* $1.5 bln capex expected in 2013, 2/3 in upstream -CEO
* Main focus of upstream will be Kurdistan region of Iraq
* MOL reports weaker than expected 4th-quarter profits
* Shares down 2.5 pct, in tune with wider Budapest market
(Adds CEO comments, analyst, updates share price)
BUDAPEST, Feb 26 Hungarian oil and gas group MOL
said it would invest about $1.5 billion in 2013,
focusing mostly on exploration and production, after profits
dropped partly due to a loss of Syrian output.
MOL, Hungary's largest company by revenue, reported a
lower-than-expected quarterly profit on Tuesday due in part to a
temporary withdrawal from Syrian operations and also to weak
demand for its refined oil products.
Profit fell in the fourth quarter to 7.7 billion forints
($34.6 million) from 67.5 billion in the third quarter but
compared with a loss of 29.1 billion in the last quarter of
Net profit excluding special items was 11.2 billion forints,
below analysts' median forecast for 44.35 billion in a survey by
business website portfolio.hu.
Chief Executive Jozsef Molnar acknowledged at a news
conference that the result was below expectations.
"The net result is the outcome of a crisis-burdened year,
which remains below the value investors typically expect in this
business," Molnar said.
He pinned most of the blame on discontinued operations in
Syria, saying that without that change, the company's EBITDA
(earnings before interest, tax, depreciation and amortisation)
would have expanded slightly.
MOL's Croatian unit INA suspended activities in
Syria in February 2012, and MOL's average hydrocarbon output
dropped to 114,200 barrels per day (bpd) of oil equivalent in
the fourth quarter from 143,400 bpd in the same period of 2011.
Its revenue totalled 5.52 trillion forints in 2012, up 3
percent from 5.34 trillion in 2011.
Even with the fall in earnings, MOL strengthened its balance
"Our indebtedness in 2012 was the lowest in five years at
24.8 percent," Molnar said. "Our first dollar-denominated bond
issue (in September) lengthened the average maturity of our loan
portfolio. We increased our financial flexibility despite the
lost production in Syria."
KURDISTAN, THE EXCITING PART
Nearly two-thirds of MOL's total capital spending of about
$1.5 billion this year will go into the upstream business, he
The main focus of upstream activity will be in the Kurdistan
region of Iraq, where MOL expects to deliver to the market the
first barrels of oil after years of exploration. Its investments
will continue in Kurdistan, to the tune of $200 million in 2013.
Meanwhile, domestic demand has slumped along with Hungary's
"Hungarian regulated revenues are likely to decline in 2013,
and taxes and other government intervention always represent a
threat," analysts at Wood & Company said in a note.
"This is probably offset by the recent further success in
the Kurdistan region of Iraq, which remains the only exciting
part of MOL's operations for now. We remain neutral (HOLD) on
As for its downstream business, an expected $250 million in
benefits from a long-standing restructuring programme will be
realised in 2013, Molnar said, partly through increased revenue
and partly through reduced costs.
Refining, marketing and other downstream operations will get
31 percent of the planned investment as MOL continues to
overhaul its refineries.
In 2014 a further $100 million to $150 million in cost
savings can be expected, according to the company presentation.
Molnar said the company reckoned with oil prices at around
$110 per barrel on average this year, give or take 10 percent.
MOL's share fell 2.5 percent by 1353 GMT to 17,050 forints,
about the same as the wider market.
($1 = 222.5246 Hungarian forints)
(Reporting by Krisztina Than/Marton Dunai; Editing by Jane