41 slides from Mol Hungarian Oil & Gas Plc Class A's earnings presentation, Aug 5, 2016
Slide 1: Second Quarter 2016 Results
SECOND QUARTER 2016 RESULTS 5 AUGUST 2016
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 2 KEY GROUP QUARTERLY FINANCIALS 3 DOWNSTREAM QUARTERLY RESULTS 4 UPSTREAM QUARTERLY RESULTS 5 GROUP OUTLOOK 6 SUPPORTING SLIDES 3
Slide 4: Highlights of the Quarter
HIGHLIGHTS OF THE QUARTER
Slide 5: On Track to Deliver
ON TRACK TO DELIVER WITH THE ESSENTIAL FUNDAMENTAL BUILDING BLOCKS 2015 YTD 2016 Target GROUP CLEAN USD 2.5 BN USD 1.09 BN USD 2 BN+ CCS EBITDA RESILIENT INTEGRATED BUSINESS MODEL GROUP CAPEX Cut by USD 0.2bn to USD 1.3 BN USD 432 MN UP TO USD 1.1bn (ORGANIC) FCF FINANCIAL USD 1,040 MN USD 595 MN PO
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% 800 700 85% 600 70% 500 55% 400 300 40% 200 25% 100 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
Slide 7: Free Cash Flow Generation Continued in Q2
FREE CASH FLOW GENERATION CONTINUED IN Q2 FINANCIAL HIGHLIGHTS Strong Clean CCS EBITDA of HUF 160bn (USD 577mn) in Q2 2016, bringing H1 EBITDA to HUF 305bn (USD 1.09bn). MOL is confident it will comfortably meet its USD 2bn+ annual guidance Downstream EBITDA rose quarter-on-quarter on seasonality, b
Slide 8: Sustainable Development & HSE Highlights
SUSTAINABLE DEVELOPMENT & HSE HIGHLIGHTS IMPROVING TRENDS TOTAL RECORDABLE INJURY RATE (ALL) TIER 1 PROCESS SAFETY EVENTS 2.0 -19% 4.0 -67% 1.6 1.5 1.4 1.4 1.4 3 3 1.3 3.0 1.1 1.0 2 2 2 2.0 1 0.5 1.0 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Lowe
Slide 9: Key Group Quarterly Financials
KEY GROUP QUARTERLY FINANCIALS
Slide 10: Q2 2016: Seasonally Strong, Slightly Down YoY
Q2 2016: SEASONALLY STRONG, SLIGHTLY DOWN YOY RECORD-HIGH DOWNSTREAM EBITDA DELIVERY IN H1 SIMPLIFIED FCF* (HUF bn) SEGMENT CLEAN CCS EBITDA (HUF bn) +7% +69% -10% +11% 104 98 204 179 83 160 157 54 152 144 62 62 49 42 47 127 93 116 10 19 8 -12 -10 -13 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
Slide 11: Clean CCS EBITDA Up 11% QoQ, Down 10% YoY
CLEAN CCS EBITDA UP 11% QOQ, DOWN 10% YOY RESILIENT DESPITE LOWER OIL PRICE, SOFTER REFINING GROUP EBITDA QoQ (HUF bn) COMMENTS Downstream Strong volumes seasonality 10.9 helps QoQ (motor fuels +23%) 1.9 23.3 160.1 Retail EBITDA jumps QoQ 5.0 6.4 Upstream 144.4 Uptick in oil prices supports results
Slide 12: Very Strong Reported Net Income, EPS
VERY STRONG REPORTED NET INCOME, EPS SUPPORTED BY DS PERFORMANCE, NON-RECURRING TAX ITEMS H1 2016 EARNINGS (HUF bn) 6 0 Other 5 -148 Downstream 209 310 -11 7 -3 7 162 157 161 Upstream 91 Clean CCS CCS EBITDA excl. Special items DD&A and Profit from Total financial Income from Profit before Income ta
