KEY CHALLENGES AND ACTIONS Jzsef Molnr Chief Executive Officer of MOL Group MOL Group Investor Day 15 November 2012, Budapest 1
SIX CHALLENGES MOL FACES 1 MATURING PORTFOLIO, DECLINING PRODUCTION 2 NEED OF CONTINUOUS EXPLORATION PORTFOLIO RENEWAL 3 MONETIZE COMPANY MAKER STORY IN KURDISTAN 4 CHANGED EXTERNAL ENVIRONMENT IN DOWNSTREAM 5 LONG-LASTING…
ACTION 1 DE-RISK 1.6 BBOE RESOURCE POTENTIAL To reach 180 thboepd production by 2018 Expected production*, 2012-2020 Plateau around 170-180 mboepd 7-8% Exploration CAGR upside (risked) Undeveloped Developed *…
ACTION 2 MORE ACTIVE PORTFOLIO MANAGEMENT TO RENEW THE ASSET MIX Add new high impact elements and potential early harvests Value creation over volumes Grow in core, experienced regions as operator and take minority shares in new…
ACTION 3 REACH EXP. PEAK PRODUCTION AROUND 55-62 MBOEPD BY 2017 Intensified appraisal & early development program Le gend cities Wells MOL present in 2+2 blocks DRN_G001…
ACTION 4 REACH 500-550 MN EFFICIENCY IMPROVEMENT BY 2014 Initiation of New Downstream Program Regain top quartile position in Europe by increasing the efficiency and profitability of MOL Group Downstream 500-550 million EBITDA…
ACTION 5 BALANCING CASH FLOW AND CAPITAL EXPENDITURE As solid balance sheet has top priority 3,5 EBITDA (in bn USD) Limit of net debt to EBITDA Net debt to EBITDA 3,0 3 2,5 2,4 2,5 2,2 2,0 1) In general CAPEX should be financed…
ACTION 6 REORGANIZE GROUP AND FLAGSHIP OPERATION Create a more international headquarters with flexible decision-making Separate tasks and responsibilities between the group and the local levels New international HQ focusing on…
UPSTREAM PORTFOLIO OVERVIEW MID- AND LONG-TERM OUTLOOK Jzsef Molnr Chief Executive Officer of MOL Group MOL Group Investor Day 15 November 2012, Budapest 1
UPSTREAM PORTFOLIO IN A SNAPSHOT Good basis for increasing mid-term EBITDA generation of the Group Strong pillar MOL IS AN UPSTREAM DRIVEN COMPANY Growth over the last years: Increased EBITDA level and investments Attractive,…
MOL IS AN UPSTREAM DRIVEN COMPANY With increasing capital expenditure EBITDA generation CAPEX breakdown Additional share purchase in INA (an upstream driven company) Bn HUF Bn HUF Upstream Downstream Gas Midstream…
IMPROVING PROFITABILITY OVER THE YEARS even compared to peers Upstream unit EBITDA, USD/boe EBITDA generation change 4
EXPLORATION SUCCESSES ARE THE BASIS OF LONG-TERM GROWTH Outstanding, over 60% exploration success rate in the last 3 years Oil discoveries in Matjushkinsky block and (latest in 2011) sizeable reserve Several billion additions, 63…
PRODUCTION COULD REACH 170-180 MBOEPD BY 2017-2020 Sustain production level from existing reserve base and step further on huge exploration upside Expected long-term production* Plateau around 170-180 mboepd Lower, 110 mboepd…
TRANSITION YEARS TO COME DUE TO A GAP IN OUR PORTFOLIO Mitigate decline rate and accelerate development Life-cycle based mixed portfolio: MATURING CEE REGION + HIGH POTENTIAL FIELDS STEP IN ONLY MID-TERM Challenge: 7-10% natural…
SLIGHT PRODUCTION DECLINE CONTINUES IN 2013 TO 110 MBOEPD but gradual increase thereafter: 110-120 mboepd in 2014/15 Production outlook* 115 mboepd 110 mboepd Other Pakistan Russia mboepd Croatia Hungary…
GOOD RESERVE BASE, BUT EVEN GREATER POTENTIALS Resource potential could be the basis of 100% reserve replacement in 3y average Proved and probable reserves 1.6 800 Bn boe Working interest 700 based unrisked recoverable 600…
