MOL GROUP
INVESTOR PRESENTATION August 2018 PRESENTATION MANUAL
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2 MOL GROUP IN BRIEF INTEGRATED CENTRAL EUROPEAN MID-CAP OIL & GAS COMPANY
CORE ACTIVITIES
UPSTREAM DOWNSTREAM CONSUMER GAS SERVICES Exploration Petrochemicals MIDSTREAM Retail
Production Refining Mobility
CLEAN CCS EBITDA BY SEGMENTS IN 2017 (USD MN)
UPSTREAM DOWNSTREAM CONSUMER GAS 854 1,178 358 223
KEY FIGURES CAPITAL MARKETS BUSINESS / ASSETS
Market Free float Countries 26,000 110 Reserves cap. DJSI (Mmboe) 45% 33 Employees Production USD 8.0 bn Constituent (mboepd) 356
Steam Retail INVESTMENT USD 7.5 417 cracker1 ~1,900 transactions GRADE Refinery mn capacity Service per day capacity Credit (ktpa) stations Liquidity (mbpd) 890 1,000,000 rating (last 6M avg.)
3 (1) Ethylene MOL GROUP GEOGRAPHY CEE-BASED INTEGRATED OPERATIONS AND INTERNATIONAL UPSTREAM
UK SLOVAKIA RUSSIA NORWAY
CZECH REP. KAZAKHSTAN
HUNGARY
HQ SLOVENIA IRAQ
PAKISTAN
OMAN CROATIA ROMANIA EGYPT SYRIA (IN FORCE MAJEURE) BOSNIA SERBIA
ANGOLA
UPSTREAM DOWNSTREAM CONSUMER SERVICES
4 AGENDA
THE MOL GROUP EQUITY STORY
SUPPORTING SLIDES
Q2 2018 RECAP (LINK TO Q2 2018 RESULTS)
DOWNSTREAM
CONSUMER SERVICES
EXPLORATION AND PRODUCTION
FINANCIALS, GOVERNANCE AND OTHERS
5 THE MOL GROUP EQUITY STORY DELIVERING TODAY, TRANSFORMING FOR TOMORROW
Efficiency & Safety: systematic focus on efficiency and safety in each business Integration: deeply integrated business model provides remarkable cash flow stability Resilience: high-quality, low-cost asset base, breaking even at the bottom of the cycle MOL 2030: transforming MOL for „beyond the fuel age”
Downstream: cash engine to drive „fuel to chemicals” transformation and growth Consumer Services: leading fuel retailer to drive the revolution of transportation E&P: highly value accretive barrels to fund inorganic reserve replacement Gas Midstream: stable, non-cyclical cash flows Financials: robust financial framework supports strategic transformation Sustainable: sole regional member of DJSI, adapting to a low carbon world
7 DOWNSTREAM: CASH ENGINE TO DRIVE „FUEL TO CHEMICALS” TRANSFORMATION AND GROWTH
DELIVERING TODAY High-quality, low-cost asset base Market leading position in Central Europe with long-standing customer relations Strong captive markets and a deeply integrated refining-chemicals-distribution value chain Proven efficiency track record: almost USD 1bn EBITDA uplift since 2011 Outstanding margin capture with double-digit unit EBITDA (USD/bbl)
TRANSFORMING FOR TOMORROW Enhancing flexibility in refining by reducing motor fuel yield from 70%+ to 50% by 2030 mostly through increasing feedstock transfer to chemicals Investing USD 4.5bn by 2030 to grow in chemicals by moving deeper along the value chain DS2022: the first milestone in the transformational journey
8 CONSUMER SERVICES: LEADING FUEL RETAILER TO DRIVE THE REVOLUTION OF TRANSPORTATION
DELIVERING TODAY Leading CEE fuel retailer with ~1,900 sites, market leader in 4 countries Exploiting the fuel market potential in CEE Non-fuel increasingly a growth driver due to new store concept: Fresh Corner
TRANSFORMING FOR TOMORROW MOL 2030: transforming fuel retailing into a consumer services hub and pioneering the transportation revolution in CEE Digital: for a personalized and convenient customer experience Beyond non-fuel: mobility services By 2021: growing EBITDA to USD 450mn with rising share of non-fuel
9 E&P: HIGHLY VALUE ACCRETIVE BARRELS TO FUND INORGANIC RESERVE REPLACEMENT
DELIVERING TODAY Existing 2P reserves generate substantial value and FCF even below USD 50/bbl oil price Exploration & Production adjusted to be fit and to prosper at the bottom of the cycle Proven capabilities to operate mature, onshore assets in a cost-efficient way Production likely to decline beyond 2020 if no reserves are added inorganically
TRANSFORMING FOR TOMORROW MOL 2030: transforming to a sustainable international Upstream portfolio Targeting 100% reserve replacement Existing barrels deliver USD 2bn+ FCF in 2017-21, which can comfortably fund inorganic reserve replacement
10 GAS MIDSTREAM: STABLE, NON-CYCLICAL CASH FLOW
DELIVERING TODAY Stable FCF generation in domestic transmission Profitable international transit business spanning 6 regional countries Recent years saw significant pipeline and trade infrastructure developments as well as efficiency improvements
TRANSFORMING FOR TOMORROW European gas market trends (increasing liquidity and interconnectedness) to bring opportunities and upside
11 ROBUST FINANCIAL FRAMEWORK SUPPORTS STRATEGIC TRANSFORMATION
DELIVERING TODAY 2018: strong first half, upgraded full-year guidance
USD 2.0-2.2bn annual Clean CCS EBITDA under normalized assumptions
Existing assets require around USD 1.0-1.1bn „sustain” capex annually
Simplified FCF (EBITDA less „sustain” capex) comfortably covers all cash outflow
Robust balance sheet with ample financial headroom
Credit metrics to be commensurate with investment grade credit rating
Steadily growing cash base dividend per share, complemented by special dividends
TRANSFORMING FOR TOMORROW MOL 2030 financial framework: existing assets generate sufficient free cash flow to fund transformational/strategic capex and rising dividends
MOL 2030 works with or without INA; good asset fit, but with declining importance
12 SUSTAINABLE: SOLE REGIONAL MEMBER OF DJSI, ADAPTING TO A LOW CARBON WORLD
DELIVERING TODAY Sustainable Development Committee integral part of the Board of Directors Minimize environmental footprint in line with climate change policy Only CEE corporation member of the Dow Jones Sustainability Index Strong sustainability scores across leading ESG research/rating providers
TRANSFORMING FOR TOMORROW MOL 2030: transforming MOL to adapt to circular economy and a low carbon world SD 2020: maintain an international leading position in corporate sustainability performance with targets for both E&P and Downstream
13 MOL 2030: TRACKING PROGRESS TOWARDS 2021
TARGET 2017 STATUS
NXDSP SLIGHTLY BEHIND TARGET; DOWNSTREAM EFFICIENCY NEW TARGETS SET IN DS2022
ENTER NEW CHEMICAL ALL POLYOL TECHNOLOGY PRODUCT LINE(S) LICENSE AGREEMENTS SIGNED
FY 2017 EBITDA: USD 358MN, +17% CONSUMERS EBITDA 2021: USD 450MN YOY
RISING NON-FUEL 24% SHARE IN 2017 CONTRIBUTION (OF TOTAL MARGIN)
STABLE PRODUCTION, FY 2017: 107 MBOEPD, E&P STRONG FCF IN 2017-19 USD 14/BOE FCF
INORGANIC RESERVE IN PROGRESS REPLACEMENT
USD 2.0-2.2BN EBITDA; USD 1.0- FY 2017: EBITDA USD 2.45BN, FINANCIALS 1.1BN SIMPLIFIED FCF (AVG.P.A.) SIMPLIFIED FCF USD 1.40BN
9% INCREASE IN BASE DPS IN 2018 + RISING DIVIDEND PER SHARE 50% TOP-UP AS SPECIAL DIVIDEND
SUSTAINABLE TOP 15% O&G INDUSTRY DJSI INCLUSION (TOP 12%)
14 DOWNSTREAM TOP 15% IN SUSTAINABILITY A COMMITMENT TO THE INTEGRATION OF ECONOMIC, ENVIRONMENTAL AND SOCIAL FACTORS INTO EVERYDAY OPERATIONS
Zero Lost-time injury frequency (LTIF) (own HEALTH & SAFETY and on-site contractors) and fatalities
Decrease direct and indirect GHG CLIMATE CHANGE emissions by 200 kt1 through energy efficiency initiatives
