Mol Hungarian Oil & Gas Plc Class A · BET:MOL
Mol Hungarian Oil & Gas Plc Class A — MOL Group — Investor Day (November 2018)
51 slides from Mol Hungarian Oil & Gas Plc Class A's investor day presentation, Nov 8, 2018
Slide 1: MOL Group Investor Day
MOL GROUP INVESTOR DAY London, 8 November 2018
Slide 2: Financial Framework
FINANCIAL FRAMEWORK
Slide 3: MOL Group 2030: Delivering Today, Transforming for Tomorrow
MOL GROUP 2030: DELIVERING TODAY, TRANSFORMING FOR TOMORROW Reducing motor fuel yield from 70%+ to below From „FUELS” 50% to „CHEMICALS” Becoming the leading CEE chemicals company From „FUEL Leading the revolution of transport in CEE to „CONSUMERS RETAILING” Becoming a true consumer goods retailer G
Slide 4: MOL 2030: Tracking Progress in 2017-18
MOL 2030: TRACKING PROGRESS IN 2017-18 INTERIM (2021) TARGETS 2017 STATUS 2018 STATUS NXDSP SLIGHTLY BEHIND TARGET; DOWNSTREAM EFFICIENCY DS2022 EFFICIENCY ON TRACK NEW TARGETS SET IN DS2022 ENTER NEW CHEMICAL ALL POLYOL TECHNOLOGY POLYOL FID IN SEP 2018 PRODUCT LINE(S) LICENSE AGREEMENTS SIGNED FY
Slide 5: 2017-18 Recap: More EBITDA and FCF, No Transformational Capex
2017-18 RECAP: MORE EBITDA AND FCF, NO TRANSFORMATIONAL CAPEX STRONG OIL MACRO, GOOD INTERNAL DELIVERY = EBITDA, FCF ABOVE NORMALIZED GUIDANCE EXPECTED CASH FLOW GENERATION IN 2017-181 (USD BN) 4.6-5.0 4.9 -2.1 Last two years turned out to be stronger In-line sustain capex, hardly than the original,
Slide 6: Resilient, Integrated Business Model, Less Exposed to Oil Macro
RESILIENT, INTEGRATED BUSINESS MODEL, LESS EXPOSED TO OIL MACRO SLIGHTLY ALTERED MACRO ASSUMPTIONS FOR 2019-23: HIGHER OIL PRICE, MORE CONSERVATIVE PETCHEM MARGIN KEY MACRO ASSUMPTIONS EBITDA SENSITIVITY TO KEY EXTERNAL DRIVERS Sensitivity Est. Clean CCS EBITDA % of Group impact (USD mn) EBITDA 2017
Slide 7: First Investment Cycle to Boost EBITDA from 2022-23
FIRST INVESTMENT CYCLE TO BOOST EBITDA FROM 2022-23 UPGRADED CASH FLOW PROFILE FOR 2019-21 ON STRONGER E&P AND CONSUMER SERVICES NEW NORMALIZED EBITDA GUIDANCE CLEAN CCS EBITDA (USD BN) FOR 2019-23E (USD BN) 2.4-2.6 2.3 2.5 2.4 ~2.4 2.2-2.4 2.2 ~2.2 2.0-2.2 0.7 0.9 0.7 1.6 Q3 1.2 0.7 1.4 1.2 1.2 Q2
Slide 8: Annual Sustain Capex to Stay Around USD 1bn
ANNUAL „SUSTAIN” CAPEX TO STAY AROUND USD 1BN STRONG DISCIPLINE MAINTAINED ACROSS THE SEGMENTS SUSTAIN CAPEX (USD BN) 1.7 1.3 1.2 0.9 1.1 1.0 1.0-1.1 1.0 0.7 0.7 0.3 0.4 0.4 0.7 0.5 0.3 0.4 Q1-Q3 0.7 0.4 0.1 0.1 0.1 0.1 0.1 2013 2014 2015 2016 2017 2018E 2019-23E Average Organic US Organic DS Organi
Slide 9: USD 3bn Transformational Capex in 2019-2023
USD 3BN TRANSFORMATIONAL CAPEX IN 2019-2023 INCLUDING SOME CAPEX RELATED TO THE 2ND INVESTMENT CYCLE OF MOL 2030 TRANSFORMATIONAL CAPEX (USD BN) 0.85 0.85 0.05 0.15 0.20 2nd Investment cycle 0.15 INA Delayed Coker (DS2022) 0.50 ~0.40 ~0.40 Other strategic (DS2022) 0.20 Polyol (DS2022) 0.65 0.50 0.15
