"Unlike its earlier forecasts, the latest projections of Hungary's MOL for the external industry environment are no longer conservative estimates compared with the plans of the region's other oil companies.In an update of MOL's corporate strategy yesterday, the management has significantly raised its expectations for oil prices, refinery margins and the Brent/Ural spread.
The combined result is an EBIDTA forecast that exceeds all previous expectations.
There is no direct comparison between the new strategy, which outlines plans for the years until 2011, and the previous one for 2005-2010, for the following reasons:
1. The figures published 2 years ago took the impact of future acquisitions into account, whereas the new plan is strictly about organic growth prospects.
2. The time frames of the two plans are not identical (one ends in 2010, the other in 2011).
However, analysts speculate that MOL has significantly raised its expectations for organic EBIDTA growth. Two years ago the company projected USD 2 billion EBDITA for 2010 without new acquisitions, whose financial impact was estimated at a further USD 1.5 billion. On the other hand, the new strategy targets USD 2.9 billion for 2011 solely from organic growth.
Although the management has not given any reasons for the much improved outlook, expectations for the external industry environment in the coming years was certainly a major factor. In the new forecast, MOL assumed that the 2006 petroleum industry environment would remain unchanged until 2011 - an industry environment far better from MOL's point of view than its situation in 2005, which formed the basis for future projections in the previous strategy.
The table below is a summary of external factors that feature in the 2005 and 2007 strategies. For the latter, we have used 2006 average figures, just like MOL did according to the release. The data show that the management has significantly raised expectations for oil prices, refiner margin and Brent/Ural spread over the next few years, while leaving projected margins in the chemical industry unchanged. As regards USD/HUF rates, MOL has used a slightly less favorable rate in the latest strategy than in 2005.
An overview of the region's leading oil companies shows that the price of oil is the only factor for which MOL assumes a much higher value than its industry peers; even higher than Lotos's USD 56 estimate. While MOL's projected figures for refiner margins and the Brent/Ural spread are not conspicuously higher than those of its competitors, the former conservative estimates of the Hungarian oil company are now a thing of the past."
Source:
Portfolio Online Financial Journal
18.07.2007