SD TARGETS Reduce NOx & SOx emissions by 15%. 1 2020 ENVIRONMENT Adapt to a circular economy and expand DOWNSTREAM in sustainable plastics solutions
Increase employee engagement and HUMAN CAPITAL develop technical Career Ladder in Downstream
Bring about cultural change, with focus on: CULTURE valuing people, collaboration and serving customers 16 (1) Versus 2014; (2) Tons in CO2 equivalent (2) A European Strategy for Plastics in a Circular Economy INTEGRATED DOWNSTREAM MODEL IN CEE
11 COUNTRIES
SALES OF 18 mtpa REFINED PRODUCTS
AND 1.25 mtpa PETROCHEMICALS
EMPLOYEES 9,500
17 HIGH QUALITY CORE REFINING ASSETS COMPLEX REFINERIES WITH VERY HIGH WHITE PRODUCT YIELD
REFINERY NELSON COMPLEXITY OF PEERS1 GROUP REFINERY YIELD, 2017 (%)
16 6.1 Mtpa 14 8.1 Mtpa 9.6% 2.9% 12 11.5 8.1% 10.6 4.5 Mtpa LPG 10 9.1 2.2 Mtpa 8.1% Naphta 8 NCI 2.3% 6.1 19.0% Motor gasoline 6 4.2% Middle distillates 4 Fuel oil 2 Bitumen 0
Other products
#1 #2 #3 #4 #5 #6 #7 #8 #9
#10 #11 #12 #13 #14 #15 #16 #17 #18 #19 #20 #21 #22 Sisak
Rijeka Own use & loss
Danube 45.9% Bratislava CLEAN CCS-BASED DS UNIT EBITDA2 (USD/BBL)
16 High complexity provides high motor fuel 14 yields, including substantial middle 12 10 distillate (diesel) output… 8 …and material petchem feedstock,
USD/bbl 6 4 enhancing integration 2 0 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017
Range MOL Group Average MOL + SN (1) Peer group consists of OMV, PKN, Lotos, Neste, Tupras, Galp, Motor Oil, Hellenic Petroleum, NIS 18 (2) Unit EBITDA range is based on volume sold and includes ELPE, Lotos, OMV, PKN, Tupras SIGNIFICANT UPSIDE POTENTIAL FROM IMO 2020 LANDLOCKED REFINERIES: 47% MIDDLE DISTILLATES, NO MATERIAL FUEL OIL
GROUP REFINERY YIELD, 2017 (%) PRODUCT FORWARDS (USD/BBL)1
2.9% Diesel HFO 9.6% 8.1% LPG 17.3 17.0 8.1% 16.2 Naphta 13.8 2.3% 12.9 13.3 19.0% Motor gasoline 4.2% 11.5 Middle distillates -7.0 -10.5 Fuel oil -11.9 -11.8 Bitumen Other products -22.8 -23.8 Own use & loss 2017 2018 2018 mid- 2019 mid- 2020 45.9% H1 YE 2019 YE 2020 YE 2017 2018 2018 mid- 2019 mid- H1 YE 2019 YE 2020
DOWNSTREAM VOLUMES / SENSITIVITIES (2017, MN BBL) Danube, Bratislava refineries have no material fuel oil output, hence will be able to capture full Medium / heavy sour 88 benefit of IMO 2020 specs changes crude intake ~85% of total crude intake is Urals or other Middle distillate 57 produced heavy crude
HFO INA refining with HFO production expected to 5 produced be affected by IMO 2020 until delayed coker is comissioned 19 (1) Product forwards as of 30th July 2018 for 2018YE and beyond DEEP DOWNSTREAM INTEGRATION MARKET LEADING POSITION WITH STRONG CUSTOMER RELATIONS IN CEE
MARKET SHARE (%)1 DOWNSTREAM INTEGRATION (FUELS)2
~24%
CRUDE INTAKE: • Russian: 68% • Seaborne: 25% ~85% ~39% • Own Refining production: 7%
~80% ~37% captive market Retail ~45% <10% 10-20% 20-40% 40+% own market 3 Deeply integrated portfolio of downstream assets Complex and flexible core refineries ~15% Very strong land-locked market presence Petchem Retail network fully within refinery supply radius Enhanced access to alternative crude supply
(1) Estimation for 2018 FY; (2) Including motor fuels, heating oil & naphtha of landlocked refineries (3) Own market is calculated as sales to own petchem and own retail over own production 20 PETROCHEMICALS IN MOL’S INTEGRATED DOWNSTREAM VALUE CHAIN
MOL PETROCHEMICAL VALUE CHAIN
Capacity
HDPE 420 kt OLEFINS (ETHYLENE, PROPYLENE, LDPE 285 kt C4 STREAM)
PP 535 kt Refining Petchem Ethylene 890 kt
Internal feedstock1: Butadiene 130 kt SSBR 60 kt ~1.5 Mt in 2017
AROMATICS2 350 kt
LDPE4: 220 ktpa unit replaced three old ones in Bratislava in 2016 Butadiene: 130 ktpa unit commissioned in 2016 SSBR: 60 ktpa unit (49% MOL stake)
(1) Considering steam cracker feedstock (naphtha & LPG) from Danube & Bratislava refineries only (2) Considering 2017 production 21 DOWNSTREAM: OUTSTANDING MARGIN CAPTURE CREATES AMPLE HEADROOM TO ABSORB EXTERNAL SHOCKS
FACT SENSITIVITY AS-IS: 2017 MARGIN, EBITDA, CAPEX AND FCF IN MID-CYCLE MACRO (USD/BBL) 1 EBITDA (USD/BBL)1 PUBLISHED MARGINS PUBLISHED MARGINS • MOL Group ref.: USD 4.5/bbl • MOL Group refining: • Petchem: EUR 450/t USD 6.5/bbl 2.4 4.1 • Petchem: EUR 504/t
10.4 10.4
8.0 SOURCES 6.4 OF 4.0 FLEXIBILITY
R&M Petchem 2017 2017 EBITDA Macro Normalized Sustain Simpl. FCF margin margin EBITDA normalization EBITDA CAPEX
...creates sufficient headroom (c. USD 6/bbl) to stay FCF Outstanding margin capture... positive even at the very bottom of the cycle (e.g. at USD 1/bbl ref. margin, EUR 100/t petchem margin)
22 (1) Excluding INA R&M PROVEN EFFICIENCY TRACK RECORD GRADUALLY INCREASING FOCUS ON GROWTH AND TRANSFORMATION
PROGRAM SCOPE FINANCIALS 3 200+ 0 0 0 500 150 1 2 years Actions Enabler Operational Large USD mn USD mn program actions actions projects3 EBITDA4 CAPEX
3 300+ 0 0 8 500 1,200 years Actions Enabler1 Operational2 Large USD mn USD mn program actions actions projects3 EBITDA4 CAPEX
5 ~450 190 140 12 500 2,100 years Actions Enabler1 Operational2 Large USD mn USD mn program actions actions projects3 EBITDA CAPEX
(1) Soft actions or very early stage ideas with progress tracking (2) Actions with measured hard operational KPIs , but non-quantified financial impact (3) USD ›10 mn CAPEX 23 (4) Including Retail QUADRUPLING EBITDA IN 6 YEARS SUPPORTED BY TWO WAVES OF EFFICIENCY PROGRAMS (AND A STRONG MACRO)
CLEAN CCS EBITDA EVOLUTION (USD MN)
~180 1,536 ~400
440 +2.5 USD/bbl complex ~160 ~140 874 refinery margin + 150 EUR/t (old) petchem margin 500 350
2011 NDSP delivered Macro Offsetting items 2014 NxDSP delivered Macro Offsetting items1 2017 2
N DSP
(1) Mainly lower wholesale margins in a high refinery margin environment and OPEX creep (2) Including consumers / retail to ensure comparability with 2014 base 24 TRANSFORMING TO „BEYOND THE FUEL AGE” FOSSIL FUEL DOMINANCE TO DIMINISH BY 2030, BUT DEMAND STILL SUBSTANTIAL
ASSUMPTIONS MOL 2030
Fossil fuel demand likely to decline by TRANSFORM… 2030, but will still remain material …FUEL TO CHEMICALS Alternative fuels and (petro)chemical markets likely to grow Increase share of non-motor Increasing demand for sustainable fuel products plastics solutions in a circular economy Extend the chemicals value chain Integration of plastics recycling CHEMICALS
AIR TRANSPORT …RETAIL TO CONSUMER SERVICES OIL-BASED FUEL CONSUMPTION To provide a broad range of TRUCKS products and services for
PASSENGER CARS people „on the move”
25 50% VALUABLE NON-FUEL PRODUCTION BY 2030 TRANSFORMATION AWAY FROM MOTOR FUELS
GROUP REFINERIES’ YIELD STRATEGIC PRIORITIES ACTIONS 2010 2015 2030 1 Benefit from profitable products (jet, base oils, LPG)
~60% ~70% 2 Increase petchem feedstock up to First round of 3 mtpa actions defined in DS2022 program
3 Increase ~50% production of other 50+% chemicals (e.g. aromatics)
Motor fuel products Others Valuable non-motor fuel products 26 SEVERAL OPTIONS TO EXPAND ALONG THE VALUE CHAIN
Polyethylenes (LDPE, HDPE)
Polyols
Propylene glycol ethers
source: www.petrochemistry.eu 27 POLYOL: A NEW MARKET ENTRY MOVING TOWARDS HIGHER VALUE-ADDED (PETRO)CHEMICALS
(PETRO)CHEMICAL TRANSFORMATIONAL JOURNEY CRITERIA FOR SEGMENT CHOICE
