Material factors affecting MOL Group earnings

MOL Hungarian Oil and Gas Company hereby informs capital market participants of two items which are expected to have a material effect on its earnings. The collective labour agreements of MOL Group companies include higher severance payment than required by law and significantly higher than usual on local labour markets. In order to bring the collective agreements into line with current labour market conditions, the MOL Group has initiated a process to reduce future severance payments to the legal minimum level, while redeeming its extra severance payment obligation to the current employees at a discounted level. Though the proposal of MOL is subject to acceptance by employees, on the basis of the level of acceptance received to date, the expected payout in 2005 may reach HUF 25 billion at Group level. MOL plans to create a provision in its 2004 accounts for this liability.

During 2004 MOL implemented a change in the sales activity of the ZMB joint venture. Prior to the change most crude oil produced by the joint venture was sold to or through Yukos. Due to the change in the financial situation of Yukos, MOL rearranged the sales channels of the ZMB joint venture in order to make it independent of Yukos’ position. However, the joint venture has overdue receivables from Yukos in respect of certain sales made in 2004. While MOL will make every effort to collect these receivables, its prudent accounting policy necessitates the creation of a provision for the overdue receivables. The amount of the provision planned in the 2004 accounts on Yukos related overdue receivables is not expected to exceed HUF 10 billion.