Slide 10: FCF Covers DS Transformation, Dividends in 2019-23
FCF COVERS DS TRANSFORMATION, DIVIDENDS IN 2019-23 OIL PRICE, IMO HOLD UPSIDE TO CASH FLOWS IN THE NEXT 5 YEARS UPSIDE POTENTIAL TO NEXT 5-YEAR CASH FLOW GENERATION AMBITIONS, 2019-23 (USD BN)1 CASH FLOWS 11.5-12.5 -5.0-5.5 Oil price at USD IMO upside in 70/bbl in 2020-21 6.5-7.0 -3.0 2019-23 -1.5 2
Slide 11: Strong Cash Flows Allow for Increased Dividends
STRONG CASH FLOWS ALLOW FOR INCREASED DIVIDENDS STEADILY RISING BASE DPS, COMPLEMENTED BY SPECIAL DIVIDEND IN 2018 DIVIDEND PER SHARE1 (HUF) 3.6% 3.5% 3.0% Dividend 2.5% 2.9% 3.3% 3.0% +1% +2% +1.5% yield2 ? ? Special dividend BASE DPS: +10% Regular dividend ? CAGR IN 2014-18 ? 43 Base DPS @8-10% 16
Slide 12: Robust Balance Sheet Can Fund E&P Reserves Replacement
ROBUST BALANCE SHEET CAN FUND E&P RESERVES REPLACEMENT ~USD 1.4bn post-dividend FCF in 2017-18… E&P needs to find 350mn boe new reserves to reach the 500mn boe 2P target by 2023 …leads to material deleveraging and building up further balance sheet flexibility Inorganic steps (M&A) are needed and may
Slide 13: INA Progress Report
INA PROGRESS REPORT Strategy MOL 2030 works with or without INA Aim is to maximize value of this significant investment; all options remain on the table In case of exit, bulk of the proceeds shall be reinvested to replace oil&gas reserves Operations Upstream: massive cash contributor; production opt
Slide 14: Sustainable Development and Capital Markets
SUSTAINABLE DEVELOPMENT AND CAPITAL MARKETS INCREASED FOCUS ON NON-FINANCIAL DISCLOSURE, CLIMATE CHANGE RISK; RISE OF ESG & PASSIVE INVESTORS INDEX INCLUSION & ESG SD REPORT REVISION CARBON FOOTPRINT ESTIMATE Rising interest in non-financial data Increasing investor interest on climate from both pas
Slide 15: Downstream
DOWNSTREAM
Slide 16: Translating MOL2030 Goals into Mid-Term Targets
TRANSLATING MOL2030 GOALS INTO MID-TERM TARGETS DS2022 IS CURRENTLY ON TRACK FOR FINANCIALS TARGETS MOL GROUP 2030 TARGETS + DS2022 TARGETS EMPLOYEE INCREASE DS 2022 EBITDA ENGAGEMENT CUSTOMER SAFETY UPLIFT BE THE FIRST CHOICE 500 BEST + SATISFACTION TO + 1ST - IN THE MN USD REGION 95% QUARTILE EBIT
Slide 17: DS 2022 Continues to Deliver Net Efficiency Gain
DS 2022 CONTINUES TO DELIVER NET EFFICIENCY GAIN AND VISIBLE CONTRIBUTION FROM THE FIRST ROUND OF STRATEGIC, TRANSFORMATIONAL PROJECTS BY 2023 CLEAN CCS EBITDA EVOLUTION (USD MN) R&M & Consumer ~180 1,536 1,536 petchem services (Retail) 440 358 358 ~250 1,200+ ~400 ~140 874 ~400 ~350 500 203 1,178 1
Slide 18: USD 600mn Incremental EBITDA Potential by 2023