Crude oil (naphtha) based REFINING PETROCHEMICALS CHEMICALS chemistry and feedstock integration
COMMODITY SEMI-COMMODITY SPECIALITY NICHE
KNOWLEDGE Attractive end-user markets MOL 2030 (Demand) BEYOND COMMODITIES Remain integrated and INNOVATION move further along the value Limited regional competition chain into speciality, more
complex chemicals FOCUS (Supply)
(2018) SYNTHETIC RUBBER POLYOL (2021) Advanced technology, high entry BUTADIENE (2016) barrier
LD POLYETHYLENE (2016) Leverage on well-established
ASSETS customer relationship in CEE COMPETITIVE ADVANTAGE / VALUE DRIVERS DRIVERS VALUE / ADVANTAGE COMPETITIVE
COST LOW PRICING / MARGINS HIGH (capture inland premium)
28 NAPHTHA-BASED PROPYLENE CHEMISTRY ENTERING THE POLYURETHANES VALUE CHAIN
Petchem feedstock Basic chemicals Intermediates / pre-polymers Polymers
nitro- benzene MDI/PMDI benzene
propylene Polyurethanes naphtha propylene polyols -oxide (PUR)
nitro- toluene TDI toluene
PUR FORMULATORS OLEFIN „SYSTEM HOUSES” END- REFINING CHEMICAL COMPANIES (R&D, technical PRODUCERS service, some USERS production)
MOL GROUP DIVERSIFICATION SPECIALISATION current coverage organic development
29 ATTRACTIVE END-USER MARKETS WIDESPREAD APPLICATION OF POLYOL AS PUR COMPONENT DRIVES DEMAND
GLOBAL POLYURETHANE DEMAND BY GROWTH DRIVERS INDUSTRY
% of global demand
Improving access to „essentials of life”, increasing comfort needs ~30% Improving life expectancy and population growth FURNITURE & INTERIOR
Improving energy efficiency in construction ~25% Polyurethanes (PUR) have outstanding insulation characteristics, 50–70% less material required to reach same insulation value CONSTRUCTION Lighter weight vehicles to reduce fuel consumption ~15% PP/PUR represent 50%+ of total plastic used in car manufacturing Average plastic content of a midrange car grew AUTOMOTIVE fivefold since the 1970s (to up to 200kg), including ca. 20-25kg polyol today
30 LIMITED REGIONAL COMPETITION MOL TO BECOME THE SOLE INTEGRATED REGIONAL POLYOL PRODUCER
Legend: LOCATION Netherlands POLYOL UNIT Multiple units 984 ktpa Marl PG UNIT LyondellBasell 80 ktpa Sasol 18 ktpa PO UNIT (TECHNOLOGY) Multiple units 1013 ktpa Schwarzheide Dormagen/Cologne Bubble size shows the size of the plant (PO/SM, PO/TBA) BASF 150 ktpa Bayer 260 ktpa Stade INEOS 120 ktpa DOW 290 ktpa CE POLYOL MARKET INEOS 200 ktpa DOW 630 ktpa (Chlorohydrin) (Chlorohydrin) Brzeg Dolny Supply Demand PCC Rokita 100 ktpa Antwerp PCC Rokita 48 ktpa ~3% CAGR BASF 170 ktpa (Chlorohydrin) Bayer 250+60 ktpa BASF/Dow 300 ktpa -~150 (HPPO)
Tertre Ludwigshafen Dow 94 ktpa BASF 80 ktpa BASF 124 ktpa Current ~2025 (Chlorohydrin) ~200 kt CE consumption represent ~15% of total European demand
Ramnicu Valcea Fos-sur-mer No ongoing capacity addition Oltchim 113 ktpa Bayer 140 ktpa project in Europe Tarragona Oltchim 15 ktpa LyondellBasell 80 ktpa Puertollano Dow 60 ktpa Oltchim 100 ktpa LyondellBasell 220 ktpa Repsol 70 ktpa Repsol 130 ktpa (Chlorohydrin) (PO/TBA) Repsol 63 ktpa Repsol 200 ktpa Barreiro (SM/PO) Source: company data PC Barreiro 10 ktpa 31 ALL TECHNOLOGY LICENSES SECURED TEAMING UP WITH WORLD-CLASS PARTNERS
WHAT HAS BEEN REACHED?
Key contracts of HPPO technology licenses signed with Evonik and thyssenkrupp, Unit to be built in Tiszaújváros, Hungary Fluor Corporation selected as project management consultant (PMC) Selected licensor for polyether polyol and propylene glycol (PG) technology (thyssenkrupp) The European Commission endorsed EUR 131mn regional investment aid for the project, further improving economics of the project
STEAM CRACKERS POLYOL & PG AND REFINERY UNITS HPPO UNIT PLANT
KEY PROJECT DEVELOPMENTS & NEXT STEPS Unit capacity step-up (from 150 kt/pa to 200 kt/pa) to achieve better economies of scale Additional PG production capability provides optionality and better overall margin capture FID is expected in 2018 with a construction timeline of 2018-21 Cost estimate (around USD 1bn) unchanged 32 A HIGH MARGIN SEMI-COMMODITY PRODUCT WITH AN EXPECTED USD 170MN+ MID-CYCLE EBITDA CONTRIBUTION
POLYOL PLANT EBITDA & SENSITIVITY PROPYLENE VS. POLYOL SPREADS1 (EUR/T) (USD MN)
Relative deviation: PO – propylene: 18% PP – propylene: 36% 170+ 1.000
800 ~100
600
400
200
0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 EBITDA generation EBITDA generation @ @ mid-cycle bottom of the cycle
Moving from commodity (polypropylene) to Nominal payback is 10-12 years assuming bottom semi-commodity (polyol): a 400-500 EUR/t step- of the cycle margin environment up in average margin capture Propylene glycol production provides CE producers enjoy 50+ EUR/t transportation cost optionality in lower than mid-cycle margin advantage vs coastal NW-European producers environment
33 (1) Monthly nominal quotations DS2022: A MAJOR MILESTONE TOWARDS MOL 2030
OTHER GROWTH STRATEGIC TRANSFORMATION (POLYOL) USD MN USD 140 MN 180 EBITDA EBITDA EFFICIENCY & UPLIFT UPLIFT FLEXIBILITY
ROADMAP EFFICIENCY USD 180 MN 2030 DS EBITDA EBITDA 1.5+ UPLIFT USD BN
SAFETY EMPLOYEES' ENGAGEMENT ST 1 BEST IN THE QUARTILE REGION CUSTOMER SATISFACTION 95%
THE BEST CHOICE OF EMPLOYEES, CUSTOMERS, INVESTORS
34 USD 500MN INCREMENTAL EBITDA BY 2022 FROM TRANSFORMATIONAL PROJECTS AND EFFICIENCY (USD 2.1BN TOTAL CAPEX)
INCREMENTAL EBITDA CONTRIBUTION (USD MN) CAPEX SPENDING (USD MN)
135 500 170 25 2,100 Growth (Polyol) 690 Other strategic 140 Efficiency 175 1,020 830 180 40 50 900 100 270 180 115 180 2018 2019 2020 2021 2022 Total 2017 2018 2019 2020 2021 2022 Total
Polyol plant will reach full capacity in 2023 with an estimated USD 170+mn yearly EBITDA contribution Other strategic projects Include INA Delayed Coker, which accounts for 50%+ of capex Steam crackers debottlenecking projects are in early phase of discussion, hence not included yet in DS2022. These projects may add to DS2022 scope in the coming years. Efficiency: Partly reversing the effect of offsetting items seen in 2016-17; targeting improvement in asset availability and market position and strong focus on energy efficiency DS2022 aims for continuation of superior margin delivery, which fully offsets macro normalization 35 OTHER STRATEGIC (BROWNFIELD) PROJECTS LARGE, TRANSFORMATIONAL INVESTMENTS ALONG 2030 STRATEGIC GOALS
EXAMPLES GOALS
FCC revamp in Duna refinery projects 11 Start up: 2021 Enhancing INA delayed coker USD 900 mn flexibility & CAPEX Debottlenecking Start up: 2021 Maleic Anhydride unit extension USD 180 mn Start up: 2021 EBITDA uplift
Minimum 15% return (IRR) threshold Crude blending system in Duna Crude Start up: 2018 diversification New crude oil tanks in Bratislava Start up: 2020
36 EFFICIENCY: USD 180MN EBITDA UPLIFT MOSTLY COMING FROM IMPROVED ENERGY EFFICIENCY AND NON-FUEL FOCUS
INCREMENTAL EBITDA CONTRIBUTION BY ACTION (USD MN)
22 Butadiene 20 sales Energy portfolio Key areas: 18 efficiency Strengthen market position 16 Group Fuel 100+ margin Energy efficiency 14 ACTIONS LUB 12 Non-motor fuel margin improvement development 10 MPC LDPE4 offgas 8 hydrocarbon recovery loss mgmt 6 Optimization of 4 Effective backpressure polymers warehousing 2 turbine op.
