Good morning, ladies and gentlemen, and welcome to MOL's Q1 2026 results conference call. I am Márton Teremi, Head in Investor Relations. The speakers on today's call are Dr. György Bacsa, Chief Strategic Officer, Dr. Ákos Székely, Chief Financial Officer, Mr. Zsombor Marton, Executive Vice President of Upstream, Mr. Gabriel Szabó, Executive Vice President of Downstream, Mr. Péter Ratatics, Executive Vice President of Consumer Services, and Mr. József Simola , Executive Vice President of Circular Economy Services. Before giving the floor to Mr. Bacsa, let me remind you of some technical details. We continue to use Microsoft Teams as a platform to hold our conference call. The presentation is accessible at our website at molgroup.info, and slides will be shared in Teams during the call.
There will be a Q&A session after the presentation, where you will have the chance to ask questions by using the Raise Your Hand function of Teams. Please keep yourself muted throughout the call except when asking a question. I would now like to draw your attention to the cautionary statement on slide number two. Now we can start the content part with Dr. György Bacsa, taking us through the highlights of the first quarter.
Good morning, everybody. Thank you, Márton Teremi. Let's start with the first quarter summary and go to page number four. Let me start with the annual guidance. If I want to be short, I would say that we didn't change the guidance, but let me take some more minutes to go a little bit of deep dive because I would like to remind you that when we issued the guidance, that was the presentation of our fourth quarter results of last year, dated 20th of February, so end of February. At that time, we already experienced many of the risk and difficulties, especially to MOL, especially to region or globally.
Especially to MOL, we were already in the middle of the AV3 reconstruction and repair issue after the fire, which will take still couple of months, but we are on progress it, and Mr. Gabriel Szabo will go into details on that. At that time, we already experienced that at end of 2025, Hungary and Slovakia had one of the lowest GDP growth in recent time, and Croatian GDP was also going down. There was also, there was already a stoppage on the Druzhba pipeline at the end of February, which lasted 10 weeks at the end. The, the risk that we practically presented during our guidance did not decrease, but rather increased.
Since that time in March, the conflict of Iran and the closure of the Strait of Hormuz have brought unprecedented volatility and fragility to the crude oil supply, especially to the seaborne supplies. There was also government interventions. Save for two markets, all our core markets are affected, some sort of government regulations, price caps, margin regulations, restrictions, export restrictions, which are not just affecting practically our margins and our pricing abilities, but also the moving of goods and the free movement of goods between our markets, between our refineries and between our wholesale storages.
I think what we are heading into that, especially if this energy shock or this war that caused the energy shock will drag on, that practically, we are heading into a perfect storm, which was also, I would say, highlighted or emphasized by the latest IMF report as well, which is forecasting, in such a real situation, historical low global GDP growth. I would say that such an outlook would not give us anything else, just to stay cautious and definitely consider all these risks are very serious and draw up a plan how to manage this risk. Now let's go into some of the key ones which are specific to MOL. The disruptions in the Druzhba pipeline. The disruption in the Druzhba pipeline were, I would say, and we emphasized several times, that we are preparing for that.
We were preparing for that. We didn't expect that it would happen, but in the last decade, just an example for that, we invested into the pipeline network more than $300 million to diversify our crude supply system. I think the first quarter just strengthened our belief that the region needs at least two open and accessible crude supply routes to ensure uninterrupted fuel supply for the CE region. It's also our business interest, our business session as well. We need to safeguard our ability to always make the best business decisions. I would also emphasize that all diversity routes enabling us to get access to seaborne supply and also to onshore resources.
Since the 22nd of April, the Druzhba pipeline is again operative, and we will remain to use both directions, both routes, to keep up this diversity, the advantage of this diversities. I also would like to go into the price controls because everyone saw the big volatility, the big ups and downs in the pricing, in the crude and the product pricing. I think there was in the supply also other volatiles, the availability of seaborne cargos and availability of resources. There was practically a fight for the cargos, a fight for the supply on the global market. The oversupplied global market became short immediately after the Iranian crisis, and regions and companies and countries were battling with each other to get access for the supply.
