MOL Group improved further its market position in 2011

MOL held its Annual General Meeting (AGM) on April 26, 2012 at Budapest. The shareholders approved the Board of Director’s report on the 2011 business performance, the Annual Report of the parent company in accordance with HAS and the consolidated report prepared in conformity with IFRS, and the Board’s dividend proposal.

Despite the environment full of challenges MOL reported a strong operating profit also in 2011. EBITDA grew by 6% (HUF 645 bn) while the operating profit was HUF 337 bn (both excluding special items), achieving practically the same result as last year. More than half of the record-high EBITDA was earned abroad, as international operations could increase their contribution.

Higher share of international operations was the result – inter alia – of growth in Upstream international segment. Upstream delivered more than 70% of Group EBITDA in line with higher realized hydrocarbon prices and increasing production. The Upstream operating profit, without special items, increased by 16%, up to HUF 330 bn versus last year. However, higher mining royalty obligation (in Hungary: HUF 102 bn, +14% yoy) and domestic gas price regulations had negative effect onto the profit.

Downstream realized an operating loss of HUF 0.5 bn in 2011, excluding special items. Profitability was negatively influenced by external factors, like higher oil price, which increased the costs of own consumption, lower average crack spreads, worsening petrochemical environment as well as refinery stoppages. Improving product slate and efficiency improvement actions could only moderate effects of unfavourable external environment. Nevertheless, the operating profit of this segment, without INA’s contribution and special items, was still relatively high and reached HUF 59 bn.

Operating profit of Gas Midstream segment (without special items) was 2011 HUF 66 bn in 2011. The most important profit contributor remained the FGSZ Ltd (gas transmission business), however, the temporary freeze of gas tariffs from 1 July 2010 carried over negative effect for the H1 2011 result of gas transmission business.

MOL remained fully committed to keep its financial stability: reacting onto the new wave of crisis the Group maintained its CAPEX spending (HUF 274 bn, 18% lower than a year ago) below the operating cash-flow level. As a result of the reduced net debt position, the gearing ratio dropped from 31,3% (a year ago) to 28,8% by the end of December, 2011.

MOL continued implementing the key projects thus prepared in every business for the period of economic recovery. The investments will focus on growth type projects also in the future, like our exploration and developments in Kurdistan Region of Iraq, Russia and Kazakhstan, selective investments in Downstream with special focus on logistic and retail developments.

In 2011, repeating the success of last year, MOL Group was included into the Dow Jones Sustainability Index, as the sole company  from the region. The rank among the top 12 oil and gas companies (top 10%) is indeed a prestigious recognition of efforts implemented in the past years. In 2011 every business division defined in details the sustainability targets along six hat Sustainability Development (FF) focus areas in order that MOL can for sure get into the peers by 2015.

„We are proud of our results whether we speak about success of any business with outstanding performance or our rank in the Sustainability Index. These results could not have been achieved without maintaining our financial stability in the past years. In 2011 was could again prove that we are not only capable of delivering outstanding results, but also overcoming the emerging challenges. Our mutual goal is to retain the discipline we had during the past years, because this was the primary reason why even the global economic environment was not able to shake our position.”- summarised Zsolt Hernádi, Chairman-CEO.

MOL AGM approved to pay HUF 45 bn dividend, corresponding with more than 2% dividend yield on share prices. The Board of Directors had the view that available financial reserves would be sufficient for implementing the CAPEX plan, thus proposed to the AGM to pay aformentioned dividend. The proposal was approved by 99.97% of the  votes.

Regarding the next years, the main goal of MOL Group is to maximise the value of the existing portfolio which is a solid basis for further growth. The primary focus will be on field development projects in Russia, Kazakhstan and Pakistan to increase production levels, with increasing contribution to the Group-level EBITDA. Moreover, MOL further pursues to extend its outstanding efficiency to the whole Upstream portfolio. On the other hand MOL is carrying out extensive and intensifying exploration and appraisal activity, with special focus on the Kurdistan Region of Iraq, to further increase the reserve base.

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.