Hungarian MOL Marks a Profitable Year: Update

(Adds comment on net income, impairments at end)

Hungary's national energy champion MOL generated $464mn adjusted income on a current cost of supplies basis in Q4 last year, it said February 19. This brought the annual total to $2.05bn, above the updated guidance. However its net income was negative, owing mainly to foreign exchange changes.

In a year of disruption, volatility and uncertainty, all segments generated positive simplified free cash flow that resulted in $636mn in 2020, higher than a year ago. Organic capex was at $1.41bn in 2020, in line with the guidance. MOL expects 2021 pre-tax income (Ebitda) of around $2.3bn as normalisation continues.

CEO Zsolt Hernadi said that "while earnings were lower compared to 2019, our fast and timely reaction to the crisis allowed us to generate even stronger free cash flow than our pre-Covid guidance. This was only possible with each and every business line having cash positive operations even in a year of major disruption."

Capital expenditure will have to catch up though, so it plans to spend around $1.7-1.9bn, "once again implying a fully funded business with positive free cash flow."

The midstream gas segment reported $201mn Ebitda for the year as a whole, 8% higher than a year ago. In Q4, Ebitday was down 41% year-on year to $42mn, as a result of materially lower cross-border capacity bookings and hence lower regulated revenues, decreasing transit revenues and higher operating expenses.

Upstream Ebitda dipped to $181mn in the quarter, mainly owing to its Azeri-Chiraz-Guneshli (ACG) project in the Caspian Sea. Sharply lower oil and gas prices were only partly offset by the contribution of ACG that helped full-year production volumes to rise by 8% compared to last year.

Proved and probable reserves increased to 364,000 barrels of oil equivalent (boe)/day by the end of 2020, up from 270,000  boe/d at the end of 2019, reflecting the ACG contribution and net upward reserve revision in the portfolio, implying 312% reserve replacement.

MOL told NGW that it did not have "material year-end impairments" at just $37mn across all businesses. "We changed long-term oil price assumptions at the end of H1 (down to $50/barrel in real terms), which at the time resulted in some total of $120mn in upstream impairments. And it said it "closed the year in the red at net income level, but this was primarily driven by foreign exchange losses (mostly unrealised) and inventory holding losses booked during Q2 at the time of the big turmoil."