Slide 13: Capex Is Materially Lower YoY
CAPEX IS MATERIALLY LOWER YOY PRIMARILY REFLECTING LOWER UPSTREAM SPENDING, NO MAJOR M&A TOTAL GROUP CAPEX (HUF bn) UPSTREAM vs DOWNSTREAM (HUF bn) 111 Organic -22% +39% 147 Inorganic 11 109 74 94 1 65 87 73 17 48 99 57 5 53 40 73 33 49 43 34 30 18 3 0 2 0 3 1 H1 2015 H1 2016 H1 2015 H1 2016 Q1 2015
Slide 14: Strong Cash Generation Intact
STRONG CASH GENERATION INTACT COMFORTABLY COVERING ORGANIC CAPEX OPERATING CASH FLOW YTD (HUF bn) 5 14 287 53 148 212 22 157 121 HUF bn Profit Before Tax DD&A Net FX (gain)/loss Other Operating CF Change in WC Income tax paid Operating CF Organic CAPEX before WC COMMENTS Operating Cash Flow before W
Slide 15: Balance Sheet Metrics on Par with Q1
BALANCE SHEET METRICS ON PAR WITH Q1 DESPITE HUF 55BN (~USD 200MN) Q2 OUTFLOW ON DIVIDEND PAYMENT NET DEBT TO EBITDA (x) GEARING (%) 2.5 40 36 35 33 1.96 31 2.0 1.72 30 28 28 28 1.66 25 1.44 25 1.5 1.38 1.31 21 20 1.08 20 1.05 16 1.0 15 0.79 0.73 10 0.5 5 0 2008 2009 2010 2011 2012 2013 2014 2015 Q1
Slide 16: Downstream Q2 2016 Results
DOWNSTREAM Q2 2016 RESULTS
Slide 17: All-Time High YTD Result
ALL-TIME HIGH YTD RESULT RISING PETCHEM & RETAIL EARNINGS COMPENSATE DECLINE IN REFINING QUARTERLY CLEAN CCS EBITDA (HUF bn) YTD CLEAN CCS EBITDA (HUF bn) +3% -8% 25% Retail Retail 153 209 Petchem Petchem 203 R&M 127 R&M 24 36 116 14 106 93 23 70 76 46 13 91 46 45 67 109 48 82 34 Q1 2015 Q2 2015 Q3
Slide 18: Only Slightly Weaker Q2 Clean CCS EBITDA YoY
ONLY SLIGHTLY WEAKER Q2 16 CCS EBITDA YOY INTEGRATED DOWNSTREAM VALUE CHAIN SHOWS ITS STRENGTH CLEAN CCS EBITDA YoY (HUF bn) COMMENTS 138 127 Contracting motor fuel crack 116 21 Retail 14 9 spreads affected refining 32 7 23 1 8 Refining and retail benefit Petchem 46 from 5% CEE demand growth 46 Petc
Slide 19: Retail EBITDA Jumped by ~50% YTD
RETAIL EBITDA JUMPED BY ~50% YTD CEE MOTOR FUEL CONSUMPTION ABOVE PRE-CRISIS HIGHS CEE1 MOTOR FUEL DEMAND EVOLUTION RETAIL EBITDA EVOLUTION (HUF BN) (2008 = 100%) 1.05 151 204 223 129 300 1.00 H2 H1 62 0.95 48 34 0.90 36 18 24 14 0.85 2008 2009 2010 2011 2012 2013 2014 2015 2016 2013 2014 2015 2016
Slide 20: Downstream: Weaker Refining, Strong Petchem
DOWNSTREAM: WEAKER REFINING, STRONG PETCHEM TURNAROUND ACTIVITIES IN 2016 Petchem: integrated margin edged down, but remained very supportive in 2016 ytd, holding upside risk for the year Refining: weaker motor fuel cracks (depressed diesel, eroding gasoline) only partly offset by low oil prices, wi
Slide 21: Upstream Q2 2016 Results
UPSTREAM Q2 2016 RESULTS
Slide 22: EBITDA on the Rise (+15%) QoQ