ACCELERATE KEY INTERNATIONAL PROJECTS TO DERISK UPSIDE Key project timeline till 2018 Exploration Appraisal Development Production Unrisked Country Assets W.I. 2012 2013 2014 2015 2016 2017 2018 RRP POS MMboe Kurdistan Region…
SIZEABLE RESOURCE POTENTIAL WILL ALREADY BE TESTED IN 2013 Operational milestones in Q4 2012 and 2013 Q4 2012 Start up 10 production wells in the Matjushkinsky block in Russia Testing of Bakrman and Gulak exploration wells in…
UP TO USD 1-1.5 BN CAPEX PER YEAR WITH INTERNATIONAL FOCUS to finance reserve booking and growing production Major International Upstream projects and their CAPEX (2013-2015) expected resource allocation 80 Bubble size represents…
HUNGARY REMAINS A CORE COUNTRY Our aim is to mitigate the natural decline rate to below 5% HUNGARY (171 MMboe reserve) 75 years E&P experience with more than 40 years EOR/EGR technological knowledge Extensive surface…
CROATIA: CONTINUING RECENT EXPLORATION SUCCESSES Aiming to maintain production on 2013 level in the coming years CROATIA (234 MMboe) Three oil discoveries in 2011-2012 proved our good geological knowledge Enhanced Oil/Gas Recovery…
RUSSIA: CONTINUOUS PRODUCTION INCREASE TO 40 MBOEPD Reserves and sizeable exploration upside create mid-/long-term growth potential RUSSIA (186 MMboe) Diversified Russian portfolio Good reserve base to boost production 230 MMboe…
PAKISTAN: HIGHER PROFIT FROM OIL/CONDENSATE DISCOVERIES Gradual production growth to 12-14 mboepd PAKISTAN (11 MMboe) Operatorship experience: major project with ca. 100.000 boe daily production potential (100%) Ongoing capacity…
KAZAKHSTAN: NEW CORE COUNTRY FOR MID-TERM GROWTH Federovskoye peak production is expected to be around 12-13 MMboe KAZAKHSTAN (37 Mmboe) Significant discovery in recent years (gross field size 200 Mmboe reserves) New block acquired…
KURDISTAN REGION OF IRAQ: KEY SOURCE OF GROWTH Promising test results from Bakrman exploration well underline upside potential KURDISTAN REGION OF IRAQ Two successful discoveries (Bijell, Shaikan) + one well with very promising…
MORE ACTIVE PORTFOLIO MANAGEMENT TO RENEW THE ASSET MIX Exploration-led focus: add new high impact elements and potential early harvests RD Renew, extend PT S Potential early value exploration portfolio KS Development realizations…
KURDISTAN REGION OF IRAQ COULD BE THE COMPANY-MAKER Strong CEE base, expanding in CIS and Kurdistan: sources of sustainable growth Relatively stable unit profitability based on current premises Expected long term production* Kurdistan…
OPERATIONAL UPDATE OF OUR PROJECTS IN KURDISTAN REGION OF IRAQ Attila Fogarasi, PhD Head of International Asset Management Middle East and Africa Region MOL Group Investor Day 15 November 2012, Budapest 1
AGENDA ABOUT KURDISTAN IN GENERAL INTRODUCTION OF THE AKRI-BIJEEL BLOCK SHAIKAN BLOCK OVERVIEW PEARL PROJECT 2
KURDISTAN REGION A hot spot in the North-Eastern part of Iraq 3
REGIONAL TECTONICS OF KURDISTAN REGION OF IRAQ KRI is part of the Zagros chain formed by a series of collisions Zagros was formed due to NE drift and collision of Arabian Plate with Eurasia First compressive movement was in the…
GENERAL STRATIGRAPHY OF ZAGROS All elements are present for hydrocarbon formation After Paleozoic carbonates and a Permian rifting episode a new carbonate platform is established - dolomitized shallow carbonates are reservoir rocks…
WORLD CLASS DISCOVERIES IN ROW Already in the spotlight of majors Legend cities Oil reserves potential around Wells DRN_G001 45 Bboe*…
Legend MAJOR PIPELINE PROJECTS IN THE PIPE cities Wells 1 million DRN_G001 boepd export capacity targeted in the short run…
