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23/04/2024
Energy NewsUncategorized

Oil and gas company MOL cuts CAPEX, focus on projects in Croatia, Russia, Pakistan

Field development will focus on Hungary and Croatia — projects that MOL said “are robust even at $30/b” — but will also continue in Russia’s Baitugan and Pakistan’s TAL blocks, both of which MOL described as low marginal cost.

Hungarian oil and gas company MOL is lowering its 2016 capex target to a maximum $1.3 billion, it said Wednesday, with deep cuts in exploration spending as it focuses on projects that are viable in a low oil-price environment.

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MOL’s 2016 capex target is down 13% from a previously planned cap of $1.5 billion and actual 2015 spending of $1.56 billion.

Within the total, organic upstream capex is now foreseen at just $500 million-$600 million, down from more than $800 million in earlier plans and from actual 2015 spending of $830 million (of which $711 million was organic)……………………

MOL is targeting average hydrocarbon production of 105,000-110,000 b/d of oil equivalent in both 2016 and 2017 — a 5,000 boe/d cut from earlier plans for 2016 and 10,000 boe/d lower than what was originally planned for 2017. Production in 2018 is foreseen at 110,000-115,000 boe/d.

Within upstream capex, exploration spending will be cut by more than half, to now make up just 20% of all upstream capex. Upstream operating expenditure will also be cut by as much as $100 million, or 5%-10% across the board.

“That’s a response to the low oil price environment, because MOL’s ultimate objective is to achieve a self-funding portfolio at today’s oil prices of $35,” upstream chief operating officer Berislav Gaso said in an internal interview released by the company.

UK North Sea fields acquired in recent years will take up about one third of planned upstream capex; while Hungary and Croatia, MOL’s top two producing regions, will account for 24% and 18%, respectively of upstream capex, the company said.

By contrast, capex will be minimal in the Kurdistan region of Iraq — where MOL holds a 20% non-operated interest in the Shaikan block — as operator Gulf Keystone is holding back spending until payment issues for crude oil sales have been sorted out.

Spending in Kazakhstan will also be modest as MOL said it is currently negotiating an exit from the minority-owned North Karpovsky block after two dry wells.

What little MOL plans to spend on exploration will be devoted to Pakistan, recently entered offshore assets in Norway, and near-field exploration in Hungary and Croatia.

Field development will focus on Hungary and Croatia — projects that MOL said “are robust even at $30/b” — but will also continue in Russia’s Baitugan and Pakistan’s TAL blocks, both of which MOL described as low marginal cost.

MOL is targeting average hydrocarbon production of 105,000-110,000 b/d of oil equivalent in both 2016 and 2017 — a 5,000 boe/d cut from earlier plans for 2016 and 10,000 boe/d lower than what was originally planned for 2017. Production in 2018 is foreseen at 110,000-115,000 boe/d.

“We want to focus on value rather than volumetric growth; it’s the dollars that count, not only the barrels,” Gaso was quoted saying. “All the investments that we make in volume growth organically or inorganically have to make sense at today’s oil prices.”

Within 2016 production, crude output is expected to rise from 39% of the total last year to 43%, whereas natural gas output is seen falling to 50% from 55%. By region, strong growth in Croatia and the UK and stable output in Hungary could be slightly offset by lower output in Russia, MOL said.

Q4 UPSTREAM OUTPUT RISES TO 108,300 BOE/D

In the fourth quarter of 2015, MOL’s hydrocarbon production WAS 108,300 boe/d, up 4.6% year on year. Full-year production was 103,900 boe/d, up 6.6% from 2014 but just short of MOL’s 105,000 boe/d target.

Q4 output growth was led by oil, up 24% year on year thanks to newly developed fields in the UK, Iraqi Kurdistan and Croatia. Natural gas output, on the other hand, fell 2.3%, led by a 6.2% drop in production at mature Hungarian fields.

Average hydrocarbon prices realized by MOL fell 34% year on year to $35/boe in Q4, the combination of a 38% drop in average realized oil and condensate prices to $39.20/boe and a 31% decrease in average realized natural gas prices to $30.50/boe. MOL said it expects oil prices in the $35-$50/b range in 2016.

MOL’s per-unit production costs (excluding depreciation) averaged $7.30/boe in Q4, the same as in Q3 but down from $8.90/boe a year earlier.

MOL booked significant asset impairments in Q4, including Forint 131 billion ($461 million) on the abandoned Akri-Bijeel block in Iraqi Kurdistan; and Forint 373 billion on other assets, mostly in the UK and Croatia, as falling oil prices reduced the valuation of these projects.

DOWNSTREAM: THROUGHPUT UP 5.8% ON YEAR

Downstream, MOL’s refinery throughput was 4.76 million mt in Q4, up 5.8% year on year as a result of rising motor fuel demand. The share of gasoline and diesel within total throughput were largely unchanged compared to a year earlier, at a respective 18.4% and 45.4% in the fourth quarter.

MOL’s group Q4 refinery margin was $4.9/b (including a combined $5.90/b at its flagship Danube and Bratislava refineries), rising slightly year on year but down by some $2 from Q3. MOL said it expects margins on average to remain in the $4-$5/b range in 2016.

MOL lost some market share in Hungary, Slovakia, and Croatia last year amid strong price competition, but downstream sales overall were lifted by newly expanded retail networks in Romania and the Czech Republic, the company said.

source; platts.com

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