58 slides from Mol Hungarian Oil & Gas Plc Class A's debt investor presentation, May 2015
Slide 1: Fixed Income Investor Update
FIXED INCOME INVESTOR UPDATE May 2015 1
Slide 2: Content
CONTENT I. Executive summary 3 II. Upstream Operation 6 III. Downstream Operation 15 VI. Financial Overview 25 V. Appendix 37 2
Slide 3: MOL Group: A Mid-Cap Integrated International Oil & Gas Company
Executive Summary MOL GROUP: A MID-CAP INTEGRATED INTERNATIONAL OIL&GAS COMPANY INTEGRATED BUSINESS MODEL COMPANY OVERVIEW $ Market capitalization – 30 Apr, 2015; bn USD 5.8 Countries of operation 40 2014FY CCS EBITDA (USD BN) Number of employees 27,500 1,2 0,9 0,1 2,2 Production - mboepd 103 Reserv
Slide 4: Clear Vision to Create Value
Executive Summary CLEAR VISION TO CREATE VALUE UPSTREAM DOWNSTREAM FINANCIALS ”Growth” ”Efficiency” ”Stability” 4
Slide 5: Key Goals and Messages
Executive Summary KEY GOALS AND MESSAGES: Around USD 2BN CCS GROUP EBITDA in 2015 at ~60 USD/bbl environment with GROUP/FINANCIALS resilient integrated business model Up to USD 1.5BN ORGANIC CAPEX (2015) with Upstream focus, financed from Operating cash flow Strong balance sheet (1.3X NET DEBT TO EB
Slide 6: II. Upstream Operation
Il. UPSTREAM OPERATION > MOLGROUP
Slide 7: Upstream: Continue Production Increase and Utilise Opportunities
Upstream UPSTREAM: CONTINUE PRODUCTION INCREASE AND UTILISE ALL OPPORTUNITIES THAT ARISE FROM CURRENT OIL PRICE ENVIRONMENT Around 105 MBOEPD production targeted for 2015 OVER 20% REDUCTION IN CAPEX SPENDING compared to original plan Reach FLAT TO DECLINING UNIT COST across all countries Capture the
Slide 8: Upstream: Growing International Portfolio with Strong, Stable CEE Presence
Executive Summary UPSTREAM: GROWING INTERNATIONAL PORTFOLIO WITH STRONG, STABLE CEE PRESENCE KEY DATA 14 Exploration and 8 Production Countries Organic Reserve Replacement Ratio at 103% in 2014 Low cost producer: avg. unit OPEX at 8.5 USD/boe PRODUCTION – 9 3 4 MBOEPD (Q1 2015) 7 103 81 Production 6
Slide 9: Continuous Increase of Production in the Following Years
Upstream CONTINUOUS INCREASE OF PRODUCTION IN THE FOLLOWING YEARS Targeting 105-110 mboepd this year PRODUCTION OUTLOOK AROUND 105 MBOEPD TARGET (RISKED, ENTITLEMENT BASED) FOR 2015 Without KRI incremental 105 110-115 115-120 Accelerated field development projects in CEE, reverse production mboepd d
Slide 10: CEE: Mitigate the Production Decline and Maximise Cash Flow
Upstream CEE: MITIGATE THE PRODUCTION DECLINE AND MAXIMISE CASH FLOW Well optimisation and EOR projects target growing production in Croatia HUNGARY+CROATIA (124+194 MMBOE) - PRODUCTION OUTLOOK 80 Unique know-how and well developed infrastructure ensures quick cash generation 60 mboepd Targeting fla
Slide 11: Kurdistan R.I.: Commercial Production from Both Blocks
Upstream KURDISTAN R.I.: COMMERCIAL PRODUCTION FROM BOTH BLOCKS Gradual increase expected in the coming years KURDISTAN REGION OF IRAQ (15 MMBOE*) 3 commercial discoveries (Bijell, Bakrman, Shaikan) Field Development Plan signed for both fields First export from Shaikan in Q1 2014 Commercial product