0
80% of total EBITDA uplift
37 CRUDE DIVERSIFICATION TARGETING 33% SEABORNE SUPPLY BY 2021
ADRIATIC PIPELINE ACCESS ESTABLISHED CRUDE DIVERSIFICATION1
Increased pipeline capacity: 6Mtpa = SN 97% 75% REB Seaborne Increased 3% 25% 33% pipeline capacity: 14Mtpa = MOL+SN 2011 2017 2021
ENHANCING FEEDSTOCK FLEXIBILITY
Number of purchased cargos* through Majority of the crude intake remains Ural, however, the number of tested Adria pipeline for landlocked refineries crudes in the complex refineries is on the rise
Targeting further increasing seaborne crude oil supply to 33% with widening crude basket to reach 50 types by 2021
25 ~25 Following the successful rehabilitation and expansion of the Friendship 1 15 17 pipeline, seaborne crude oil delivery to Slovnaft was launched in 2016 8 3 Opportunistic approach based on continuous optimization - capturing benefits of fluctuating crude spreads 2012 2013 2014 2015 2016 2017 2018E 38 * One cargo is equivalent of 80kt crude; (1) Group level, including INA CONSUMER SERVICES A LEADING REGIONAL NETWORK
CZECH R. MARKET POSITION: 2 MARKET SHARE: 20% SLOVAKIA MARKET LEADING MARKET POSITION: 1 IN 60% OF THE NETWORK MARKET SHARE: 48%
HUNGARY MARKET POSITION: 1 TOP 3 MARKET SHARE: 44% IN 90% OF THE NETWORK SLOVENIA MARKET POSITION: 3 MARKET SHARE: 10% ROMANIA 9 COUNTRIES1 MARKET POSITION: 3 MARKET SHARE: 18% 6 WELL ESTABLISHED BRANDS
SERBIA ~1,900 MARKET POSITION: 5 MARKET SHARE: 5% MOSTLY COCO / COCA SERVICE STATIONS CROATIA MARKET POSITION: 1 BiH MARKET SHARE: >50% MARKET POSITION: 1 ~1 MN TRANSACTIONS / DAY MARKET SHARE: 13%
CORE 5 COUNTRIES REFINERY
(1) Montenegro (1 station) is not included in the map 40 Market share sources: Hu, Ro, Sk, Cz – local oil associations, Slo, Cro, Srb, BiH – own estimate 2021 STRATEGIC PRIORITIES EXPLOIT POTENTIAL IN FUEL, ACCELERATE SHIFT TOWARDS NON-FUEL
MARGIN DEVELOPMENT GROWTH STRATEGY TO 2021
4 1 Exploiting the fuel potential: growing fuel sales and taking advantage of market upside throughout the CEE 2 3 Non-fuel increasingly a growth 2 driver: Optimize/customize store format and improve services through non-fuel concept roll-out
3 Go online and digital: for a 1 personalized and convenient customer experience
4 Beyond non-fuel: Create new mobility services platform including e-mobility, car-sharing, fleet 2016 2021 New services Non-fuel Fuel management
EBITDA to increase to USD 450mn by 2021
41 EXPLOITING THE FUEL POTENTIAL FUEL SALES ON THE RISE MOSTLY DRIVEN BY RISING CEE FUEL CONSUMPTION
CEE MOTOR FUEL DEMAND (2008 = 100%) FUEL THROUGHPUT PER SITE (MN L/SITE)
+20% 1.15 +22% 3.03 2.84 1.10 2.52
1.05
1.00
0.95
0.90
0.85 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 H1 2013 2015 2017 2018
FLEET CARD SALES vs TOTAL (2017, %) COMMENTS
44 Fuel remains the main EBITDA contributor providing 75% of total gross margin
32 30 30 Rising fuel consumption and constantly 25 optimized network drive rise in throughput Fleet card sales a massive captive customer base in CEE and a good base for the consumer services transformation
42 Hungary Slovakia Croatia Romania Group NON-FUEL INCREASINGLY A GROWTH DRIVER CONCEPTUAL CHANGE, COCO/A OPERATING MODEL SUPPORT GROWTH
NON-FUEL SHARE OF TOTAL MARGIN NON-FUEL TO TOTAL GROSS MARGIN (%) GROWTH (%)
~30 34 24 22 26 19
10
2013 2015 2017 2021E 2013 2015 2017
NETWORK TRANSFORMATION (% OF RECONSTRUCTED SITES) Focus on own convenience brand encompassing coffee, fresh food, everyday
50+ groceries through concept Average store size on reconstructed sites: ~90 sqm
25 Total 2017 coffee servings: 41mn (1.3 coffee/sec) Average investment: 200-250k EUR/site
1
2015 2017 2021E 43 DIGITAL: FOR A PERSONALIZED AND CONVENIENT CUSTOMER EXPERIENCE & IMPROVED OPERATIONS
Personalizing interactions via Enhancing convenience via leveraging data and AI introducing digital channels
Digital Loyalty signage
E- commerce
Data Single Lake customer view Social media / chatbot
Integrated AI mobile IoT platform
Improving internal operations via increased and real-time access to relevant transaction and customer information 44 Legend Existing Being implemented Concept development BEYOND NON-FUEL: MOBILITY SERVICES
BUILDING BLOCKS OF DEVELOPING MOBILITY SOLUTIONS
Scalable CAPEX in mobility related activities, below EUR MOL LIMO: Innovative car- 100mn by 2021 sharing platform launched in Budapest in 2018 with 300 (o/w EBITDA break-even targeted 100 EV) cars within 2 years following Car concept roll-out More than 30k users sharing Leading mobility solutions
Fleet E-mobility management MOL is part of a Own fleet management 45% EU-funded platform commissioned in consortium to H2 2017, currently with install 250+ EV ~2,000 cars chargers in CEE
45 CONSUMERS TO DELIVER USD 450MN BY 2021 AND A TOTAL FREE CASH FLOW OF OVER USD 1BN OVER 2017-21
BUILDING BLOCKS OF CONSUMERS EBITDA EBITDA TRANSFORMATION 2013-2021 UPLIFT BY 2021 (USD MN) (USD MN)
USD 90mn+ Weight in group EBITDA (%), right Consumers EBITDA (USD mn), left 450+ ~20% 600 20 358 500 15% 307 15 400 9% 300 10 7% 151 450+ 200 358 5 221 100 151 0 0 EBITDA EBITDA EBITDA Fuel Non-fuel Mobility EBITDA 2013 2015 2017 2021 2013 2016 2017 2021
EBITDA PER SITE (USD TH PER SITE) Consumer Services’ share in group EBITDA more than doubled since 2013 and is set to 187 continue to grow to ~20% by 2021 Consumer cash-flows typically trade at much 123 higher multiples (~10 EV/EBITDA) vs integrated 88 oils (~5-6 EV/EBITDA)
2013 2015 2017 46 EXPLORATION AND PRODUCTION TOP 15% IN SUSTAINABILITY A COMMITMENT TO THE INTEGRATION OF ECONOMIC, ENVIRONMENTAL AND SOCIAL FACTORS INTO EVERYDAY OPERATIONS
We operate safely or we don’t operate.
