91 slides from Mol Hungarian Oil & Gas Plc Class A's investor presentation, May 2017
Slide 1: MOL Group Investor Presentation May 2017
MOL GROUP INVESTOR PRESENTATION May 2017
Slide 2: MOL Group in Brief
MOL GROUP IN BRIEF INTEGRATED OIL & GAS COMPANY Upstream Downstream Consumer Services Gas Midstream CEE International R&M Petchem CAPITAL MARKETS OVERVIEW BUSINESS/ASSETS OVERVIEW Tickers: MOL HB; MOLB.BU Countries of operation: 33 Main listings: Budapest, Warsaw Number of employees: 25,000 Number o
Slide 3: Agenda
AGENDA 1 Investment Case & Financial Framework 2 Q1 2017 Recap 3 Downstream 4 Consumer Services 5 Exploration and Production 6 Financials, Governance, Others 3
Slide 4: Investment Case & Financial Framework
INVESTMENT CASE & FINANCIAL FRAMEWORK
Slide 5: MOL Group 2030: A Vision, A Strategy and One Overriding Objective
MOL GROUP 2030: A VISION, A STRATEGY AND ONE OVERRIDING OBJECTIVE MOL 2030 BUILD ON EXISTING LEAD THE INDUSTRIAL LEVERAGE ON CEE STRENGTHS TRANSFORMATION LEADERSHIP DIVERSIFY AWAY FROM USE EXISTING MARKET RESILIENT INTEGRATED FUELS… PRESENCE AND BUSINESS MODEL CUSTOMER BASE …AND GROW HIGH-QUALITY (P
Slide 6: Conservative Macro Assumptions for 2017-21
CONSERVATIVE MACRO ASSUMPTIONS FOR 2017-21 KEY MACRO ASSUMPTIONS EBITDA SENSITIVITY TO KEY EXTERNAL DRIVERS Sensitivity1 Est. Clean CCS EBITDA % of Group impact (USD mn) EBITDA 2016 Q1 5Y 2017- 2014 2015 2016 2017 AVG 21E +/‐ 50 USD/Mcm ~30 1.4% Brent Gas Price (NCG2) 40- crude 99 52 44 54 78 60 (US
Slide 7: 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 8: High Quality, Low Cost Asset Base
HIGH QUALITY, LOW COST ASSET BASE VERY LOW BREAK-EVEN PRICES IN BOTH UPSTREAM AND DOWNSTREAM E&P UNIT OPEX1 (USD/BOE) MOL 2030 45 40 35 30 MOL will build on existing USD/bbl 25 strengths 20 15 Continued relentless focus 10 on efficiency... 5 0 ...to maintain competitive H2 2013 H1 2014 H2 2014 H1 20
Slide 9: Constant Drive for Efficiency
CONSTANT DRIVE FOR EFFICIENCY SUCCESSFUL EFFICIENCY PROGRAMS WITH MAJOR EBITDA CONTRIBUTION DOWNSTREAM EFFICIENCY PROGRAMS AND CLEAN CCS EBITDA (USD MN) ~500 1,500 ~ 1,400‐1,500 ~500 1,000 874 500 350 0 2011 2014 2017 NEW UPSTREAM PROGRAM (USD MN, MBOEPD) CONTROLLABLE ~‐18% ORGANIC CEE +5% OPEX CAPE
Slide 10: Sustained Cash Generation
SUSTAINED CASH GENERATION IN 2016 AND IN THE NEXT 5 YEARS CLEAN-CCS EBITDA (USD BN) 2.5 2.3 2.5 2.2 2.2 0.7 2.0‐2.2 2.0+ 0.7 1.9 1.6 1.2 1.7 1.5 0.7 0.9 0.7 0.6 Q1 0.3 0.3 0.3 0.2 0.2 ‐0.3 ‐0.3 ‐0.1 ‐0.1 ‐0.2 2012 2013 2014 2015 2016 2017 YTD 2017‐21E Average Upstream Downstream Gas Midstream Corpor
Slide 11: DS: Outstanding Mid-Cycle FCF Generation
DS: OUTSTANDING „MID-CYCLE” FCF GENERATION WITH CONTINUOUS FOCUS ON EFFICIENCY IMPROVEMENT CLEAN CCS EBITDA (USD MN) 1,453 1,400-1,500 ~150 ~160 ~410 400-500 ~170 ~340 ~1000 874 24 500 350 2011 NDSP Macro* 2014 NxDSP Offsetting Macro 2016 Macro* NxDSP 2017 Normalized Simplified delivered items** CAP
Slide 12: Gradual EBITDA Transformation
GRADUAL EBITDA TRANSFORMATION TOWARDS „HIGHER-VALUE”, STABLE CONSUMER SERVICES CASH FLOW EBITDA TRANSFORMATION IN 2013-2030 (USD MN) Consumer services EBITDA (USD mn) 600 40% Weight in Group EBITDA (%), right axis 550 500 450‐500 30% 450 30% 400 ~23% 350 307 300 20% 250 221 14% 200 151 9% 150 10% 7%
Slide 13: E&P Delivers Substantial FCF in 2016-21
