43 slides from Mol Hungarian Oil & Gas Plc Class A's earnings presentation, Feb 21, 2020
Slide 1: Fourth Quarter 2019 Results
FOURTH QUARTER 2019 RESULTS 21 FEBRUARY 2020
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 4 2 KEY GROUP QUARTERLY FINANCIALS 9 3 DOWNSTREAM QUARTERLY RESULTS 16 4 CONSUMER SERVICES QUARTERLY RESULTS 20 5 UPSTREAM QUARTERLY RESULTS 24 6 2020 GROUP LEVEL OUTLOOK 31 7 SUPPORTING SLIDES 33 3
Slide 4: Highlights of the Quarter
HIGHLIGHTS OF THE QUARTER
Slide 5: 2019: Meeting the Upgraded Guidance
2019: MEETING THE UPGRADED GUIDANCE WITH THE ESSENTIAL FUNDAMENTAL BUILDING BLOCKS IN PLACE 2019 2019 2020 TARGETS RESULTS TARGETS RESILIENT GROUP CLEAN UPGRADED TO INTEGRATED CCS EBITDA USD 2.44 BN ~USD 2.5 BN ~USD 2.4 BN BUSINESS MODEL GROUP CAPEX USD 1.9-2.1 BN USD 2.08 BN USD 1.9-2.1 BN (ORGANIC
Slide 6: Solid, Consistent EBITDA Generation
SOLID, CONSISTENT EBITDA GENERATION RESILIENT INTEGRATED BUSINESS MODEL IN A HIGHLY VOLATILE ENVIRONMENT EXTERNAL ENVIRONMENT* VS MOL CLEAN CCS EBITDA (USD MN) 100% 800 85% 600 70% 55% 400 40% 200 25% 10% 0 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4
Slide 7: Q4 2019: Slightly Lower, Still Much Reasonable EBITDA
Q4 2019: SLIGHTLY LOWER, STILL MUCH REASONABLE EBITDA DESPITE MOST MACRO DRIVERS TURNING NEGATIVE IN THE QUARTER FINANCIAL HIGHLIGHTS Clean CCS EBITDA was USD 598mn in Q4, 13% lower YoY, bringing FY 2019 EBITDA to USD 2.44bn, just above the recently upgraded guidance Simplified FCF declined YoY, but
Slide 8: Sustainability Performance Recognized
SUSTAINABILITY PERFORMANCE RECOGNIZED GROUP TOTAL RECORDABLE INJURY RATE GROUP TIER 1 PROCESS SAFETY EVENTS 1.8 5 1.6 1.6 1.4 4 1.3 1.3 3 2 1 0 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Yearly TRIR came in at 1.43, below the 1.5 target as a resul
Slide 9: Key Group Quarterly Financials
KEY GROUP QUARTERLY FINANCIALS
Slide 10: Lower Q4 EBITDA in a Weaker External Environment
LOWER Q4 EBITDA IN A WEAKER EXTERNAL ENVIRONMENT PARTLY OFFSET BY AN OUTSTANDING PERFORMANCE IN CONSUMER SERVICES AND GAS MIDSTREAM SEGMENT CLEAN CCS EBITDA (USD mn) COMMENTS -13% -13% Upstream 708 686 689 634 598 Lower oil and gas prices, flat production slightly above guidance, 235 strong cost con
Slide 11: Organic Capex Further Up on Strategic Projects
ORGANIC CAPEX FURTHER UP ON STRATEGIC PROJECTS TOTAL 2019 ORGANIC CAPEX OF USD 2.08BN AT THE UPPER END OF THE GUIDANCE RANGE TOTAL GROUP CAPEX (USD mn) TOTAL GROUP CAPEX (USD mn) +40% +48% 861 861 216 152 613 580 613 580 111 101 513 513 0 263 100 80 310 218 493 287 310 287 440 22 476 316 413 81 288
Slide 12: Simplified FCF Remains Positive in 2019 Despite Higher Capex
SIMPLIFIED FCF REMAINS POSITIVE IN 2019 DESPITE HIGHER CAPEX UPSTREAM, CONSUMER SERVICES, GAS MIDSTREAM ALL REMAINED POSITIVE FCF CONTRIBUTORS SIMPLIFIED FCF* (USD mn) COMMENTS 398 Group-level simplified FCF (Clean CCS EBITDA less organic capex) 109 109 231 declined to a negative USD 111mn in Q4 201
Slide 13: Reported Net Income and EPS Lower on Weaker EBITDA