HEALTH & SAFETY Implement actions aiming at zero incidents and zero fatalities2
CLIMATE CHANGE Decrease GHG emissions from SD TARGETS flaring by ~35% 20201 UPSTREAM Reduce the number of spills (over 1 ENVIRONMENT cubic meter) by 30%
Increase employee engagement and HUMAN CAPITAL further develop and utilize technical Career Ladder in upstream
48 (1) Versus 2014; (2) Lost-time injury frequency, own and on-site contractors (2) Tons in CO2 equivalent PRODUCTION IN 8 COUNTRIES
RUSSIA Reserves: 47.2 MMboe CEE TOTAL Production: 5.8 mboepd Croatia, Hungary KAZAKHSTAN Reserves: 237 MMboe Reserves: 23.5 MMboe Production: 75.5 mboepd PAKISTAN o/w CEE offshore Reserves: 9.4 MMboe Reserves: 9.4 MMboe Production: 8.9 mboepd Production: 6.7 mboepd OTHER INTERNATIONAL UK, NORTH SEA Egypt, Angola, Kurdistan Reserves: 22.2 MMboe Region of Iraq Production: 11.6 mboepd Reserves: 16.5 MMboe Production: 7.9 mboepd
MORE INFORMATION: EXPLORATION & PRODUCTION UPDATE 2018 PRODUCTION BY COUNTRIES AND RESERVES BREAKDOWN BY COUNTRIES PRODUCTS (MBOEPD; H1 2018) AND PRODUCTS (MMBOE; FY 2017)
8% 7% 10% 15% 6% 26% 38% 11% 44% 20% 110 110 356 51% 5% 356 41% 48%
31% 41%
Hungary WEU (North Sea) Oil Hungary WEU (North Sea) Oil Condensate Croatia MEA & Africa Gas Croatia MEA & Africa Gas CIS Condensate CIS 49 Note: Group production figures include consolidated assets, JVs ( Baitex in Russia, 5.8 mboepd) and associates (Pearl in the KRI, 2.5 mboepd) CREATING VALUE BELOW 50 USD/BBL OIL PRICE
ANNUAL PRICE REALIZATION, EBITDA, FCF (USD/boe)
120 112 109 110 99 100 90 80 76 69 71 70 62 60 54 52 49 Brent price 50 43 42 41 44 39 40 33 33 32 Realized HC price 30 23 19 17 Unit EBITDA 20 30 24 25 Unit FCF* 10 14 8 7 0 1 2012 2013 2014 2015 2016 2017 H1 2018
Proven track record of generating value even at low oil prices in 2016-2017 Substantial efficiency improvement delivered across the value chain and across the portfolio Very competitive unit costs (lifting costs below USD 7/boe) to be sustainable for years to come Heavily scrutinized and rationalized capital program
* Based on: Simplified FCF = EBITDA Excl. Special Items – Organic CAPEX 50 E&P ADJUSTED TO BE FIT AND TO PROSPER AT THE BOTTOM OF THE CYCLE
OPERATIONAL EFFICIENCY, PRODUCTION OPTIMIZATION IN FOCUS
G&A EXPENSES (USD MN) AVERAGE WELL COST CEE ONSHORE PRODUCTION IN HUNGARY (USD/M) (MBOEPD) -7% ~-20% +6%
71 70 66
2016 2017 2016 2017 2015 2016 2017
GROUP DIRECT UNIT OPEX1 (USD/BOE)
9
8
7
6
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2014 2015 2016 2017 2018 2019 51 (1) Incl. JVs and associates PRODUCTION AT ~110 MBOEPD UNTIL 2019 LIKELY TO DECLINE BEYOND 2020 IF NO RESERVES ADDED INORGANICALLY
MID-TERM PRODUCTION PROFILE KEY MESSAGES (MBOEPD)
120 112 Stable contribution from CEE ~110 ~110 New 107 104 ~10-15 barrels Impact of successful production required 100 optimization and EOR Pursue transfer of undeveloped reserves and EOR opportunities 80 Capturing value from international projects
60 Continue field development in TAL (PAK) and Baitugan (RUS) ~95-105 Development and infill projects to 40 contribute to production growth in the UK
Inorganic steps are required to achieve 100% 20 reserves replacement
0 2015 2016 2017 2018 2019 2020-2021
Rest CEE Production guidance 52 Note: figures include consolidated assets, JVs and associates STABLE PRODUCTION IN Q2 2018 RISING UK PRODUCTION OFFSET SLIGHTLY LOWER CEE GAS VOLUMES
QUARTERLY PRODUCTION BY COUNTRY (mboepd) COMMENTS
Q2 2018 QoQ (vs. Q1 2018): 0% -1% UK: +2.7 mboepd on Catcher 111.7 109.4 110.0 109.3 111.0 ramping up Associated 8.8 104.7 104.1 companies* 8.7 8.5 8.1 CEE: -2.6 mboepd on lower gas 2.6 2.4 8.5 8.5 2.0 2.2 Other 3.8 3.3 3.4 production 3.9 2.3 2.1 KRI 9.5 7.3 3.6 3.4 10.2 4.4 3.9 12.9 UK Q2 2018 YoY: 8.3 8.4 8.7 8.7 9.1 Pakistan 8.6 UK: +5.6 mboepd on Catcher coming on-stream and then ramping up in Q2 Croatia 36.0 35.7 34.2 34.2 35.1 33.0 CEE : -4.5 mboepd (o/w -1.2 mboepd off-shore decline), primarily on lower onshore gas production
July production:
Hungary 42.7 43.0 42.1 43.3 42.6 41.2 Strong Catcher (UK) performance and higher Hungarian volumes increased group production in July
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 July Estimate
* Associated companies include Baitex (Russia) and Pearl (KRI); Q2 2018 production of Baitex was 5.7 mboepd, Pearl 2.4 mboepd 53 EXISTING ASSETS DELIVER USD 2BN+ FCF IN 2017-21 AND CAN COMFORTABLY FUND INORGANIC RESERVE REPLACEMENT
EBITDA, CAPEX AND FCF EXPECTATIONS (2017-21, USD MN) KEY MESSAGES
Brent @ 60 USD/bbl +USD Existing assets would ~600 mn generate USD 2bn+ EBITDA Brent @ 50 post-tax FCF in 2017-21 USD/bbl at USD 50/bbl oil price
This shall comfortably ~1,300-1,500 cover 100% reserve replacement...
~1,800-2,000 ...and leave cash for 557 ~400 rewarding ~3,100-3,500 ~1,400-1,600 shareholders
Any USD 10/bbl ~2,000-2,200 upward move in crude price provides material FCF upside
EBITDA CAPEX Simplified Tax & FCF 2017 FCF Total FCF FCF to FCF to FCF other (post-tax) delivered 2017 - 21 100% RR shareholders
2018-21 expected 54 TARGETING 100% RESERVE REPLACEMENT TO TRANSFORM TO A SUSTAINABLE INTERNATIONAL UPSTREAM PORTFOLIO
RESERVES GAP IN 2016-21 (MMBOE) MOL’S E&P FOOTPRINT – CORE REGIONS
459 459
356 30-40 200-220 150-160
2016 YE 2P 2017 YE 2P New booking Production Inorganic Reserves after Booked Booked and additions 100% RR Reserves Reserves reclassification required
2018-21 MOL 2030 targets 100% reserve replacement BREAKDOWN OF OPERATED PRODUCTION Limited organic reserve replacement nessecitates substantial inorganic moves Focus on the existing hubs and adjacent areas Gas @ regulated price 39% 43% Gas @ market price Preference for late-stage development or Liquids producing assets
Proven excellence in operated gas production 18% 55 FINANCIALS, GOVERNANCE AND OTHERS UPGRADED FULL-YEAR 2018 GUIDANCE WITH THE ESSENTIAL FUNDAMENTAL BUILDING BLOCKS IN PLACE
2018 2017 H1 2018 TARGETS RESILIENT GROUP CLEAN UPGRADED TO INTEGRATED USD 2.45 BN USD 1.29 BN CCS EBITDA ~USD 2.4 BN BUSINESS MODEL GROUP CAPEX USD 1.04 BN USD 403 MN (ORGANIC)1 USD 1.1-1.3 BN FINANCIAL DISCIPLINE UPGRADED TO SIMPLIFIED FCF1, 2 USD 1.41 BN USD 890 MN USD 1.1-1.3 bn SYSTEMATIC SAFETY & USD 100 MN DS 2022 ON TRACK EFFICIENCY (NXDSP) USD 100 MN
HIGH-QUALITY OIL & GAS 107 MBOEPD 109 MBOEPD ~110 MBOEPD LOW-COST PRODUCTION3 ASSET BASE
MOL 2030: NET DEBT/EBITDA 0.65X 0.57X <2X BUILD ON EXISTING STRENGTHS HSE – TRIR4 1.5 1.6 <1.5
(1) 2018 organic CAPEX budget including up to 300mn USD spendings on transformational projects (2) Clean CCS EBITDA less Organic CAPEX (3) Including JVs and associates 57 (4) Total Recordable Injury Rate ROBUST, RESILIENT CASH GENERATION 2017: A YEAR OF VERY STRONG DELIVERY
CLEAN-CCS EBITDA (USD BN)
Upstream Consumer Services1 Corporate & Other (incl. intersegment) Downstream Gas Midstream Group total
2.3 2.5 2.4 2.4 2.2 2.2 0.7 0.9 2.0-2.2 0.7 1.6 1.2
1.4 1.2 1.2 Q2 0.7 0.6 0.5 0.4 0.1 0.2 0.3 0.3 Q1 0.6 0.3 0.3 0.2 0.2 0.2 -0.3 -0.1 -0.1 -0.2 -0.2 2013 2014 2015 2016 2017 2018 2017-21E Average Robust EBITDA and cash generation to sustain in 2017-21E on the back of the existing asset base
1 Segment established in 2017; until 2016 the segment includes Retail EBITDA 58 STRONG CAPEX DISCIPLINE
ORGANIC CAPEX (USD BN)1
Organic US Organic DS Organic CS Organic GM Group total
1.8 1.7 1.6
1.4 1.3 1.2 0.9 1.1-1.3 1.2 1.0 1.0-1.1 1.0 1.0 0.7 0.7 0.3 0.8 0.4 0.6 0.7 0.5 0.4 0.3 0.4 0.4 Q2 0.24 0.2 0.1 0.1 0.1 0.1 0.1 Q1 0.16 0.0 2013 2014 2015 2016 2017 20182 2017-21E Average