This volatility and the consumers were protected against this volatility with the price controls and the government mechanisms. We were not protected on our supply and on our logistic markets against such volatilities, so it negatively affected our performance, especially in the downstream. Let's go to the page number five. If you look at the first quarter results, what we can see that our first quarter Clean CCS EBITDA came in at $626 million, which means 25% year-on-year decrease. Positive, we can report only in upstream, which improved back of the higher oil and gas prices, and in consumer services, which was mainly supported with the increasing foreign exchange and with the favorable foreign exchange rate figures.
In downstream, we suffered greatly due to the multiple shocks and the volatility, its financial impact, and the significant operational challenges that we are facing with. Our downstream Clean CCS EBITDA decreased to $69 million. Our Consumer Services EBITDA was driven by seasonality and reached $21 million. Our Consumer Services EBITDA increased to $177 million. Upstream EBITDA rose to $346 million. My colleague will give you more details on the financial performance and the drivers behind the financial performance. As I mentioned earlier, the Druzhba pipeline was not functioning for 10 weeks, during which the Bratislava and the Danube Refinery had to switch to seaborne crude supplies of non-Russian origin.
We delivered it via the Adriatic pipeline, but I also have to mention that the Danube Refinery has lost almost half of its crude processing capacity, so it was not running at full capacity during this time. Another event that in the first quarter I want to emphasize is we increased our stake in Alteo Plc. to 40% by agreeing or swapping our Waberer’s shares to Alteo shares. On the next transactions, we are still continuing the negotiation. We have the negotiation license from OFAC, and we have the pre-agreement with the seller. I think everyone knows that this is a complex transaction where we have three work streams of negotiations, not only the sellers and the host country, but also the United States regulators and to a certain extent, the EU regulators are also involved.
The Rijeka refinery upgrade project has been completed and is expected to have material operational financial impact on the refining by end of the year. We expect that the diesel production in the refinery to increase by up to 30%. Furthermore, MOL has also been successful in bidding for an offshore exploration area near Libya, or the offshore Libya, jointly with Repsol and TP. Let me give you just a short summary on the sustainability results. I think it's a positive that the MOL safety ratio was one, the TRIR ratio was 1.15, where our guidance for the year is 1.25. We would expect to keep the guidance throughout the entire year. I would like to give the floor to Mr. Ákos Székely.
Thank you, György. Let me continue with the EBITDA performance and the segment breakdown. The Clean CCS EBITDA reached $626 million in the first quarter. As György said, decrease of 25% year-on-year. With the EVPs to discuss their respective segment performance in these, as usual, I will elaborate on the segment which fall outside the scope. First, the Gas Midstream. The EBITDA came in at $93 million, which represent a year-on-year increase of almost 40%, 39%. The reason is that the transmission volumes were flat, the higher cross-border capacity demand was substantial due to the relatively cold winter, as well as favorable FX effect supported EBITDA generation.
The second, regarding the corporate and other segment, the central cost of $52 million were broadly in line with the seasonal leverage, and also with the dollar weakening, explaining much of the year-over-year increase. Finally, the inter-segment elimination had a negative effect on EBITDA of $28 million, which is kind of expected mainly due to the higher oil prices resulting in the higher inventory elimination. Let's discuss the CapEx. The CapEx amounted to $241 million in the first quarter of 2026. Organic CapEx was at $252 million. This translate to an increase year- on- year, to tell the truth, the base was in the base period was relatively slow, you know, comparing to the historical figures.
Therefore, I think this figure getting back to the normal range. Some words about the details. The growth and efficiency CapEx grew by close to $70 million and amounted to $108 million in the first quarter, mainly as the Rijeka refinery investment was finished and invoices were settled. Also, an uptake in field development works in upstream and in Croatian offshore assets also contributed to an increase, as did the construction in product pipeline works between Bratislava and Danube Refinery. The next category is the inorganic CapEx, which amounted to $241 million and was driven by the closing of the acquisition of the photovoltaic portfolio in Mezőcsát, Hungary, with the SPA signed in December 2025.
