MOL is planning to reduce investments and focus on assets closer to Hungary that can still generate cash after a plunge in oil prices, Bloomberg cited the head of the upstream division at Hungary’s largest refiner as saying.
MOL has expanded in Norway and the U.K. in the past two years to add low-risk areas to its portfolio, which stretches as far as Pakistan and Iraq. While the U.K.’s North Sea basin isn’t profitable with oil trading at $30 a barrel, there’s still "upside" in assets in Hungary and Croatia, Berislav Gaso, the chief operating officer in charge of the exploration and production division, said in an interview with Bloomberg in Budapest on Tuesday.
Controlling costs is more important at the moment than chasing production goals or acquisitions, he told Bloomberg.
"Our priorities for this year are focusing on what we have, extracting value from the assets,"said Gaso, who took over the division last September. "I like barrels but I like dollars even more and in a $30 environment it is all about dollars when you operate in upstream."
Hungary’s second-largest listed company by market value, which operates in 40 countries, is betting on lower spending as oil prices slumping to the lowest in more than a decade force industry players worldwide to rethink strategy to stay afloat. MOL will cut operating costs and will only invest in projects that can break even at an oil price of $30 a barrel, according to Gaso.
The company is intensifying production in Hungary and Croatia, which together account for close to 80 percent of the group’s overall output as "there’s still a lot of value to be extracted from these assets," Gaso said.
As a result, production in Hungary rose in the last three months of 2015 from the previous quarter and Croatian onshore oil production rose on an annual basis, he said.
Gaso declined to give specific output or investment targets before the financial report scheduled for Feb. 24.
Under MOL’s latest published guidance, production was to rise to as much as 115,000 barrels a day this year from an expected daily output of 105,000 barrels in 2015. MOL doesn’t have a shortlist of upstream assets it’s looking to sell and acquisitions are also not among the priorities for 2016, Gaso said.