USD 600MN INCREMENTAL EBITDA POTENTIAL BY 2023 FROM TRANSFORMATIONAL PROJECTS AND EFFICIENCY (USD 2.3BN TOTAL CAPEX) INCREMENTAL EBITDA POTENTIAL BY 2023 (USD MN) CAPEX SPENDING REQUIRED BY 2022 (USD MN)1 Efficiency 210 Efficiency 2018 100 Other strategic Strategic 190 2019 850 Polyol Polyol 100 202
Slide 19: DS Roadmap to Converge Towards 50% Non-Fuel Vision
DS ROADMAP TO CONVERGE TOWARDS 50% NON-FUEL VISION STRIKING THE RIGHT BALANCE BETWEEN INCREASED FLEXIBILITY AND FUEL DEMAND EVOLUTION GROUP REFINERIES’ YIELD (%) NON-FUEL YIELD INCREASE ROADMAP Defining economically viable alternatives: 2015 2030 Utilizing existing flexibility: Existing asset pool a
Slide 20: Strategic (Brownfield) Projects of DS 2022
STRATEGIC (BROWNFIELD) PROJECTS OF DS 2022 LARGE, TRANSFORMATIONAL INVESTMENTS ALONG THE 2030 STRATEGIC GOALS STRATEGIC PROJECT GROUPS GOALS MAIN INVESTMENTS 1 big ticket CAPEX project Delayed coker investment in Rijeka Annual capacity of 0.8mn t ~450 mn CAPEX Engineering complete, FID is contingent
Slide 21: Polyol: EPC Contract Signed with World-Class Partners
POLYOL: EPC CONTRACT SIGNED WITH WORLD-CLASS PARTNERS PROJECT TO ADD USD 170MN EBITDA UNDER MID-CYCLE CONDITIONS POLYOL INVESTMENT HIGHLIGHTS ECONOMIC AND COMMERCIAL HIGHLIGHTS Engineering, procurement, construction (EPC) contracts cover 85% of technical Total project costs estimated at USD 1.4bn sc
Slide 22: What Comes Beyond Polyol?
WHAT COMES BEYOND POLYOL? REPLICATING THE DOWNSTREAM SUCCESS STORY WITH STRONG CEE FOCUS INVESTMENT CRETERIA VAST OPPORTUNITIES TO EXPAND ALONG THE PETCHEM VALUE CHAIN Crude oil (naphtha) based chemistry and feedstock integration Attractive end-user markets (Demand) Limited regional competition (Sup
Slide 23: Transforming MOL to Adapt to Circular Economy
TRANSFORMING MOL TO ADAPT TO CIRCULAR ECONOMY PLASTICS RECYCLING: A GREAT OPPORTUNITY TO COMPLEMENT THE PETCHEM PRODUCT MIX AVOIDED EMISSIONS CIRCULAR ECONOMY Legislation and changing end-user behavior provides an opportunity in Avoided emissions: biofuels, semi- recycling commodity petchem products
Slide 24: Improving Margin Capture by 2023
IMPROVING MARGIN CAPTURE BY 2023 DS 2022 PROGRAM TARGETS OFFSETTING POTENTIAL MACRO NORMALIZATION DS EBITDA PROFITABILITY EVOLUTION (2017-23, USD/BBL)1 • MOL group ref.: USD 4-5/bbl • Petchem: EUR 300-400/t 11.4 0.8 ~3.5 Higher energy 4.0-4.5 prices and CO2 Wage pressure in 6.9 the CEE ~1.5 R&M Pote
Slide 25: Significant Upside Potential from IMO 2020
SIGNIFICANT UPSIDE POTENTIAL FROM IMO 2020 LANDLOCKED REFINERIES: 47% MIDDLE DISTILLATES, NO MATERIAL FUEL OIL GROUP REFINERY YIELD, 2017 (%) PRODUCT FORWARDS (USD/BBL)1 9.6% 2.9% Diesel HFO Brent-Ural 8.1% LPG 8.1% Naphta 16.6 16.7 16.6 Motor gasoline 14.5 14.6 2.3% 19.0% 12.9 4.2% Middle distillat
Slide 26: DS Safety: Targeting an HSE Conscious Behavior