The solar portfolio has a total capacity of 304 MWs and is expected to generate around almost $40 million, $38 million of EBITDA per annum. Other transaction is the, which we closed in the first quarter, this was the vertical integration in the waste management segment with the acquisition of one of the regional coordinator in South Eastern Hungary. The first quarter clean CCS EBITDA of $626 million resulted in a net income of $522 million. Regarding the component of the bridge, let's see the details in the next slide. The clean CCS effect showed the positive impact of $47 million in the first quarter, which was in line with the effect of increasing oil price.
The positive CCS effect was supported by the seasonal cleaning of CO2 cost, while limited by the adjustment for losses on commodity hedges. The next is the DD&A, which reached $417 million in the first quarter of 2026. This means a year-on-year increase of 23% driven by the dollar depreciating by over 10% is the first quarter of 2025, and the higher depreciable assets of the group, most notably Upstream assets, acquired or activated last year. With the foreign depreciating and exchange rate volatile during the quarter, the financial line was negative to results. Let me stop here and recall a couple of figures because yes, there was a huge volatility.
In the same period last year, the dollar foreign exchanges was 371, which decreased to 328 in the last quarter of 2025. After that, increased somewhat to HUF 333 per dollars. While in euro, which, you know, was relatively stable, the last year quarter figure was EUR 402, which decreased to EUR 285. Practically the same figure we could see in this quarter, which was also EUR 385. Yes, there was a huge volatility, and this was especially seen in dollar/ HUF FX. The income from associated was $35 million, mainly driven by one-off revenue from Pearl compensating for earlier inaccuracies in measurement of performance.
This one-off effect amounted to $17 million. Finally, the tax expense amounted to $84 million, translating to an effective tax rate of nearly 40%. The extra taxation continues to wait on the group with the special levy in Slovakia impacting the results by $15 million. Let's look at how cash flow evolved during the quarter. Operating cash flow before working capital was around $800 million, even somewhat higher than the first quarter of last year, despite the challenges throughout the year. However, ongoing challenges were much more apparent when looking at the change in the working capital, which marked a build of nearly $1.4 billion. Most of the deterioration net working capital was related to the crude sourcing, switching to seaborne in March, impacting working capital on several fronts.
Regarding the inventories, there was a build that amounted to $900 million, roughly $900 million, for the group. The time between receiving the crude oil at the port in Omišalj in Croatia and the start of processing work become longer as a result of the more cumbersome logistic and blending, leading to an increase in crude inventories. Regarding fuel products, volumes also increased mainly due to the timing effect in Hungary. Strategic product reserves released in the beginning of March led to product inventory levels that did not fully deplete by the end of the month. Also the skyrocketing crude and product prices contributed most of the increase in the build of inventories.
Apart from inventories, I think it's worth to mention that the net working capital position was also worsened by the advanced payments made to secure crude cargoes and also effect of higher margin deposits or more extensive hedging transaction. Overall, as a result of these factors, operating cash flow, including working capital, reached over half a billion dollars in the red. You know, just highlighting again, the inventory effect amounted to around $900 million. The advanced payments at around $100 million, and the margin call deposit roughly $300 million which finally resulted in $1.4 billion increase. Finally, let's look at the balance sheet.
The net debt level deteriorated by over $1 billion compared to during the quarter, which reflected in challenges in the operational cash flow, especially in the working capital cycle, which we discussed in details. Net debt does close the quarter at close to 1x EBITDA, with the gearing ratio rising to 17%. While the increase in the net debt, We could clearly see, our expectation is that some of the factors leading to the cash drain in the first quarter will just not be with us going forward. Most notably, the flows resuming on the Druzhba pipeline system should able to release some of the working capital that built up during the first quarter. My cash flow and working capital is definitely under higher management focus than usual.
The balance sheet remains strong, with the available liquidity of around $4.3 billion. After the financial overview, I would like to hand over to Gabriel to discuss the downstream results.
