* MOL cuts midterm output projections in investor
* Lower output expected from Kurdistan region of
* Downstream hit by collapsing margins, lower sales volumes
* MOL says earlier 2018 target achievable, hinges on
(Adds MOL's comments)
By Krisztina Than
BUDAPEST, Feb 25 Hungarian oil group MOL
has cut its crude oil production forecasts mainly due
to lower expected output from its fields in the Kurdistan region
of Iraq, which had been seen as an important growth driver for
its upstream business.
Output was expected to fall to 91,000-96,000 barrels per day
(bpd) this year from 96,900 in the fourth quarter of last year,
before growing again in 2015, MOL said in an investor
presentation posted on its website on Tuesday.
Production will rise to 105,000-110,000 bpd in 2015 and peak
at about 125,000-135,000 by 2018, based on its current upstream
portfolio, MOL said.
That is way lower than a 170,000-180,000 bpd target set out
in an investor presentation in November 2013.
"Two drillings (in Kurdistan) were unsuccessful recently and
this led them to downgrade the field's potential," Concorde
analyst Attila Vago said.
MOL said in an emailed response to Reuters questions that
"depending on future acquisitions, it's possible to reach
170,000-180.000 barrels per day in 2018."
For the two blocks in the Kurdistan region of Iraq where MOL
has a stake, it had projected peak production at about 50,000
barrels per day by 2020, and now this has been cut to
20,000-25,000 barrels per day.
MOL said the earlier 50,000 barrels per day production level
was "an unrisked best estimate" at the beginning of its work
program and as such, had been subject of high uncertainty.
"Now we have more detailed information on resource
potentials following the final evaluation of our last two
exploration wells and appraisal wells, which led us to be more
conservative," MOL's communications department said.
"The (upstream) growth potential is significantly lower ...
and this is mainly due to Kurdistan," Erste equity analyst Tamas
"This is not good news as upstream has been the key story of
interest in MOL."
MOL has four refineries in central Europe and upstream
businesses in Hungary, Croatia, Russia, Iraqi Kurdistan,
Pakistan, Angola and elsewhere. It recently bought stakes in
North Sea offshore fields from Wintershall Norge AS, a unit of
Germany's BASF, for $375 million.
Its executive vice president for exploration and production
(E&P) has said that MOL planned to invest about $1 billion a
year to achieve growth in E&P, including bidding for licenses in
the North Sea.
Concorde's Vago said lower production in Russia and the sale
of MOL's 49-percent stake in upstream firm BaiTex LLC to Turkish
Petroleum Corporation also contributed to the
"This shows a more conservative approach to the current
(upstream) portfolio which is not positive," he said.
MOL also reported on Tuesday that net profit halved in the
fourth quarter due to a squeeze on gasoline margins as well as
big impairment charges related to its Croatian assets and the
shutdown of a refinery in Italy.
The company said its downstream result was hit by a sharp
drop in gasoline crack spreads, decreasing sales volumes and
one-off costs totalling 51 billion forints ($226 million).
MOL Chairman and CEO Zsolt Hernadi said in an earnings
statement that MOL would continue its downstream efficiency
programme in 2014 and would seek upstream growth opportunities.
MOL shares dropped 3.6 percent on Tuesday, underperforming
the broader Budapest market.
(Reporting by Krisztina Than; Editing by Louise Ireland)