32.4 C
Belgrade
Supported byspot_img
spot_img

Hungary oil company MOL plans to reduce investments abroad, focus on assets closer to home

Member of Europium Groupspot_img
Supported byspot_img

MOL Group CEO, Mr. Zsolt Hernádi is on and off the Interpol wanted list. Hungary’s courts willingly cleared him of any wrongdoing, but the stubborn Croatian authorities still accuse him of bribery. Hungariy’s handling of his corruption probe is disturbing, institutionalized legal and financial corruption in Budapest is rampant.

A couple of months ago the Hungarian oil firm MOL Group made the surprise announcement that its executive vice-president of exploration and production, Alex Dodds, was quitting. Mr. Dodds helped to mastermind MOL’s “brilliant strategy” to build interests in Kurdistan and the UK North Sea region

Years ago Mr. Dodds’ name appeared in British tabloids when he has sustained head injuries after falling on the steps of a jet at Vnukovo airport in Moscow. They reported that the seasoned ExxonMobil veteran had been drinking large quantities of Beluga vodka on a privately chartered flight.

Supported by

While with MOL the jolly Mr. Dodds has spent cash freely. He forked out over 400 million dollars in 2013 in the North Sea region to buy stakes in several oil fields. MOL spent another 130 million to buy part of Premier Oil and some other smaller assets. MOL was also successful in the UK offshore licensing round, being awarded four blocks.

Sounds impressive? There is only one problem – oil business is practically dead at the North Sea region. Plunging oil prices and high operating costs are hampering the business and analysts question the viability of North Sea oil. MOL was forced to book a writedown on North Sea assets in their recent quarterly report.

MOL also ran into problems in Kurdistan. They started “minimizing investment” in the Akri-Bijeel block, citing “complex geology and uncertainty.” In other words the wells are dry and they don’t have oil to make it profitable.

Earlier Mr. Dodds had been very optimistic about Akri-Bijeel: “MOL is pleased to announce commerciality on the Akri-Bijeel block after recent successful long term tests in our Bakrman discovery.” Things turned out differently, MOL has lost a good chunk of cash at the Akri-Bijeel adventure.

Buying assets when oil prices are freefalling could be dangerous to your company’s financial health. Not surprisingly MOL reported $1.6 billion loss in the last quarter due to writedowns. (Yes, that is a “b”, billion.)

There is another problem. MOL Group CEO, Mr. Zsolt Hernádi is on and off the Interpol wanted list. Hungary’s courts willingly cleared him of any wrongdoing, but the stubborn Croatian authorities still accuse him of bribery. Hungariy’s handling of his corruption probe is disturbing, institutionalized legal and financial corruption in Budapest is rampant.

MOL’s stock price has dropped in the last 5 years. It is around 14 thousand Ft per share now down from the 2010 high of over 25 thousand Ft. MOL is partially owned by the Hungarian State which sunk pensioner’s funds into the company. Half of that investment is gone.

Mr. Dodds abrupt resignation is a serious warning. Although he cited undisclosed personal reasons, I have a feeling that he might have seen the writing on the wall and wanted to leave the sinking (at least damaged) ship.

MOL plans to reduce investments abroad and instead focus on assets closer to home in order to ride out the drop in oil prices. Berislav Gaso, the head of the upstream division at MOL, told recently to Bloomberg. In the last 16 months, about 60 oil companies have filed for bankruptcy as oil prices dropped, and that figure is expected to double in the coming months. As much as a third of the oil and gas industry in the US could disappear as a result of the downturn.

MOL continues to issue overly optimistic statements, although CEO Hernádi added, “the dramatically changed environment forced us to take some painful yet necessary decisions.” I have a feeling this is just the beginning. Expect more pain, oil prices won’t recover in the near future and MOL is badly mismanaged, concludes the writer György Lázár for http://hungarianfreepress.com/.

Investors should tighten their seatbelts, it will be a bumpy ride!

Supported byElevatePR Digital

Related News

Ukraine’s strategic importance in global critical raw material supply chains amid geopolitical dynamics

Ukraine's role in global supply chains for critical raw materials is increasingly pivotal amidst ongoing geopolitical challenges. These include the Russian invasion of Ukraine,...

Nornickel in talks with China Copper for copper smelting venture in China

Russian mining giant Nornickel is reportedly in discussions with China Copper to establish a smelting facility in China. This joint venture aims to relocate...

Pan Asia Metals secures option agreement for RK Lithium Prospect in Thailand

Pan Asia Metals Limited has taken a significant step forward by securing an exclusive option agreement for the RK Lithium Prospect in Thailand. This...

Critical Metals partners with Obeikan Group to build lithium hydroxide plant in Saudi Arabia

Mining company Critical Metals has finalized a joint venture (JV) agreement with the Obeikan Group to establish a lithium hydroxide processing plant in Saudi...
Supported by
Supported by
Supported by
error: Content is protected !!