Thank you very much, Akos. Good morning, ladies and gentlemen. Let me elaborate on the first quarter 2026 results. As you have just learned from Mr. Bacsa, we faced very challenging times in downstream, let's get to the numbers. Downstream Clean CCS EBITDA was well below last year's and came in at $9 million for the first quarter of 2026. The other performance was due to a series of shock, which I will then elaborate on them later, that led to lower capacity utilization in refining and the petrochemicals performance that is not yet reflective of the better price environment in the wake of the Iran conflict. On the refining slide, Clean CCS EBITDA came in at $132 million, a decrease of 62% year-on-year.
This was mainly due to the 30%-34% lower processing in the Bratislava and Danube Refinery. While we tried to make up for some of the lost own volumes through third parties, including semi-finished products with the final steps of processing in the Danube Refinery, product sales were still 8% below last year's level. Regarding petrochemicals, volumes were 15% below last year at 263 kt as a result of the naphtha scarcity, what reflects the lower refining capacity. In order to provide you a better sense of those shocks and the sequence of those shocks and their impacts on our processing and profitability, we prepare the next slide. This slide is showing the shocks from four perspectives.
What happened and when, then how it impacted the crude supply processing and also the profitability. As Mr. Bacsa mentioned, the series of challenges started October last year. You are very much aware of it. The pump station of AV3 distillation unit burned down, meaning that the total crude processing of our two landlocked refineries has been limited to 75%-80% of the usual capacity throughout the first quarter. At the end of January, flows from the Druzhba pipeline were disrupted. I have to mention that it was the 23rd disruption, which we experienced from the outbreak of the war. In this particular case, it was the result of the drone attack of the, at the 70,000 cubic meters oil tank in Ukraine. We had no information on when the pipeline could resume operation.
The two refineries ran on their own reserves. By mid-February, we initiated the plans to switch to the Adriatic route supply route and started booking cargos with deliveries expected to the port of Omišalj by early March. At the same time, we also did trigger the release of strategic crude reserves in both Hungary and Slovakia in order to keep the operation until the first seaborne crude supplies arrives to our refineries. In this period, we although adjusted the processing as a precaution and in order to keep the utilization of strategic reserves as low as possible. By the first crude supplies arrived in March, the war in Iran had already erupted, and the Strait of Hormuz was already closed.
Although costly, we ramp up our crude processing in order to supply our customers and to start refilling the strategic crude reserves and our own inventories. In terms of profitability, it was really volatile and under pressure throughout the first quarter. Mainly the impact of low utilization is magnified in financial result as the fixed cost in the refinery were not covered as in the normal or within the normal operation. Additionally, seaborne crude, coupled with the unprecedented situation on crude markets due to the closure of the Strait of Hormuz, has also a significant negative impact on the results in March. All in all, the first quarter of the year posed a series of significant challenges.
With the resumption of the crude flows through Druzhba pipeline on the April 22nd, the operational and technical difficulties are eased and we can get back, or we are about to get back to the modus operandi of selecting dynamically between the two available crude supply routes and different crudes based on our best interest. Now get back to the normal sequence of my slides. Let's tackle the macro environment. Please. Thank you. Brent-based refining margins were about $11 per bbl for the quarter, figures pulling the average upwards as a result of the supply shock in European middle distillate markets. However, this attractive margin was unfortunately not reflective of the actual unit profits we could realize.
After the Strait of Hormuz closure, the producer asked for a premium to Dated Brent, with volatility in the markets adding further cost to hedging, logistics and insurance was also turning more expensive. At the same time, product prices were also under pressure in March, as many governments in the region introduced price cap, margin caps or other mechanism to limit increases in the fuel price. Actually, out of the 12 countries we supply with fuel, out of those 12 countries, in 10 countries, there is some regulation there. Petrochemicals margin have a longer lead time in reacting to these changes, margins remain subdued in the first quarter. Looking to the April, the Strait of Hormuz shock is more visible. Refining margin increased to levels which we experienced last time back in 2022.
The Urals blend was traded at a premium to dated Brent. This was also for the first time since the DAP India quotations are available. Petrochemicals margin have also increased materially as the closure of the strait has decreased global petrochemical supply directly or indirectly. In my last slide about the impacts of several factors. I believe there is no surprise in the light of my earlier comments that the refining margin and price effect was positive, but and there was theoretically much more potential there, but because of the aforementioned factors limited the upside of the refining margin closure close to tripling year on year. Petrochemical also contributed positively on the margin side. The volume impact amounted to over HUF 200 million negative contribution, which underlines the severity of the financial impacts of the landlocked refineries' low utilization.
