Hungarian oil and gas company MOL reported a net loss of 152 million US dollars in its first quarter financial report, due to large inventory and foreign exchange losses. According to the company press release, the pandemic had already started to severely affect all business lines in the last 2-3 weeks of March and the situation further deteriorated in April.
As it was announced earlier due to the unpredictable external environment, MOL had withdrawn its 2020 EBITDA guidance and cut the organic capital expenditure guidance by more than 25 per cent.
“COVID-19 shapes and rules the world and the energy industry,” said Chairman-CEO Zsolt Hernádi. “The pandemic situation and economic crisis that follows will cast a long shadow on our overall performance in 2020.”
Mr Hernádi underlined that MOL has already made a series of difficult decisions in order to achieve cash neutrality, to maintain liquidity and financial flexibility as well as to grab opportunities which may arise on the way towards normalization.
According to the first quarter financial report, upstream EBITDA decreased to 185 million US dollars as oil prices crashed at the beginning of March. Upstream oil and gas production volumes decreased by 4 per cent year on year, due to the natural decline in Central and Eastern Europe. In the first quarter, MOL, as an operator, made an oil and gas discovery offshore Norway with a preliminary estimate of recoverable resources between 12-71 million barrels.
Meanwhile, the company successfully closed the acquisition of Chevron’s non-operated interests in Azerbaijan by purchasing a 9.57 per cent stake in the ACG oil field and an 8.9 per cent stake in the Baku-Tbilisi-Ceyhan pipeline.
The report takes note of the newly implemented OPEX and CAPEX measures, that swiftly brought down portfolio level cash break-even to around 25 US dollars per barrel oil price. In Pakistan, TAL block is currently producing at around 50 per cent of capacity given the refinery shutdowns caused by the demand drop during the COVID-19 crisis. Brent Dated oil price averaged at around 18,5 US dollars per barrel in April, less than half of the first quarter level, and natural gas prices fell further, implying materially weaker outlook for the second quarter.
In the downstream sector, Clean CCS EBITDA doubled and increased to 295 million US dollars in the first three months of 2020 from a low base, supported by doubling refinery margins. The polyol project reached 60 per cent completion at the end of the first quarter. The pandemic affects the project’s supply chain and makes workforce mobilisation increasingly difficult. Its full impact on the project schedule is not yet possible to assess, but delays are expected.
In the wake of the pandemic situation refineries were running at reduced capacity (70-75 per cent), steam crackers at 90 per cent capacity in April. Refinery margin was 9 US dollar per oil barrel in April, but declined materially recently; petchem margin has been at 500-600 euros/t since mid-March. MOL reassures that all main logistics routes and systems are operational.
Consumer Services EBITDA remained flat at 88 million US dollars in the first quarter, as lockdowns in March wiped out earlier growth experienced in the first quarter of the year in fuel and non-fuel margins.
In the gas midstream sector EBITDA grew by 9 per cent compared to last year’s first quarter results to 71 million US dollars, driven by higher volumes and lower operating expenses. Domestic transmission volumes were flat while export transmission volumes increased by 39 per cent in the first quarter. OPEX decreased on lower gas consumption cost, in line with lower gas purchase prices.
According to MOL, April brought much-increased challenges and difficulties in all segments, showing the real and full-blown effects of the pandemic and economic crisis.