 1
Slide 32: Agenda
AGENDA ABOUT KURDISTAN IN GENERAL INTRODUCTION OF THE AKRI-BIJEEL BLOCK SHAIKAN BLOCK OVERVIEW PEARL PROJECT 2
Slide 33: Kurdistan Region
KURDISTAN REGION A hot spot in the North-Eastern part of Iraq 3
Slide 34: Regional tectonics of Kurdistan Region of Iraq
REGIONAL TECTONICS OF KURDISTAN REGION OF IRAQ KRI is part of the Zagros chain formed by a series of collisions Zagros was formed due to NE drift and collision of Arabian Plate with Eurasia First compressive movement was in the Cretaceous, second started in Eocene with the total closure of the ocean
Slide 35: General stratigraphy of Zagros
GENERAL STRATIGRAPHY OF ZAGROS All elements are present for hydrocarbon formation After Paleozoic carbonates and a Permian rifting episode a new carbonate platform is established - dolomitized shallow carbonates are reservoir rocks Multiple source rock - Basin sediments of Triassic, Middle-Late Jura
Slide 36: World class discoveries in a row
WORLD CLASS DISCOVERIES IN ROW Already in the spotlight of majors Legend " cities Oil reserves potential around Wells DRN_G001 45 Bboe* Contract_Blocks_poly <all other values> CON_STATUS Gas and associated gas Development Discovery reserves potential up to 200 Production Tcf (36 Bboe)* Surf Expl/Dri
Slide 37: Major pipeline projects in the pipe
Legend MAJOR PIPELINE PROJECTS IN THE PIPE " cities Wells 1 million DRN_G001 boepd export capacity targeted in the short run Contract_Blocks_poly <all other values> ”With open support from CON_STATUS Ankara, Kurdistan has plans to Development begin exporting its oil along a new Discovery 1 million b
Slide 38: Overview of MOL's assets in Kurdistan
OVERVIEW OF MOL’S ASSETS IN KURDISTAN entered in 2007 Block Working Interest Fully diluted WI Operator Other partner Akri-Bijeel 80% 51.2% MOL GKP (20%) Shaikan 20% 13.6% GKP (75%) MOL, TKI (5%) Khor Mor 10% 10% Dana Gas, Cresent Pearl Petroleum Chemchemal 10% 10% Petroleum, MOL, OMV 8
Slide 39: Introduction of the Akri-Bijeel block
INTRODUCTION OF THE AKRI-BIJEEL BLOCK 9
Slide 40: One successful discovery
ONE SUCCESSFUL DISCOVERY Two exploration wells under drilling target further upside Located N of Erbil, total Block area: 889 km2 Consists of two different terrains: lowlands covered by thick Tertiary; mountains with exposed Cretaceous 1 successful oil and gas discovery – Bijell-1 Bakrman-1 well wit
Slide 41: Work program 2012-2014
WORK PROGRAM 2012 – 2014 to derisk the significant petroleum original oil in place E - expected spud - expected well test * Conditional, not fixed yet 11
Slide 42: Bijell-1 discovery
BIJELL-1 DISCOVERY Jurassic showed commercial discovery with high permeability and flow rates 4 way closed S buried anticline Bijell-1 N Thick Neogene Productive zones have high permeability and all Main kitchen of them naturally fractured All reservoirs present Tests showed flowing oil with product
Slide 43: Bijell appraisal program
# BIJELLBijell-4 APPRAISAL (Qalati-1) PROGRAM Extensive appraisal acreage with several potentially linked compartments # Bijell-5 (Qandagul-1) 6 wells - 3 firm and 3 # Bijell-6 (Aqra-2) contingent 1 drilled, tested (Bijell-1) # Bijell-7 (Sharf una-1) 1 drilled, under testing (Bijell-3) 3 under prepa
Slide 44: Three further appraisal wells in the next 9 months
THREE FURTHER APPRAISAL WELLS IN THE NEXT 9 MONTHS BIJELL-2 BIJELL-7 BIJELL-5 Targeting the mid-point Targeting the SE edge Targeting a new compartment TD: 5330m TD: 4650m TD: 3200m Appraisal of Bijell Appraisal of Bijell Appraisal of Bijell Jurrasic package, Jurrasic package Jurrasic package in wit
Slide 45: How to handle heavy oils and H2S?
