MOL to realise additional organic growth and cash generative opportunities

MOL to target increasing dividend payout ratio

MOL today announces a set of initiatives to realise additional growth and cash generation throughout its current operating base and portfolio. These measures are announced at the mid-point of MOL’s current five year strategic plan and are based on an examination of development options created or identified since 2005. In anticipation of the cashflow benefits of these developments, MOL has revised its capital return policy.

MOL’s downstream and upstream operations are the most efficient in Europe based on recognised independent analysts. MOL Group has the highest net cash refining margins among European refineries due to its state-of-the-art refining assets, enviable market position, efficient logistics and unique supply chain management practices. The excellence of its business operation is reflected in the share price performance which has consistently outperformed its European refining and marketing peers during the last five years.

The Board of MOL believes that the company has significant unrecognised organic upside potential. The company is targeting Group EBITDA excluding any future M&A activity to grow at an average of 6.5% per annum between 2006 and 2011 (based on the 2006 macro environment) and reaching USD 2.9 billion in the year to 31 December 2011.

In the Refining and Marketing segment MOL is targeting a ca. 5% annual average EBITDA growth until 2011, to exceed USD 1,420 million in 2011. The Hydrocracker project in Duna Refinery is expected to improve EBITDA by approximately USD150 million per year starting in 2011, raising diesel yields of MOL Group from 44% in 2006 to 50% in 2011 on an increased capacity of 15 million tonnes. This will happen against the backdrop of a market environment that is characterised by 7-8% annual average demand growth in diesel over the next four years. MOL also intends to increase the energy integration of its refineries in order to both save costs and enhance its revenue base through the sale of excess electricity.

In the Exploration and Production segment, MOL is targeting ca. 6.6% annual average EBITDA improvement through 2011 when it is projected to reach USD 1,030 million based on a target production level of over 110 thousand boe/day. MOL intends to stabilise its Hungarian hydrocarbon production through the continued use of EOR/IOR techniques across its extensive field portfolio, while intensifying exploration, field development and rehabilitation activity. In the international upstream segment, MOL plans to continue to develop the Baytugan-Baitex field and to intensify the exploration and development of the West Siberian Matyusinskaya and Surgut-7 blocks that it acquired in 2006 and 2007, respectively. MOL also expects significant production increases in Russia and Pakistan starting in 2009-2010.

 

In the Petrochemicals segment, MOL is targeting an annual average EBITDA improvement of over 8% through 2011 to reach USD 300 million in that year. The TVK-Slovnaft petrochemicals merger will further improve the already cost effective operations. The capacity of MOL’s ethylene plants is forecast to increase to 870 kt, while polymer capacity expected to reach 1.3 million tonnes per annum through the cost effective intensification of TVK units, revamp of Slovnaft’s ethylene cracker and replacement of LDPE unit.

In the Gas segment, MOL is targeting an annual average EBITDA growth of at least 10% through 2011, aiming to exceed USD 340 million in annual EBITDA in 2011. The international gas transit business is expected to double by 2011 as a result of the building of pipeline connections between Hungary and Croatia and Hungary and Romania. The import capacity extension project will open the way for further regional transit opportunities. MOL sees significant profit upside in the strategic and commercial storage of gas, and its first new gas storage facilities will begin operating in 2010.

MOL estimates that its organic capital expenditure will be approximately USD 5.3 billion between 2007 and 2010.

In addition to organic growth opportunities, MOL remains committed to continuing to create value through acquisitions and strategic alliances, both in the downstream and the upstream segments, provided that these acquisitions meet the company’s strict criteria for financial returns and strategic fit.

Through the treasury share purchase program announced on 22 June 2007, MOL has purchased 10.6 million shares, returning over USD 1.6 billion to its shareholders and moving from a net cash to a net debt position. MOL intends to continue its share buyback program as authorised by its General Meeting, and has given a new order to purchase additional “A” series MOL shares through the investment service providers ING Bank Zrt. and OTP Bank Nyrt. The Board of Directors intends to request authorisation to cancel treasury shares at the next AGM. The Board decided to increase the dividend payout ratio towards 40% from 2008, depending on investment opportunities.

MOL has already proved that it is capable of creating outstanding value for its shareholders. The Board of Directors is convinced that MOL will continue to create substantial value for its shareholders through the implementation its own, independent strategy.