40 slides from Mol Hungarian Oil & Gas Plc Class A's earnings presentation, Oct 31, 2019
Slide 1: Third Quarter 2019 Results
THIRD QUARTER 2019 RESULTS 31 OCTOBER 2019
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 SUPPORTING SLIDES 30 3
Slide 4: Highlights of the Quarter
HIGHLIGHTS OF THE QUARTER
Slide 5: 9M 2019: Strong Delivery; Raising Full-Year Guidance
9M 2019: STRONG DELIVERY; RAISING FULL-YEAR GUIDANCE WITH THE ESSENTIAL FUNDAMENTAL BUILDING BLOCKS IN PLACE 2019 2018 Q1-Q3 2019 TARGETS RESILIENT GROUP CLEAN USD 2.69 BN UPGRADED TO INTEGRATED CCS EBITDA USD 1.84 BN ~USD 2.4 BN BUSINESS MODEL GROUP CAPEX USD 1.29 BN USD 1.37 BN USD 1.9-2.1 BN (ORG
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% 70% 600 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: Q3 2019: Robust EBITDA, Virtually Flat YoY
Q3 2019: ROBUST EBITDA, VIRTUALLY FLAT YOY DESPITE A WEAKER MACRO WITH MUCH LOWER OIL AND GAS PRICES FINANCIAL HIGHLIGHTS Full-year 2019 EBITDA guidance raised slightly to „around USD 2.4bn” (from „around USD 2.3bn”); with an unchanged capex guidance (USD 1.9-2.1bn), this also implies slightly highe
Slide 8: Sustainability Performance Recognized
SUSTAINABILITY PERFORMANCE RECOGNIZED GROUP TOTAL RECORDABLE INJURY RATE GROUP TIER 1 PROCESS SAFETY EVENTS 1.8 4 1.7 1.7 1.6 1.4 3 1.1 2 2 1 0 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 YTD injury rate came below the FY target of 1.5, partly as a
Slide 9: Key Group Quarterly Financials
KEY GROUP QUARTERLY FINANCIALS
Slide 10: Q3 EBITDA Nearly Flat YoY, Further Improving Sequentially
Q3 EBITDA NEARLY FLAT YOY, FURTHER IMPROVING SEQUENTIALLY WEAKER UPSTREAM ON OIL AND GAS PRICES, CONTINUED STRENGTH IN CONSUMER SERVICES SEGMENT CLEAN CCS EBITDA (USD mn) COMMENTS -3% +9% Upstream 708 686 634 689 Lower oil prices and significantly weaker gas prices, slightly lower 668 production in
Slide 11: Organic Capex Strongly Up on Strategic Projects
ORGANIC CAPEX STRONGLY UP ON STRATEGIC PROJECTS IN LINE WITH PLANS TOTAL GROUP CAPEX (USD mn) TOTAL GROUP CAPEX (USD mn) +87% +15% 613 580 613 101 506 580 506 80 258 0 83 217 310 287 310 243 22 287 476 243 413 20 81 76 361 288 289 322 120 223 203 54 42 32 8 52 38 18 14 0 0 37 3 0 0 5 Q2 2018 Q3 2018
Slide 12: Simplified FCF Remains Positive Despite Large Capex
SIMPLIFIED FCF REMAINS POSITIVE DESPITE LARGE CAPEX UPSTREAM AND CONSUMER SERVICES CONTINUE TO BE MATERIAL POSITIVE FCF CONTRIBUTORS SIMPLIFIED FCF* (USD mn) COMMENTS -73% -15% Group-level simplified FCF (Clean CCS EBITDA less organic capex) 398 425 declined to USD 109mn in Q3 2019 (and to USD 467mn
Slide 13: Reported Net Income and EPS Lower on CCS Modification
REPORTED NET INCOME AND EPS LOWER ON CCS MODIFICATION LARGE POSITIVE CCS IMPACT IN 2018 (ON INVENTORY HOLDING GAINS) TURNS INTO NEGATIVE IMPACT IN 2019 Q1-Q3 2019 EARNINGS (USD mn) – BELOW THE EBITDA LINE ITEMS 1,837 7 61 14 Other 367 Consumer Services Cash tax USD 56mn 926 Deferred tax USD 69mn Dow
Slide 14: Operating Cash Flow Only Marginally Lower YoY
OPERATING CASH FLOW ONLY MARGINALLY LOWER YOY OPERATING CASH FLOW IN Q1-Q3 2019 (USD mn) 1,775 53 103 323 1,452 1,370 926 799 Profit Before Tax DD&A Income tax paid Other Operating CF Change in WC Operating CF Organic CAPEX before WC COMMENTS Operating Cash Flow before Working Capital declined by 16
Slide 15: No Material Change in Debt and Leverage in Q3
NO MATERIAL CHANGE IN DEBT AND LEVERAGE IN Q3 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 17 16 15 0.97 1.0 15 0.79 0.79 12 0.74 0.74 0.65 0.57 10 0.5 0.41 5 0 2011 2012 2013 2014 2015 2016 2017 2018 Q1 2019 H1 2019 Q1-Q3 2011 2012 2013 2014 2015 2016 2017