USD 1.0-1.1bn sustain CAPEX annually on average in 2017-21 with continued strong discipline
(1) Fact & guidance represent total organic spending of MOL Group (2) 2018 organic CAPEX budget including up to 300mn USD spendings on 59 transformational projects SUBSTANTIAL SIMPLIFIED FREE CASH FLOWS ACROSS THE CYCLE AND ACROSS ALL BUSINESS SEGMENTS
SIMPLIFIED FREE CASH FLOW1 (USD BN)
Upstream Consumer Services C&O (incl. intersegment) Downstream Gas Midstream Group total 1.8 1.4 1.6 1.1 1.2 1.2 1.4 0.0 0.5 0.2 1.2 1.2 1.0-1.1 1.0 0.9 1.0 0.8 0.5 0.8 0.7 Q2 0.4 0.6 0.3 0.4 0.2 0.2 0.2 0.1 0.2 0.2 0.2 Q1 0.5 0.2 0.2 0.2 0.2 0.2 0.0 0.0 -0.2 -0.2 -0.2 -0.2 -0.2 -0.3
-0.4 2013 2014 2015 2016 2017 2018 2017-21E Average
Simplified FCF (EBITDA less organic capex) comfortably covers all cash outflow
60 (1) Simplified Free Cash Flow = Clean CCS EBITDA – Organic CAPEX SOURCES AND APPLICATIONS OF CASH
SOURCES AND APPLICATIONS OF CASH, 2012-17 (USD MN)1
180
-613 348 546 557 354 738 579 402 205 270 196 164 202 350 575 473 302 427 2 524 2 477 2 447 322 164 2 308 2 183 2 153 111
1 689
1 211 1 258 1 034 1 011 1 037
2012 2013 2014 2015 2016 2017
Clean CCS EBITDA Organic CAPEX Inorganic CAPEX Interests & Taxes Dividend (De)leveraging & Other
EBITDA/CAPEX gap should comfortably cover taxes, cost of funding, rising dividends and small-size M&A...... and would also contribute to funding the upcoming transformational projects
61 (1) Dividends refer to the year when they were earned, rather than when they were paid out ROBUST BALANCE SHEET, AMPLE HEADROOM REMAIN A PRIORITY IN „MOL 2030”
NET DEBT TO EBITDA (X) MOL 2030
2.5
2.0 Net debt/EBITDA to be in 1.0-2.0x tolerance 1.72 1.66 range on a forward-looking basis under 1.5 1.44 „normal” circumstances (covenant 1.38 1.31 threshold at significantly higher levels) 0.97 1.0 0.79 0.74 0.65 0.72 Credit metrics to remain commensurate 0.57 0.5 with investment grade credit rating Higher/lower leverage may be tolerated
2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 H1 temporarily and/or for strategic reasons, 2018 2018 but would trigger action plan to bring it back to target range AVAILABLE LIQUIDITY (30.06.2018)* Maintaining strong liquidity and 4.5 USD 4.2bn comfortable financial headroom remain 4.0 priority 1.0 3.5 0.1 3.0
bn 2.5
2.0 USD USD 1.5 3.2 1.0 0.5 0.0 Undrawn Marketable Cash Total available facilities securities liquidity 62 *30.06.2018 amended with effect of EUR 555m RCF concluded on the 9th of July along with the partial cancellation of USD 1550m facility. AMPLE FINANCIAL HEADROOM FROM DIVERSIFIED FUNDING SOURCES
AVERAGE MATURITY OF 3.7 YEARS*
Reported cash & cash equivalents Senior Unsecured Bonds Medium term loan Long term loan (multilaterals) Undrawn facilities 2,000
1,500 717
mn 647 1,000 410 USD USD 874 500 1,032 38 874 510 500 9 0 2 19 18 18 58 Reported 2018 2019 2020 2021 2022 2023 2024+ cash&cash equivalents MID- AND LONG-TERM COMMITTED DRAWN VERSUS UNDRAWN FACILITIES FUNDING PORTFOLIO* (30.06.2018*)
Other bilateral loans Schuldschein 2% 4% Multilateral loans Syndicated / club loans drawn 2% 0%
Senior unsecured bonds 33%
Syndicated / club loans undrawn 59% 63 *30.06.2018 amended with effect of EUR 555m RCF concluded on the 9th of July along with the partial cancellation of USD 1550m facility. FULL INVESTMENT GRADE RATING ACHIEVED FOLLOWING S&P UPGRADE IN NOVEMBER 2017
HISTORICAL FOREIGN LONG TERM FFO ADJUSTED NET LEVERAGE RATINGS (3Y AVG. 2015-2017)
MOL Fitch MOL Moody's MOL S&P
PKN, BBB- 0.58 Baa1 BBB+ MOL, BBB- 1.16
Baa2 BBB Bashneft, BBB- 1.28
OMV, A- 1.74 Baa3 BBB- Total, AA- 1.86
Ba1 BB+ Tupras, BBB- 2.04
Ba2 BB ENI, A- 2.93 Repsol, BBB 3.30
0 0.5 1 1.5 2 2.5 3 3.5 Source: www.fitchratings.com
Standard & Poor’s upgraded to BBB- investment grade (stable outlook) on 15 November 2017 BBB- (stable outlook) affirmed by Fitch Ratings on 26 October 2017 Moody’s Baa3 investment grade rating received in March 2017, last affirmed in June 2018 MOL’s strong financials are visible even among better rated peers
Note: S&P has been rating MOL since 2005, Fitch since 2010 and Moody’s since March 2017 64 INCREASING DISTRIBUTION TO SHAREHOLDERS STEADILY RISING BASE DPS, COMPLEMENTED BY SPECIAL DIVIDEND IN 2018
DIVIDEND PER SHARE1 (HUF)
3.6% 3.5% 3.0% Dividend 2.5% 2.9% 3.3% 3.0% +1% +2% +1.5% yield2
BASE DPS: +10% 43 CAGR IN 2014-18 Special dividend Regular dividend 16
85 71 78 57 58 58 61
2012 2013 2014 2015 2016 2017 2018
Cash dividend is the primary distribution channel to shareholders Primary target is to steadily increase base dividend per share (+10% CARG in 2014-2018) Special dividend payment to share excess free cash flows with shareholders when balance sheet, forward-looking capex plans allow for it (e.g. in 2014 and 2018) Annual review of the status and the potential use of treasury shares to continue
(1) Restated to reflect post share split values; (2) Calculated with publication date (AGM) share prices 65 FCF TO COVER STRATEGIC CAPEX IN 2017-21 AND TO CREATE HEADROOM FOR ADDITIONAL TRANSFORMATIONAL SPENDING
NEXT 5-YEAR CASH FLOW GENERATION AMBITIONS, 2017-21 (USD BN)1
10-11 -5.0-5.5 Transformational 2017 delivery capex is back-loaded
1.04 5.0-5.5 -2.0 (20%)
-1.4-1.6
1.6-1.90 -1.2-1.5 2.45 0.32 (23%) 1.41 (21%) ~0.40 (27%) 1.08
Clean CCS Sustain Capex Simplified FCF Transformational Funding FCF pre- Dividends2 FCF-post- Optionality/ EBITDA Capex cost/tax/FX dividends dividend Flexibility Simplified FCF in the next 5 years shall fully cover transformational capex, dividends E&P reserves replacement can be funded from FCF and the strong balance sheet 2017: first year brings very strong FCF delivery, implying upside to the 5-year financial framework
(1) Excluding changes in working capital 66 (2) Dividends are set and approved in HUF-terms and refer to base dividends (excluding special) MOL 2030 WORKS WITH OR WITHOUT INA FOCUS ON SECURING RETURN ON INVESTMENT
REALITIES AND PRIORITIES STRONG REGIONAL ASSET BASE
MOL 2030 strategy can be and will be Low-cost E&P in Croatia* (both onshore and executed with or without INA off-shore)
Good geographical fit and untapped Coastal refinery (Rijeka) efficiency upside in downstream Construction of Rijeka Delayed Coker Extensive retail network
Conversion of Sisak Refinery SLOVENIA: 6 SERVICE STATIONS Yet, the relative importance of INA has CROATIA: 387 declined within MOL Group SERVICE STATIONS RIJEKA
Priority: to maximise the value of MOL’s SISAK investment in INA: BOSNIA: 101 Keeping/operating INA on market-based SERVICE STATIONS terms and with a MOL-controlling position MONTENEGRO or 1 SERVICE STATION Selling/monetizing the investment REFINERY PIPELINE
Legal proceedings continue; OIL/GAS FIELD first arbitration in favour of MOL (all Croatian claims rejected) More information on the history of MOL & INA
*E&P activities primarily within Croatia, with international activities in Angola/Egypt (activities in Syria are currently 67 suspended due to force majeure proclaimed in Feb 2012) THE HISTORY OF INA & MOL, 2003-2018
STORYLINE
UNDER THE FASHA, MOL DELEGATES FIVE MOL AND THE GOVT OF CROATIA SIGN THE GAS ST OUT OF NINE MEMBERS TO THE 1 SHAREHOLDER RIGHTS AGREEMENT (SHA): MASTER AGREEMENT (GMA) AND AN ST SUPERVISORY BOARD AND THREE OUT OF MOL ALLOWED TO NOMINATE TWO MEMBERS 1 AMENDMENT AMENDMENT TO THE FIRST SHAREHOLDERS SIX MEMBERS TO THE MANAGEMENT TO THE SUPERVISORY BOARD, THE CFO AND A AGREEMENT (FASHA) BY WHICH MOL GAINS VP TO THE MANAGEMENT BOARD BOARD, INCLUDING THE PRESIDENT
AGREEMENTS FULL MANAGEMENT CONTROL ON INA. SHAREHOLDER (WITH THE TIE-BREAKING VOTE).