OVERVIEW OF MOLS ASSETS IN KURDISTAN entered in 2007 Block Working Interest Fully diluted WI Operator Other partner Akri-Bijeel 80% 51.2% MOL GKP (20%) Shaikan 20% 13.6% GKP (75%) MOL, TKI (5%) Khor Mor 10% 10% Dana Gas,…
INTRODUCTION OF THE AKRI-BIJEEL BLOCK 9
ONE SUCCESSFUL DISCOVERY Two exploration wells under drilling target further upside Located N of Erbil, total Block area: 889 km2 Consists of two different terrains: lowlands covered by thick Tertiary; mountains with exposed…
WORK PROGRAM 2012 2014 to derisk the significant petroleum original oil in place E - expected spud - expected well test * Conditional, not fixed yet 11
BIJELL-1 DISCOVERY Jurassic showed commercial discovery with high permeability and flow rates 4 way closed S buried anticline Bijell-1 N Thick Neogene Productive zones have high permeability and all Main kitchen of them…
BIJELLBijell-4 APPRAISAL (Qalati-1) PROGRAM Extensive appraisal acreage with several potentially linked compartments Bijell-5 (Qandagul-1) 6 wells - 3 firm and 3 Bijell-6 (Aqra-2) contingent 1 drilled, tested (Bijell-1)…
THREE FURTHER APPRAISAL WELLS IN THE NEXT 9 MONTHS BIJELL-2 BIJELL-7 BIJELL-5 Targeting the mid-point Targeting the SE edge Targeting a new compartment TD: 5330m TD: 4650m TD: 3200m Appraisal of Bijell Appraisal of Bijell Appraisal…
HOW TO HANDLE HEAVY OILS AND H2S Good chance to blend from own sources Heavy-sour oil findings have to be handled Density of liquid petroleum products (API) 55 Condensates Blending to reach Kirkuk crude quality density 38-55 Light…
FACILITY DEVELOPMENT PROGRAM Early production to start in Q2 2013, export quality in 2014 EWT Phase I EWT Upgrade Commercial phase Total gross capacity 10 thboepd 10 thboepd Depending on field Total storage capacity 30 thboepd 30…
BAKRMAN VERY PROMISING SHOWS Good permeability and possibly lighter oils Structure is on trend with GEP Atrush discovery with lighter oils Well drilled deeper than planned to Triassic Upper unit: Good mud gas shows and heavy oil on…
GULAK Cautiously optimistic view at the moment Gulak-1 under drilling Good mud gas shows in Jurassic reservoir section of the Upper unit (same as Bekhme) Good mud gas shows in the repeated Jurassic reservoir section of the Lower…
TARGETING TRIASSIC SYSTEM Chances for light oil and condensates Triassic systems may contain light oil and condensate with API 40 along with natural gas No quality discount and/or good for blending with heavy oils All three…
EXPECTED TIME SCHEDULE AND PRODUCTION OUTLOOK By 2014 Exploration and appraisal program 2013 Q2 - Start up of early production, EWT facility with 10 thboepd gross capacity Mid 2014 Reserve booking Bijell Mid 2014 Declaration of…
SHAIKAN BLOCK OVERVIEW Source: GKP 21
COMMERCIALITY DECLARED Development program due by February Located NW of Erbil Total Block area: 283 km2 Successful discovery and completion of five well appraisal program, crude from 16 to 52 API Declaration of Commerciality…
SHAIKAN EXPLORATION APPRAISAL STRATEGY Several discoveries in one major anticline One major anticline with Cretaceous exposed in the core Discovery of heavy oil in several Jurassic reservoirs; discovery of light oil and…
TIME SCHEDULE AND PRODUCTION OUTLOOK 2013 Q1 Submitting Development plan 2013 Q1 Finishing construction of two early production facilities on SH2 and SH1-3 wells Shaikan 2013 spud of SH-7 targeting deeper zones of deeper…
PEARL PROJECT 25