Slide 12: North Sea: Sizeable Mid-Term Production
Upstream NORTH SEA: SIZEABLE MID-TERM PRODUCTION With 8-9 mboepd contribution already in 2015 NORTH SEA (30 MMBOE) Successfully entered the region in 2014 – established local office in Aberdeen with experienced team Majority of assets already in development or production phase Current work programme
Slide 13: Expanding Our North Sea Portfolio Entering Norway
Upstream EXPANDING OUR NORTH SEA PORTFOLIO ENTERING NORWAY Further balancing the country risk profile & doubling the resource potential of the Group’s exploration portfolio ACQUIRING ITHACA PETROLEUM NORGE* Acquiring 100% ownership in Ithaca Petroleum Norge – a pre-qualified operator Further balance
Slide 14: M&A: Balance Risk and Seek New Accretive Opportunities
Upstream M&A: BALANCE RISK AS WELL AS SEEK NEW ACCRETIVE EXPLORATION AND DEVELOPMENT OPPORTUNITIES PURSUING OPPORTUNITIES TO FURTHER BALANCE ENHANCE INTERNATIONAL EXPLORATION PORTFOLIO OUR COUNTRY RISK PROFILE OMAN, NORTH PAK, RUS, SEA HUN KRI KRI, UK, LOWER RISK PAK EXPLORATION KAZ, PAK, RUS, KAZ R
Slide 15: III. Downstream Operation
III. DOWNSTREAM OPERATION 15
Slide 16: Downstream: CEE Stronghold: Integrated Operation of Competitive Asset Base
Downstream DOWNSTREAM: ’CEE STRONGHOLD’: INTEGRATED OPERATION OF COMPETITIVE ASSET BASE Deep downstream integration instead of „pure refining concept” guarantees extended margin capture on our landlocked markets Delivered USD 500mn Clean EBITDA improvement in 2014 vs 2011 with New Downstream Program
Slide 17: Deep Downstream Integration Guarantees Extended Margin Capture
Downstream DEEP DOWNSTREAM INTEGRATION GUARANTEES EXTENDED MARGIN CAPTURE IN OUR LANDLOCKED MARKETS DOWNSTREAM INTEGRATION (FUELS)1 23% Other wholesale 45% Bratislava Captive wholesale Bratislava Danube 89% 79% Rijeka Sisak Fuel & naphtha 32% captive production 39% market2 in refineries Own Retail o
Slide 18: Refining Asset Complexity and Profitability Above Peer Group Average
Downstream REFINING ASSET COMPLEXITY AND PROFITABILITY ABOVE PEER GROUP AVERAGE REFINERY NELSON COMPLEXITY OF THE PEER CLEAN CCS-BASED DS UNIT EBITDA2(USD/BBL) GROUP1 14 6.1 Mtpa 14 Peer range 11,5 8.1 Mtpa MOL-Group 12 10,6 12 MOL-Group ex. INA 10 9,1 4.5 Mtpa 2.2 Mtpa 10 8 NCI 6,1 8 6 6 4 4 2 2 0
Slide 19: Mid-Cycle Refinery Margin Supported by Lower Oil Price Environment
Downstream ‚MID-CYCLE’ REFINERY MARGIN SUPPORTED BY LOWER OIL PRICE ENVIRONMENT Demand growth of CEE is still well ahead of Western-Europe GROUP REFINERY MARGIN EXPECTATIONS (USD/BBL) MOTOR FUEL DEMAND CHANGE (2014/2013, %) USD/bbl 7 6 Expected range of mid- Core-3 (HU/SK/CR) 4,2% 5 cycle group refi
Slide 20: MOL Delivered Significant Improvement in a Persistently Tough Macro
Downstream MOL DELIVERED SIGNIFICANT IMPROVEMENT IN A PERSISTENTLY TOUGH MACRO THROUGH THE IMPLEMENTATION OF THE EFFICIENCY IMPROVEMENT PROGRAM GROUP REFINERY MARGIN VS CLEAN CCS EBITDA DOWNSTREAM NORMALIZED CASH FLOW (MN USD) MOL clearly outperformed external environment by …translating into enhanc
