Hungarian MOL reports best ever quarter
Hungarian oil and gas company MOL reported its strongest ever financial results for Q2 2021 on August 6, although there were weak areas, especially in the gas midstream sector.
On a current cost of supplies basis, MOL's pre-tax earnings (Ebitda) were $893mn, 153% more than a year ago; while for the first half they were $1.56bn, 60% higher year-on-year, and prompting a guidance rise from $2.3bn to $3bn for the year as a whole.
Announcing the results, CEO Zsolt Hernadi said the company's "resilient integrated business model not only managed to successfully navigate the challenges posed by COVID, but also captured the strong commodity cycle we are experiencing."
Upstream Q2 Ebitda tripled to $336mn although production fell from 120,000 barrels of oil equivalent (boe)/day in Q2 2020 to 114,000 boe/d and the full-year guidance is lower still at 110,000 boe/d. But the high Brent price saw cash flow up year opon year to $230mn. Upstream remained one of the largest sources of free cash flow (FCF), rising to $25/barrel of oil equivalent in Q2 2021 – the highest since Q3 2018.
However it was its downstream sector that became MOL's largest cash contributor in Q2 on the back of a very strong petchem performance and recovery in refining. Ebitda rose fourfold. Other European oil companies saw poor European refining margins over the quarter owing to high feedstock prices and weak demand for middle distillates.
Midstream gas earnings were down 48% year on year to $23mn as both transit revenues and regulated income fell. Cross border capacity and transmission demand both "materially decreased," as flows to Ukraine, Romania, Croatia and Slovakia were down almost 87%. But within Hungary it was a brighter picture: domestic transmission rose by 32% in Q2 year on year.
Non-regulated transit revenues fell by almost 91% in Q2, as transmission towards Serbia stopped in January 2021 with the completion of the Balkan Stream pipeline at the end of 2020. Operating expenses were similar to prior year in Q2 2021, as the slightly higher gas cost of the transmission system could be compensated by strict cost control on other items. And capital expenditure rose owing to the Serbian-Hungarian interconnector project. All in all, FCF for the sector went negative in Q2.