Good morning, ladies and gentlemen, and welcome to MOL's Q4 2024 Results Conference Call. My name is Márton Teremi, Head of Investor Relations, and, as usual, we have a strong lineup of management for today's call: Dr. György Bacsa, Executive Vice President, Group Strategic Operations and Corporate Development. Mr. József Simola, Chief Financial Officer. Mr. Zsombor Márton, Executive Vice President of Upstream. Mr. Szabolcs Szabó, Senior Vice President of Downstream Value Chain Management. Mr. Péter Ratatics, Executive Vice President of Consumer Services. And Mr. Zsolt Pethő, Chief Operating Officer of Circular Economy Services. We continue to use Microsoft Teams as a platform to hold our conference call. The presentation can be downloaded from our website at molgroup.info, and we will be sharing the slides in Teams too.
After the presentation, we will move to a Q&A session where you will have the chance to ask questions by using the Raise Your Hand function on Teams. Please keep yourself muted throughout the call, except when asking a question. Before we start, I would like to draw your attention to the cautionary statement on slide number two. And now, let me hand over to Mr. György Bacsa, who will take us through the highlights of the fourth quarter.
Thank you, and good morning, everyone. Let me start with the highlights of the 2024, in light of our annual guidance. Please go to the slide of the guidance and the end results. I'm proud to present that we met practically all the aspects of our guidance. Meeting the guidance depended on two factors: the external environment and our internal performance. Let's take it separately. 2022 and 2023 were extraordinary. The global environment was set to normalize in 2024, and that's what happened exactly. Hydrocarbon prices moderated, crack spreads, and refinery margins retreated by 20%-30%. We also expected that the government taxes will be lower and will be more moderate level. We also expected that the economic growth will be weak in certain parts of Europe, especially Germany, and that, unfortunately, also affected Central and Eastern Europe.
We are going too close to recession since growth has been definitely slowing down in many of the industrial sectors. Regarding our internal performance, we are generally satisfied. We achieved our goals: high and growing production levels in upstream. We kept the profitability, and we kept the quantity, the production level above 90,000 bbl a day, and we achieved our guidance set between 92,000 bbl and 94,000 bbl, almost 94,000 bbl. Let me note that the extra barrels were mainly coming from our new exploration and development successes, especially in Hungary. We saw that we managed to secure the supply security as well. In downstream, we faced several turnarounds, heavy turnarounds, especially in the first half of the year. That's why we couldn't exactly meet our 12 million tons of targets, and that's why we lowered the guidance for 11.5 million tons and at the end, we ended up with 11.3 million tons.
Consumer services has been delivering a strong integration push, and the results are expected. The growth on the non-fuel part was extremely good. With regards to the safety ratio, we were successful, especially in the first half of the year. We introduced several actions. Unfortunately, the last quarter, the trend became a little bit more negative. So that's why I think we are satisfied with the 2024 results, but definitely we cannot lean back in terms of HSE targets and all other safety measures. Regarding the financial performance, our EBITDA is 2% higher, so more or less the same, but we put it in the guidance, so about $3 billion. The profit before tax reached $1.5 billion. It's $100 million lower than we expected or we thought that it would result. It is mainly due to the FX, so the not-so-favorable FX changes.
So that's why in US dollar terms, it's lower than, but only $100 million. On the CapEx, we delivered the usual performance, especially so this $1.7 billion, close to $1.7 billion, which was all our guidance. So if we move further, so let's focus on the last quarter. Regarding the last quarter results, the specific section, so the financial part and the business part, the business EVAP presentation, did include more details. MOL Group posted a clean CCS EBITDA of $682 million. It is 31% worse than the same level last year. There have been several effects that impacted our results last year positively. So, as I mentioned, this year, so 2024, was a year of normalization where we faced certain challenges, positive and negative external impacts.
But all in all, I would say that the integrated model worked, and we delivered the result, which is more in line on a normalized sustainable level of our performance. So if I don't go into the details segment by segment now, just mention that this was the main result or the main learning after the last quarter. And of course, in the last quarter, we also faced several one-off year-end effects as well that would result in only the Q4 results. Give some more details on the operational updates. So in the last quarter, we acquired our biggest single photovoltaic plant, which is adding to our renewable power generation portfolio and our energy mix, green energy mix significantly.
In our Upstream portfolio, we continued our Hungarian success, and with the Vecsés-3 well, so this is the third successful development in the Vecsés area, we added an additional 1,500 bbl of Hungarian crude oil production, and this is only the crude part. In the shallow grounds, we also managed several successes. Last, we made an acquisition in South Eastern Hungary, which is also adding up to this increased Hungarian production rate of MOL Group. Finally, we made a divestment from the synthetic rubber plant because we sold our stake to our partner ENEOS. This synthetic rubber plant, we continue to operate in our Tiszaújváros plant in Hungary, but I think as a logical step, we handed over and we sold to ENEOS our stake in this JV. Let me also give an update on the ESG and the HSE part.