Slide 21: Successful New Downstream Program Delivery (USD 500mn)
Downstream SUCCESSFUL NEW DOWNSTREAM PROGRAM DELIVERY (USD 500MN) NDSP DELIVERY 2011 VS 2014 (MN USD) ~160 ~140 874 • Petchem margin • Impact of IES conversion increase (+85 EUR/t) ; • Non-realized NDSP 500 • Brent price drop (-12 contribution of IES USD/bbl) • Planned & unplanned SDs 350 1 2011 CCS
Slide 22: Targets USD 500mn Additional Improvement by 2017
Downstream TARGETS USD 500MN ADDITIONAL IMPROVEMENT BY 2017 DOWNSTREAM FREE CASH FLOW GENERATION BY 2017 (MN USD)1 Any potential future add-on projects (e.g. Rijeka DC, 1 2 Sensitivity to SSBR, petchem projects, 1300 - 1400 refinery margin retail M&A) is evaluated on change standalone basis with str
Slide 23: USD 350mn Efficiency Improvement & USD 150mn from Growth Projects
Downstream USD 350MN ASSET & MARKET EFFICIENCY IMPROVEMENT & USD 150MN TARGETED FROM GROWTH PROJECTS EFFICIENCY IMPROVEMENT GROWTH PROJECTS’ CONTRIBUTION 1 2 (CUMULATIVE, MN USD) (MN USD) 20% 350 Production 1. Availability & 80% maintenance 2. Production flexibility cost revenue and yield improvemen
Slide 24: Natural Gas Transmission Activity Provides Stable Returns
Gas Midstream NATURAL GAS TRANSMISSION ACTIVITY PROVIDES STABLE RETURNS COMPETITIVE ADVANTAGES & MAIN DRIVERS Sole transmission system operator license Strategic location in the heart of CEE region for potential transit developments Domestic business: regulated domestic transmission has stable contr
Slide 25: IV. Financial Overview
IV. FINANCIAL OVERVIEW yy GROUP
Slide 26: Strong Balance Sheet Has Top Priority
Financials STRONG BALANCE SHEET HAS TOP PRIORITY CONSERVATIVE FINANCIAL POLICY: organic CAPEX financed from operating cash flow 1.3X NET DEBT TO EBITDA & BELOW 20% NET GEARING (2014YE) Around USD 2BN CCS GROUP EBITDA IN 2015 at ~60 USD/bbl environment USD 1.5-1.8BN ORGANIC CAPEX (2015) with upstream
Slide 27: Conservative Financial Policy
Financials CONSERVATIVE FINANCIAL POLICY Organic CAPEX financed from operating cash flow OPERATING CASH FLOW VS. CAPEX (USD BN) 4,0 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0 2008 2009 2010 2011 2012 2013 2014 Organic Inorganic Operating CF 27
Slide 28: Continuously Strengthening Financial Position
Financials CONTINUOUSLY STRENGTHENING FINANCIAL POSITION Indebtedness indicators still at historical lows despite increase in FY14 NET DEBT TO EBITDA (X) GEARING (%) 3,5 3.5 Limit of Net Debt to EBITDA 45 3 40 36 35 33 31 2,5 28 30 1,96 25 2 1,66 1,72 25 1,44 20 1,38 1,31 20 1,5 16 15 1 0,79 10 0,5
Slide 29: Resilient Business Model Capable of Generating USD 2bn in 2015
Executive Summary RESILIENT BUSINESS MODEL CAPABLE OF GENERATING USD 2BN IN 2015, EVEN AT ~60USD/BBL ENVIRONMENT EBITDA TARGET AND SENSITIVITY CAPEX PLAN MOL is relatively well shielded against the oil Scope adjustments and potential effect of lower price drop oil price on partners Strong Integrated
Slide 30: MOL Has Sufficient Liquidity for Acquisitions