HOW TO HANDLE HEAVY OILS AND H2S? Good chance to blend from own sources Heavy-sour oil findings have to be handled Density of liquid petroleum products (API) >55 Condensates Blending to reach Kirkuk crude quality – density 38-55 Light crude oil and viscosity improves in a non linear way 22-38 Medium
Slide 46: Facility development program
FACILITY DEVELOPMENT PROGRAM Early production to start in Q2 2013, export quality in 2014 EWT Phase I EWT Upgrade Commercial phase Total gross capacity 10 thboepd 10 thboepd Depending on field Total storage capacity 30 thboepd 30 thboepd development results Key data Start of operation 2013 Q2 2014 Q
Slide 47: Bakrman – very promising shows
BAKRMAN – VERY PROMISING SHOWS Good permeability and possibly lighter oils Structure is on trend with GEP Atrush discovery with lighter oils Well drilled deeper than planned to Triassic Upper unit: Good mud gas shows and heavy oil on shakers in Cretaceous Sarmord and Lower Jurassic Butmah/Sarki Fm L
Slide 48: Gulak
GULAK Cautiously optimistic view at the moment Gulak-1 under drilling Good mud gas shows in Jurassic reservoir section of the Upper unit (same as Bekhme) Good mud gas shows in the repeated Jurassic reservoir section of the Lower unit (same as Bijell) NE Bekhme-1 Gulak-1 SW Eocene dolomite/limestone
Slide 49: Targeting Triassic system
TARGETING TRIASSIC SYSTEM Chances for light oil and condensates Triassic systems may contain light oil and condensate with API > 40 along with natural gas No quality discount and/or good for blending with heavy oils All three prospects have Triassic targets Bakrman is our first real Triassic testing
Slide 50: Expected time schedule and production outlook
EXPECTED TIME SCHEDULE AND PRODUCTION OUTLOOK By 2014 – Exploration and appraisal program 2013 Q2 - Start up of early production, EWT facility with 10 thboepd gross capacity Mid 2014 – Reserve booking Bijell Mid 2014 – Declaration of Commerciality 2014 – EWT surface facility upgrade to reach export
Slide 51: Shaikan block overview
SHAIKAN BLOCK OVERVIEW Source: GKP 21
Slide 52: Commerciality declared
COMMERCIALITY DECLARED Development program due by February Located NW of Erbil Total Block area: 283 km2 Successful discovery and completion of five well appraisal program, crude from 16 to 52 API Declaration of Commerciality submitted in August 2012 Possible reserve booking already in FY 2012 EPF i
Slide 53: Shaikan exploration – appraisal strategy
SHAIKAN EXPLORATION – APPRAISAL STRATEGY Several discoveries in one major anticline One major anticline with Cretaceous exposed in the core Discovery of heavy oil in several Jurassic reservoirs; discovery of light oil and gas-condensate in several Triassic reservoirs. All reservoirs are fractured ca
Slide 54: Time schedule and production outlook
TIME SCHEDULE AND PRODUCTION OUTLOOK 2013 Q1 – Submitting Development plan 2013 Q1 – Finishing construction of two early production facilities on SH2 and SH1-3 wells Shaikan 2013 – spud of SH-7 targeting deeper zones of deeper Triassic and Permian 2013-15: Facility and pipeline developments 2014 – s
Slide 55: Pearl project
PEARL PROJECT 25 > MOLGROUP
Slide 56: Self financing operation with huge upside potential
SELF FINANCING OPERATION WITH HUGE UPSIDE POTENTIAL Operator reported 10 Tcf 1P natural gas with condensate reserves Dana Gas 40% Khor Mor (299 km2): Crescent Petroleum: 40% OMV 10% 6 existing production wells MOL 10% Gas production at 340 Mcfpd, condensate production at 15 thboepd Two train gas pro
Slide 57: Appendix
APPENDIX > MOLGROUP 27