E&P DELIVERS SUBSTANTIAL FCF IN 2016-21 WITH MATERIAL FLEXIBILITY ON THE CAPEX SIDE EBITDA, CAPEX AND FCF EXPECTATIONS (2016-21, USD MN) KEY MESSAGES Brent @ 60 USD/bbl Next 5Y post-tax free +USD Less than 20% of cash-flow shall cover ~750mn the total Upstream reserve replacement EBITDA CAPEX pool i
Slide 14: Strong Sustain Capex Discipline
STRONG „SUSTAIN” CAPEX DISCIPLINE SUSTAIN CAPEX (USD BN)1 Organic US Organic DS Organic GM Organic C&O (incl. intersegment) Group total 1.8 1.7 1.6 1.4 1.3 1.2 0.9 Up to 1.2 1.2 1.0 1.0 1.0‐1.1 1.0 0.7 0.7 0.8 0.5 0.4 0.6 0.4 0.7 0.4 0.4 0.5 0.5 0.2 0.1 Q1 0.0 2012 2013 2014 2015 2016 2017 YTD 2017‐
Slide 15: Robust Simplified Free Cash Flow
ROBUST SIMPLIFIED FREE CASH FLOW ACROSS THE CYCLE AND ACROSS ALL BUSINESS SEGMENTS SIMPLIFIED FREE CASH FLOW1 (USD BN) Organic US Organic DS Organic GM Organic C&O (incl. intersegment) Group total 1.5 1.8 1.6 1.1 1.2 1.4 1.1 0.0 1.2 0.2 1.0‐1.1 1.3 1.0 0.9 0.8+ 0.8 1.2 0.5 0.6 1.0 0.3 0.4 0.3 0.2 0.
Slide 16: Transformational Capex
TRANSFORMATIONAL CAPEX MOL 2030 STRATEGY IMPLEMENTATION TRANSFORMATIONAL CAPEX (USD BN) MOL 2030 Refining/Chemicals transformational capex: tbd Consumers a total of ~USD 4.5bn until 2030 Up to USD 1.9bn spending in petchem/chemicals in 2017‐21 tbd E&P Steam cracker integration and debottlenecking an
Slide 17: FCF to Cover Strategic Capex in 2017-21
FCF TO COVER STRATEGIC CAPEX IN 2017-21 AND TO CREATE HEADROOM FOR ADDITIONAL TRANSFORMATIONAL SPENDING NEXT 5-YEAR CASH FLOW GENERATION AMBITIONS, 2017-21 (USD BN)1 10‐11 ‐1.4‐1.6 ‐5.0‐5.5 ‐2.0 ‐1.0‐1.3 ~0.6 Clean CCS EBITDA Funding cost/tax/FX Sustain Capex Transformational Dividends FCF‐post‐divi
Slide 18: Increasing Distribution to Shareholders
INCREASING DISTRIBUTION TO SHAREHOLDERS SECOND CONSECUTIVE YEAR WITH DOUBLE-DIGIT DPS INCREASE DIVIDEND PAYMENTS (HUF BN) Special dividend Regular dividend MOL was one of the very few integrateds 13 who could increase DPS in 2016.... ...and can comfortably cover dividends 55 58 and capex from cash f
Slide 19: Robust Balance Sheet, Ample Headroom
ROBUST BALANCE SHEET, AMPLE HEADROOM REMAIN A PRIORITY IN „MOL 2030” NET DEBT TO EBITDA (X) MOL 2030 2.5 1.96 Net debt/EBITDA to be in 1.0-2.0x tolerance 2.0 1.72 range on a forward-looking basis under 1.66 1.5 1.44 1.38 „normal” circumstances (covenant 1.31 threshold at significantly higher levels)
Slide 20: Simpler Shareholder Structure
SIMPLER SHAREHOLDER STRUCTURE1 HIGHER FREE FLOAT AND LIQUIDITY DESIRABLE IN THE MEDIUM TERM Considerable increase in free-float and liquidity following the CEZ divestment (of 7.4% MOL shares) Crescent has also been selling its MOL shares since H2 2016 AGM approved 8-for-1 stock split from September
Slide 21: MOL 2030 Works With or Without INA
MOL 2030 WORKS WITH OR WITHOUT INA FOCUS ON SECURING RETURN ON INVESTMENT NET DEBT (USD MN), NET DEBT/EBITDA INA: WHAT IS UNCHANGED? (X) AND FCF (USD MN) IN 2016* The priority is to maximise the value of the Full consolidation of INA INA investment: INA as Discontinued ops Keeping and operating INA
Slide 22: Sustainable Development; HSE Commitment
SUNSTAINABLE DEVELOPMENT; HSE COMMITMENT “SUSTAINABILITY PLAN 2020” AND RANKING INCLUSIONS SD GOVERNANCE SD PLAN 2020 Sustainable Development Committee of MAIN OBJECTIVE: achieve and maintain an Board of Directors since 2006; MOL Group internationally acknowledged leading position CEO is a permanent
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Slide 24: Q1 2017 Recap
TOMORROW Q1 2017 RECAP
Slide 25: Q1 2017: Well on Track for a Strong Year