REPORTED NET INCOME AND EPS LOWER ON WEAKER EBITDA AND ALSO AFFECTED BY CCS MODIFICATION, DEFERRED TAX AND LOWER INCOME FROM ASSOCIATES FY 2019 EARNINGS (USD mn) – BELOW THE EBITDA LINE ITEMS 2,435 Other 46 70 11 Consumer Services 471 Cash tax: USD 80mn 1,342 Deferred tax: USD 83mn Downstream 866 2,
Slide 14: Operating Cash Flow Increased in 2019 YoY
OPERATING CASH FLOW INCREASED IN 2019 YOY HELPED BY MORE BENIGN CHANGES IN NET WORKING CAPITAL OPERATING CASH FLOW IN FY 2019 (USD mn) 2,445 2,428 17 67 220 2,079 1,342 950 Profit Before Tax DD&A Income tax paid Other Operating CF before WC Change in WC Operating CF Organic CAPEX COMMENTS Operating
Slide 15: No Material Change in Debt and Leverage in Q4
NO MATERIAL CHANGE IN DEBT AND LEVERAGE IN Q4 LARGE DECLINE IN NWC OFFSET NEGATIVE SIMPLIFIED FCF AND SOME M&A SPENDING NET DEBT TO EBITDA (x) GEARING (%) 2.0 30 28 25 25 25 1.5 1.44 1.38 21 1.31 20 20 19 18 19 17 16 15 0.97 1.0 15 0.79 0.79 0.82 12 0.74 0.74 0.65 0.57 10 0.5 0.41 5 0 2011 2012 2013
Slide 16: Downstream Q4 2019 Results
DOWNSTREAM Q4 2019 RESULTS
Slide 17: Downstream EBITDA Declined on Weaker Margins
DOWNSTREAM EBITDA DECLINED ON WEAKER MARGINS BOTH IN Q4 AND IN FY 2019 QUARTERLY CLEAN CCS EBITDA (USD mn) TOTAL PRODUCT SALES (kt) Petchem R&M Total petrochemicals products Total refined products -21% -30% 265 272 262 +2% -7% 241 73 5,413 5,492 43 5,018 4,967 310 5,103 191 373 279 4,419 17 138 199
Slide 18: Margins Dropped at the End of the Year
MARGINS DROPPED AT THE END OF THE YEAR FOLLOWING A VERY STRONG OCTOBER IN REFINING REFINING MARGIN1 (USD/bbl) COMMENTS Total MOL Group refinery margin Refining margins were lower in Q4 YoY, as the extremely strong October Complex refinery margin (MOL+SN) 8.0 was followed by collapsing margins at the
Slide 19: Clean CCS EBITDA Down 21% in Q4 on Margins, Petchem Volumes
CLEAN CCS EBITDA DOWN 21% IN Q4 ON MARGINS, PETCHEM VOLUMES FY 2019 EBITDA DROP REFLECTS THE WEAKER REFINING ENVIRONMENT CLEAN CCS EBITDA YoY, Q4 2019 VS. Q4 2018 (USD mn) COMMENTS 241 Negative R&M price impact due to lower 28 Petchem 43 6 15 headline margins (-0.6 USD/bbl) and lower 191 14 sales ma
Slide 20: Consumer Services Q4 2019 Results
CONSUMER SERVICES Q4 2019 RESULTS
Slide 21: Outstanding EBITDA Growth in Q4 Caps a Very Strong Year
OUTSTANDING EBITDA GROWTH IN Q4 CAPS A VERY STRONG YEAR CONSUMER SERVICES REACH USD 500MN EBITDA MILESTONE MUCH EARLIER THAN PLANNED QUARTERLY EBITDA (USD mn) EBITDA YoY, Q4 2019 VS. Q4 2018 (USD mn) +30% +24% 109 2 104 9 5 84 14 161 147 118 104 84 89 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019
Slide 22: Fuel Sales Increased by Close to 5% in Both Q4 and FY 2019
FUEL SALES INCREASED BY CLOSE TO 5% IN BOTH Q4 AND FY 2019 AS REGIONAL FUEL CONSUMPTION GROWTH SHOWED NO SIGN OF A SLOWDOWN YET IN 2019 TOTAL VOLUMES SOLD (mn litres) FUEL THROUGHPUT/SITE (mn litres) 0.77 0.80 0.75 0.70 0.71 4.9% 1 689 1 609 4Y CAGR: 1 507 1 482 1 412 +3.4% 1 299 Q4 2015 Q4 2016 Q4
Slide 23: Non-Fuel Margin Reaching 30% of the Total Margin