Furthermore, the Rijeka refinery also underwent a planned turnaround during the first quarter, adding to the negative volume effect. Within the other factors, there is also a negative contribution there due to the base effects as well as the negative contribution of the gas and power trading and similar negative impact of the hedging activity. This would be everything from my side, and I would like to hand over to Péter Ratatics to continue with consumer services. Thank you very much.
Yeah. Thank you, Gabriel, and good morning to everyone. The consumer services reached $177 million of EBITDA in the first quarter, as it was already mentioned, which is roughly 12% increase year-on-year. If you look at this chart on the right side, you can see that the year-on-year depreciation of the dollar had a material positive effect on the result. I also have to highlight that this is just the first quarter, the Hungarian forint change compared to euro and dollar that just happened in April. This first quarter effect is just purely the dollar depreciation. Without this effect, the EBITDA would have grown by 1%, meaning basically a flat year-on-year performance.
On a more underlying level, the fuel side of the business contributed negatively to results, with the rise in non-fuel margin having offsetting partially or close to equally this effect. This is not surprising, by the way, if you think through, you know, what range of measures were introduced by the governments across our area of operation in March in response to the crisis in the Middle East. In fact, all countries in our operation, in the 10 countries operation, except Bosnia Herzegovina, have imposed regulatory measures for the fuel prices. All in all, I mean, it would take, like, half an hour to go through on the different countries, different regulations. Some of the countries has a hard price cap, like in Hungary.
Many of the other countries have a margin regulation, but the frequency of the regulation changes are also different country by country. During the whole month of March, actually, we were trying to adapt our operation, and the whole market tried to adapt to the operation of the changed environment. Before we move on to the, to the fuel, just a brief summary for the first quarter. Out of these three months, January, February were practically normal month. The dynamics and the direction, the trajectory of the business was practically the same what we have observed in the previous years. In March, actually, as a result of this Iranian conflict, immediately changed the market dynamics. What was the effect of that for the fuel? Let's move on to the next slide.
You can see that the fuel volumes rose by 7% year-on-year, clearly a consequence of the mentioned price control mechanism. In fact, looking at the first two months, what I've just mentioned, the volumes were up by 1% only. Reflecting purely and consequently to the underlying market fundamentals. However, in March, actually the fuel volumes increased. The sold fuel volumes in our network increased by 18% year-on-year growth. I mean, just in a few countries, this 18% came up just in a few countries like Hungary, Slovakia, Slovenia mainly, and also in Croatia. Rest of the countries, the increase was a single-digit percentage increase, but still substantial.
Regarding the margin, there has been a decrease overall, with the profitability of fuel retailing falling the largest, where the harshest measures were introduced. Actually that was in Croatia, Hungary, and Romania. In these three countries, the impact on our unit margin was the harshest in March. We will see that how that will continue in the upcoming quarter. Let's move to the non-fuel part, because the non-fuel part is still the bright side of this whole operation. The development in the non-fuel part of the business, where there are no surprises, and we have continued on the path of this 5% organic year-on-year growth. Obviously, in such circumstances, what we see that the fuel drives the footfall.
Our intention and the clear task for us at this current moment that try to convert as much of these new customers to the non-fuel transactions as we can and also to try to convince them to join to our loyalty program, so to gain an additional long-term customers to our operation. Once the world will go back to normal, then hopefully our market shares and also the non-fuel transaction will land on a higher level than it used to be. That's our business strategy at the moment. Thank you very much for your attention, and let me pass the floor to Zsombor.
Good morning, everyone. Upstream recorded $46 million in the first quarter of 2026, and this corresponds to a 40% increase compared to the previous quarter and, around 10% increase versus last year. The increase was predominantly driven by higher hydrocarbon prices because of the Strait of Hormuz closure. With that, dated Brent increased to $81 per average and gas price to $80 on a dollar per bbl of oil equivalent. I think what's the good news is that we were able really to capture this relatively high share of these elevated prices. Plus, we delivered the strong production in our home turf, both in Hungary and Croatia, and were able to catch that and harvest.