Slide 58: Structure of our production sharing agreements
STRUCTURE OF OUR PRODUCTION SHARING AGREEMENTS Schematic of Production sharing at Akri-Bijeel Block Schematic of Production sharing at Shaikan Block Oil produced Oil produced Royalty Oil Royalty Oil 10% of total Crude oil 10% of total Crude oil 43% Available crude Oil 40% Available crude Oil Cost oi
Slide 59: Income and cost development of a typical PSA
INCOME AND COST DEVELOPMENT OF A TYPICAL PSA 1200 30 1000 Profit Oil 25 Majority of CAPEX 1-2 years before start of commercial Cost Oil 800 20 production Production 600 WI 15 Early cost recovery right after starting commercial production 400 10 Followed by years of high profit 200 5 ratio 0 0 Y1 Y3
Slide 60: New Downstream Program 2012-2014
NEW DOWNSTREAM PROGRAM 2012 – 2014 Ferenc Horváth Executive Vice President of MOL Group Downstream MOL Group Investor Day 15 November 2012, Budapest 1
Slide 61: New Downstream Program to regain top quartile position in Europe
NEW DOWNSTREAM PROGRAM TO REGAIN TOP QUARTILE POSITION IN EUROPE Changed, challenging external enviroment Dramatic change in industry’s profitability compared to ‘golden ages’ Zero based revision of business processes, costs and paradigm shifts in operation are needed $ 500-550 million efficiency im
Slide 62: Changed, challenging downstream environment
CHANGED, CHALLENGING DOWNSTREAM ENVIRONMENT USD/bbl 2007-2011 Ch. 150 100 Increased overall energy costs, especially costs on own Brent price +53% consumption & loss 50 High product prices – decreasing product demand 0 2005 2012 Brent DTD crude… Pressure on sales margins USD/bbl Decreased and fluctu
Slide 63: European refineries compete for survival
EUROPEAN REFINERIES COMPETE FOR SURVIVAL Recently closed European refineries OECD Refinery capacity closure ths barrel/day Teeside 117 1400 Wilhelmshafen 260 Europe Coryton 175 1200 Fawley 80 Dunkirk 137 Harburg 101 North America Paramo 20 Nadvornaja 50 1000 Lisichansk 175 Reichstett 81 Pacific Gonf
Slide 64: MOL Group downstream profitability under pressure as well
MOL GROUP DOWNSTREAM PROFITABILITY UNDER PRESSURE AS WELL EBITDA effect on MOL Group DS – 2007 vs. 2011 Clean CCS-based DS* unit EBITDA (USD/bbl) 12 higher oil price ca. $ -550 million 10 low refinery margin 8 ca. $ -250 million 6 decreased gasoline demand ca. $ -50 million 4 2 depressed petchem mar
Slide 65: Initiation of the New Downstream Program
INITIATION OF THE NEW DOWNSTREAM PROGRAM Regain top quartile position in Europe by increasing the efficiency and profitability of MOL Group Downstream $ 500-550 million EBITDA improvement* TARGET $ 370-400 mn $ 130-150 mn cost savings revenue increse *based on 2011 premises 6
Slide 66: Program covers the entire downstream value chain
PROGRAM COVERS THE ENTIRE DOWNSTREAM VALUE CHAIN More than 500 individual projects in 19 main groups of initiatives Crude Supply Refining Logistics Petchem Wholesale Retail Real Crude Selection Value chain On demand production optimization optimization Quality givaways Make or buy (Own production vs
Slide 67: 10% cost savings by targeting all the key cost elements
10% COST SAVINGS BY TARGETING ALL THE KEY COST ELEMENTS Cost structure* of Energy cost 1 MOL Group Volumetric reduction Downstream Optimization of energy sources and procedures $ 3.7 billion Contract management New Downstream Program target: 10% reduction Energy cost (own cons.) Maintenance cost 2 T
Slide 68: Targeted 10% decrease in total energy costs
