Fitch revises MOLʼs outlook to stable; affirms ‘BBB-’ rating


Fitch Ratings has revised Hungarian oil and gas company MOLʼs outlook to stable from negative, while affirming its long-term issuer default rating (IDR) at ‘BBB-’, the ratings agency said yesterday, according to Hungarian news agency MTI.

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.


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