Fitch Ratings said the outlook change reflects its view that MOL should be able to maintain a conservative financial profile with leverage within the ratings agencyʼs guidelines, despite lower projected oil prices in 2016 and moderating refining margins.
Under the agencyʼs conservative assumptions MOLʼs net debt may increase in 2016, but its free cash flow (FCF) deficit is likely to be moderate and manageable, unlike that of many other integrated oil players. This is due to expected strong downstream performance, a fairly low share of higher-cost upstream assets in its portfolio and considerable capex reduction. Fitch said it expects MOL to generate positive post-dividend FCF in 2017-19.
Fitch Ratings said the outcome of the dispute between MOL and Croatia over the management rights in INA remains difficult to predict, with two arbitrations currently in progress. A negative outcome for MOL, including the loss of control over INA, cannot be excluded and would likely be credit-negative but manageable for MOL. Fitch said it treats this possibility as an event risk.
The agency said MOL demonstrates only limited exposure to the Hungarian economy as its two main profit drivers – crude oil prices and refining margins – are more affected by global factors. This allows Fitch to rate MOL above the Hungarian sovereign rating (BB+/Positive); however, MOLʼs foreign currency IDR is potentially capped by the countryʼs current Country Ceiling of ‘BBB’, they added.
Producing journalism that is worthy of the name is a costly business. For over 30 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.