Q1 2017: WELL ON TRACK FOR A STRONG YEAR WITH THE ESSENTIAL FUNDAMENTAL BUILDING BLOCKS IN PLACE 2017 2016 Q1 2017 TARGETS RESILIENT GROUP CLEAN INTEGRATED CCS EBITDA USD 2.15 BN USD 614 MN USD 2 BN+ BUSINESS MODEL GROUP CAPEX USD 1.0 BN USD 109 MN Up to USD 1.2 BN (ORGANIC) FINANCIAL DISCIPLINE SIM
Slide 26: Outstanding Simplified FCF in Q1 2017
OUTSTANDING SIMPLIFIED FCF IN Q1 2017 IN A SUPPORTIVE EXTERNAL ENVIRONMENT FINANCIAL HIGHLIGHTS Clean CCS EBITDA rose 21% YoY to USD 614mn in Q1 2017, as all segments improved their contribution Simplified FCF surged to over USD 500mn (+54% YoY), as organic capex was seasonally low at USD 109mn Upst
Slide 27: Strongest Q1 EBITDA Since 2013, Up 21% YoY
STRONGEST Q1 EBITDA SINCE 2013, UP 21% YOY ALL SEGMENTS BOOSTED THEIR EBITDA CONTRIBUTION SEGMENT CLEAN CCS EBITDA (USD mn) COMMENTS +21% +26% Downstream 614 Both refining and petchem enjoyed better availability (no material 587 506 571 488 unplanned event) both YoY and QoQ 525 219 Both refinery and
Slide 28: Surging Simplified FCF in Q1 2017
SURGING SIMPLIFIED FCF IN Q1 2017 SIMPLIFIED FCF AT USD 0.5+BN; STRENGTH ACROSS THE BOARD SIMPLIFIED FCF* (USD mn) COMMENTS +54% +218% Group-level simplified FCF (Clean CCS EBITDA less organic capex) jumped 505 54% YoY to USD 505m in Q1 2017 163 All segments improved simplified FCF contribution YoY
Slide 29: DS: USD 43mn Higher CCS EBITDA in Q1 2017 YoY
DS: USD 43MN HIGHER CCS EBITDA IN Q1 2017 YOY ON SIGNIFICANTLY IMPROVING R&M CONTRIBUTION CLEAN CCS EBITDA YoY (USD mn) COMMENTS 369 Unlike in Q1 2016 smooth 30 45 34 59 operations resulted in yield 281 47 improvement in refining and 123 higher volumes Petchem 160 Wider headline margin supported ref
Slide 30: Consumer Services Continues Its Ascent
CONSUMER SERVICES CONTINUES ITS ASCENT GROWTH IN FUEL CONSUMPTION DRIVES VOLUMES AND EARNINGS QUARTERLY EBITDA (USD mn) EBITDA YoY (USD mn) 15% 56 3 55 112 1 1 7 81 47 67 55 43 47 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 EBITDA Q1 Fuel volume Non‐fuel Others EBITDA Q1 FX EBITDA Q1 2016 & marg
Slide 31: E&P: Higher Prices, Lower Opex Boost EBITDA
E&P: HIGHER PRICES, LOWER OPEX BOOST EBITDA BROADLY NEUTRAL VOLUMES IMPACT UPSTREAM EBITDA QoQ (USD mn) COMMENTS 9 219 1 2 0 Oil price continued to rise in 193 20 Q1 2017 QoQ (+4.2 USD/bbl), while spot gas prices edged up as well 115 Lower opex continued to add to EBITDA, cash flows 103 EBITDA Price
Slide 32: Stable Production in Q1 2017
STABLE PRODUCTION IN Q1 2017 LOWER CEE GAS OUTPUT MOSTLY OFFSET BY HIGHER PAKISTAN, UK PRODUCTION QUARTERLY PRODUCTION BY COUNTRY (mboepd) COMMENTS QoQ: ‐3% ‐1% CEE: -2.3 mboepd on various 114.4 113.1 operational issues, weather 112.4 111.5 Estimate 108.3 109.2 ~110 7.5 8.0 UK: +1.6 mboepd QoQ 8.7 8
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Slide 34: Downstream Strategy
DOWNSTREAM STRATEGY
Slide 35: Downstream: CEE Stronghold
DOWNSTREAM: CEE STRONGHOLD TRANSFORMATIONAL PROJECTS TO ADD USD 3/BBL BY 2022 TO THE ALREADY OUTSTANDING MARGIN CAPTURE MOL 2030 Downstream strategy prepares for peak fossil-fuel demand R&M: raising the yield of high-value non-motor fuel product to at least 50% by 2030 Petchem: debottlenecking exist
Slide 36: Downstream World Is Under Pressure
DOWNSTREAM WORLD IS UNDER PRESSURE REGULATORY ENVIRONMENT AND CHANGING CUSTOMER BEHAVIOUR CAN SERIOUSLY AFFECT CEE REFINERS LOW-CARBON REVOLUTION DECLINING DEMAND AND BACKED BY PROGRESSIVE ENERGY POLICY1 INCREASING IMPORT IN CEE FOSSIL FUELS PUSHED ECO-FRIENDLINESS and OUT FROM SOME OPENNESS TOWARDS