DS SAFETY: TARGETING AN HSE CONSCIOUS BEHAVIOR PARTICULAR ATTENTION TO BEHAVIORAL SAFETY TO REDUCE THE NUMBER OF LOW-POTENTIAL AND LOW-SEVERITY CASES TRIR SAFETY 3.26 1ST QUARTILE TARGETING: TRIR OF 1.5 OR LOWER INCREASE OF TRIR* VS 2017 SAFETY LEADERSHIP ENGAGEMENT SLIP & TRIP PREVENTION AND DECREA
Slide 27: Employee Engagement: Four Focus Areas to Improve
EMPLOYEE ENGAGEMENT: FOUR FOCUS AREAS TO IMPROVE RESULTS FROM THE EMPLOYEES ENGAGEMENT SURVEY SHOWED FOUR KEY POINTS TO FOCUS ON EMPLOYEE EMPLOYEE ENGAGEMENT ENGAGEMENT 74% BEST IN THE REGION TARGETING 80+% +5% VS 2015* OPERATING EFFICIENCY STRONG PERFORMANCE IN: LEADERSHIP COOPERATION REMUNERATION
Slide 28: Customer Satisfaction: Some Critical Areas to Improve
CUSTOMER SATISFACTION: SOME CRITICAL AREAS TO IMPROVE TOGETHER WITH OUR CUSTOMERS WE IDENTIFIED WHERE AND HOW TO IMPROVE CUSTOMER INCREASE SATISFACTION CUSTOMER SATISFACTION TO 89% 95% 10 COUNTRIES CUSTOMER CARE END TO END CUSTOMER JOURNEY CLAIM MANAGEMENT CONTRACT MANAGEMENT 15 PRODUCT LINES ONLINE
Slide 29: Consumer Services
CONSUMER SERVICES
Slide 30: Consumer Services: Becoming a True Consumer Goods Retailer
CONSUMER SERVICES: BECOMING A TRUE CONSUMER GOODS RETAILER AND LEADING THE REVOLUTION OF TRANSPORTATION IN CEE YESTERDAY: LEADING CEE FUEL RETAILER TRANSFORMING FOR TOMORROW LEAD THE BECOME A TRUE DIGITALIZE CUSTOMER (R)EVOLUTION OF CONSUMER GOODS INTERACTIONS AND TRANSPORTATION RETAILER OPERATIONS
Slide 31: USD 500mn+ EBITDA in 2023 from a More Diverse Portfolio
USD 500MN+ EBITDA IN 2023 FROM A MORE DIVERSE PORTFOLIO TRANSFORMATION FROM A FUEL RETAILER TO A LEADING CEE CONSUMER SERVICES BRAND EBITDA (USD mn) New Consumer Goods businesses USD 500mn+ 5 Consumer Goods (CG) 4 Mobility services* 3 2 Mileage demand - Alternative fuels 1 Mileage demand - Fossil fu
Slide 32: 2030 Fossil Fuel Volume and Margin at ~2016 Levels
2030 FOSSIL FUEL VOLUME AND MARGIN AT ~2016 LEVELS MOL’S RETAIL FUEL SALES VOLUME PROJECTION MOL GROUP’S RETAIL FUEL MARGIN PROJECTION USD mn (bn liters) +20-30%1 -20-30% ~6bn ~USD 700mn 2016 2021-2023 avg. 2030 2016 2018 2020 2022 2024 2026 2028 2030 Fuel margin MOL retail sales 32 1. Including acq
Slide 33: Increasing Mileage Demand in CEE
INCREASING MILEAGE DEMAND IN CEE Increasing car penetration in CEE Increasing GDP/capita Stagnating population Car stock / population Real GDP/cap. (in 2017 ’000 Euro) CEE country pop. (2015=100) Biggest potential 0% 50 120 in core MOL countries 101 3% 40 97 3% 91 5% 80 30 59% 20 40 38% 10 0 0 0% -1
Slide 34: New EV Charging Business
NEW EV CHARGING BUSINESS VISION: BECOME BEST CEE ALT. FUEL PROVIDER & EARN AT LEAST SAME MARGIN/KM AS ON FOSSIL FUELS Earning at least same EVCH INSTALLATION SCHEDULE (~ FIGURES) margin as on fossil fuels EV chargers (closing pcs) - Right axis Transactions (’000) - Left axis Strategic aim is to deve