MOL ACQUIRES A 25% STAKE MOL GROUP INCREASES MOL GROUP ACQUIRES AN MOL GROUP HOLDS 49.1% IN INA PLUS 1 SHARE STAKE IN INA TO 47.1% ADDITIONAL 2% STAKE IN INA IN INA AS OF JUNE 2018
(USD 505 MN) (USD 1.18 BN) (USD 131 MN) (USD 1.8 BN) OWNERSHIP
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
CROATIA BEGINS INVESTIGATION OF EX-PM IVO SANADER FOR ALLEGEDLY BEING OFFERED A €10MN BRIBE BY CROATIA ISSUES EUROPEAN ARREST WARRANT (EAW) FOR MOL MOL FOR SECURING MANAGEMENT RIGHTS IN INA. THE INVESTIGATION ALSO TARGETS MOL CHARIMAN/CEO. CHAIRMAN/CEO. CROATIA REQUESTS INTERPOL TO PLACE A RED NOTICE FOR THE ARREST OF MOL CHAIR/CEO. INTERPOL ACCEPTS.
HUNGARIAN PROSECUTION LAUNCHES INVESTIGATION ON SUSPICION OF BRIBERY IN CONNECTION WITH FASHA CROATIA GOVT LAUNCHES ARBITRATION UNDER UNCITRAL MOL FILES A REQUEST FOR ARBITRATION WITH THE INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES TO RULES SEEKING NULLIFICATION OF THE 2009 FASHA/GMA, START ARBITRATION PROCEEDINGS VS THE GOVT OF CROATIA FOR BREACHING CONTRACTUAL OBLIGATIONS UNDER THE CLAIMING THAT MOL UNLAWFULLY OBTAINED
LEGAL PROCEEDINGS LEGAL FASHA/GMA. NO RULING AS OF 30.04.2018 MANAGEMENT RIGHTS
CROATIAN REGULAR (1st and 2nd inst.) COURTS FIND THE EX. PM GUILTY OF ACCEPTING THE ALLEDGED BRIBE INTERPOL CANCELS RED UNCITRAL REJECTS ALL OF NOTICE BUT EAW STILL CROATIA’S CLAIMS AIMING AT A BUDAPEST COURT REJECTS CROATIA'S REQUEST FOR EXTRADITION OF MOL CHAIRMAN/CEO STANDS NULLIFYING THE 2009 FASHA/GMA. ALLEGATIONS OF BRIBERY, BREACHING THE THE CONSTITUTIONAL COURT OF CROATIA REVOKES TWO PREVIOUS LOWER INSTANCE RULLINGS AND ORDERED FOR RETRIAL 2003 SHA AND NOT ACTING
RULLINGS WITHIN CROATIAN COMPANY AUSTRIA AND LAW ARE ALL DISMISSED. HUNGARIAN PROSECUTION DECLARES THAT THE CRIMINAL ACCUSTATION RAISED GERMANY SUSPEND SWISS SUPREME COURT BY CROATIA ON SUSPICION OF BRIBERY IS UNFOUNDED. INVESTIGATION ENDS. EAW ON MOL CONFIRMS RULING. CHAIRMAN/CEO MOL IS CLEARED.
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
CROATIAN BRIBERY INVESTIGATION INTO EX CROATIA PM AND MOL CHAIRMAN/CEO HUNGARIAN BRIBERY INVESTIGATION INTO MOL CHAIRMAN/CEO ARREST WARRANT FOR MOL CHAIRMAN/CEO ICSID ARBITRATION UNCITRAL ARBITRATION MOL-CROATIA ARBITRATION STATUS UNCITRAL ARBITRATION ICSID ARBITRATION (CROATIA VS. MOL) (MOL VS. CROATIA)
INITIATED GOVERNMENT OF CROATIA MOL BY
WHEN 17 JANUARY 2014 26 NOVEMBER 2013
PCA (PERMANENT COURT OF ARBITRATION), GENEVA UNDER UNCITRAL ICSID (INTERNATIONAL SETTLEMENT OF FORUM (UNITED NATIONS COMMISSION ON INVESTMENT DISPUTES), WASHINGTON INTERNATIONAL TRADE LAW) RULES
THE THE MAIN ALLEGATION OF THE GoC2 REMEDY FOR SUBSTIANTIAL LOSSES INA CLAIM WAS THAT CHAIRMAN OF MOL HAD SUFFERED IN THE GAS BUSINESS AS A BRIBED CRO'S FORMER PM DR. IVO CONSEQUENCE OF THE BREACH OF THE SANADER TO GAIN MANAGEMENT 2009 AGREEMENTS1 BY THE GoC2. THE CONTROL OVER INA THROUGH PROCEEDING IS ALSO ABOUT ABUSE OF AMENDING THE 2003 SHAREHOLDERS REGULATORY POWER AT THE EXPENSE AGREEMENT AND SIGNING AN OTHER OF A SINGLE ACTOR, INA, AND AGREEMENT RELATING TO INA'S GAS INDIRECTLY, MOL. BUSINESS IN 2009. THEREFORE IT REQUESTED NULIFICATION OF THESE AGREEMENTS ON VARIOUS BASIS.
FINAL AWARD (IN MOL’S FAVOUR) STATUS ON 23 DECEMBER 2016, THE UNCITRAL ONGOING TRIBUNAL REJECTED ALL OF CROATIA’S CLAIMS BASED ON BRIBERY, CORPORATE GOVERNANCE AND MOL’S ALLEGED BREACHES OF THE 2003 SHAREHOLDERS AGREEMENT.
(1) 2009 Agreements refers to FASHA (First Amendment to the Shareholders Agreement), GMA (Gas Master Agreement) and FAGMA (First Amendment to the Gas Master Agreement) 69 (2) The Government of Croatia SHAREHOLDER STRUCTURE1 HIGHER FREE FLOAT AND LIQUIDITY
The 8-for-1 stock split was successfully executed in September 2017 CEZ exit (selling 7.4% stake in MOL) in March 2017 was a major boost to free float and liquidity
Treasury shares MUFG 9.8% 0.6% UniCredit Bank AG 3.0% ING Bank N.V. Foreign investors (mainly institutional) 4.1% 33.9% OTP Bank Plc. 4.9%
OmanOil (Budapest) Limited Free-float 7.1% 45.3%
Domestic institutional Hungarian State (MNV Zrt.) 5.9% 25.2% Domestic private investors OTP Fund Management 4.2% 1.2%
(1) Shareholders structure as of 30 June 2018 70 SOLID, CONSISTENT EBITDA GENERATION RESILIENT INTEGRATED BUSINESS MODEL IN A HIGHLY VOLATILE ENVIRONMENT
EXTERNAL ENVIRONMENT* VS MOL CLEAN CCS EBITDA (USD MN)
100% 800
85%
600
70%
55% 400
40%
200
25%
10% 0 Q1 12Q2 12Q3 12Q4 12Q1 13Q2 13Q3 13Q4 13Q1 14Q2 14Q3 14Q4 14Q1 15Q2 15Q3 15Q4 15Q1 16Q2 16Q3 16Q4 16Q1 17Q2 17Q3 17Q4 17Q1 18Q2 18
Clean CCS EBITDA (r.s.) MOL Group Refining Margin Brent crude MOL Group petchem margin
* The quarterly % values of the Refinery Margin, Petchem Margin and Brent price are measured against their respective maximum values (100%) in the period of Q1 2012 – Q2 2018 100% equals to the following values: MOL Group Refining Margin: 7.3 USD/bbl; MOL Group Petchrochemicals margin: 654 EUR/t; Brent crude: 119 USD 71 KEY ITEMS OF TAXATION CORPORATE INCOME TAX (CIT) RATES CUT IN CORE OPERATING COUNTRIES
HUNGARY
CIT tax remains at 9% Profit based ’Robin Hood’ with an implied tax rate of 21% Only energy related part of the profit affected (~66%), nameplate tax rate is 31% Only the Hungarian operation of certain companies are affected (i.e: MOL Plc., while gas transmission (FGSZ) or petrochemicals (MOL Petrochemicals) are not subject to the tax) Gross margin-based Local Trade Tax (2%) and Innovation Fee (0.3%)
CROATIA & SLOVAKIA
CIT rate at 18% in Croatia and 21% in Slovakia
HUF bn 2013 2014 2015 2016 2017 Local Trade Tax and Innovation Fee 14 13 15 14 15 Corporate Income Tax (incl. RH tax) 20 17 23 37 29 Total cash taxes 34 30 38 51 44
72 TRANSFORMING MOL TO ADAPT TO CIRCULAR ECONOMY AND A LOW CARBON WORLD
BUILDING BLOCKS OF GREEN INITIATIVES IN MOL
Targeting reductions by 2020
2030 strategy supports Solar power generation at Scope 3 GHG emission DS sites and mining plots reduction GHG Renewables Geothermal power
Advanced biofuels: fats and oil co-processing
Plastics Rubber recycling bitumen
Strategic Internally developed partnership formed technology for utilizing used with APK for plastic tires in road construction recycling to adapt to circular economy
73 MOL GROUP CARBON FOOTPRINT TARGETING REDUCTIONS BY 2020; 2030 STRATEGY TO CONTRIBUTE
GHG CHANGES 2016-17 CARBON FOOTPRINT 2017 (MT CO2 EMISSiON)
7.10 0.95
61.03
DIRECT GHG EMISSIONS INDIRECT GHG EMISSIONS FROM PURCHASED ENERGY CONSUMPTION GHG EMISSIONS BY CUSTOMERS AND OTHER INDIRECT RESOURCES
2020 REDUCTION TARGETS* 2030 EXPECTED FOOTPRINT
35% reduction of flaring in upstream MOL 2030 transformation to “beyond fuel 3% reduction in combined Group scope 1 & 2 age” likely to result in a reduction of Scope 3 GHG emissions GHG emissions**
*2014 baseline excl. M&A / ** The expansion into new (petro)chemical lines to increase the share of non-motor fuel production by 2030 will likely result in 74 the overall reduction of MOL’s Scope 3 GHG Emissions. STRONG ESG RATINGS LEADING POSITIONS ACROSS LEADING ESG1 RESEARCH/RATING HOUSES
RELATIVE RATING2 VS TOP 12% TOP 22% TOP 2%3 INDUSTRY PEERS
MOL SCORE 69 AA5 83 684