Slide 16: Downstream Q3 2019 Results
DOWNSTREAM Q3 2019 RESULTS
Slide 17: Downstream EBITDA Slightly Up in Q3 YoY
DOWNSTREAM EBITDA SLIGHTLY UP IN Q3 YOY SUPPORTED BY RECOVERING REFINERY MARGINS AND STRONG MARKET DYNAMICS QUARTERLY CLEAN CCS EBITDA (USD mn) TOTAL PRODUCT SALES (kt) Petchem R&M +4% +3% Total petrochemicals products Total refined products 274 272 +3% +12% 262 265 241 73 5,505 5,664 67 5,354 105 3
Slide 18: Refinery Margin Rebounded in Q3
REFINERY MARGIN REBOUNDED IN Q3 PETCHEM MARGINS DECLINED IN Q3 AND HAVE BEEN SLUGGISH RECENTLY REFINING MARGIN1 (USD/bbl) COMMENTS Total MOL Group refinery margin Refining margins grew by over 2.0 USD/bbl QoQ reaching similar levels as Complex refinery margin (MOL+SN) in Q3 2018 9 8.0 8.0 -1% Motor
Slide 19: Clean CCS EBITDA USD 10mn Above the Base in Q3 2019
CLEAN CCS EBITDA USD 10MN ABOVE THE BASE IN Q3 2019 10% DROP IN EBITDA YTD ENTIRELY DRIVEN BY THE WEAKER EXTERNAL ENVIRONMENT CLEAN CCS EBITDA YoY, Q3 2019 VS. Q3 2018 (USD mn) COMMENTS 262 8 19 272 Positive R&M price impact primarily due to 19 3 43 weakening local currencies vs the USD while 229 Pe
Slide 20: Consumer Services Q3 2019 Results
CONSUMER SERVICES Q3 2019 RESULTS
Slide 21: Q3 Segment EBITDA Rises to New Historic Highs
Q3 SEGMENT EBITDA RISES TO NEW HISTORIC HIGHS UNDERLYING LOCAL CURRENCY EARNINGS CONTINUE TO SHOW STRONG, DOUBLE-DIGIT GROWTH QUARTERLY EBITDA (USD mn) EBITDA YoY, Q3 2019 VS. Q3 2018 (USD mn) +15% +10% 12 169 15 161 147 20 8 161 147 111 118 84 89 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 EBIT
Slide 22: Fuel Sales Increased by 5% in Both Q3 and YTD
FUEL SALES INCREASED BY 5% IN BOTH Q3 AND YTD BENEFITING FROM STRONG REGIONAL FUEL DEMAND TRENDS TOTAL VOLUMES SOLD (mn litres) FUEL THROUGHPUT / SITE (mn litres) 5.0% 4Y CAGR: +5.4% 1 689 1 609 1 462 1 507 0.92 1 412 0.86 0.88 1 299 0.81 0.83 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q3 2015
Slide 23: Non-Fuel Contribution Close to 29% of the Total Margin
NON-FUEL CONTRIBUTION CLOSE TO 29% 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) +15% 4Y CAGR: +19% 81.2 70.8 68.6 64.3 62.7 56.1 44.0 38.6 32.2 26.3 22.3 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 20
Slide 24: Upstream Q3 2019 Results
UPSTREAM Q3 2019 RESULTS
Slide 25: E&P EBITDA Affected by Weaker Prices in Q3 2019
E&P EBITDA AFFECTED BY WEAKER PRICES IN Q3 2019 QUARTERLY EBITDA (ex-spec) (USD mn) REALIZED HYDROCARBON PRICES -26% -13% 80 74.4 75.3 75 68.8 68.8 70 66.8 66.8 67.8 64.6 64.8 339 65 63.2 61.9 325 319 61.4 283 269 58.8 58.4 235 60 52.1 53.3 53.5 55 60.7 51.3 52.1 49.8 48.2 50 47.4 46.3 47.3 47.5 Q2
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 74 75 68 69 70 63 62 60 51 54 52 Brent price 47 48 50 43 40 34 34 34 Realized HC price 30 28 30 26 Unit EBITDA 20 27 Unit FCF* 10 26 23 21 19 17
Slide 27: Declining Oil and Gas Prices Remain in the Driving Seat in Q3
DECLINING OIL AND GAS PRICES REMAIN IN THE DRIVING SEAT IN Q3 UPSTREAM EBITDA QoQ, Q3 2019 VS. Q2 2019 (USD mn) COMMENTS 269 Significant negative price impact, as Brent 51 235 dropped 10% and realized gas prices declined 2 18 by another 11% in Q3 QoQ 3 1 134 101 Small negative volume impact on lower
Slide 28: Production Lower in Q3 2019
PRODUCTION LOWER IN Q3 2019 OCTOBER PRODUCTION WAS AFFECTED BY MAINTENANCE QUARTERLY PRODUCTION BY COUNTRY (mboepd) COMMENTS Q3 2019 QoQ (vs. Q2 2019): 114.9 115.5 111.8 CEE: -2.9 mboepd due to decline in both Associated 109.3 108.3 8.9 9.7 107.5 Hungary and Croatia companies* 9.4 105.0 8.1 8.0 2.1
