S&P revises MOL outlook to positive

Ratings

Standard and Poorʼs on Friday said it revised its outlook on Hungarian oil and gas company MOL from stable to positive, Hungarian news agency MTI reported.

S&P affirmed its ʼBBʼ long-term corporate credit rating on MOL, as well as its ʼBBʼ issue ratings on MOLʼs senior unsecured debt instruments and the ʼBʼ issue ratings on the groupʼs junior subordinated debt.

"The positive outlook reflects our view that MOLʼs financial risk profile could strengthen over the next 18 months on the back of stronger performance than we currently expect in our base-case scenario," the ratings agency said.

S&P said it sees MOLʼs oil production increasing over the next year and a half, and it assumes oil prices will recover. The performance of MOLʼs downstream business could be supported by an efficiency improvement plan and the retail growth strategy the company is implementing, it added.

S&P revised its assessment of MOLʼs liquidity to "strong" from "adequate".

"The positive outlook reflects our view that strong downstream margins, increased oil production, and the absence of credit-dilutive acquisitions could support operating performance such that adjusted funds from operations (FFO) to debt improves toward 40% in 2016 and 2017," it said.

S&P said uncertainties around MOLʼs stake in Croatian peer INA, stemming from a row with the companyʼs other big shareholder, the Croatian state, pose a potential risk. But it added that the possible sale of the stake would not result in a revision of its assessment of MOLʼs "fair" business risk.

"We understand that MOL could consider selling its stake, although for MOL, negotiation and agreement is the preferred option. If it did sell its stake, the negative impact on its business risk profile could be neutralized by what MOL does with the proceeds," S&P said.

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