Slide 37: Preparing for Peak Fuel Demand
PREPARING FOR PEAK FUEL DEMAND FOSSIL FUEL DOMINANCE TO DIMINISH BY 2030, BUT DEMAND STILL SUBSTANTIAL CHEMICALS FOSSIL FUEL DEMAND MAY DECLINE, AIR TRANSPORT BUT STILL MATERIAL OIL-BASED FUEL CONSUMPTION ALTERNATIVE FUELS LIKELY TO TRUCKS WORLD TRENDS GAIN SIGNIFICANT MARKET SHARE PASSENGER CARS IN
Slide 38: Production: 50% Non-Motor Fuel Products by 2030
PRODUCTION: 50% NON-MOTOR FUEL PRODUCTS BY 2030 FROM THE CURRENT LESS THAN 30% MOTOR FUEL GROUP REFINERIES YIELD PRODUCTS 2010 2015 2030 • KEEP CURRENT LEADING POSITION • BUILD ON CURRENT RETAIL NETWORK VALUABLE NON-MOTOR FUEL PRODUCTS ~60% ~70% • INCREASE PRODUCTION OF PETCHEM FEEDSTOCK UP TO 3 MTP
Slide 39: Petchem Debottlenecking to Increase Flexibility
PETCHEM DEBOTTLENECKING TO INCREASE FLEXIBILITY STEAM CRACKER INVESTMENTS TO INCREASE NAPHTHA INTAKE BY UP TO 800 KT/Y CAPEX EARLIEST PROJECT TARGET (USD mn) START-UP • Energy efficiency and propylene yield MPC Steam improvement Cracker Revamp - ~300 2020-2021 naphtha processing NEXT FIVE YEARS • 20
Slide 40: Propylene, Butadiene & Aromatics Attractive for European Naphtha-Based Producers
PROPYLENE, BUTADIENE & AROMATICS ATTRACTIVE FOR EUROPEAN NAPHTHA-BASED PRODUCERS NORTH-AMERICA EUROPE CHINA Shale gas developments – a Economic slowdown in Asia Crackers will rely on more expensive naphtha potential challenge to the turning PE exports towards feedstock, have to focus on efficiency E
Slide 41: Polyol – An Attractive Propylene Derivative
POLYOL – AN ATTRACTIVE PROPYLENE DERIVATIVE MOL LACKS SUFFICIENT AMOUNT OF OWN FEEDSTOCK TO EXPAND IN PP FORWARD INTEGRATION OPTIONS ALONG THE SELECTION CRITERIA PROPYLENE VALUE CHAIN Other Propylene Further analysis is in progress Derivatives Market size 1 WE/CE: 5/0.4 mt/y 2 to recognize other att
Slide 42: Widespread Application of Polyol
WIDESPREAD APPLICATION OF POLYOL … AS AN ESSENTIAL POLYURETHANE COMPONENT GLOBAL POLYURETHANE DEMAND BY DRIVERS INDUSTRY % of global demand Improving access to „essentials of life”, increasing comfort needs ~30% Improving life expectancy and population growth FURNITURE & INTERIOR Improving energy ef
Slide 43: MOL to Become the Sole Integrated Regional Polyol Producer
MOL TO BECOME THE SOLE INTEGRATED REGIONAL POLYOL PRODUCER POLYOL CONSUMPTION PER CAPITA CE POLYOL SUPPPLY (WESTERN EUROPE, 2016 = 100%) Crude Steam Polyol processing cracking W e s t e r n ‐Europe 110% E a s t e r n‐Europe 100% 90% 65% Current CE PO producers 2016 2025 Supply: Demand: CE producers
Slide 44: Attractive Value Chain Extension
ATTRACTIVE VALUE CHAIN EXTENSION WITH 900-1,000 USD/T ADDITIONAL MARGIN CAPTURE OPPORTUNITY PROPYLENE VS. POLYOL SPREADS CE POLYOL MARKET CHARACTERISTICS (USD/T) ~3% CAGR Relative deviation: S u p p ly - PP – propylene: 47% 1,200 Demand - PO – propylene: 13% 1,000 ~80kt ~150 800 deficit 600 currentl
Slide 45: ~USD 1.9bn Earmarked for Petchem Until 2021
~USD 1.9BN EARMARKED FOR PETCHEM UNTIL 2021 PROVIDING ~2 USD/BBL ADDITIONAL EBITDA CAPTURE IN DOWNSTREAM EARMARKED CAPEX FOR PETROCHEMICAL GROWTH PROJECTS (2017-21, USD MN) ~1,800-2,000 Annual incremental 900-1,000 1,500-1,700 EBITDA1 of USD 250-300mn from growth projects • Growth CAPEX shall be cov
Slide 46: 2030 Strategy and 2030 Culture
2030 STRATEGY AND 2030 CULTURE VISION VALUES STRATEGY STANDARDS GOALS CULTURE 2030 STRATEGY ENTER TOMORROW COMPETENCY ACTIONS BEHAVIOUR PROCESSES RESULT 46