As in the beginning, I mentioned, we considerably improved MOL safety ratio in 2024. It was measurable, especially with the TRIR, so Total Recordable Injury Rate figures. We are under the 1.3 tolerance rate, and we will close or under our strategic 1.1 long-term strategic target. This is due to active measures, which were specialized to our operations, especially in downstream, to address the safety risk and in the services to give a more safer work process. However, we see and we saw a favorable trend in 2024, as I mentioned also in the first part of my presentation. To make it sustainable, we need more effort since in the last quarter and the first quarter of this year, we saw, unfortunately, unfavorable trends. There was an improvement, but there is still a long road to achieve a sustainable strategic level target of the Total Recordable Injury Rate.
As the last part of my presentation, we would like to give you some guidance for 2025. We foresee several headwinds on the external markets, but we are confident with regards to our internal performance and a mildly more optimistic regarding 2025 than 2024. With the financial targets, we continue to believe that our sustainable, normalized operational clean CCS EBITDA will be north of $3 billion, so we will again exceed the $3 billion EBITDA performance. Out of that, we think that the $1.6 billion profit before tax is also deliverable. In the upstream segment, we still believe that between 92,000 and 94,000 bbl a day, and in the crude processing, 12 million ton. The CapEx level, we continue to set at this $1.7 billion level.
The net debt to EBITDA in such cases will stay under the very comfortable one-times multiplier, and the HSE TRIR rate. We continue to set the 1.3 target that we can deliver and we can guide you. So thank you for your patience, and now let me give the floor to Mr. József Simola.
Good morning, ladies and gentlemen. Let me start with the financial review on page nine. As usual, you will receive detailed coverage for the four major segments from the business leaders. As for the gas midstream business, quarterly EBITDA stood at $52 million, exactly the same number as a year ago, and a slight decrease from the previous quarter. The slight decrease is due to various changes, one of them being a decrease in certain regulated prices. With this, the yearly EBITDA is $244 million, a slight decrease on a year-on-year basis, but still a very strong simplified free cash flow generation in around $200 million from the gas business. As for the outlook, CapEx, we expect to be in the same range as in the previous years. As for the EBITDA, we expect some decrease for the next year.
But having said this, it's clear that the results of this segment are very strongly influenced from the overall situation in Ukraine. As for the CNO line, -$20 million, including an above $20 million plus contribution from the intersegment. This is due to increasing gas and crude prices and the decrease of intersegment relevant inventories in Q4. The C&O expense is -$41 million, which is pretty much the same number for the CNO as a year ago, which was -$38 million. Please note, as it noted in the footnote, that the Q4 number last year still included a significant positive contribution from the circular economy segment. Let's go to page 10, CapEx overview. With above $1.3 billion spending, very much in line with our forecast and our usual slight conservative underspending in this segment. That's for the organic CapEx.
Inorganic CapEx was for the whole year in total $69 million, and from this, $52 million was for a smaller upstream acquisition in Hungary. So let's go to the below EBITDA items on page 11. Here, I only like to point out that no special items, EBITDA relevant special items for this year. And then let's see on page 12 some more details. For the last quarter, CCS loss of $89 million, as there was barely a $2 decrease in the closing Brent price. That's not the reason for this. This is the usual Q4 CO2 adjustment impact what we see in the numbers, with a total contribution of about -$70 million. As discussed last year, in the CCS methodology, we distribute the costs of the CO2 quotas throughout the year.
In the IFRS, we usually buy the missing quotas, which are missing above the free quotas in the last quarter and book it in the last quarter. This above minus EUR 70 million represents this adjustment for closing this position for the year. The DD&A for the year on a year-on-year basis is $1.3 billion-$1.4 billion, pretty much moving in the same range, while a significant decrease for Q4 on a year-on-year basis. The reason for this is the impact of two different effects. One of them is that in last year in Q4, we booked higher impairments in the year-end housekeeping activity, and that's why the decrease on a quarterly basis, while we have some decrease in the overall asset base. These two counterbalancing effects result in a roughly flat DD&A number for the year.