Financials MOL HAS SUFFICIENT LIQUIDITY FOR ACQUISITIONS… EUR 4.1bn total available liquidity as of Q1 2015 DRAWN VERSUS UNDRAWN FACILITIES TOTAL AVAILABLE LIQUIDITY (EUR MILLION) (EUR MILLION) 7 000 4 500 EUR 4 079m 635 4 000 6 000 527 610 3 500 2837 5 000 715 3 000 1965 4 000 2 500 mEUR 223 2 000
Slide 31: From Diversified Funding Sources
Financials …FROM DIVERSIFIED FUNDING SOURCES Cost rationalization keeping diversification in mind MID- AND LONG-TERM COMMITTED FUNDING RECENT EVENTS PORTFOLIO Multilateral Other New USD 1.5bn Revolving Credit Facility has been loans bilateral signed (more expensive USD 545m cancelled, Perpetual 3% l
Slide 32: Average Maturity of 2.7 Years
Financials AVERAGE MATURITY OF 2.7 YEARS Maturity structure enhanced with newest transaction 2 500 2 000 1 500 EUR M 1307 1 000 110 969 1 242 135 500 750 750 452 465 141 56 0 41 41 41 41 Reported 2015 2016 2017 2018 2019 2020 2021 cash&cash equivalents Reported cash&cash equivalents Long term loan (
Slide 33: Credit Rating Above Sovereign Rating at Fitch, One Notch Below at S&P
Financials CREDIT RATING ABOVE SOVEREIGN RATING AT FITCH, ONE NOTCH BELOW AT S&P (AFTER RECENT UPGRADE) MOL to follow? FFO*/NET DEBT HISTORICAL FOREIGN LONG TERM RATINGS MOL S&P Hungary S&P MOL Fitch Hungary Fitch 50% A 45% A- 40% 35% BBB+ 30% BBB 25% 20% BBB- 2014: effect of 15% lower oil price BB+
Slide 34: Peer Comparison: MOL's Strong Financial Position
Financials PEER COMPARISON: MOL’S STRONG FINANCIAL POSITION IS VISIBLE… …Even in a peer group containing better rated entities FFO ADJUSTED NET LEVERAGE FIXED CHARGE COVER (3Y AVG. 2011-2013) (3 YRS AVERAGE 2011-2013) Repsol (BBB) Repsol 3,24 Eni (A+) Eni SpA 4,81 MOL, 2012-2017 BG Energy 8,05 MOL (
Slide 35: Well Diversified Business Portfolio
Financials WELL DIVERSIFIED BUSINESS PORTFOLIO Business Profile Assessment MOL PKN REPSOL TUPRAS OMV MOL PKN Repsol Tupras OMV Revenues (FY 2014) $mm 20 967 33 921 60 365 18 177 47 716 1P Reserves mmboe 370 n/a 1 538.8 n/a 1 058.9 Total Production mboepd 35.2 n/a 341.6 n/a 299.8 Cost of Producton $/
Slide 36: Improving Spread Performance Versus Peer's Bonds
Financials IMPROVING SPREAD PERFORMANCE VERSUS PEER’S BONDS MOL/REPSOL (EUR) SECONDARY PERFORMANCE MOL/OMV (EUR) SECONDARY PERFORMANCE 36
Slide 37: V. Appendix
V. APPENDIX PMOLGROUP
Slide 38: Over 20% Reduction in CAPEX Spending Compared to Original Plan
Upstream OVER 20% REDUCTION IN CAPEX SPENDING COMPARED TO ORIGINAL PLAN OF OVER USD 1BN Utilise all opportunities and make all necessary steps the oil price environment implies GEOGRAPHICAL BREAKDOWN OF CAPEX SPENDING ORGANIC CAPEX BY FIELD TYPE CEE North Sea CIS MEA & Asia Other Appraisal & Develop
Slide 39: Overview of MOL's Assets in Kurdistan Region of Iraq
Appendix OVERVIEW OF MOL’S ASSETS IN KURDISTAN REGION OF IRAQ Entry in 2007 amongst the first ones BLOCK W.I. FULLY OPERA DILUTED TOR W.I. Akri-Bijeel 80% 51.2% MOL GKP Shaikan 20% 13.6% (75%) Khor Mor 10% 10% Pearl Petrole Chemchemal 10% 10% um 39
Slide 40: Akri Bijeel: Intensive Drilling Campaign