Slide 47: Downstream Overview
DOWNSTREAM OVERVIEW
Slide 48: Integrated Downstream Model in CEE Countries
INTEGRATED DOWNSTREAM MODEL IN CEE 12 COUNTRIES SALES OF 18 mtpa REFINED PRODUCTS AND 1.25 mtpa PETROCHEMICALS TO OUR WHOLESALE CUSTOMERS WORLDWIDE ANNUALY SERVICE STATIONS ~2000 FUEL SOLD ~5.2 bnliters 48
Slide 49: Deep Downstream Integration
DEEP DOWNSTREAM INTEGRATION HIGH-QUALITY LAND-LOCKED ASSETS WITH OUTSTANDING MARGIN CAPTURE MARKET SHARE (%)1 DOWNSTREAM INTEGRATION (FUELS)2 ~24% CRUDE INTAKE: • Russian: ~40% 67% • Seaborne: 25% ~85% • Own Refining ~80% production: ~36% 8% captive Retail ~45% market3 own ~15% market Petchem <10% 2
Slide 50: Over 12 USD/bbl Margin Capture in 2016
OVER 12 USD/BBL MARGIN CAPTURE IN 2016 FURTHER ~3 USD/BBL UPLIFT POTENTIAL FROM PETCHEM & CONSUMERS DOWNSTREAM (W/O INA) CAPTURED EBITDA MARGIN (USD/BBL) ~1 ~2 12.3 2.0 Sales margin 4.6 ~5 USD/BBL delivered through internal efficiency Bulk improvement (2012-16) margin 5.7 R&M gross R&M OPEX R&M Petc
Slide 51: NxDSP: USD 350mn Asset & Efficiency Improvement
NXDSP: USD 350MN ASSET&EFFICIENCY IMPROVEMENT ADDITIONAL USD 150MN TARGETED FROM GROWTH PROJECTS EFFICIENCY IMPROVEMENT GROWTH PROJECTS’ CONTRIBUTION 2 1 (CUMULATIVE, MN USD) (MN USD) 350 Production USD ~270MN 1. Availability & USD ~70MN DELIVERED SO FAR DELIVERED SO FAR maintenance (ONLY USD 10MN I
Slide 52: Outstanding Mid-Cycle FCF Generation
OUTSTANDING „MID-CYCLE” FCF GENERATION WITH CONTINUOUS FOCUS ON EFFICIENCY IMPROVEMENT CLEAN CCS EBITDA (USD MN) 1,453 1,400-1,500 ~150 ~160 ~410 400-500 ~170 ~340 ~1000 874 24 500 350 2011 NDSP Macro* 2014 NxDSP Offsetting Macro 2016 Macro* NxDSP 2017 Normalized Simplified delivered items** CAPEX F
Slide 53: Constantly Improve Efficiency and Availability
CONSTANTLY IMPROVE EFFICIENCY AND AVAILABILITY ~96,0% 96+% EXTEND TURNAROUND CYCLES 94.7% SYSTEMATIC IMPROVEMENT OF MECHANICAL INTEGRITY RELIABILITY AWARENESS MIND-SET AMONG WORKERS 2014 2018 2020 REFINING OPERATIONAL ONE-QUARTILE IMPROVEMENT 50%+ OF NON MOTOR FUELS AVAILABILITY TO ~96% IN COST EFFI
Slide 54: ~19% Seaborne Crude to Danube Refinery in 2016
~19% SEABORNE CRUDE TO DANUBE REFINERY IN 2016 FIRST SEABORNE CARGO PROCESSED IN BRATISLAVA IN 2016 ADRIATIC PIPELINE ACCESS ESTABLISHED CRUDE DIVERSIFICATION1 Increased pipeline capacity: 6Mtpa = SN REB 97% 75% Seaborne Increased 3% 25% 33% pipeline capacity: 14Mtpa = MOL+SN 2011 2016 2020 ENHANCIN
Slide 55: Petrochemicals in MOL's Integrated Downstream Value Chain
PETROCHEMICALS IN MOL’S INTEGRATED DOWNSTREAM VALUE CHAIN RELEVANT POLYOLEFIN CAPACITY IN MOL’S PETROCHEMICALS VALUE CHAIN EUROPE (2015 KTPA) Capacity LyondellBasell Borealis 420 kT HDPE SABIC Europe INEOS Total Petrochemicals 285 kT LDPE Repsol MOL Group 1.200 ExxonMobil Refining Petchem 535 kT PP
Slide 56: Entering the Polyurethanes Value Chain
ENTERING THE POLYURETHANES VALUE CHAIN Petchem feedstock Basic chemicals Intermediates / pre-polymers Polymers nitro- benzene MDI/PMDI benzene propylene naphtha propylene polyols polyurethanes -oxide nitro- toluene TDI toluene PUR FORMULATORS „SYSTEM HOUSES” OLEFIN END- REFINING PRODUCERS CHEMICAL C
Slide 57: Several Options to Expand Along the Value Chain
SEVERAL OPTIONS TO EXPAND ALONG THE VALUE CHAIN Polyethylenes (LDPE, HDPE) source: www.petrochemistry.eu 57
Slide 58: Consumer Services
CONSUMER SERVICES