Total financial expense of $601 million negative number, that's actually the major driver, is the weakening of the forint compared to the euro and to the dollar in the last quarter, and if you look at the yearly number, we see the same impact. The financial loss for the year is minus $181 million compared to a financial gain of plus $34 million in the previous year, so please keep in mind that that's above $200 million difference, which then shows up in the below EBITDA numbers on a year-on-year comparison and also in the profit before tax. Income from associates, $23 million, very much in the regular range of contribution from the associates, and as usual, Ferrol and other companies contributing to this number. Income tax expense for the whole year in total $397 million, around $50 million increase on a year-on-year basis.
If you look at the details, the local and the industry tax very much remained the same. We see a significant increase in the deferred taxes due to the increase of various provisions, and we see on the other side a significant decrease on the corporate income tax, around 40% on a year-on-year basis. Keep in mind that the largest driver for this is actually a significant decrease in the profit before tax line on the company, coming from operational results, but also from the aforementioned negative FX number. Let's go to page 13, the operating cash flow. Essentially, no kind of in the Q4, we covered the DD&A, no other major movements here. All in all, in the working capital, a very small $27 million build-up in the last quarter, but overall flat-ish in the last three quarters.
And with this, an operating cash flow of $2.2 billion, significantly above the organic CapEx of $1.6 billion. Let's go to the last slide of the financial review balance sheet. Maybe to start with the change in the net debt, I think we continue the trend what we saw in the previous quarter. And essentially, we ended up with a year-on-year basis, a slightly higher net debt. But if you actually take out the dividend payment of more than $500 million, we see actually from the operations a significant reduction in the net debt, which was counterbalanced with the payment of the dividend. And in terms of the increase in the net debt to EBITDA, we see a slightly higher increase than in the net debt.
That's, of course, due to the decreasing EBITDA, but I think overall still very much in our financial comfort zone as in the previous years, and with this, I'd like to hand over to Szabolcs to cover the downstream results.
Good morning, everyone. MOL downstream delivered a clean CCS EBITDA of $267 million in the fourth quarter, which is bringing the full year EBITDA to $1.267 billion, some $60 million below last year's full year result. It's important to note that it's been a busy year with intensive turnaround activities executed both in major refining and pet chem assets of ours. And of course, we do it always because it's necessary and such programs contribute to our long-term performance, but in the short run, they put pressure on cash flows and EBITDA and CapEx numbers.
At the same time, we also see what has already been highlighted, that some headwinds on the macro side are strengthening, so the extraordinary times are seemingly gone. We see a normalization of margins both in refining and pet chem, and also the motor fuel market is showing a decrease on year-on-year in the fourth quarter in the region, and especially this we see in Croatia and Hungary.
If we look at the refining a little bit, the turnaround ended in September, so in Q4, we could go with full throttle regarding production, and that delivered actually an outstanding CCS EBITDA of $314 million. On the other hand, of course, it's lower than the fourth quarter of 2023 due to the normalization.
On the pet chem side, that we already mentioned in November, utilization was impacted by turnarounds in Bratislava, and generally, we see that the European pet chem markets are still very much in the bottom of the cycle, characterized by an environment of low demand, high feedstock and gas prices, and an extremely depressed product price environment, and that, of course, is keeping the EBITDA contribution negative, though significantly less negative than it was in the previous period.
On the next slide, we see the overview of the external environment. The refining margins continued downward. In Q1, it was still extraordinary, and then it started sliding down, and in Q3 and Q4, we were basically around historical levels. This is, of course, expecting the normalization, as we said. On the other hand, January figures suggest that these margins shall remain more or less on that level for this year as well, so this normalized environment we expect, and this is how we plan. Regarding pet chem, the variable margin returned to the sub-200 mark, as you can see in Q4, after being above 200 in Q1, Q3.
We see, as I said, the pet chem environment fairly depressed and no or hardly any signs of improvement that we also see in the January numbers. If we look at the main drivers of the quarter-on-quarter performance, then you can see that the fall on the refinery margins had a big effect of $136 million, while on the other hand, the pet chem was, even though negative, but QoQ was positive with $11 million. Volumes, due to going on full throttle, had a positive contribution of $60+ million, and we see the other category as fairly significant due to mostly higher maintenance costs in Q4 and also some CO2-related expenses.
If you look at the full year results, the signs there are in most of the extent are similar. The margin normalization on refining is apparent and visible. On the other hand, the pet chem part was markedly positive on a year-on-year base, and the other category on yearly level is rather impacted by the decrease in the tax rate of the revenue-based extra tax in 2024. With that, I would hand over to Péter Ratatics to go on with the consumer services.
Thank you very much, Szabolcs, and good morning to everyone from my side as well. Consumer services EBITDA in the fourth quarter of 2024 amounted to $156 million, making an increase of 8% year-on-year. Maybe next time, I should correct the slides and not really focus on the third quarter to fourth quarter, but rather to the fourth quarter to fourth quarter or year-on-year comparison, because obviously, we have a significant seasonality always in our numbers, especially during the summer season, where some of our countries are extremely exposed to the tourism and also the summer kind of consumptions.