Slide 35: Mobility Trends Shaping Car Demand
MOBILITY TRENDS SHAPING CAR DEMAND Business Impact Autonomous By 2035 Level 4 and 5 autonomous cars** could represent 16% of new car sales Robo-taxis could become cost competitive with traditional vehicle ownership Connected Around 2/3 of new cars globally projected to have some form of connectivity
Slide 36: Scaling Up Mobility Services
SCALING UP MOBILITY SERVICES USD 30MN INCREMENTAL MOBILITY EBITDA IN 2021 FROM 3 SOURCES Public transport Car sharing Fleet mgmt. and AV* Connect MOL brand and Build capabilities to manage Develop public transport shared cars in customers’ the future connected car capabilities with new minds (buildi
Slide 37: Boost Consumer Goods EBITDA with Proficient FMCG Capabilities
BOOST CONSUMER GOODS EBITDA WITH PROFICIENT FMCG CAPABILITIES Place- Promo- Store Product Pricing ment tion format Unique Offers Space Margin Brand Smart investment allocation maximization management Right range, in line Spaceman tool to One-to-one Promotional Increasing Fresh with market & develop
Slide 38: New Business Models: Consumer Investments
NEW BUSINESS MODELS: CONSUMER INVESTMENTS PENETRATE THE (FMCG) VALUE CHAIN DIVERSIFIED SALES CHANNELS Water Non-fuel Fresh Corner retail sites Purchased Fonte Viva mineral water Developing and implementing coffee shop and kiosk concept bottling company for own brand Open 100 new coffee shop stores a
Slide 39: ~USD 1.2bn Simplified FCF in 2019-23
~USD 1.2BN SIMPLIFIED FCF IN 2019-23 SUFFICIENT BOTH FOR INORGANIC INVESTMENTS AND FUNDING DIVIDENDS EBITDA STRATEGIC ACTIONS EBITDA AND FCF (2019-2023) DRIVERS (2014-2018) 100 50 Increasing gross margin contribution of 100 Product & shelf mgmt. consumer goods from 27% in 2018 to One-to-one reward 3
Slide 40: Exploration and Production
EXPLORATION AND PRODUCTION
Slide 41: Strong Cash Flow to Fund Reserve Replacement
STRONG CASH FLOW TO FUND RESERVE REPLACEMENT 1. WE HAVE SUSTAINED EFFICIENCY 3. WE ARE GENERATING STRONG CASH FLOW • Strong cost discipline remains even in a 80 USD/bbl oil price environment • 2017-2018 USD 1.5 bn simplified FCF likely to be delivered • Unit direct production cost will stay at aroun
Slide 42: Strong Cost Discipline
STRONG COST DISCIPLINE REMAINS IN OUR DNA EVEN IN A HIGH OIL PRICE ENVIRONMENT COST CONTROL STABILIZATION SUSTAIN & CONTROL IMPLEMENTED DIRECT PRODUCTION COST (USD/BOE) KEY MESSAGES -15% E&P’s cost base became fit for a Keep flat 7 30 USD/bbl oil price environment Cost discipline remains in our 2015
Slide 43: Maintain Production at 100-110 mboepd Through 2023
