Hernádi Zsolt Elnök- Vezérigazgató, MOL Group From a national player to an integrated...
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Hernádi ZsoltElnök- Vezérigazgató, MOL Group
From a national player to an integrated international company
Keeping up with the new environmental challenges continuously
Heti Válasz- Figyelő konferencia
2008.november 26.
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Agenda
► Journey so far, the main drivers
► How could we achieve our goals?
► The way forward
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Starting point: state owned – national oil company
Main characteristics:
Inward lookingEngineering drivenLack of business mentalityUnclear investment criteria: financial, political, securityManagement instabilityInternal focusBUT: good technical and operational knowledge base
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Privatization and regionalization
Facing new challenges, new business approach…4 psychological barriers:► Cross the border► Venture out from the region► Venture out from the conventional oil business► Step out form conventional corporate models
► State control is not a solution, it is a problem► BUT: a Hungarian national firm is not viable in a global market
Access to capital Project management HR
► The choice: linger in state ownership; sell the assets to a multi or build a Hungary based multinational
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Growth beyond regional borders
Becoming a regional market leader
Stabilization
Preparations for privatization
MOL history: Within 15 years MOL became from a state owned socialist corporation in international arena acknowledged player of the energy sector
State property
0
1991 1995 1999 2005 2010
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MOL GroupMOL Group
Cash Cow Step out of core regions
Step out of core
activities
Step out of the existing business
culture, structures► generate cash
► return excess cash to shareholders
► step out of core regions in DS&US
► build up new international capabilities
► enter new businesses even unrelated to oil & gas with or without partners
► find appropriate partner to invest jointly and to prevent from unfriendly takeover
What were the drivers? The way forward…?
Need to be increasingly innovative in Need to be increasingly innovative in transaction structures and corporate transaction structures and corporate
governance modelsgovernance models
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MOL first mover in regional consolidation: acquisitions and partnerships
2000 2001 20032002 2004 2005
Exploration rights in
Oman
Acquisition of
100% in Surgut-7
Acquisition of 100% in
BaiTex
Acquisition of 100% in
Matjushkinskaya
Acquisition of 100%
Tifon
2006 2007
Sale of Natural
Gas Business
Acquisition of 67% in
Energopetrol (with
INA)
Exploration rights in Pakistan
Increasing influence in
TVK to 94.85%Acquisition of
100% IES
Acquisition of 40% interest in a new offshore
block in Cameroon
Production Sharing Contract with the
Kurdistan Regional Government
Acquisition of
36.2% of
Slovnaft
Gain control
over Slovnaft (stake 70.0%)
Acquisition of Shell
Romanian
Retail Sites
Acquisition of
25.0% in INA
98.4% stake in Slovnaft
through public offer
Acquisition of
Austrian Roth
company
Closing of
Shell Romani
aacquisiti
on
Acquisition of 32.9% of
TVK
Gain control
over TVK (stake 34.5%)
ZMB JV signed
Acquisition of Austrian
storage facility
Acquisition of 22.5% stake in Kazakh
exploration block
(Federovsky)
Increasing stake to 27.5% in Kazakh
Federovsky Block
Joint-venture agreement with
CEZ
2008
Strategic co-operation
with Oman Oil Company
(OOC)
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Key drivers
►Management with outstanding track record in operational integration and efficiency improvement
►Technology leadership: further investments to stay ahead of the pack
► Good timing of investment decisions
►High quality asset base
►Opportunity to purchase heavier, sour crude raw material
►High refinery complexity provides outstanding product slate
►Significant market position supported by complex logistics in a ‘landlocked’ environment
►Supply chain optimization along the whole value chain (refineries, petchem, retail)
Crucial factor: state of the art asset base
8
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12
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Ranking Refinery NCM in 2007 in USD/bbl Country Owner1 Duna 11.2 Hungary MOL2 Bratislava 10.8 Slovak Republic MOL3 Schwedt 10.5 Germany BP/ENI/Shell/Total/PV4 Leuna (Mider) 10.3 Germany Total5 Porvoo 10.2 Finland Neste Oil6 Puertollano 10.0 Spain Repsol YPF7 Plock 9.8 Poland PKN Orlen S.A.8 Omsk 9.6 Russia Gazprom9 Pernis Shell 9.4 Netherlands Shell/Statoil
10 La Coruna 9.0 Spain Repsol YPF…46 Frassino, Mantova 5.2 Italy MOL
Net Cash Margin (USD/bbl) in Europe by companies, 2007*
Net Cash Margin (USD/bbl) in Europe by refineries, 2007*
*Source: WoodMackenzie – European and Russian refiners, Net Cash Margin in 2007
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To manage our transactions we have to develop our internal resources and be abreast of the environmental challenges as well
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Key factors of our success
At the same time keep up with the external environmental challenges continuously
These are to be developed permanently
Strong vi
sion
Strong vi
sion
Settlement of internal
resources
Settlement of internal
resources
Focusedapproach
Focusedapproach Management
capabilities
Management
capabilities
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The external environment has changed- Global economic downturn in reference to MOL
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► Falling oil price
► Macroeconomic change
► Weaker domestic demand: secondary effects on downstream sales margins
► Tightening liquidity
Instinctive first reaction of the typical companies: everybody is panic-stricken
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What can you do when alone in the dark?
Stopping – lawnmower method
Let’s reduce expenses at whatever cost
► Command & control
► Considering employees, development, innovation as cost-only factors
► Restricted future – development limited
► Sends a wrong message to employees: you are not a partner but an enemy
► Risk-taking related to market change
MOL’s answer is different…:transformative change!
Running– blind flying method
Let’s continue and increase investments
► Command & control
► Reduces amount of cash, the flexibility of the company
► Frightens investors
► Sends a wrong message to employees: no cost control
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MOL manages the crisis in an other way than the
others do
Changing the crisis into opportunity and chance
Sustainable governance & business development
=
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The crisis might be the best opportunity to implement structural reforms for long term sustainable growth
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We always want to win – so we do it another way
Leadership of the management
► Save your future – think long-term
► Be quick and flexible - follow and adapt to changes continuously
► Step out of the box – answer challenges proactively
► Be cooperate – involve, rely on and lead employees
► Reassure investors – keep strong fundamentals, reappraise opportunities & strategy
► Improve efficiency – reconsider expenses and investments including all type of possible return and added value (indirect-direct, short & long term)
Enhanced trust & credibility among all stakeholders
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Continuous growth to position MOL for
the post- crisis upswing
Cost efficiency and CAPEX-discipline
Sound, well-managed stress-resistant core business
Post-crisis business approach
Our aim is not the survival but to be among the best for the future as well
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Thank you for your attention!