But all in all, the fourth quarter compared to the last year's same period was a strong over-the-year performance. Looking at the full year, the dynamics were similar with 7% growth. And also, let me note here that despite the continuation of the Fresh Corner rollout concept throughout all the countries where we are present, and also we have now an increased service station numbers after the acquisitions and also in combination with the remedy stations.
But all in all, our service stations are higher, but still, we are able to manage the CapEx spending on a stable level between $150 million-$180 million. And as a result of this, the consumer services simplified free cash flow contribution to the Group's has increased by 14%, and we finished the year with $569 million free cash flow contribution. As the chart on the right side suggests, the main driver of the growth in the fourth quarter is the expansion in the non-fuel part of the businesses.
The fuel sales also contributed positive results, but only added $2 million in this quarter. And actually, this quarter, it was very kind of calm in terms of the taxation or other technical factors contribution, and also the FX movements were minor. But also, I have to emphasize here that the OpEx was quite stable on a year-on-year comparison, despite the strong inflation and wage pressure, which is visible in all of our countries. And that's also a result of our strong focus on the efficiency and optimization efforts. Let me note that we achieved this organic growth despite the size of the network decreasing by 4%.
Again, as a part of the LOTOS acquisition in Poland, the swap lag of this acquisition, the handover of the Hungarian stations to Orlen, or some of the, obviously, some of the parts of the Hungarian service stations just realized in the first quarter of this year, and also in Slovenia, as a final result of the competition clearance, we handed over a few stations to Shell, but also realized this quarter, I mean, the first quarter of last year, so all in all, that gave us this 4% decrease on the service station side.
However, I think the loyalty application, the loyalty platform what we have, and also the brand power showed the strength and kept the majority of our customers in our operation. On this slide, actually, you can see that the volumes decreased by 1% year-on-year, year-over-year. Actually, more precisely, it was just 0.56%, so I would say it's practically stable. However, the throughput per site improved by 3%, and that's also a very positive result that the optimization of the tail end of the network was very efficient, and per site, the operation or the profitability is increased.
This is in line with the aforementioned 4% decrease in the size of the network, and this suggests that we manage well the decrease of the network, and the strength of the MOL brand assignment, as I have already mentioned, gave us the possibility to keep the attrition on a very low level. And here, just one additional note, since the fourth quarter report is practically also the full year report, so in 2024, all in all, we saw more than 8 billion L fuel volumes over on our network.
The first time in our history, we surpassed the 8 billion L, and that's altogether 124 million L more than it was in 2023, which is 1.6% higher than a year before. Now we can turn the page to the non-fuel part. I've already mentioned that this is a very positive, or this suggests a very positive picture. The non-fuel turnover and also the margin evolved in the fourth quarter. There was a visible continuation of the positive dynamics in the non-fuel business, and the non-fuel turnover grew by 4%, while margin rose by 11% year-on-year. The non-fuel share of margin also increased year-on-year to 36.1%, which is 2.5 % points higher than a year ago.
Although the macro and some other factors are starting to make an impact on the fuel sales, especially at the last quarter, we see from various indicators that the customers' consumption and also their kind of purchasing habit focusing more or they are spending more with us on the dining and shopping possibilities. So I think the Fresh Corner operation and also the very strong non-fuel focus from the management side started to pay off. So with that, I thank you for your attention, and let me pass the floor to Zsombor.
Thank you, Peter. Good morning, ladies and gentlemen. So on Upstream, the fourth quarter was very similar to the third quarter in terms of EBITDA generation, arriving to $276 million, as well as the free cash flow generation. And the reasons are the rock-solid production figures we had throughout the year, and quarter-on-quarter Brent price decreased, but TTF improved, and also the ACG cargo effect this quarter helped.
So overall, a slightly positive impact on Q4. With regards to the full year, just like in 2023, again, we brought the EBITDA above $1 billion. In 2024, almost $1.1 billion, and that's 7% more than in 2023. Out of this, we are nearing $800 million with the simplified free cash flow, and that's a visible 35% raise compared to 2023. We managed to increase production to 93.800 bbl of oil equivalent per day on average, to a three-year record high production level, meaning we surpassed the 90,000 guidance set at the beginning of last year, and almost we reached the top of the updated guidance of the 90,000 to 94,000 bbl per day.
