MOL Group implements measures not only to mitigate the impact of the current situation on the Group, but also to allow MOL to emerge from the crisis stronger. The company is focusing on protecting the health and safety of its employees, adjusting operations to minimize the spread of COVID-19 and adapting its production volumes to the altered market demand. Operational and capital expenditures will be reduced materially to preserve cash and to allow MOL to manage through challenging times even in the case of a longer lasting crisis.
Constantly adapting to the ever-changing situation, MOL has implemented different actions and created new solutions in the past few weeks to reduce the likelihood of infection among employees and customers. These preventive and precautionary measures affect retail, downstream and upstream sites as they support social distancing, increase hygienic awareness and include the provision of protective equipment to our colleagues, the changing of shift patterns throughout the Group’s plants and exploration sites, the implementation of testing in key operational areas and the switch to home office wherever possible.
COVID-19 emergency measures by governments in MOL’s countries of operations have resulted in partial or full lockdown, significantly slowing down economic activity in the company’s core CEE countries. In order to remain resilient, MOL Group has updated its financial and operational guidance.
Due to the uncertainty about the duration and impact of the coronavirus pandemic, the extreme volatility of the external environment, and the unpredictability of demand across the businesses, MOL is
* withdrawing its EBITDA guidance for 2020;
* lowering capital spending by at least 25% to below USD 1.5bn in 2020, following a project-by-project review to delay non-essential investment;
* completing a comprehensive review of operational expenditure to preserve cash
* maintaining ample liquidity even after closing the ACG transaction, with around USD 2.0-2.5bn on hand, to weather a potentially longer-lasting crisis and grab opportunities once normalization begins; and
* retaining after-tax profits from 2019 fully until the situation normalizes, when they might be paid out as dividends, should shareholders so decide.
MOL Group’s Chairman-CEO Zsolt Hernádi commented: “The world is facing an unprecedented challenge. Our life has changed completely in the last few weeks. The energy industry, while better positioned to weather the economic hardships than some others, enters a period of uncertainty it has probably never faced before, with scenarios ranging to extremes, which were impossible to imagine even a few weeks ago.
MOL has proven its adaptability many times before; we have seen and overcome several shocks in the past. We have shown that we are able to operate successfully in a highly volatile external environment, thanks in no small part to our high-quality assets, our resilient, integrated business model and most importantly to our dedicated, highly-skilled workforce. MOL enters this difficult period in a good shape – and I am sure it will emerge from it even stronger, and certainly with important lessons learnt.
At the end of the day, it all comes down to our investments into human capital – to the dedicated work of almost 25,000 of my colleagues. We have many assets in many countries, but it is our people, who are the key to our resilience. We have done and will continue to do everything to protect their health, especially those who need to be physically present at our sites to ensure both business continuity and supply security.
I am extremely proud of my colleagues who came up with the idea of switching a lubricants production line to manufacture sanitizers. While in normal times this may also have been a good business proposition, today it is our responsibility and obligation to come up with innovative ideas and solutions to help to contain the virus, protect our employees and fight side by side with the governments, public authorities and communities in our countries of operations. I personally believe that the way a company behaves in a crisis will show its real character and strength. MOL is determined to be a source of stability in a world plagued by uncertainty and will prove once again that it has a place in the “champions league” of energy companies.”
Operational update on the key businesses:
* Upstream, production was around 110 mboepd in Q1, in line with earlier guidance. Lower demand for fuels, full storage capacities and reduced refinery runs may however lead to temporary production curtailment in some of our international assets, potentially offset by more entitlement barrels due to the low oil price. In light of the uncertain macroeconomic environment, we are changing production guidance to 115-120 mboepd from 120 mboepd (assuming a 6-month contribution from ACG). We have put in place a set of actions to adjust expenditures and reduce our portfolio breakeven towards USD 25/boe.
* Downstream. Lockdowns in core countries of operations have resulted in a significant drop in demand of 20-40% for key product groups. While this has created operational challenges and a need for continuous optimization across our high-quality downstream assets, we are also making use of currently attractive margins by keeping all refineries running, even if at reduced rates. MOL will continue to provide a safe and steady supply of oil and chemical products in all core countries.
* Consumer Services. After a strong operational and financial performance in Q1, MOL Group has experienced declining sales as borders have been closed and social activities restricted. As a result, MOL Group has refocused operations to provide reliable and safe supply across our network and remain cash flow positive. Targets and guidance set for 2020 are being withdrawn here as well, given the unknown duration of measures restricting non-essential travel.
About MOL Group
MOL Group is an integrated, international oil and gas company, headquartered in Budapest, Hungary. It is active in over 40 countries with a dynamic international workforce of 25,000 people and a track record of more than 100 years in the industry. MOL’s exploration and production activities are supported by more than 75 years’ experience in the hydrocarbon field. At the moment, there are production activities in 8 countries and exploration assets in 13 countries. MOL Group operates three refineries and two petrochemicals plants under integrated supply chain management in Hungary, Slovakia and Croatia, and owns a network of about 1900 service stations across 10 countries in Central & South Eastern Europe.