EBITDA ON THE RISE (+15%) QOQ SUPPORTED BY RECOVERING OIL PRICES QUARTERLY EBITDA (HUF bn) REALIZED HYDROCARBON PRICES -9% +15% 100 60 89.9 91.4 54 90 86.2 49 43 44 42 80 69.6 70 63.4 62.5 63.0 60 54.7 53.1 52.6 50 46.0 44.8 43.2 43.5 43.2 44.4 39.9 37.7 39.2 37.2 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1
Slide 23: Volumes, Cost Control Remain Crucial
VOLUMES, COST CONTROL REMAIN CRUCIAL TO MITIGATE/OFFSET NEGATIVE PRICE IMPACT US EBITDA QoQ (HUF bn) COMMENTS 3 49 1 Higher oil prices partly offset 1 by lower gas prices 1 6 40 (primarily in Croatia) 42 Lower exploration expenses 8 on reduced activty Lower opex HUF mn EBITDA Prices FX Volumes Explo
Slide 24: Production Remained Strong in Q2
PRODUCTION REMAINED STRONG IN Q2 ON TRACK TO MEET UPPER END OF 105-110 MBOEPD GUIDANCE RANGE FOR FY 2016 QUARTERLY PRODUCTION BY COUNTRY COMMENTS Q2 2016 vs. Q1 2016 (-1%) +7% -1% 112.1 ~112.0 UK: -1.9 mboepd QoQ on 110.8 Cladhan and Scott decline 108.3 3.4 2.8 3.3 Other 103.3 103.6 3.3 4.1 100.5 3.
Slide 25: CEE Production Optimization Brings Further Success
CEE PROD. OPTIMIZATION BRINGS FURTHER SUCCESS CEE OIL PRODUCTION FURTHER UP BY 3% QOQ, +20% YOY History of onshore production Total onshore hydrocarbon Oil production (mbpd) since the acquisition of INA production (mboepd) Crude oil Total +22% +4% 60 +10% -1% 50 15 50 40 40 10 30 Hungary 30 20 20 5
Slide 26: Continued Operational Success in Pakistan
CONTINUED OPERATIONAL SUCCESS IN PAKISTAN 5 NEW DISCOVERIES SINCE 2015; ON THE WAY TO REACH 80 MBOEPD MILESTONE IN TAL IN H2 Discoveries and tie-ins since 2015 January MOL made 5 new discoveries in Pakistan since 2015, of which Discoveries TAL BLOCK three in the operated TAL block Kalabagh-1A Halini
Slide 27: Cost Discipline Continues
COST DISCIPLINE CONTINUES CAPEX BY REGION AND TYPE IN H1 2016 (HUF bn) UNIT OPEX 2014 TO DATE (USD/boe) TOTAL TOTAL HUN CRO KRI RUS PAK UK NOR OTHER H1 2016 H1 2015 9.0 EXP 3.2 0.2 0.0 0.0 2.9 0.2 2.0 6.0 14.5 42.9 8.5 DEV 8.2 10.9 0.2 2.1 0.8 28.7 0.0 2.4 53.2 49.7 8.0 -15% C&O 1.8 2.4 0.7 0.0 0.0
Slide 28: New Upstream Program on Track
NEW UPSTREAM PROGRAM ON TRACK SELF FUNDING AND VALUE CREATING BUSINESS AT 45-50 USD/BBL OIL PRICE 2016 YTD TARGET Material CEE onshore growth PRODUCTION on Production Optimization Mboepd 105-110 111.5 Higher UK volumes YoY production growth fully liquids-driven USD 80-100 mn opex UNIT OPEX reduction
Slide 29: Group Level Outlook
GROUP LEVEL OUTLOOK
Slide 30: 2016 Clean CCS EBITDA Guidance Reiterated
2016 CLEAN CCS EBITDA GUIDANCE REITERATED 2016 ORGANIC CAPEX GUIDANCE LOWERED TO „UP TO USD 1.1BN” EXTERNAL ENVIRONMENT (2016) EBITDA, CAPEX (2016) Oil price: USD 35-50/bbl USD 2bn+ EBITDA at our planning Downstream: above mid-cycle, below 2015 assumptions peaks Capex guidance lowered by USD 0.2bn t