We also met the production quotas in Hungary, so we expect to avoid any extra royalty payment in the country. So extraordinary internal performance of the teams, given the very strong headwinds, mature assets without significant inorganic addition, volatile macro, and the diverse operational challenges throughout the portfolio. If we move to the unit free cash flow, it was exactly the same amount quarter-on-quarter, $24. This brought fourth quarter simplified free cash flow to roughly $200 million in total, and altogether $792 million for the full year.
Regarding the unit free cash flow, it came and arrived at $25, well above our strategic guidance of $20, and looking at the annual development, it is visible that the extra mining royalty no longer applied in 2024 due to our excellent production performance, enabling the increase in the free cash flow realization. Looking at the changes quarter-on-quarter, let me briefly discuss the technical factors that impacted our EBITDA results, so once again, the ACG cargo effect is distorting underlying trends.
As opposed to the third quarter, when there was a negative impact on the prices and volumes, now it's the other way around, then there were three deliveries instead of the usual two, and you might recall that in Q3, there was only one, so this had, in the quarter, a slightly positive impact on both volumes and realized prices. There was another impact resulting from the reclassification of CapEx as OpEx. We found a total of $13 million worth of capital expenses throughout 2024 that were reclassified in Q4, and that distorts quarterly comparisons to the negative.
Regarding the other category, the main driver was the year-end revision of field abandonment provisions that also weighed on EBITDA. The drivers were quite similar in the year-on-year comparison, so the only item that had a significant effect that I would highlight is the extra royalty reversal that was affecting our results in the fourth quarter of 2023 positively at that time with the magnitude of $63 million. So we move into the production slide, which is self-explanatory. I believe this production level showed the real performance of the division. The last quarter came in a rather strong historical perspective as well, nearing 95,000 barrels of oil equivalent per day.
The average for the full year, again, close to 94, which is well above our initial guidance, and I'm proud that we were, throughout the portfolio, be able to achieve that on a mostly mature asset base. And if you know that how big work is that to get value out of mature portfolio, how much hard work, agility, lots of production optimization efforts, and sharp focus on exploration and tying of the wells as soon as possible.
So looking at the fourth quarter developments on individual assets, production in Hungary kept on growing further, which is the most energetic growth in the oil can be processed locally in the Danube refinery with little logistic costs. And again, the Vecsés-3 , the third well, is also adding 600 bbl to the production, and we still have further exploration activity in the country. We also had a milestone with Vecsés at the end of last year, and the three wells combined now in the last two years producing over already 1 million bbl oil production. On the international arena, lots of actions and also challenges were taking place in Q4, and let me just highlight some of them.
In Croatia, the Obradovci- 5 exploration wells gas discovery was also confirmed. In Pakistan, the production is constrained from time to time due to logistic bottlenecks, as the TSO transmission system operator is sometimes restricting domestic production, and we suffered curtailment. At the same time, the production ramp-up in Kazakhstan continued in Q4, and two additional wells put into production, now totaling five wells producing.
In Azerbaijan, the third well in the Azeri Central East new offshore platform also started production in November with the expected and planned production rates, helping to contribute the stabilization of the ACG production levels in the short and midterm. And production in Shaikan in the Kurdistan region of Iraq has been impacted by maintenance shutdown in the last quarter. Otherwise, we continue production for domestic sales currently. In the Pearl, yearly production came in higher due to higher customer demands and delivery of the operation.
So going forward, we retain our production guidance for 2025 and expect the annual production to average between 92 and 94 oil equivalent per day. So arriving to the last slide regarding the evolution of unit OpEx and CapEx. So let me start with the OpEx and first refer back to my earlier comments on the year-end CapEx OpEx reclassification.
Some expenses were booked as CapEx but have been now reclassified as OpEx in Q4 for the full year. If this impact is distributed along Q1 and Q4, so the proforma unit OpEx remains still below $7 per barrel for the full year. Ultimately, the dotted proforma line on the left side chart reflects the underlying evolution of unit OpEx, which shows that the costs have been relatively stable with an average 3% year-on-year increase. Of course, we can never be pleased with even this rate of increase in general.
However, in the current elevated inflation environment, this is a result of extreme cost discipline. CapEx for the full year is 16% below the last year's level due to optimization of investment schedules, scrutiny, and decisions in Hungary, Croatia, and Azerbaijan. It also reflects our goal to keep CapEx in Shaikan Kurdistan at the bare minimum level until the export pipeline reopens.
Again, a robust production performance with strict cost control resulted in a strong EBITDA and free cash flow contribution to the group results, as well as to the energy supply security in the region. And with that, let me pass the floor to Zsolt Pethő to present the results of Circular Economy Services.
