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MOL extends Balkan retail arm following positive Q3

Hungarian company reports clean third-quarter, current cost of supplies profit before tax, interest, depreciation and amortisation of forints 198.7bn

The downstream business remains the key contributor, given the low oil price. This is an area MOL has been expanding in. In forints, CCS Ebitda downstream was 80% up on the same quarter of 2014 while upstream was down 33%.

With profits (Ebitda) above $1.9bn already delivered in the first nine months, the company is “more than confident” of reaching its target of $2.2bn this year, it says.

The strong downstream performance explains its purchases in recent weeks of Eni’s retail businesses in Hungary and Slovenia as outlets for its refineries’ products. No financial terms were revealed.

The former deal announced 21 October brought with it 183 Agip-branded service stations, including dealer-owned sites as well as wholesale activities in the country. “Increasing the retail presence within the supply radius of its refineries, the deal significantly contributes to MOL Group’s strategy of further downstream integration,” it says.

Over the first nine months the oil price nearly halved year-on-year but the upstream segment's results fell by only 23%

The latter deal gave it 17 Agip-branded service stations in Slovenia, complementing MOL’s existing network of 40 stations in the country and provides an opportunity to establish a retail presence in the capital, Ljubljana. Closing of the deal is subject to the fulfilment of certain condition precedents, including the anti-trust agency’s approval.

“In the past 18 months we have announced the acquisition of around 450 service stations in the Czech Republic, Hungary, Romania, Slovakia and Slovenia. As a result we are succeeding in significantly increasing our market share and ensuring further overall margin capture for our downstream business,” MOL said November 11.

MOL’s efficiency drive implemented in its downstream programs have “succeeded in fully capturing the favourable external conditions,” the company said. Low prices have also encouraged more driving: motor fuel use in the quarter rose by more than was usual, for the summer period.

Over the nine months the oil price nearly halved year-on-year but the upstream segment’s results fell by only 23% and average hydrocarbon production exceeded the base period by over 7%. However, maintenance in the UK led to a drop in the average rate to 101,000 barrels of oil equivalent/day (boe/d) in the quarter. In the mature region of central and eastern Europe, output grew as a result of initiatives in Croatia by 3,000 boe/d or 9%, while decline in Hungary was 1%, significantly below the previously targeted 5% level.

But its gas transportation business, while still profitable, is doing worse this year than last, down 7% in forint terms in the first nine months, as less gas was delivered within or across Hungary.

MOL signed a farm-in agreement in October with Det norske oljeselskap for equity in three licences that lie within its core area. The deal is subject to approval by the Norwegian government. MOL has also submitted bids for five new licences in the Norwegian 2015 Awards in Predefined Areas, which are expected to be awarded in January.

MOL’s chief executive Zsolt Hernadi said that the successful efficiency measures and the greater value chain in both petrochemicals and retail meant the company was well positioned to seize further opportunities in the segment. Even allowing for some softening of the downstream macro in 2016 it aims to preserve its strong profits and free cash flow generation next year.

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