Hungarian oil and gas group MOL said on Friday that a sharp fall in crude prices was not expected to have a significant impact on the company’s profitability.
CEO György Mosonyi told Reuters that crack spreads remained stable and a stronger US dollar was favorable for MOL’s main business segments. “Despite the over 30% fall in the crude oil price, we do not expect material impact on MOL Group profitability,” Mosonyi said.
“MOL is a downstream-oriented company, where the crack spreads for diesel and gasoline remained stable or even improved,” he added. “As a consequence, fundamentals for the MOL Group didn’t change,” Mosonyi said. MOL more than quadrupled its net income in the Q2 mainly due to a favorable revaluation of its debt on forint strength and a strong performance in its oil business.
MOL’s reported net income was Ft 114.7 billion ($668.6 million) for the quarter, up from 26.9 billion in the Q2 of 2007. US crude fell to a seven-month low of $90.51 a barrel on Wednesday before recovering to around $100, while London Brent crude traded at $97.65 a barrel on Friday.
Analysts said the fall in the oil price, from levels above $140 per barrel in July, would have a negative impact on MOL’s upstream business, but the key for MOL was downstream, where diesel, or automotive gas oil, crack spreads were very strong and gasoline spreads also looked good.
This works in MOL’s favor as MOL’s product slate is geared towards diesel. “As for refineries, I agree that crack spreads are very strong,” said Péter Tordai, analyst at KBC Securities. He added that the stronger dollar also worked in MOL’s favor, and sales volumes in Hungary were strong despite sluggish economic growth. But Tordai said there was a risk that global crack spreads could narrow due to the impact of the ongoing financial market crisis on the real economy and demand. (Reuters)