Thank you very much, Zsombor Márton, and good morning, everyone. As you can see from the volatility in our results over the past year, the Circular Economy Services segment is still in a startup mode with low predictability in its finances. In 2024, we were very much focusing on avoiding reputational loss and providing the same service level as everybody was used to and maintaining the service level for more than four million households and tens of thousands of industrial customers.
It was especially true for the deposit refund system, which the introduction of this system was a very complex project, and it was not only a brand new methodology for us, but also for all the Hungarians who needed to learn how to use this system. So, this whole, the DRS operation and even keeping the service levels, we just realized lots of uncertainties, which that's what we were focusing on, handling all those uncertainties.
In 2025, and I think that keeping in mind that in long term, waste management is an absolute strategic fit to the operation of the group, the whole team of mine Circular Economy Services very eagerly and very diligently, day by day, week by week, we will focus on turning this operation profitable. So thank you very much for your attention, and I pass back the word to Márton.
Thank you very much. That completes the formal part of our presentation. So we now open the floor for the Q&A session. Please indicate if you'd like to ask a question by using the raise your hand function on Teams. Anna, please go ahead.
Hi, thank you for taking my questions. I actually have three. First, around the guidance for 2025 EBITDA, what level of Polyol project is included in the guidance? And the question is, for the context, given that downstream macro environment is much weaker this year, in the beginning of this year versus 2024, how do you see comparable reaching comparable EBITDA for the full year?
Second question will be on your just recently announced acquisition around gas plant and upstream assets in Eastern Hungary. If you can provide a bit more color on what level of investments it required and what EBITDA contribution you expect from those? And finally, on the Slovakia windfall tax, it looks like on your financial statements that you booked a much lower windfall tax contribution in Slovakia that initially flagged or expected. Can you provide a bit more color, whether it's the final level of the payment and how did you manage to decrease these volumes or what was the story there? Thank you very much.
So let me then try to summarize some of the answers, and I will ask the business EVPs to add up on their inputs. You asked about the guidance for 2025. The 2025 guidance was still not calculating with a, how to say, fully scaled up polyol project impact. We rather calculate the 2026 EBITDA year than our EBITDA or EBITDA contribution of the polyol project with material in our EBITDA guidance or on our EBITDA forecast. So 2025 is not calculating with the still embedded risk of the successful completion of the commissioning of the plant and ramping up the marketing. So it's rather an upside if it happens earlier or it happens more successful or the margins recovers significantly.
So the downstream macro environment assumption behind is as conservative as it was given for this year, especially for the second half or the last quarter of this year. Regarding the gas upstream, I will hand over to Zsombor Márton to summarize what exists, but you need to know that this acquisition is already developed inorganic acquisition, so it's not an exploration program.
This is not something that we need to steal long-time de-risk and put it into production. I would also add that, which we didn't mention in the briefing, that we continue to apply for new concessions and picking up more and more concession areas to continue both our crude program, so around the Vecsés area, and both our share gas program. Now I would like to ask Zsombor Márton to add up whether additional CapEx needed for the Eastern Hungarian acquisition.
Okay, so the transaction is expected to be closed in the first quarter of 2025. We believe this is a strategically fit to our Hungarian portfolio, as well as our ambitions that we still see potential in the Hungarian oil and gas market. So this is an asset portfolio which has an existing well stock and production of gas combined with good infrastructure, which fits to more efficient operations. And thirdly, it has some shallow gas prospects, which we intend to drill in the next three years. Expected CapEx is about $20 million for the next three years, and we also believe that we can really leverage the synergies on the cost and OpEx side with that asset.
Okay, and let your last question be answered by Mr. Simola.
Thank you. So as for the Slovak taxation, you are right that we gave a more conservative estimate in the previous call for this number compared to the number which we included in the windfall tax line. And generally, the reason for this is that in the tax-based calculation, it's not just the operational kind of results that are included, but other factors. And based on the current calculations, as we stand for the Q4 closing, we see a smaller number than we guided before. Also, having said that, I like to repeat my comments from a year before that this is just the Q4 number, and I think all these special taxes and the regulation for special taxes is a new situation for us.
So in terms of the final number, we have to see and wait for the year-end closing of MOL Group, which will be also audited, unlike the Q4 number, and also the statutory closing of Slovnaft PLC. Probably follow-up question would be 2025. There is a new regulation for 2025, so the one for 2024 SVC will not apply and at this point, we are not really able to give you a guidance for the 2025 special tax number.
Thank you very much.
Thank you, Anna. Mr. Tomáš Hnízdil please go ahead.
Yes, thank you very much. Good morning. Three questions on my side. First of all, you recently announced that you are preparing to increase the product sales towards the Serbian market. Can you tell us a little bit more about this decision and what volume can it mean that you can provide additionally to that southern market to Hungary? Also, my second question would regard the Serbian initiative. Recently, there were some talks on a political level between Serbia and Hungary to speed up the building of this crude oil pipeline, which would connect your system and NIS's system. Can you tell us a little bit more about this?