Slide 59: A Leading Regional Network
A LEADING REGIONAL NETWORK CZECH R. 10 COUNTRIES MARKET POSITION: 2 MARKET SHARE: 20%1 SLOVAKIA MARKET POSITION: 1 MARKET SHARE: 47%1 7 WELL ESTABLISHED BRANDS HUNGARY MARKET POSITION: 1 MARKET SHARE: 43%1 ~2000 SLOVENIA MARKET POSITION: 3 MARKET SHARE: 8%2 SERVICE STATIONS ROMANIA MARKET POSITION:
Slide 60: A Value Generating Network
A VALUE GENERATING NETWORK… …AS EBITDA PER SITE ALMOST DOUBLES EBITDA (REPORTED, USD MN) NORMALIZED FCF (USD MN1) 0 56 193 200 29 179 307 126 204 221 151 2013 2014 2015 External Internal FX 2016 2013 2014 2015 2016 EBITDA (CONSTANT, USD MN 2) EBITDA PER SITE (USD TH1) COMMENTS 164 Fuel is still the
Slide 61: Fuel Sales on the Rise
FUEL SALES ON THE RISE GROWTH MOSTLY DRIVEN BY RISING CEE FUEL CONSUMPTION; M&A CONTRIBUTES M&A DRIVEN NETWORK EXPANSION FUEL SALES (MN LITERS) CZECH R. HUNGARY SLOVAKIA ROMANIA SLOVENIA 5 239 BOSNIA 4 837 MONTENEGRO CZECH R. SLOVENIA SLOVENIA CZECH R. 4 292 4 323 ITALY CROATIA BOSNIA CROATIA AUSTRI
Slide 62: Non-Fuel Increasingly a Growth Driver
NON-FUEL INCREASINGLY A GROWTH DRIVER CONCEPTUAL CHANGE, COCO/A OPERATING MODEL SUPPORT GROWTH NEW CONCEPT AND A COMPLETE REVAMP NON-FUEL SHARE OF TOTAL MARGIN GROWTH (%) Introducing a non-fuel concept: FRESH CORNER 37 24 4 SKUs heavily reduced and optimized 2 Focus on coffee, fresh food, everyday g
Slide 63: 2021 Organic Growth Targets
2021 ORGANIC GROWTH TARGETS TRANSFORMATION FROM TRADITIONAL RETAIL TO CONSUMER SERVICES 2021 2000 NUMBER OF SERVICE STATIONS EBITDA 750+ NUMBER OF FRESH CORNER SITES MOL GROUP CONSUMER SERVICES 2030 5.8 LITERS SOLD (BN LITRES) 1. 2. 3. CURRENT PLUS MOBILITY NON-FUEL SHARE OF TOTAL RETAIL 30% MARGIN
Slide 64: Exploration and Production Strategy
EXPLORATION AND PRODUCTION STRATEGY
Slide 65: E&P Business Successfully Rebalanced
E&P BUSINESS SUCCESSFULLY REBALANCED CREATING VALUE AT ~50 USD/BBL OIL PRICE 7 USD/boe free cash-flow delivered in 2016 on the back of the successful New Upstream Program implementation Production to peak at ~115 mboepd in 2018/19 E&P business shall seek for inorganic expansion possibilities to repl
Slide 66: Top 15% in Sustainability
TOP 15% IN SUSTAINABILITY A COMMITMENT TO THE INTEGRATION OF ECONOMIC, ENVIRONMENTAL AND SOCIAL FACTORS INTO EVERYDAY OPERATIONS HEALTH & SAFETY WE OPERATE SAFELY OR WE DON’T OPERATE IMPLEMENTING ACTIONS AIMING AT ZERO INCIDENTS AND ZERO FATALITIES 1 ENVIRONMENT REDUCE THE NUMBER OF SPILLS (OVER 1 C
Slide 67: Production in 8 Countries
PRODUCTION IN 8 COUNTRIES RUSSIA Reserves: 50 MMboe CEE TOTAL Production: 7 mboepd Croatia, Hungary KAZAKHSTAN Reserves: 262 MMboe Reserves: 60 MMboe Production: 81 mboepd PAKISTAN o/w CEE offshore Reserves: 10 MMboe Reserves: 10 MMboe Production: 8 mboepd Production: 9 mboepd OTHER INTERNATIONAL UK
Slide 68: 7 USD/boe Free Cash-Flow Delivered in 2016
7 USD/BOE FREE CASH-FLOW DELIVERED IN 2016 ON THE BACK OF SUCCESSFUL NEW UPSTREAM PROGRAM IMPLEMENTATION 2016 2016 TARGET FACT Material CEE onshore growth on Production Optimization PRODUCTION1 105-110 112 (110) 1 Higher UK volumes, growth in Mboepd low-cost Russia, Pakistan YoY production growth fu
Slide 69: Production to Stabilize at ~110 mboepd Until 2019
PRODUCTION TO STABILIZE AT ~110 MBOEPD UNTIL 2019 ~10-15 MBOEPD NEEDED TO SUSTAIN PRODUCTION BEYOND 2020 MID-TERM PRODUCTION PROFILE KEY MESSAGES (MBOEPD) 120 112 ~110-115 Stable contribution from CEE ~110 ~110 New 104 ~10-15 barrels Impact of successful production required 100 optimization and EOR
