Mol Sees 2016 Earnings Drop After Fourth-Quarter Loss on Oil

  • Mol targets EBITDA above $2 billion from $2.5 billion in 2015
  • Refiner books $1.7 billion impairment on oil, exploration

Hungarian energy group Mol Nyrt. plans to scale back investment and is targeting lower earnings after plunging oil prices caused a revaluation of its assets and led to a fourth-quarter loss.

The company booked a net loss of 438 billion forint ($1.6 billion) in the last three months of 2015, compared with a 70 billion-forint loss a year earlier. Earnings before interest, taxes, depreciation and amortization on a clean-current cost of supplies basis rose 13 percent to $2.5 billion last year. Mol is targeting more than $2 billion this year for this measure, the most closely watched for the group, based on oil prices above $35, it said.

Hungary’s second-largest listed company by market value is relying on its refining and retail operations, which produced record earnings in the last quarter of 2015, to offset the impact of falling oil prices. The company seeks to reduce operating costs in its exploration and production division by as much as $100 million this year and plans to cut back investments by about 20 percent, Chief Operating Officer Berislav Gaso said in a video on Mol’s website.

"The biggest priority that remains for us from 2016 onward is to ensure that our portfolio is self-funding at today’s oil prices of $35," Gaso said.

Refining Margins

The company sees the oil price in a range between $35 and $50 per barrel this year and anticipates refining margins of $4-$5 per barrel, according to a presentation published on Wednesday. Petrochemical margins are expected between 400 and 500 euro per metric ton.

Out of impairment charges of about $1.7 billion, around $1 billion came from the impact of lower oil prices on the book value of assets, with the rest stemming from exploration projects, Chief Financial Officer Jozsef Simola said in the same video. Mol seeks to maintain the dividend payment practice of recent years, Simola said.

"The earnings report is not looking that great due to the larger-than-expected asset writedowns," KBC Groep NV’s Hungarian brokerage said in an e-mail.

Mol’s shares weakened as much as 1.4 percent and were trading 0.2 percent lower at 14,005 forint by 3:11 p.m in Budapest. The stock has declined 1.8 percent this year compared with a 3.7 percent loss in the benchmark BUX stock index in the period.

The company targets annual production of 105,000 to 110,000 barrels in 2016 and 2017 and sees output rising to as much as 115,000 barrels in 2018, according to Gaso. The company’s production was 104,000 barrels in 2015.

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