Finally, on Slovakia and this recent derogation that you can sell the refined products of Slovnaft, which is processed from Russian crude to the Hungarian market, what kind of upside can we see here and what could be the impact on your performance and on your volumes? Thank you.
Let me ask Mr. Szabolcs Szabó to ask your questions.
[inaudible] pipeline?
Yeah, sorry for the delay. We have been muted for a little while. I'll ask Mr. Szabolcs Szabó to repeat his answer.
Regarding Serbia, I mean, everybody's main assumption is that the situation will be sorted out before the deadline expires. However, the deadline is pretty close, and so far, no solution can be seen. It can happen in the very last moment. I think the plan B for the market and for all the market players is that it will be sorted out, but of course, everybody is preparing for a plan B, we as well. We do see opportunities to regroup from our sales portfolio some volumes towards Serbia and harvest the opportunities there which might arise and increase local purchase in other areas of our sales portfolio. I think also other market players are considering that.
On the other hand, the Serbian market is primarily supplied by its own refining assets, so if that should become kind of impossible due to the sanction or the regulation, then this would be a hard situation for the Serbian market, and MOL alone is, of course, not in the position to cover for it, nor any other market players and import players on the Serbian market, so we are kind of preparing for it. We are not sure, of course, whether it will happen, but we do see some opportunities there. Regarding the pipeline question, it has been around a topic. We, of course, do have expertise in building and operating such pipelines.
And if this project is materialized and there is a proper return on it, then MOL can be the one to build and operate it, but it's subject to the proper return expectations and guarantees set. And the third one was regarding? Yeah, the derogation.
When we were making our business plan and when we were preparing for the current year, of course, we always take into consideration the current legislative environment and embargo environment, which was that we were preparing not to supply Czechia if the derogation shouldn't have been prolonged. We do believe it's an additional step towards the regional supply security that it has been prolonged, but should it not be prolonged, we are ready to act and act accordingly. And of course, all our decisions are subject to proper economic returns, as always.
May I ask a follow-up here? So the derogation to Hungary and to Czech Republic, do I know correctly that it expires by the middle of this year, or does it doesn't have an expiry date? And also the second issue on the Serbian pipeline, do I understand correctly the situation that potentially you can build the Hungarian section of this pipeline, not the whole one? Thank you.
Question, question. When you say end of the derogation, you mean the crude part or the Russian-based products import to Czechia?
Yeah, I thought of the second issue. So when will be the deadline for you to export products processed from Russian crude in the Slovnaft refinery?
That expires 5th of June. So that's the last day, or from that day on, we cannot export Russian-based or Russian crude-originated product to any other EU country.
That is both Hungary and Czech Republic?
Czech Republic, for sure. I mean, that's our main area of export from Slovakia.
All right. Okay, thank you very much.
Thank you very much. Mr. Giuseppe Villari, please go ahead with your question.
Hi everybody. Thanks for the presentation. Just one quick question from our side. The potential peace deal between Ukraine and Russia has been a key discussion topic in the markets for a while, and we were wondering, what do you think would be the impact to MOL, both operationally and financially, from a potential peace deal? And what do you think would be the impact to the broader refining industry in Europe, but also the other segments in which the company operates? Thank you.
Thank you for the question. I would like to ask Dr. György Bacsa to answer.
Thank you. Thank you for the question. I think for us and the operation and for all the European industry, a peace and, as a follow-up, easement on the sanctions and on this practically frozen trade war between Europe and Russia would be a positive development. Of course, I don't want to go into political analysis that what peace could be achieved, that one different range of agreements can be achieved.
We hope that if a peace will be agreed or will be signed, then it won't be just a ceasefire, but it will also enable that the European economy can go back to its growth path and could also extend its trade relations, both in terms of natural resources, energy supply, but also on exporting and trading. I think that would help. For the other questions, of course, the time horizon.
When it happens, I think for us as a European refiners, as an industry player, always the sooner is the better. I think we saw what the sanctions and what the war can create as an extra cost, extra burden, and extra practical pressure on the economy.
Thank you very much.
That's helpful. Thanks.
Thank you. Mr. Oleg Galbur, please go ahead with your question.
Yes, good morning, and thank you for the presentation. I hope you can hear me well. I have three questions. I'll start with the upstream segment. Could you please tell us what should we expect in terms of the oil and gas royalty regime in Hungary so you are able to maintain or to avoid overtaxation in 2024? Based on your current plans and maybe agreements with the government, what should you expect this year and maybe also a comment about next year?