Slide 70: E&P Delivers Substantial FCF in 2016-21
E&P DELIVERS SUBSTANTIAL FCF IN 2016-21 WITH MATERIAL FLEXIBILITY ON THE CAPEX SIDE EBITDA, CAPEX AND FCF EXPECTATIONS (2016-21, USD MN) KEY MESSAGES Brent @ 60 USD/bbl Next 5Y post-tax free +USD Less than 20% of cash-flow shall cover ~750mn the total Upstream reserve replacement EBITDA CAPEX pool i
Slide 71: The Minimum Aspiration to Sustain Production
THE MINIMUM ASPIRATION TO SUSTAIN PRODUCTION BUT IT HAS TO MAKE ECONOMIC SENSE PRO-FORMA 2016-21 2P RESERVES EVOLUTION (MMBOE) KEY MESSAGES 514 514 Sustain at least current 100% RRR level of production to maintain the integrated 100‐105 business model of MOL 170‐175 Group Maintain production 65‐75 O
Slide 72: Exploration and Production Overview
EXPLORATION AND PRODUCTION OVERVIEW
Slide 73: Balancing the Portfolio in the Mid-Term Is a Challenge
BALANCING THE PORTFOLIO IN THE MID-TERM IS A CHALLENGE Time to first oil 1-3 years 4-5 years 5+ years KEY MESSAGES Pakistan Hungary Hungary Norway Exploration Croatia Limit ExpEx to nearfield FED Croatia exploration in CEE and Pakistan as well as to high- impact Norway Limited development project pi
Slide 74: Strict Cost Discipline to Continue
STRICT COST DISCIPLINE TO CONTINUE CAPEX SPENDING IN THE NEXT 5 YEARS DIRECT UNIT OPEX (USD/BOE) (USD BN) 1, 2 2.0-2.2 Exploration ~20% 9 2013-14 average @ 8.0 USD/bbl 8 Development ~55% 7 6 Other ~25% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2013 2014 2015 2016 2017 2
Slide 75: CEE: Strong Cash Flow, Higher Onshore Production
CEE: STRONG CASH FLOW, HIGHER ONSHORE PRODUCTION ON THE BACK OF COMPREHENSIVE PRODUCTION OPTIMIZATION PROGRAM HUNGARY AND CROATIA (105+156 MMBOE) Production 100 Employed a systematic approach to identify improvement potential in both surface and subsurface 80 CAGR ex Production optimization through
Slide 76: Pakistan: 15+ Years of Successful Operation
PAKISTAN: 15+ YEARS OF SUCCESSFUL OPERATION HIGHLY SUCCESSFUL TAL DEVELOPMENT WITH EXPLORATION IN NEARBY BLOCKS HIGHLIGHTS AND KEY FOCUS AREAS (10 MMBOE) Operator of the TAL block around 80 km from the border of Afghanistan, where production exceeded 80 mboepd on 100% basis in Q1 2017 13 discoveries
Slide 77: CIS: Field Development of Low-Cost Baitugan
CIS: FIELD DEVELOPMENT OF LOW-COST BAITUGAN WITH STABLE CASH FLOW GENERATION EVEN AT CURRENT OIL PRICES RUSSIA (50 MMBOE) - Baitugan A shallow, compact field with developed infrastructure ensures low unit costs thus stable cash-flow generation Ongoing intensive development program to be pursued in t
Slide 78: North Sea, UK: Visible Contribution in 2016
NORTH SEA, UK: VISIBLE CONTRIBUTION IN 2016 WITH AN ONGOING COMPREHENSIVE VALUE OPTIMIZATION PLAN NORTH SEA, UK (23 MMBOE) First oil achieved on Scolty and Crathes in November 2016 ahead of schedule and significantly below budget Scott: infill drilling which commenced in 2016 will continue throughou
Slide 79: Norway: A New Exploration Hub
NORWAY: A NEW EXPLORATION HUB INCREASING FOOTHOLD IN THE NCS Entered Norway in 2015, acquiring 100% ownership in Ithaca Petroleum Norge – a pre-qualified operator Successfully participated in the 2015 and 2016 APA licensing rounds and acquired further eight licences Currently has 20 exploration bloc
Slide 80: Financials, Governance, Others
FINANCIALS, GOVERNANCE, OTHERS
Slide 81: Sources and Applications of Cash
