Outlook on strategic horizon

MOL has become more international, more efficient and more upstream driven

In 2011 more than half of Group all time high EBITDA was generated outside Hungary as share of international operation increased further considerably and we expect this tendency to continue in mid and long term. The Upstream division’s contribution has grown significantly in the last years and achieved more than 70% of Group EBITDA in 2011. Downstream put more emphasis on integration of assets, yield optimalization and energy efficiency improvement to respond unfavourable conditions.

Upstream: targeted 130% reserve replacement ratio in the next 3 years on average ensures mid-term production growth

MOL not just remained committed to keep its financial stability, but continued the key development projects, hereby established an outstanding position for the upturn period in each business division. The investments will focus on growth type projects also in the future, like our exploration and developments in Kurdistan Region of Iraq, Russia and Kazahstan, selective investments in Downstream with special focus on logistic and retail developments.The main objective for the coming years will be to maximise the value of our existing portfolio, which is a solid basis for further growth with sizeable production in 8 countries and exploration potential in 12 countries. The focus will be on field development projects in Russia, Pakistan, Kazakhstan to increase production levels, with increasing contribution to Group level EBITDA. In CEE with maximization of recovery rate we intend to mitigate the decline in production. We further pursue to extend MOL’s outstanding efficiency to the whole Upstream portfolio. On the other hand we are carrying out extensive and intensifying exploration and appraisal activity, with special focus on the Kurdistan Region of Iraq, to further increase our reserve base. Due to the earlier years’ exploration driven strategy, the reserve replacement rate is expected to reach an average 130% in the next three years. The elevated reserve level will provide a good basis for the estimated 3-4% production increase from 2014.

Downstream: Improve profitability and efficiency

Regarding the downstream business MOL Group’s main goal is to focus on market driven selective developments and efficiency improvement in current unfavorable market environment. The Group is focusing on exploiting further synergies through the whole value chain. MOL will optimize its assets on Group level and reshape less efficient assets. Our aim is to gradually improve the Croatian downstream profitability in the coming years. Moreover, residue upgrade modernization program will be elevated in the Rijeka refinery on a long-term horizon. Harmonized development of logistics, commercial and retail will serve the increase of profitable captive market and growth.

2012-2014 CAPEX (up to USD 2bn p.a.) should be financed from operating cash flow

In the 2012-2014 period MOL aims to finance its CAPEX spending, which is targeted up to USD 2bn per annum, fully from the operating cash flow. The focus will be on high return projects at the two key business divisions, upstream and downstream. 50% of the CAPEX is allocated to the Upstream, 25% for Downstream, 4% for Gas Midstream while 21% serves as contingency. On the other hand, MOL continuously monitors the macro environment and is ready to cut its CAPEX program.

 
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