MAINTAIN PRODUCTION AT 100-110 MBOEPD THROUGH 2023 STABLE FOR LONGER PRODUCTION PROFILE (MBOEPD) 120 112 107 ~110 ~105-110 104 ~100-105 100 80 60 40 20 0 2015A 2016A 2017A 2018F 2019-21 2022-23 E&P International CEE Production guidance 43 Note: including equity consolidated assets
Slide 44: Upgraded Mid-Term Production Guidance
UPGRADED MID-TERM PRODUCTION GUIDANCE THE LONGEVITY OF OUR MATURE PORTFOLIO WILL EXCEED EXPECTATIONS MID-TERM PRODUCTION GUIDANCE (MBOEPD) Full commercial turnaround Raise capacity to 55 mboepd by 2020, 110 SHAIKAN en route to up to 110 mboepd later Entirely self-financing 105 ~95-105 ~105-110 2020-
Slide 45: Shaikan: Major Investment After Commercial Turnaround
SHAIKAN: MAJOR INVESTMENT AFTER COMMERCIAL TURNAROUND UP TO ~3X INCREASE IN PRODUCTION, SELF-FUNDING INVESTMENT INVESTMENT IN STAGES WITH MOL’S FULL REVISED FIELD DEVELOPMENT PLAN (BPD) OVERSIGHT Full commercial turnaround: on-time payment 120 000 received from MNR with Brent-driven pricing based on
Slide 46: At Least USD 500mn Simplified FCF @ USD 60/bbl
AT LEAST USD 500 MN SIMPLIFIED FCF @ USD 60/BBL PROVEN TRACK RECORD OF GENERATING CASH FLOW EVEN AT LOW OIL PRICES (2016) PRICE REALIZATION, EBITDA, SIMPLIFIED FCF1 (USD/BOE) 72 70 Brent price 60 52 54 44 Realized HC price Unit EBITDA Unit Simplified FCF 25 15 18 13 7 1 2015A 2016A 2017A 2018 9M 201
Slide 47: ~350 MMboe Gap to Reach 500 MMboe Reserves by 2023
~350 MMBOE GAP TO REACH 500 MMBOE RESERVES BY 2023 BIGGEST ORGANIC REPLACEMENT POTENTIAL IS NORWAY, INORGANIC STEPS ALSO REQUIRED RESERVES GAP MOL Group 2P reserves (MMboe) 514 500 459 A Largest potential for organic ~350 reserve replacement is Norway 356 MMboe Smaller replacement in CEE B Inorganic
Slide 48: Norway Is the Biggest Organic Opportunity
NORWAY IS THE BIGGEST ORGANIC OPPORTUNITY A THIRD OF NORWAY RESOURCES TO BE DE-RISKED IN THE NEXT 12 MONTHS NET RISKED RESOURCE POTENTIAL OF NORWEGIAN WELLS KEY MESSAGES (MMBOE) Well-timed entry to Norway in 2015 450 Current MOL Group 2P Valuable exploration portfolio built around the 400 reserves M
Slide 49: Inorganic Deals Required for Reserves Target
INORGANIC DEALS REQUIRED FOR RESERVES TARGET MOL CONSTANTLY SCREENS THE MARKET FOR THE RIGHT OPPORTUNITIES OUR VALUE FRAMEWORK How can we generate value at USD 80/bbl? 2 Assets with restructuring potential RUSSIA Swaps in Norway post-discovery 4 Strong G2G relations What assets are we pursuing? 1 CO
Slide 50: Current Assets to Generate USD 2bn+ FCF in 2019-2023
CURRENT ASSETS TO GENERATE USD 2BN+ FCF IN 2019-2023 FUNDING RESERVE REPLACEMENT AND ADDING TO THE DIVIDEND POOL EBITDA, CAPEX AND FCF (USD BN)1 KEY MESSAGES Brent @ 70 USD/bbl +USD USD 1.2bn post-tax free cash flow to be ~0.9 bn achieved in 2017-2018, above guidance Brent @ 60 EBITDA USD/bbl Curren
Slide 51: 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