S&P affirms MOL 'BBB-' rating with stable outlook

Ratings

S&P Global Ratings on Tuesday affirmed Hungarian oil and gas company MOL's 'BBB-' rating with a stable outlook, according to a report by state news wire MTI.

S&P said that political risks MOL faces, in the form of a European Union embargo on Russian oil and a windfall tax on refiners introduced by the Hungarian government, are mitigated by "robust" cash flow boosted by high commodity prices.

The ratings agency noted that the EU embargo does not apply to pipeline deliveries to Hungary, for the moment, but said the timeframe of the exemption would play "an important role" in MOL's ability to utilize its capacity and maintain cash flow. If MOL needed to replace its Russian crude, "significant" infrastructure and asset investments might be necessary, it added.

The windfall tax on refiners could add HUF 250 billion to MOL's tax payment in 2022, S&P said.

In spite of those factors, S&P said MOL's profits stemming from the big Urals-Brent spread, its "business resilience and diversity" and "prudent balance sheet management" will limit the overall effect on credit metrics.

S&P could lower MOL's rating if an unexpected change in crude sourcing was to materially cut refinery output parallel with a fall in prices.

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