SOURCES AND APPLICATIONS OF CASH SOURCES AND APPLICATIONS OF CASH, 2012-17 (USD MN) 180 ‐549 284 666 521 407 579 459 196 205 270 450 200 202 456 420 302 350 2 524 370 2 477 164 2 308 2 183 2 153 111 2 000 1 689 1 211 1 258 1 200 1 034 1 011 2012 2013 2014 2015 2016 2017E Clean CCS EBITDA Organic CAP
Slide 82: Strong Balance Sheet and Liquidity
STRONG BALANCE SHEET AND LIQUIDITY DRAWN VERSUS UNDRAWN FACILITIES AVAILABLE LIQUIDITY (31.03.2017) (31.03.2017) 5.0 Medium term loan Long term loan USD 4.1bn Senior Unsecured Bonds Outstanding short term loans 4.0 7,000 0.8 0.2 6,000 634 3.0 5,000 3090 2081 2.0 4,000 mUSD 3.1 3,000 177 1.0 2,000 29
Slide 83: Ample Financial Headroom
AMPLE FINANCIAL HEADROOM FROM DIVERSIFIED FUNDING SOURCES AVERAGE MATURITY OF 2.7 YEARS 2,500 Reported cash & cash equivalents Medium term loan Undrawn facilities 2,000 Senior Unsecured Bonds Long term loan (multilaterals) 1,500 1,550 1,000 21 117 500 992 783 41 802 657 802 500 0 59 41 22 22 12 Repo
Slide 84: Double Investment Grade Rating Achieved
DOUBLE INVESTMENT GRADE RATING ACHIEVED NEW MOODY’S BAA3 INVESTMENT GRADE RATING RECEIVED ON 31 MARCH HISTORICAL FOREIGN LONG TERM FFO ADJUSTED NET LEVERAGE RATINGS (3Y AVG. 2013-2015) MOL Fitch MOL Moody's MOL S&P (BBB‐) 1.7 BBB+ Baa1 (A‐) 1.9 BBB Baa2 BBB‐ Baa3 (A‐) 2.2 BB+ Ba1 (BBB‐) 2.7 BB Ba2 3
Slide 85: Key Items of Taxation
KEY ITEMS OF TAXATION CORPORATE INCOME TAX (CIT) RATES CUT IN CORE OPERATING COUNTRIES HUNGARY CIT tax rate cut to 9% as of 2017 from 19% Profit based ’Robin Hood’ with an implied tax rate of 21% Only energy related part of the profit affected (~68%), nameplate tax rate is 31% Only the Hungarian ope
Slide 86: Top Management Incentive Schemes
TOP MANAGEMENT INCENTIVE SCHEMES FOR MOL GROUP EB MEMBERS, MORE THAN 2/3 OF TOTAL REMUNERATION IS VARIABLE AND PERFORMANCE DRIVEN SHORT-TERM INCENTIVES Bonus opportunity between 0.85x and 1x of annual base salary, depending on the level Payout linked to yearly performance based on financial, operati
Slide 87: MOL Group Carbon Footprint
MOL GROUP CARBON FOOTPRINT TARGETING A 400K T CO2E REDUCTION BY 2020* GHG CHANGES 2015-16 CARBON FOOTPRINT 2016 (MT CO2 EMISSiON) 6,07 1,33 59,14 2020 REDUCTION TARGETS DIRECT GHG EMISSIONS INDIRECT GHG EMISSIONS FROM PURCHASED ENERGY CONSUMPTION GHG EMISSIONS BY CUSTOMERS AND OTHER INDIRECT RESOURC
Slide 88: Shareholder Agreements Legal Proceedings
THE HISTORY OF INA & MOL, 2003-2017 STORYLINE SHAREHOLDER AGREEMENTS UNDER THE FASHA, MOL DELEGATES FIVE MOL AND THE GOVT OF CROATIA SIGN THE GAS 1ST SHAREHOLDER RIGHTS AGREEMENT (SHA): OUT OF NINE MEMBERS TO THE MASTER AGREEMENT (GMA) AND AN MOL ALLOWED TO NOMINATE TWO MEMBERS 1ST AMENDMENT SUPERVI
Slide 89: MOL-Croatia Arbitration Status
MOL-CROATIA ARBITRATION STATUS UNCITRAL ARBITRATION ICSID ARBITRATION (CROATIA VS. MOL) (MOL VS. CROATIA) INITIATED GOVERNMENT OF CROATIA MOL BY WHEN 17 JANUARY 2014 26 NOVEMBER 2013 PCA (PERMANENT COURT OF ARBITRATION), GENEVA UNDER UNCITRAL ICSID (INTERNATIONAL SETTLEMENT OF FORUM (UNITED NATIONS
Slide 90: MOL Group Specific Refinery Margins
MOL GROUP SPECIFIC REFINERY MARGINS 10 9.4 MOL Group refinery margin 8.8 8.6 9 8.28.2 Complex refinery margin (MOL+SN) 7.7 7.8 7.6 7.77.7 8 7.4 7.37.47.4 7.5 7.6 7.1 7.1 6.8 6.5 6.7 6.6 6.5 6.7 6.8 7 6.3 6.3 6.26.2 6.2 6.3 7.2 6.8 5.9 6.0 7.0 5.85.8 5.7 5.8 5.9 7.0 6 5.6 5.5 5.55.6 5.3 5.4 5.45.2 5.
Slide 91: 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