28/11/2005

Setting the pace from "New Europe"

MOL Group’s New Strategic and Financial Targets for the Period 2006-2010

MOL’s 2006-2010 strategy is to maximise the potential from growth in “New Europe” while providing superior returns. Drawing on the Company’s disciplined transaction track record and proven transformation and integration skills, MOL will continue to develop the group with a focus on growth and efficiency, while at the same time closely managing risk at the group level.

Key strategic targets*

o Group EBITDA over USD 3.5 billion
o Group ROACE** of 15%
o Efficiency improvement of USD 285 million

*based on a set of market assumptions
**NOPLAT based

Zsolt Hernádi, Executive Chairman of MOL commented:

“Based on our successful regional partnerships, well-timed investments in quality assets and the consequent execution of our efficiency and synergy plans we achieved our 2005 strategy targets well ahead of schedule. In the course of the three year period MOL became one of the best performing integrated energy companies in the world. Based on our proven capabilities in the period to 2010 our aim is to generate outstanding growth while maintaining the Group’s level of returns above that of our peers”


MOL has set the following targets to achieve these goals. 

  • Growth: MOL growth targets have been developed with due consideration given to the maintenance of the balance of MOL`s business portfolio. MOL aims to increase upstream integration by tripling hydrocarbon production and to double refined product sales. MOL plans to achieve the ambitious growth targets set for the period by dedicating USD 5.4 billion for organic CAPEX and through the continued application of a disciplined approach to inorganic opportunities.
  • Efficiency: Further improvement of operating efficiency by creating an annual total efficiency improvement of USD 285 million by 2010. This includes significant cost savings and better utilisation of assets.
  • Financial flexibility: MOL intends to keep its gearing ratio below 30% and maintain its investment grade credit rating. The Company plans to gradually increase the absolute level of dividend to reach the dividend payout ratio of peers (currently 30% of normalised earnings) by 2010.
    In order to reach the aforementioned targets, we have developed the following strategies for our businesses:

Upstream – Build a focused but robust core portfolio

In the Exploration & Production segment MOL intends to triple its hydrocarbon production to 300,000 boe per day and triple the total oil and gas reserves to 900 million boe by 2010 whilst maintaining reserve replacement costs under USD 6.5 boe. In the Central-Eastern European region MOL aims to expand its exploration and production activity jointly with INA and through new corporate acquisitions. In the international arena MOL intends to develop a strong and focused portfolio applying rigorous evaluation and portfolio management methods. This includes at least one new core region, in addition to the existing ones, in order to secure long-term reserve growth and at the same time maintaining a balance between exposure to exploration and development & production projects. As a result of these actions the company intends to increase the contribution of upstream to Group EBITDA to over 40%.

Downstream – Develop further the competitive quality refinery pool and an efficient retail network

In the Refining & Marketing segment, MOL`s aim is to maintain quality leadership and leverage it to new growth markets. Therefore the company intends to invest in quality-related upgrades in the core markets in order to improve product yields and will also take advantage of appropriate acquisitive opportunities. The Company intends to increase refined product sales to reach 500,000 barrels per day at the same time to optimise the downstream value chain to maximise profit through the extension of the supply chain philosophy within the growing Group.
MOL targets an efficient group retail network of 1,500 stations by 2010 within its refineries’ supply radius.

Petrochemical business – Leverage investments of the past three years

In the Petrochemical segment, leveraging on its quality asset base, competitive cost structure and favourable geographic position, MOL’s aim is to strengthen its traditional niche market position on Western markets, while developing its presence in strategic Eastern growth markets.

Gas transmission – Generate additional non-regulated transit income

In the Gas business, MOL`s objective is to maintain its position in transmission, which provides not only stable cash generation but growth opportunities. The company’s intention is to increase its participation further in the regional gas transit business, utilising its unique geographical location.

In summary, MOL is confident that its current capabilities, its proven track record and new strategy provide it with a solid basis from which it can meet future challenges. MOL`s vision is to set the pace from “New Europe” by achieving outstanding growth, above-average profitability and superior returns from its portfolio.

The detailed strategy presentation will be available on MOL’s website: www.mol.hu