Slide 29: No Big Move in Q3 in the Very Competitive Unit Opex
NO BIG MOVE IN Q3 IN THE VERY COMPETITIVE UNIT OPEX UNIT OPEX (USD/boe) COMMENTS 9 Group (incl. JVs/associates) Fully consolidated subs. Group-level unit opex (direct production cost), including JVs and 8 7.5 7.5 7.5 7.0 6.9 associates, only marginally changed both QoQ and YoY despite lower 6.8 6.8
Slide 30: Supporting Slides
SUPPORTING SLIDES
Slide 31: Upstream & Downstream EBITDA Changes
UPSTREAM & DOWNSTREAM EBITDA CHANGES UPSTREAM EBITDA YoY Q3 2019 VS. Q3 2018 (USD mn) COMMENTS 319 Key drivers in Q3 2019 vs. Q3 2018 Materially weaker realized gas prices (-36% 96 YoY) and also much lower oil price (Brent - 11 235 18%, or -13 USD/bbl) 8 4 3 134 Positive volume impact driven by the
Slide 32: Upstream: Operational Update (1)
UPSTREAM: OPERATIONAL UPDATE (1) Hungary United Kingdom Exploration: UK production stood at 16.6 mboepd in Q3 2019, slightly lower QoQ due to Mezőhegyes-21 well, which was drilled in partnership with Vermillion, unplanned shutdown at Scott, but still 9% higher YoY due to the strong confirmed a disco
Slide 33: Upstream: Operational Update (2)
UPSTREAM: OPERATIONAL UPDATE (2) Pakistan Kurdistan Region of Iraq Production (net to MOL) was at 7.9 mboepd in Q3, 5% lower QoQ and Shaikan production reached 3.8 mboepd in Q3 2019 (net to MOL), 4% down YoY due to natural decline increasing materially from previous quarters TAL block gross producti
Slide 34: 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 – Q1-Q3 2019 Total – Q1-Q3 2018 EXP 9.7 1.5 0.0 0.3 0.0 37.0 8.3 56.7 44.4 DEV 50.8 29.0 18.9 2.6 38.6 0.2 11.4 151.6 142.1 M&A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other 6.3 24.7 0.5 0.2 8.7
Slide 35: Gas Midstream: Key Financials
GAS MIDSTREAM: KEY FINANCIALS EBITDA (USD mn) CAPEX (USD mn) +8% +18% 18 65.5 14 47.7 30.9 8 25.2 27.1 23.1 6 5 1 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 KEY FINANCIALS (USD mn) COMMENTS YoY Ch YoY Ch EBITDA grew by 8% in Q3 2019 YoY to USD 27m
Slide 36: Sustainability Indicators
SUSTAINABILITY INDICATORS CO2 under ETS (mn t) HC Spill above 1m3 (m3) Tier1 PSE -13% 4.0 300 254.9 4 2.0 1.6 1.7 3.0 1.6 1.6 1.5 1.4 1.4 3 200 2.0 2.0 1.0 2 100 1.0 0.5 23.7 36.9 21.2 1 6.4 14.8 0.0 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q2 2
Slide 37: Macro Indicators
MACRO INDICATORS BRENT (USD/bbl) REFINERY MARGIN (USD/bbl) HUF/USD (Q avg.) 120 10 MOL Group 300 100 8 Complex 280 80 6 260 60 4 240 40 2 220 20 0 200 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 12 12
Slide 38: Consolidated Statement of Profit or Loss
CONSOLIDATED STATEMENT OF PROFIT OR LOSS YoY Q2 2019 Q3 2019 Q3 2018 Income Statement (HUF mn) Q1-Q3 2019 Q1-Q3 2018 Ch % Ch % 1,341,046 1,399,968 1,449,018 (3) Net sales 3,883,395 3,784,704 3 4,126 5,157 5,248 (2) Other operating income 12,569 21,088 (40) 1,345,172 1,405,125 1,454,266 (3) Total ope
Slide 39: Consolidated Statement of Financial Position
CONSOLIDATED STATEMENT OF FINANCIAL POSITION Balance Sheet (HUF mn) 30 Sep 2019 31 Dec 2018 Ch % Assets Equity and Liabilities Non-current assets Shareholders’ equity Share capital 79,408 79,298 0 Property, plant and equipment 2,554,412 2,274,271 12 Reserves 1,871,579 1,613,960 16 Intangible assets
Slide 40: Consolidated Statement of Cash Flow
CONSOLIDATED STATEMENT OF CASH FLOW Q2 2019 YoY Q3 2019 Q3 2018 Cash Flow (HUF mn) Q1-Q3 2019 Q1-Q3 2018 Ch % Restated Ch % 90,809 85,353 122,022 (30) Profit / (loss) before tax 230,188 290,400 (21) Adjustments to reconcile profit before tax to net cash provided by operating activities 93,392 87,700