Appendix AKRI BIJEEL: INTENSIVE DRILLING CAMPAIGN TO FULLY UNDERSTAND BLOCK VALUE Complete the information acquisition campaign on Akri-Bijeel, with more focus on Triassic AKRI – BIJEEL WORK PROGRAMME Akri-Bijeel in appraisal/early development phase Commercial production ongoing from EWT on B-1B Deb
Slide 41: North Sea: A Strategic Step to Create New Hub
Appendix NORTH SEA: A STRATEGIC STEP TO CREATE NEW HUB In a lower risk offshore operation which should serve as a hub of know-how technology STRATEGIC CONSIDERATIONS Strategic step to enhance offshore experience and create a new hub for production and know-how Ultimate goal to become a well reputed
Slide 42: Pakistan: Over Years of Successful Operation
Appendix PAKISTAN: OVER 15 YEARS OF SUCCESSFUL OPERATION Continue field development of TAL block and fully explore upside of Karak, Ghauri and Margala North blocks HIGHLIGHTS AND KEY FOCUS AREAS 8 discoveries since 1999 in 3 different blocks Noticeable operation experience – TAL block production (10
Slide 43: CIS: Moving Forward Towards Value Monetisation
Appendix CIS: MOVING FORWARD TOWARDS VALUE MONETISATION Successful appraisal programme closed on FED with additional 24 MMboe reserve booking RUSSIA (75 MMBOE) – STILL A CORE COUNTRY WITH GROWTH POTENTIAL Portfolio restructured after monetising ZMB field and 49% in Baitugan and Yerilkinsky Intensive
Slide 44: Downstream Strategy: Maximise Free Cash Flow Generation
Downstream : MAXIMISE FREE CASH FLOW GENERATION WITH FURTHER EFFICIENCY IMPROVEMENT AND ADD- ON GROWTH PROJECTS Wholesale GOALS Normalized DS CCS Retail 2017 EBITDA fuel volume fuel volume free cash flow1 USD 500mn 150% USD ~900 USD CCS EBITDA 5.4 Bnlpa of own sales mn 1.3-1.4bn improvement producti
Slide 45: Production Roadmap Targets Uptime Increase, Energy Efficiency & Yield
Downstream PRODUCTION ROADMAP TARGETS UPTIME INCREASE, 1 ENERGY EFFICIENCY & YIELD IMPROVEMENT A 97% 96,0% 96% HSE 95% 94,7% Operational Availability Optimize maintenance costs and increase operational availability 94% of MOL Group assets 2014 2015 2016 2017 2018 Maintenance Efficiency Move up one q
Slide 46: Supply & Sales: Growing Contribution Through Volumetric Increase
Appendix SUPPLY & SALES: GROWING CONTRIBUTION THROUGH 1 DELIVERING VOLUMETRIC INCREASE B CENTRAL REGION: SALES AND MARGIN GROWTH 1 Sales volume growth 2 Margin revenue growth TRADING BELT: 150% SALES TO NEW MARKETS / NEW CUSTOMERS OWN PRODUCED FUELS 3 Stabilize market +50% 4 Extend market reach ADDI
Slide 47: Well Established Retail Network in the CEE
Appendix WELL ESTABLISHED RETAIL NETWORK IN THE CEE WITH FURTHER GROWTH POTENTIAL GROUP RETAIL NETWORK RETAIL NETWORK INTEGRATION Takeover of 125 stations 6 #FS/kbpd of ref. Capacity in Czech Republic and 41 in Slovakia is yet to be 5 closed Slovnaft 192 4 Czech Republic Slovakia Slovnaft 214 3 57 2
Slide 48: Conceptual Change in Retail to Improve Financial Contribution
Downstream CONCEPTUAL CHANGE IN RETAIL TO IMPROVE 1 FINANCIAL CONTRIBUTION C VISION PILLARS RETAIL TARGETS To be customers’ Growing number of retail stations (network optimization first choice in fuel and M&A): and convenience SELLING POINTS retailing and 1 750 # of fuel stations become a Power >2 0
