Our Strategy

Thanks to successful regional developments, timely investments in quality assets as well as efficiency and synergy achievements, MOL Group accomplished its strategic objectives for 2005 well ahead of schedule.

Over a three-year period, MOL has become one of the best performing integrated energy companies in the world.

Our new five-year objective, reaching out to 2010, sets the strategies of maximising opportunities for growth arising in “New Europe” and providing superior shareholder return. Benefiting from our proven track record in conducting transactions and managing integration processes, MOL Group will continue international development and efficiency improvements, while keeping potential risks at acceptable levels.

Key financial targets*

• Group EBITDA  - over $US 3.5 billion
• Group ROACE**  - 15%
• Efficiency improvements - $US 285 million

*based on a set of marketplace assumptions
**NOPLAT based

MOL Group’s main strategic objectives

Growth

Growth targets have been developed bearing the maintenance of the balance of MOL Group business portfolio in mind. The company aims to increase upstream integration by tripling hydrocarbon production and the doubling of refined product sales. MOL plans to achieve these ambitious growth targets, set for the five-year period, by allocating $US 5.4 billion to organic CAPEX, and through the continued application of a disciplined approach to non-organic opportunities.

Efficiency

Our objective of achieving further operating efficiency improvements foresees the creation of annual total efficiency improvements of $US 285 million by 2010. This will involve significant cost savings and better utilisation of assets.

Financial flexibility

MOL intends to keep its gearing ratio below 30% and maintain its investment grade credit rating. The company plans to gradually increase the absolute level of dividend to reach the payout ratio of peers in the region (currently 30% of normalised earnings), by 2010.

Actions at business level

Upstream – Build a focused but robust core portfolio

In the Exploration & Production segment MOL plans to triple hydrocarbon production to 300,000 boe per day and triple total oil and gas reserves to 900 million boe by 2010, while keeping reserve replacement costs under $US 6.5 boe. In Central & Eastern European, the company aims to expand its exploration and production activities jointly with INA, and through new corporate acquisitions. In the international arena, MOL Group intends to develop a strong, focused portfolio by applying rigorous evaluation and portfolio management methods. Securing long-term reserve growth and maintaining the balance between exploration and development or production projects will require the strengthening of operations in existing core regions and in at least one new core region. In relation to this, the company intends to increase the contribution of the upstream segment to Group EBITDA to over 40%.

Downstream – Further develop the competitive quality refinery pool and an efficient retail network

In the Refining & Marketing segment, the main Group objective is to maintain quality leadership and extend it to new markets that offer high growth potential. The company therefore intends to invest in quality-related upgrades in core markets to improve product yields, and to take advantage of appropriate acquisition opportunities. We also aim to increase refined product sales to 500,000 barrels per day, and optimise the downstream value chain to maximise profits through promotion of the supply chain philosophy throughout the Group. For the retail segment, we plan to put in place an efficient network of 1,500 filling stations by 2010, within supply range of the refineries.

Petrochemical business – Leverage the past three years’ investments

In the Petrochemical segment, benefiting from its high quality asset base, competitive cost structure and favourable geographic position, MOL’s aim is to strengthen its traditional niche market position in West European markets, while developing its presence in the growing markets of Eastern Europe.

Gas transmission – Generate additional non-regulated transit income

In the Gas business, MOL's objective is to maintain its position in gas transmission, which provides not only stable returns but also opportunities for growth. Benefiting from its unique geographical location, the company intends to increase further its participation in the regional gas transit business.