Slide 31: Supporting Slides
SUPPORTING SLIDES
Slide 32: 2016 YTD Upstream & Downstream EBITDA Changes
2016 YTD UPSTREAM & DOWNSTREAM EBITDA CHANGES UPSTREAM EBITDA YTD (HUF bn) COMMENTS 114 Key drivers in H1 2016 Oil prices (-31% yoy) 41 6 91 8% higher production 2 11 1 Slightly lower exploration expenses 74 Depreciation: regular DD&A and smaller scale well write- 17 offs EBITDA Prices FX Volumes Ex
Slide 33: Financials: Sources and Uses of Cash
FINANCIALS: SOURCES AND USES OF CASH SOURCES AND USES OF CASH (2011-TO DATE, HUF bn) 3,500 135 27 171 258 3,000 2,500 1,622 2,000 2,939 1,500 1,367 421 1,000 264 216 276 500 318 190 Cash & Cash Pre-Tax OP CF Sales & Other Net Interest Cash Tax CAPEX FCF Post Change in Acquisitions Dividends to Divid
Slide 34: Upstream: Operational Update Highlights
UPSTREAM: OPERATIONAL UPDATE HIGHLIGHTS Hungary United Kingdom Successful continuation of the production Cladhan: Production rates show natural decline in line optimisation campaign with 6 well workovers in Q2 with expectations (15 in H1) Scott, Telford & Rochelle: Infill drilling program is Hungari
Slide 35: Upstream: Operational Update Highlights
UPSTREAM: OPERATIONAL UPDATE HIGHLIGHTS Pakistan Kurdistan Two new discoveries in the Tal Block: Makori Deep-1 Production and crude oil export sales continued and Tolanj West-1 wells. Post acidization the Makori from 9 wells and two production facilities in Q2 at Deep-1 well flowed oil and gas from
Slide 36: Gas Midstream: Key Financials
GAS MIDSTREAM: KEY FINANCIALS EBITDA CAPEX -20% -57% 3.9 18.9 19.2 18.0 12.3 10.3 8.3 1.5 0.7 0.3 0.1 0.1 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 KEY FINANCIALS (HUF bn) COMMENTS Q2 2016 Q2 2015 YoY H1 2016 H1 2015 YTD H1 2016 EBITDA relatively
Slide 37: SD & HSE Indicators
SD & HSE INDICATORS CO2 under ETS HC Spill above 1m3 Tier1 PSE -67% -83% +8% 3.0 3.0 2 150 138.0 3 1.5 1.4 1.3 1.3 1.3 2.0 2.0 2.0 1.2 100 2 1 1.0 50 23.0 1 10.0 2.0 4.9 0.0 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 2015 2015 2015 2015 2016 2016 2015 2015 2015 2015 2016 2016 2015 2015 20
Slide 38: Macro Indicators
MACRO INDICATORS BRENT REFINERY MARGINS HUF / USD 150 10 300 MOL Group 8 280 Complex 100 6 260 4 240 50 2 220 0 0 200 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 12 12 13 13 14 14 15 15 16 12 12 13 13 14 14 15 15 16 12 12 13 13 14 14 15 15 16 BRENT URAL SPREAD PE
Slide 39: Consolidated Income Statement
CONSOLIDATED INCOME STATEMENT 39
Slide 40: Consolidated Balance Sheet
CONSOLIDATED BALANCE SHEET 40
Slide 41: Consolidated Cash Flow Statement
CONSOLIDATED CASH FLOW STATEMENT 41