Second of all, Mr. Ratatics, you were saying that in retail you were able to maintain the same level of OpEx, and this is happening while other competitors are confronted with high-cost inflation, which is negatively affecting their business. Could you please tell us more and maybe a bit more details?
What are the measures that help you actually avoid higher-cost inflation than 3% that you mentioned? And lastly, now that you have a clear picture of the last year's result and also you have already a feeling of the developments into this year, could you maybe make a comment about potential dividend distribution? What could be expected to be distributed from last year? Any flavor here would be very helpful. Thank you.
Thank you very much. I would like to ask Mr. Márton to answer the first question.
So regarding the Hungarian new royalty regime, so again, this 2024 year, we were successfully meeting production quotas and avoided the penalty. And the new regime coming online from this year, it has a progressive element, which means that the royalty rates are higher if the hydrocarbon prices increase and lower when it decreases. So it has a compensation element both for oil and also for gas.
We think this is a more predictable solution, and this should really manage the extreme conditions when it comes like in 2022 or 2023. And when the mining royalties will increase progressively, automatically resulting in a higher contribution to the national budget, we think it's a predictable and fair system, and this we expect from this year onwards.
Could you please quantify it maybe, or at least give us some ideas what could be the impact in the current price environment or based on your expectations?
So we expect that it's going to be broadly neutral compared to last year, but more predictable.
Thank you. Thank you very much. I'd like to ask Mr. Péter Ratatics to answer the second question.
Yeah. Sorry, can you repeat then the question?
The question was that clearly MOL stands apart from its competition when it comes to evolution of cost inflation in retail. You mentioned that it was only 3% year-over-year, while other competitors are confronted with significantly higher. I was wondering if you could share more details about what measures or what other developments helped you maintain this low level of inflation.
Yeah. I mean, yeah, thanks for the question, and sorry that you had to repeat it, so first of all, our OpEx on a total level is roughly around $900 million. That's the yearly OpEx. Out of this, practically 55% is so-called personal type of expenses, so altogether, we have like 22,000 service station workers, and that's the vast majority of the human cost, and actually,
we started to optimize the opening hours, so we analyzed hour by hour the cost versus margin, and in many of those stations where in the night, in the late hours or in the early mornings, the margin generation was not covering the OpEx, then we shifted and changed the workforce and the opening hours, and we decreased the number of FTEs, and also, we still see quite a potential to continue this journey. So even for this year, we plan to decrease it further, like 10%-15%, the total FTE numbers all across the 10 countries in the group. So actually, that's the majority of the cost optimization effect.
While, on the other hand, also on the back of the significant energy price increases, what happened since the war started, we revised all the kind of service station energy consumption. We tried to procure it, I mean, even the electricity on a different way. And as much as we were able, we tried to decrease the large consumers, large energy consumers at the service station operation, fridges, lamps. So these kind of things we started to revise and also to change it.
Also, we hand out an operational manual to the service station workers that how can they, I mean, optimize or manage better the temperature control within the service station environment in order to save some energy. So, I mean, all in all, I mean, the personnel type expenses is the big hit. However, we have a lot of additional what we turn on and what we managed. So altogether, like 30 different small project items we executed, and that's what resulted in this effect. I hope it's helped.
Thank you very much. It's helping. Yeah.
Thank you.
Thank you, and on the last question, I would like to ask Mr. Simola to comment on the dividend.
Thank you very much. And I think usual question, usual answer. I start with the easy part, the backward-looking part. I think clearly, as we discussed on the net debt and financial health balance sheet side, I think we had a solid year, and we have the financial basis for paying a dividend.
I think it's complicated, as always, the forward-looking part in terms of any potential acquisitions and, of course, any potential major negative events in the future. That will be up to the board of directors to review, and we will communicate the proposals for the annual meeting as usual in the second half of March, including the proposal, if any, for the dividend payment.
Understood. Thank you very much.
Thank you. And last, Mr. Mihai Galbur, please proceed with your question.
Hello. Could you provide some information? What kind of Brent-Urals spread do you use for developing your 2055 guidance?
Thank you for the question. If you look at actually one of our charts that we see where the Brent-Ural spread is actually depicted, you can see that it has been on a fairly stable level in the last three to four quarters. Seemingly, under the given circumstances, that's the, let's say, new normal of Brent-Ural spread, and we're not counting with any earthquake change in relation to that.
That's more or less it.
Thank you.
Okay. Thank you very much. If there are no further questions, then I would like to thank you for your participation. In case of further questions, of course, we are available at the Investor Relations Department. Please reach out if you would like to follow up. Thank you very much, and have a good day.