SELF FINANCING OPERATION WITH HUGE UPSIDE POTENTIAL Operator reported 10 Tcf 1P natural gas with condensate reserves Dana Gas 40% Khor Mor (299 km2): Crescent Petroleum: 40% OMV 10% 6 existing production wells MOL 10% Gas…
APPENDIX 27
STRUCTURE OF OUR PRODUCTION SHARING AGREEMENTS Schematic of Production sharing at Akri-Bijeel Block Schematic of Production sharing at Shaikan Block Oil produced Oil produced Royalty Oil Royalty Oil 10% of total Crude oil 10%…
INCOME AND COST DEVELOPMENT OF A TYPICAL PSA 1200 30 1000 Profit Oil 25 Majority of CAPEX 1-2 years before start of commercial Cost Oil 800 20 production Production 600 WI 15 Early cost recovery right after starting commercial…
NEW DOWNSTREAM PROGRAM 2012 2014 Ferenc Horvth Executive Vice President of MOL Group Downstream MOL Group Investor Day 15 November 2012, Budapest 1
NEW DOWNSTREAM PROGRAM TO REGAIN TOP QUARTILE POSITION IN EUROPE Changed, challenging external enviroment Dramatic change in industrys profitability compared to golden ages Zero based revision of business processes, costs and…
CHANGED, CHALLENGING DOWNSTREAM ENVIRONMENT USD/bbl 2007-2011 Ch. 150 100 Increased overall energy costs, especially costs on own Brent price +53% consumption & loss 50 High product prices decreasing product demand 0 2005…
EUROPEAN REFINERIES COMPETE FOR SURVIVAL Recently closed European refineries OECD Refinery capacity closure ths barrel/day Teeside 117 1400 Wilhelmshafen 260 Europe Coryton 175 1200 Fawley 80 Dunkirk 137 Harburg 101 North…
MOL GROUP DOWNSTREAM PROFITABILITY UNDER PRESSURE AS WELL EBITDA effect on MOL Group DS 2007 vs. 2011 Clean CCS-based DS* unit EBITDA (USD/bbl) 12 higher oil price ca. -550 million 10 low refinery margin 8 ca. -250 million 6…
INITIATION OF THE NEW DOWNSTREAM PROGRAM Regain top quartile position in Europe by increasing the efficiency and profitability of MOL Group Downstream 500-550 million EBITDA improvement* TARGET 370-400 mn 130-150 mn cost…
PROGRAM COVERS THE ENTIRE DOWNSTREAM VALUE CHAIN More than 500 individual projects in 19 main groups of initiatives Crude Supply Refining Logistics Petchem Wholesale Retail Real Crude Selection Value chain On demand production…
10% COST SAVINGS BY TARGETING ALL THE KEY COST ELEMENTS Cost structure* of Energy cost 1 MOL Group Volumetric reduction Downstream Optimization of energy sources and procedures 3.7 billion Contract management New Downstream Program…
TARGETED 10% DECREASE IN TOTAL ENERGY COSTS 1 Solomon EII (MOL Group vs. Western Europe Trend Group) Q4 240 Q3 Aiming to reach Q1 performance in 220 Q2 Solomon index for DR, BR Index 200 Q1 Index Sisak 180 Aiming to…
ENERGY EFFICIENCY PROJECTS 1 Bubble size represents targeted EBITDA improvement (M USD, 2014 vs. 2011) Flare gas recovery by a new 12 More efficient steam recompression station at production by modernisation Sisak Refinery of…
KEEP TIGHT MAINTENANCE SPENDINGS 2 Solomon 300 MEI (Western Europe Trend Group) Q4 250 Q3 Complex Maintenance Spending (CMS): Maintenance Efficiency Index 200 Q2 Ca. USD 400 million in 2011, Q1 including USD 120 million CAPEX…
OTHER SIGNIFICANT COST AND CASH FLOW RELATED NEW DOWNSTREAM INITIATIVES Inventory Hydrocarbon loss management management Ca. 10% stockholding Hydrocarbon loss in 2011: 0.9% reduction target: Ca. USD 110-120 million Release…
REORGANIZATION AND RESOURCE PRODUCTIVITY IMPROVEMENT 3 Downstream Old DS structure 1. Review of our business R&M Petchem Retail SCM processes and organizational structure: PROD PROD Wind up silo operation Exploit synergy potentials LOG…