TARGETED 10% DECREASE IN TOTAL ENERGY COSTS 1 Solomon EII ® (MOL Group vs. Western Europe Trend Group) Q4 240 Q3 Aiming to reach Q1 performance in 220 Q2 Solomon index for DR, BR Index 200 Q1 Index Sisak 180 Aiming to increase CRO refineries Intensity Rijeka intensity 160 140 Energy 120 Energy Manto
Slide 69: Energy efficiency projects
ENERGY EFFICIENCY PROJECTS 1 Bubble size represents targeted EBITDA improvement (M USD, 2014 vs. 2011) Flare gas recovery by a new 12 More efficient steam recompression station at production by modernisation Sisak Refinery of quench coolers at TVK Benefit: 3.75 M USD Benefit: 4.3 M USD Start: 2013 Q
Slide 70: Keep tight maintenance spendings
KEEP TIGHT MAINTENANCE SPENDINGS 2 Solomon 300 MEI ® (Western Europe Trend Group) Q4 250 Q3 Complex Maintenance Spending (CMS): Maintenance Efficiency Index 200 Q2 Ca. USD 400 million in 2011, Q1 including USD 120 million CAPEX 150 (EURO) Mantova 100 Sisak Aiming to reach Q1 efficiency in maintenanc
Slide 71: Other significant cost and cash flow related initiatives
OTHER SIGNIFICANT COST AND CASH FLOW RELATED NEW DOWNSTREAM INITIATIVES Inventory Hydrocarbon loss management management Ca. 10% stockholding Hydrocarbon loss in 2011: 0.9% reduction target: Ca. USD 110-120 million Release 110-120 kt Set non-tolerable loss limits and act to product and raw material
Slide 72: Reorganization and resource productivity improvement
REORGANIZATION AND RESOURCE PRODUCTIVITY IMPROVEMENT 3 Downstream Old DS structure 1. Review of our business R&M Petchem Retail SCM processes and organizational structure: PROD PROD Wind up silo operation Exploit synergy potentials LOG LOG SALES Cease functional duplications and activity SALES SALES
Slide 73: Group level effect of downstream reorganization
GROUP LEVEL EFFECT OF DOWNSTREAM REORGANIZATION 3 Organizations Headcount Group-level Downstream organizations Group-level headcount reduction decreased by 60% from 520 to 165 people Managerial headcount reduction by 30% New/remaining Terminating Group-level Terminating group-level group-level 41 gr
Slide 74: Sales portfolio revision to increase margin revenue
SALES PORTFOLIO REVISION TO INCREASE MARGIN REVENUE Fuel Sales - Logistics Retail Increase/maintain strong market leader position on Increase and rationalize Retail market presence domestic markets Growth in Czech Rep., Romania, Serbia, Slovenia Market optimization on core export markets Keep leadin
Slide 75: Few 'big things' and hundreds of small actions
FEW ‘BIG THINGS’ AND HUNDREDS OF SMALL ACTIONS cumulative Total 2014 savings Some mid-scale projects and hundreds of small actions within the more than 500 projects 80% of total EBITDA increase will result from 17% 400 of actions Four main areas deliver more than 50% of total benefit 80% 200 Energy
Slide 76: Continuous delivery
CONTINUOUS DELIVERY cost revenue ∑500-550 ∑500-550 mn USD mn USD 500 ∑400 mn USD 400 benefit [mn USD] 300 200 130 mn USD 100 0 2012 2013 2014 2014 vs 2011 Majority of the benefit should be realized till end of 2013 Proportional contribution of key flagship companies 17
Slide 77: Strict tracking and monitoring of the program
STRICT TRACKING AND MONITORING OF THE PROGRAM Filtering out Downstream level Action level reporting external effects Financial verification Calculate progress and benefit Comparing calculated and achieved through physical and financial KPIs. EBITDA impact Action level performance monitoring Filterin
Slide 78: On track results of New Downstream Program in 2012 Q1-Q3
