Hungarian integrated oil and gas company MOL Group announced that it is withdrawing its guidance for 2020 EBITDA and cutting back on investment and operation costs in response to the current economic situation triggered by the coronavirus pandemic.
Presenting the company’s decision, the Group CEO Zsolt Hernádi stated that the energy industry, while more resilient to economic difficulties than others, has entered a period of uncertainty with extreme scenarios that we could have not imagined even a few weeks ago.
“In Central and Eastern Europe, the core operation area of MOL Group national governments imposed restrictive emergency measures to curb the spread of COVID-19, that resulted in a significant slowdown in the economy. Due to changes in external conditions, MOL Group has updated its financial and operational targets for 2020”, reads the company announcement.
MOL decided to withdraw its guidance for the 2020 EBITDA due to the uncertainty of the duration and impact of the coronavirus pandemic and the extreme volatility and unpredictability of the market.
MOL also announced to decrease 2020 CAPEX with at least 25 per cent, below 1.5 billion US dollars, to delay non-essential projects and investments and to review operational costs to maintain cash neutrality without the disruption of its operations.
The company expects to maintain liquidity even after the acquisition of a stake in the Azeri-Chirag-Gunashli oil field in the Caspian Sea. With an estimated 2-2.5 billion US dollars at its disposal, MOL anticipates that it could successfully manage through these challenging times and survive even a prolonged crisis.
The board also decided about placing all of the last yearʼs profit into retained earnings, that could be used for cash dividend distribution upon the decision of shareholders once the economic situation returns to normal.
MOL will continue to supply oil and chemical products to all countries in the region. Although the current situation has posed operational challenges and ongoing optimisation needs for the company’s downstream assets, MOL is currently leveraging the potential of higher margins keeping all of its refineries in operation even with reduced capacity.
After the first quarter’s strong financial performance in the segment of consumer service, MOL Group’s revenue declined as the lockdown entered into force. The company restructured its activities to secure fuel supply and to generate positive cash flow. However, 2020 targets had to be revised in this segment as well.
Given the uncertain macroeconomic environment of falling fuel demand and reduced refining activities, MOL revised its production targets from 120,000 barrels per day to 115-120,000 barrels per day. With plummeting oil prices, MOL intends to optimise spending to make its portfolio profitable at oil prices as low as 25 US dollars per barrel.
“MOL has already proven its adaptive capabilities several times,” added Mr Hernádi. “We proved that we can operate successfully even in an extremely uncertain external environment, primarily due to our high-quality assets, our flexible, integrated business model, and most importantly, our dedicated, highly skilled workforce.”
In the past weeks, MOL has introduced several protective measures and solutions responding to the outbreak of the virus that is still on the rise in Hungary. Lubricants producer and MOL Group member MOL Lub have shifted production of a windshield washer production line at its Almásfüzitő plant in only one week to produce hand and surface sanitizers, both of which is in short supply in Hungary. The unit is operating in three shifts, producing a daily volume of around 50,000 litres, allowing MOL to contribute to the global fight against COVID-19.