GROUP LEVEL EFFECT OF DOWNSTREAM REORGANIZATION 3 Organizations Headcount Group-level Downstream organizations Group-level headcount reduction decreased by 60% from 520 to 165 people Managerial headcount reduction by 30%…
SALES PORTFOLIO REVISION TO INCREASE MARGIN REVENUE Fuel Sales - Logistics Retail Increase/maintain strong market leader position on Increase and rationalize Retail market presence domestic markets Growth in Czech Rep., Romania, Serbia,…
FEW BIG THINGS AND HUNDREDS OF SMALL ACTIONS cumulative Total 2014 savings Some mid-scale projects and hundreds of small actions within the more than 500 projects 80% of total EBITDA increase will result from 17% 400 of…
CONTINUOUS DELIVERY cost revenue 500-550 500-550 mn USD mn USD 500 400 mn USD 400 benefit [mn USD] 300 200 130 mn USD 100 0 2012 2013 2014 2014 vs 2011 Majority of the benefit should be realized till end of…
STRICT TRACKING AND MONITORING OF THE PROGRAM Filtering out Downstream level Action level reporting external effects Financial verification Calculate progress and benefit Comparing calculated and achieved through physical and…
ON TRACK RESULTS OF NEW DOWNSTREAM PROGRAM IN 2012 Q1-Q3 Results are determined: External factors (e.g. refining & petrochemical margins; demand) Internal efficiency Improvement Program Other internal factors (e.g. unplanned…
SUMMARY - NEW DOWNSTREAM PROGRAM 2012-2014 Return to the European top quartile 500-550 million efficiency improvement on 2011 basis, equal to 3 - 3.5 USD/bbl increase Covering the entire Downstream value chain with more than 500…
CONSERVATIVE POLICY TO KEEP FINANCIAL STABILITY EVEN IN HARD TIMES Jzsef Simola Chief Financial Officer of MOL Group MOL Group Investor Day 15 November 2012, Budapest 1
KEY FINANCIAL PRINCIPLES SOLID BALANCE SHEET HAS TOP PRIORITY Keep key covenant and gearing ratio in the safety zone Around 2.0 Net Debt to EBITDA and 30% gearing ratio Adjust CAPEX if external environment requires In general…
CONTINUOUSLY STRENGTHENING FINANCIAL POSITION Covenants Gearing (%) Limit of net debt to EBITDA 40 3,5 EBITDA (in bn USD) 36 Net debt to EBITDA 3,0 33 3 31 2,5 30 28 2,5 2,4 2,2 24 2,0 2 (%) 20 1,5 1 10 0,5…
SUPPORTED BY OUR CONSERVATIVE, PROVED POLICY: In general CAPEX should be financed from operating cashflow 600 450 bn HUF 300 150 0 2007 2008 2009 2010 2011 Q1-3 2012 CAPEX - acq INA acq Pearl Operating Cash Flow 4
UP TO USD 2.0 BN CAPEX PER ANNUM IN THE NEXT 3 YEARS CAPEX 2013-2015 Downstream Upstream Control sustain-type CAPEX Kurdistan Region of Iraq: appraisal and accelerated Profitable growth projects 28% field development up to (cca.…
MAINTAINING BALANCED FUNDING PORTFOLIO Mid- and long-term committed funding portfolio based on facilities as of 30 September 2012 Further steps made towards diversification in 2012 2% 10% 10% New USD 500 mn dollar bond issued…
MORE THAN EUR 2.8 BN AVAILABLE LIQUIDITY Maturity profile as of 30 September 2012 1800 1600 1400 1200 1000 EUR M 800 600 400 200 0 Term deposits 2012 2013 2014 2015 2016 2017 2018 2019 Deposits Outstanding short-term…
FX MIX OF OPERATION SERVES AS A NATURAL HEDGE FOR OUR DEBT USD and EUR denominated business mix, balanced FX exposure with the debt portfolio Revenue generation by divisions, Q1-Q3 2012 Debt by currencies, 31 Sep 2012 Corporate &…
SUMMARY KEY TAKEAWAYS bn USD EBITDA generation in 2011 3 70% from Upstream, 50% from international operation Bboe Recoverable Resource Potential (WI) in 11 countries 1.6 682 Mmboe 2P reserves at the end of 2011 170- mboepd Group…
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