NON-FUEL MARGIN REACHING 30% OF THE TOTAL MARGIN AS NON-FUEL CONTINUED TO VISIBLY OUTGROW THE EXPANDING FUEL MARGIN NON-FUEL MARGIN (USD MN) NON-FUEL MARGIN / SITE (’000 USD) +10% 37.2 33.9 29.3 22.2 19.3 4Y CAGR: +18% 81.2 70.8 68.6 68.7 62.7 56.1 Q4 2015 Q4 2016 Q4 2017 Q4 2018 Q4 2019 149 137 Q3
Slide 24: Upstream Q4 2019 Results
UPSTREAM Q4 2019 RESULTS
Slide 25: E&P EBITDA Recovering Somewhat in Q4
E&P EBITDA RECOVERING SOMEWHAT IN Q4 QUARTERLY EBITDA (ex-spec) (USD mn) REALIZED HYDROCARBON PRICES -22% +12% 80 74.4 75.3 75 67.8 68.8 70 66.8 339 65 63.2 61.9 63.3 319 61.4 68.8 283 269 264 66.8 235 60 64.6 64.8 52.1 53.3 53.5 55 60.7 51.3 52.1 60.2 58.8 58.4 47.3 47.5 48.2 50 46.3 45.2 Q3 2018 Q
Slide 26: Robust Unit Free Cash Flow Despite Lower Prices
ROBUST UNIT FREE CASH FLOW DESPITE LOWER PRICES EXISTING BARRELS GENERATE SUBSTANTIAL CASH AND VALUE QUARTERLY PRICE REALIZATION, EBITDA, FCF (USD/boe) 80 75 68 69 70 63 62 63 60 54 52 Brent price 47 48 50 43 45 40 34 34 Realized HC price 30 28 25 28 30 Unit EBITDA 20 Unit FCF* 10 26 23 21 19 17 16
Slide 27: Slightly Higher Prices, Rebounding Production in Q4
SLIGHTLY HIGHER PRICES, REBOUNDING PRODUCTION IN Q4 UPSTREAM EBITDA QoQ, Q4 2019 VS. Q3 2019 (USD mn) COMMENTS 2 11 Both oil and gas prices increased slightly in Q4 9 264 27 QoQ 235 19 Positive volumes impact reflects higher production in Q4 and a further shift towards 133 high-margin UK barrels Hig
Slide 28: Full-Year Production of 111 mboepd, Slightly Above Guidance
FULL-YEAR PRODUCTION OF 111 MBOEPD, SLIGHTLY ABOVE GUIDANCE PRODUCTION REBOUNDED TO ABOVE 110 MBOEPD TOWARDS THE END OF THE YEAR, DRIVEN BY THE UK QUARTERLY PRODUCTION BY COUNTRY (mboepd) COMMENTS Q4 2019 QoQ (vs. Q3 2019): 114.9 115.5 UK: +5.3 mboepd on jump in Scolty & 111.8 112.0 108.3 9.7 107.5
Slide 29: Very Competitive Unit Opex with a Seasonal Uptick in Q4
VERY COMPETITIVE UNIT OPEX WITH A SEASONAL UPTICK IN Q4 UNIT OPEX (USD/boe) COMMENTS 9 Group (incl. JVs/associates) Fully consolidated subs. 7.9 Group-level unit opex (direct production cost), including JVs and 8 7.5 7.5 7.5 7.0 6.9 7.1 associates, increased seasonally in Q4 to USD 7.1/boe and was a
Slide 30: 2P Reserves at 270 MMboe at the End of 2019
2P RESERVES AT 270 MMBOE AT THE END OF 2019 ACG TO ADD MEANINGFULLY TO 2P RESERVES IN 2020 ONCE THE DEAL IS COMPLETED 2P RESERVES MOVEMENTS (MMBOE) COMMENTS 323.6 Upward revisions: Hungary (+10 MMboe), Croatia (+6 MMboe), UK (+3 MMboe) and Pakistan (+2 MMboe) 38.6 21.0 0.0 1.0 37.0 Downward revision
Slide 31: 2020 Group Level Outlook
2020 GROUP LEVEL OUTLOOK
Slide 32: 2020 Guidance and Outlook
2020 GUIDANCE AND OUTLOOK EXTERNAL ENVIRONMENT (2020) EBITDA, CAPEX (2020) No change in MOL’s mid-term base macro framework Around USD 2.5bn EBITDA at the working assumptions, (assumptions used for the 2019-23 financial framework) including 6-month contribution from ACG 2020 may bring more uncertain
Slide 33: Supporting Slides
SUPPORTING SLIDES
Slide 34: Upstream & Downstream EBITDA Changes
UPSTREAM & DOWNSTREAM EBITDA CHANGES UPSTREAM EBITDA YoY Q4 2019 VS. Q4 2018 (USD mn) COMMENTS 339 Key drivers in Q4 2019 vs. Q4 2018 51 Plunging realized gas prices (-29% YoY) and also much lower oil price (Brent -18% YoY, 13 1 1 11 264 or -13 USD/bbl) 145 119 Negative volume impact, as the CEE dec