ON TRACK RESULTS OF NEW DOWNSTREAM PROGRAM IN 2012 Q1-Q3 Results are determined: External factors (e.g. refining & petrochemical margins; demand) Internal efficiency Improvement Program Other internal factors (e.g. unplanned shutdowns) New Downstream Program actions resulted in $ 114 million in 2012
Slide 79: Summary - New Downstream Program 2012-2014
SUMMARY - NEW DOWNSTREAM PROGRAM 2012-2014 Return to the European top quartile $ 500-550 million efficiency improvement on 2011 basis, equal to 3 - 3.5 USD/bbl increase Covering the entire Downstream value chain with more than 500 individual projects Continuous delivery with proportional contributio
Slide 80: Conservative policy to keep financial stability even in hard times
CONSERVATIVE POLICY TO KEEP FINANCIAL STABILITY EVEN IN HARD TIMES József Simola Chief Financial Officer of MOL Group MOL Group Investor Day 15 November 2012, Budapest 1
Slide 81: Key financial principles – solid balance sheet has top priority
KEY FINANCIAL PRINCIPLES – SOLID BALANCE SHEET HAS TOP PRIORITY Keep key covenant and gearing ratio in the safety zone Around 2.0 Net Debt to EBITDA and 30% gearing ratio Adjust CAPEX if external environment requires In general CAPEX should be financed from Operating Cash Flow Further diversificatio
Slide 82: Continuously strengthening financial position
CONTINUOUSLY STRENGTHENING FINANCIAL POSITION… Covenants Gearing (%) Limit of net debt to EBITDA 40 3,5 EBITDA (in bn USD) 36 Net debt to EBITDA 3,0 33 3 31 2,5 30 28 2,5 2,4 2,2 24 2,0 2 (%) 20 1,5 1 10 0,5 0 0 2008 2009 2010 2011 Q3 2012 rolling* 2008 2009 2010 2011 Q1-Q3 2012 Keep covenants in th
Slide 83: Capex financed from operating cash flow
…SUPPORTED BY OUR CONSERVATIVE, PROVED POLICY: In general CAPEX should be financed from operating cashflow 600 450 bn HUF 300 150 0 2007 2008 2009 2010 2011 Q1-3 2012 CAPEX - acq INA acq Pearl Operating Cash Flow 4
Slide 84: Up to USD 2.0 bn capex per annum in the next 3 years
UP TO USD 2.0 BN CAPEX PER ANNUM IN THE NEXT 3 YEARS CAPEX 2013-2015 Downstream Upstream Control sustain-type CAPEX Kurdistan Region of Iraq: appraisal and accelerated Profitable growth projects 28% field development up to (cca. 50%) 52% 2.0 bn Efficiency improvement of CEE field development USD/yea
Slide 85: Maintaining balanced funding portfolio
MAINTAINING BALANCED FUNDING PORTFOLIO Mid- and long-term committed funding portfolio based on facilities as of 30 September 2012 Further steps made towards diversification in 2012 2% 10% 10% New USD 500 mn dollar bond issued 10% with 7 year maturity - Sep 2012 35% + 1 year extension for more than h
Slide 86: More than EUR 2.8 bn available liquidity
MORE THAN EUR 2.8 BN AVAILABLE LIQUIDITY Maturity profile as of 30 September 2012 1800 1600 1400 1200 1000 EUR M 800 600 400 200 0 Term deposits 2012 2013 2014 2015 2016 2017 2018 2019 Deposits Outstanding short-term loans Medium-term loans Bonds PEX Long-term loans (multilaterals) Undrown facilitie
Slide 87: FX mix of operation serves as a natural hedge for our debt
FX MIX OF OPERATION SERVES AS A NATURAL HEDGE FOR OUR DEBT USD and EUR denominated business mix, balanced FX exposure with the debt portfolio Revenue generation by divisions, Q1-Q3 2012 Debt by currencies, 31 Sep 2012 Corporate & Gas HUF; 3% other; 3% Upstream; Midstream; 7% 13% USD; 27% EUR; 70% Do
Slide 88: Summary – key takeaways
SUMMARY – KEY TAKEAWAYS bn USD EBITDA generation in 2011 3 >70% from Upstream, >50% from international operation Bboe Recoverable Resource Potential (WI) in 11 countries 1.6 682 Mmboe 2P reserves at the end of 2011 170- mboepd Group level production target by 2018 180 o/w 55-62 mboepd to come from K