Slide 49: Deeply Integrated Petrochemical Portfolio
Downstream DEEPLY INTEGRATED PETROCHEMICAL PORTFOLIO PETCHEM VALUE CHAIN1 A TOP 10 European polymer producer and the biggest producer in CEE: 420 kT HDPE Naphtha Efficient assets & up-to-date product portfolio Gasoil LDPE 285 kT2 LPG Integrated and optimized feedstock supply Strong regional position
Slide 50: Extending the Petrochemicals Value Chain to Increase Profitability
Appendix EXTENDING THE PETROCHEMICALS VALUE CHAIN TO INCREASE PROFITABILITY LDPE4 BUTADIENE SYNTHETIC RUBBER PILLARS PILLARS PILLARS New 220 ktpa capacity LDPE unit New 130 ktpa capacity Butadiene Entering into the synthetic rubber replaces 3 old ones at Slovnaft Extraction Unit (BDEU) at the site o
Slide 51: Adriatic Connection of Landlocked Refineries Improves Security of Supply
Appendix ADRIATIC CONNECTION OF LANDLOCKED REFINERIES IMPROVES SECURITY OF SUPPLY ADRIATIC PIPELINE ACCESS ESTABLISHED Restore the reliable operation of Friendship 1 Increase pipeline pipeline capacity to 6Mtpa = SN Potentially able to fully cover Danube and Bratislava refineries crude supply via Ad
Slide 52: Dividend: Predictable Pay-out with Balance Sheet Stability
Appendix DIVIDEND: PREDICTABLE PAY-OUT WITH BALANCE SHEET STABILITY IN THE FOCUS DIVIDEND HISTORY OF LAST 4 YEARS (HUF BN) AND KEY PRINCIPLES 60 Pay out dividend to Special dividend shareholders whilst Regular dividend maintaining adequate 13 financial stability Balance sheet has top priority Net ge
Slide 53: Key Items of Taxation
Appendix KEY ITEMS OF TAXATION HUNGARY Revenue based ’Crisis tax’ abolished from 2013 – ~HUF 30bn negative effect p.a. in 2010-12 Profit based ’Robin Hood’ nominal tax rate is 31% only energy related part of the profit affected (~70%), thus implied RH tax rate is cca. 22% only the Hungarian operatio
Slide 54: MOL Executive Team, Top Management and Incentive Schemes
Appendix MOL EXECUTIVE TEAM, TOP MANAGEMENT AND INCENTIVE SCHEMES EXECUTIVE BOARD MANAGEMENT INCENTIVE SCHEMES Stable and Proved SHORT TERM INCENTIVES: Executive Management Maximum opportunity between 0.85x and 1x of base salary Team Pay-out linked to yearly performance, based on financial (e.g. Exc
Slide 55: Corporate Commitment to SD & HSE Improvement
Appendix CORPORATE COMMITMENT TO SD & HSE IMPROVEMENT SUSTAINABLE DEVELOPMENT FRAMEWORK AT DJSI PERFORMANCE OF MOL GROUP MOL GROUP 100 Sustainable Development Framework: All 90 levels of the organization have a focus on HSE 80 and Sustainable Development 70 60 SD Commitee of the Board of Directors 5
Slide 56: Shareholder Structure
Executive Summary SHAREHOLDER STRUCTURE MOL shares are listed on the Budapest, Luxembourg and Warsaw Stock Exchanges. Our depository receipts are traded on London’s International Order Book and OTC in the USA. SHAREHOLDER STRUCTURE AS OF 31 MARCH 2015 Credit Agricole UniCredit Bank AG Treasury share
Slide 57: 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 58: More Info at www.molgroup.info
MORE INFO AT WWW.MOLGROUP.INFO CONTACT: PHONE: +36 1 464 1395 E-MAIL: INVESTORRELATIONS@MOL.HU