ENVIRONMENTAL 71 6.4 84 74 (LEADER)
SOCIAL 78 7.7 84 63 (LEADER)
GOVERNANCE 60 4.8 80 63 (OUTPERFORMER)
Continuous monitoring of and response to ESG research/rating agency and investor disclosure requests, targeting industry best practice Consistently strong(er) environmental and social scores across all players, while somewhat weaker, but improving corporate governance scores Strong corporate safeguards are in place (Link to Code of Ethics and Business Conduct)
(1) ESG = Environmental, Social and Governance / (2) Latest Available Score (3) An Overall ESG Score of 83 puts MOL 3rd out of 127 industry peers, landing a 98th Percentile spot with classification “Outperformer”. As of February 7th 2018. (4) ESG Disclosure Score reflecting the level of disclosure (5) Weighted-Average Key Issue Score 6.1 and Industry Relative Score 8.1 as of May 19th 2018 75 MOL GROUP REFINERY AND PETCHEM MARGINS
VARIABLE REFINERY MARGINS1 (USD/bbl) PETROCHEMICALS MARGIN (EUR/t) 10 900 800 8 700 6 600
4 500 400 2 300 0 200 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 MOL Group refinery margin Complex refinery margin (MOL+SN) OLD petchem margin NEW MOL Group petchem margin
IMPLIED YIELDS IMPLIED YIELDS AND FEEDSTOCK
9.9% 5.5% 9.0% 5.0% 19.4% 129.5%
10.9% 10.4% 18.4% 100.0% MOL Complex Naphtha Polypropylene Propylene Group refinery HDPE 37.3% refinery margin LDPE 117.5% 8.7% 10.4% margin (MOL+SN) Ethylene 25.5% Benzene 45.6% 46.8% Butadiene 16.0% 8.3% 7.6% 5.3% 12.0% Output Input
(1) Based on weighted Solomon refinery yields, contains cost of purchased energy 76 MACRO ASSUMPTIONS
KEY MACRO ASSUMPTIONS EBITDA SENSITIVITY TO KEY EXTERNAL DRIVERS
Sensitivity Est. Clean CCS EBITDA % of Group impact (USD mn) EBITDA 2017
5Y 2018- 2015 2016 2017 +/- 50 USD/Mcm AVG 21E ~30 1% Gas Price (NCG) Brent crude 52 44 54 72 40-60 (USD/bbl) +/- 10 USD/bbl ~100 4% MOL Brent price Group 4.0- refinery 6.1 5.7 6.5 4.8 5.0 margin +/- 50 EUR/t (USD/bbl) MOL Group ~80 3% petchem margin NEW MOL Group 400- +/- 1 USD/bbl petchem 588 543 504 460 500 margin MOL Group ~110 4% (EUR/t)1 refinery margin
NB: - Sensitivity calculated for the 2018: Ceteris paribus for current assets assuming full re-pricing of portfolio; all other premises and volumes remain unchanged - Gas price sensitivity is the net impact of E&P sensitivity (around USD 50m) and an offsetting Downstream sensitivity.NCG: Largest German trading point for natural gas (operated by NetConnect Germany) - Crude price sensitivity is the net impact of Upstream sensitivity (including all liquids sensitivity and also the oil price-linked gas production sensitivity) and an offsetting Downstream sensitivity 77 TOP MANAGEMENT INCENTIVE SCHEMES FOR MOL GROUP EB MEMBERS, MORE THAN 2/3 OF TOTAL REMUNERATION IS VARIABLE AND PERFORMANCE DRIVEN
SHORT-TERM INCENTIVES Bonus opportunity between 0.85x and 1x of annual base salary, depending on the level Payout linked to yearly performance based on financial, operational and individual measures, including but not limited to: Group Level target: Clean CCS EBITDA*, CAPEX utilization, TRIR Divisional targets: Clean CCS EBITDA, CAPEX utilization, OPEX, non-financial targets etc. LONG-TERM INCENTIVES Long-term incentive (LTI) scheme consists of two elements: Absolute share value based (previous stock option plan) and Relative market index based (previously Performance Share Plan) plans LTI payout is linked to long-term share price performance, both nominal and relative Absolute share value plan: a plan with 2 year lock-up period in which shares are granted on a past strike price. Any payout being the difference between strike price and actual spot price Relative index based plan: measures MOL share price vs CETOP and DJ Emerging Market Titans Oil&Gas 30 Index over 3 years Benchmark choice: MOL competes regionally (CEE) for investor flows, as well as with the global emerging market O&G sector Purpose: Incentivize and reward executives for providing competitive returns to shareholders relative to the regional and global O&G markets As of 2017, target amounts and actual payout for both LTI pillars will be based on physical MOL shares in order to further strengthen the alignment between the interest of our shareholders and MOL management. REMUNERATION MIX
26% 28% 37%35% Other 32%35% 44% Other EB 48% Chairman Group Executive CEO CEO membersBoard Members 26% 28% 30%
Base Salary Short Term Incentives Long Term Incentives 78 *2017 target for the CEO was set at USD 2.24 bn. FY17 Clean CCS EBITDA for the Group reached USD 2,447mn. For 2017, the BoD set the corporate factor at 1.09 for the CEO reflecting external effects and internal impacts. GAS MIDSTREAM: STABLE, NON-CYCLICAL CASH FLOW
GAS MIDSTREAM EBITDA (HUF BN, USD MN) FACTS & FIGURES
Domestic natural gas 70 300 256 250 252 transmission system operator 60 213 223 250 Regulated business (asset base 50 194 200 and return) with continuous 40 regulatory scrutiny 116 150 61 30 58 56 59 60 55 100 Nearly 6,000km pipeline system 20 30 in Hungary 10 50 Transit to Serbia, Bosnia- 0 0 Herzegovina 2012 2013 2014 2015 2016 2017 H1 2018 Interconnectors to Croatia, HUF bn USD mn (rhs) Romania, Slovakia, Ukraine
79 DISCLAIMER
"This presentation and the associated slides and discussion contain forward-looking statements. These statements are naturally subject to uncertainty and changes in circumstances. Those forward-looking statements may include, but are not limited to, those regarding capital employed, capital expenditure, cash flows, costs, savings, debt, demand, depreciation, disposals, dividends, earnings, efficiency, gearing, growth, improvements, investments, margins, performance, prices, production, productivity, profits, reserves, returns, sales, share buy backs, special and exceptional items, strategy, synergies, tax rates, trends, value, volumes, and the effects of MOL merger and acquisition activities. These forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from those expressed or implied by these forward-looking statements. These risks, uncertainties and other factors include, but are not limited to developments in government regulations, foreign exchange rates, crude oil and gas prices, crack spreads, political stability, economic growth and the completion of ongoing transactions. Many of these factors are beyond the Company's ability to control or predict. Given these and other uncertainties, you are cautioned not to place undue reliance on any of the forward- looking statements contained herein or otherwise. The Company does not undertake any obligation to release publicly any revisions to these forward-looking statements (which speak only as of the date hereof) to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as maybe required under applicable securities laws.
Statements and data contained in this presentation and the associated slides and discussions, which relate to the performance of MOL in this and future years, represent plans, targets or projections."
MORE INFO AT www.molgroup.info CONTACT: Phone: +36 1 464 1395 E-mail: investorrelations@mol.hu 80