Slide 35: Upstream: Operational Update (1)
UPSTREAM: OPERATIONAL UPDATE (1) Hungary United Kingdom Exploration: UK production stood at 21.9 mboepd in Q4 2019, jumping 32% QoQ and also MOL was awarded two new concessions in the 7th bid round (Kisvárda 25% higher YoY, driven by the excellent performance of Scolty & Crathes and Nyírbátor) and S
Slide 36: Upstream: Operational Update (2)
UPSTREAM: OPERATIONAL UPDATE (2) Pakistan Kurdistan Region of Iraq Production (net to MOL) was at 8.1 mboepd in Q4, 3% higher QoQ and Shaikan production reached 3.6 mboepd in Q4 2019 (net to MOL), slightly practically flat YoY lower QoQ due to a planned maintenance turnover TAL block gross productio
Slide 37: Upstream Capex by Region and by Type
UPSTREAM CAPEX BY REGION AND BY TYPE CAPEX BY REGION AND BY TYPE (USD mn) HUN CRO KRI PAK UK NOR OTHER Total – FY 2019 Total – FY 2018 EXP 16.6 6.3 0.0 3.3 0.0 58.1 10.0 94.3 70.3 DEV 75.5 41.8 27.7 2.9 50.5 0.2 15.4 213.9 200.7 M&A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other 11.1 30.2 0.7 0.4 9.2 0.0
Slide 38: Gas Midstream: Key Financials
GAS MIDSTREAM: KEY FINANCIALS EBITDA (USD mn) CAPEX (USD mn) +48% +161% 24 70.8 65.5 18 47.7 14 25.2 27.1 8 23.1 5 1 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 KEY FINANCIALS (USD mn) COMMENTS EBITDA rose by 48% in Q4 YoY as capacity demand rose s
Slide 39: Sustainability Indicators
SUSTAINABILITY INDICATORS CO2 under ETS (mn t) HC Spill above 1bbl (m3) Tier1 PSE -9% 5.0 300 254.9 5 2.0 1.7 4.0 1.6 1.6 1.6 4 1.4 1.4 3.0 1.5 200 3 1.0 2.0 100 2 1.0 0.5 14.8 23.7 36.9 21.2 1 7.3 0.0 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q3
Slide 40: Macro Indicators
MACRO INDICATORS BRENT (USD/bbl) REFINERY MARGIN (USD/bbl) HUF/USD (Q avg.) 120 10 MOL Group 320 100 8 Complex 300 280 80 6 260 60 4 240 40 2 220 20 0 200 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 1
Slide 41: Consolidated Statement of Profit or Loss
CONSOLIDATED STATEMENT OF PROFIT OR LOSS YoY Q3 2019 Q4 2019 Q4 2018 Income Statement (HUF mn) FY 2019 FY 2018 Ch % Ch % 1,399,968 1,383,340 1,383,964 0 Net sales 5,266,735 5,168,668 2 5,157 17,902 20,883 (14) Other operating income 30,471 41,971 (27) 1,405,125 1,401,242 1,404,847 0 Total operating
Slide 42: Consolidated Statement of Financial Position
CONSOLIDATED STATEMENT OF FINANCIAL POSITION Balance Sheet (HUF mn) 31 Dec 2019 31 Dec 2018 Ch % Equity and Liabilities Assets Shareholders’ equity Non-current assets Share capital 79,408 79,298 0 Property, plant and equipment 2,685,969 2,274,271 18 Reserves 1,848,763 1,613,961 15 Intangible assets
Slide 43: Consolidated Statement of Cash Flow
CONSOLIDATED STATEMENT OF CASH FLOW Q3 2019 Q4 2019 Q4 2018 YoY Ch % Cash Flow (HUF mn) FY 2019 FY 2018 Ch % 85,353 45,511 40,950 11 Profit / (loss) before tax 275,699 331,351 (17) Adjustments to reconcile profit before tax to net cash provided by operating activities 87,700 124,636 143,019 (13) Dep