We are still pushing for more and accelerating in the sea as well, for the future, trying to get more out of the favorable environment. If we move to the next slide, you see that this trend is reflected in the evolution of the unit economics. That's the highest after the 2022 price peaks in the last four years. Even accounting for or despite of the higher organic CapEx, the simplified free cash flow per bbl reached $32, well above the $20 per bbl equivalent strategic guideline. If we move to the next on the EBITDA, let us now break down quarter on quarter. You see that it was really because of the higher prices.
Most of the increases compared to the fourth quarter of 2025 is due to the macro. Lower volumes only accounted for $15 million negative effect. That was mainly due to lower production in Iraq, both Shaikan and Pearl, because of the stoppage and the precautionary halt in Shaikan production in March, as well as the technical factor of less cargos loaded in Azerbaijan. The other category you see on the waterfall had a positive impact. Dollar extent of $32 million. In a year-on-year perspective, the volume impact was also positive despite the suspension of production in Iraq Shaikan, with this average production. If we move to the next slide, let's see the production volume as well.
The production is lower compared to the fourth quarter, but averaged above the lower threshold of the annual guidance of 95,000 bbl and 97,000 bbl of oil equivalent per day. Still with the Iraqi Shaikan and Pearl stoppage and lower production, we are inside the guideline, and we are missing around 7,000, 8,000 bbl of oil production, which we believe if the Iraqi production will restart, then we will be above 100,000 bbl in average. And that could still end up in the year and the forecast between the 95,000 bbl and 97,000 bbl guidance. In April, again, the Iraqi Pearl resumed production after the suspension of production.
It is not yet fully operational, but that's why the production level decreased to 92. You see, in April, but we are seeing now an elevated production going forward. Lastly, let me share a few thoughts on the evolution of the unit OpEx and our investment perspective. The OpEx rose by 11% year- on- year. This increase is predominantly due to weaker USD. If we would consider that not in the numbers, we would only be 1% above the plan. We can say that the OpEx is flat, still, due to the measures we are taking on efficiency and the diligent production.
With regards to CapEx, the spending in the first quarter is usually the weakest. Here, there was an increase of $36 million year-on-year. This is largely due to the offshore campaign and the development wells we are doing in Croatia currently. Then of ACG CapEx, which is coming with the drilling of the new offshore platform. Let me also share that in the TAL block in Pakistan with regards to projects, we were able to have a new discovery drilled on one well, which is gross 5,000 bbl well production. We will start that still this year. The production is, the share is only 8.4% of ours. This is still a nice discovery and adding volumes to our portfolio.
In Croatia, we have also expanded our onshore portfolio, two exploration blocks were awarded to INA by the Hydrocarbon Agency, while we have also completed farming acquisition of Vermilion Energy's remaining 60% share of the Sava-07 block. Furthermore, we have also moved in Hungary and had acquired the range of upstream assets from OGD at the end of April. This acquisition would add almost 1,000 bbl of oil equivalent to our production and to our group oil production primarily. We seek to develop these fields as well with large exploration acreage, mostly oil dominated. Again, let me also finish with the news from Libya. That's a new country entry for upstream.
That was a successful joint bid together with Repsol and TP, where Repsol will be operator into an offshore block in Libya. We have 20% in the joint venture. With that, I will pass the floor to József Simola to discuss the circular economy.
Higher on a year-on-year basis. This increase includes also seasonal factors such as the higher DRS return volumes and the lower collected waste volumes due to the colder winter, but it includes also the impact of the ongoing efficiency program. Organic CapEx was at low level as planned and expected, reflecting our cautious approach for spending. As discussed last time, the preparations for waste to energy plant to be co-located at our refinery in Százhalombatta are ongoing.
Currently, we are foreseeing final investment decision sometime during this year. As on the general trends on the business side, with the above 90% return rates in the DRS system, we can clearly call it's fully operational and completed. We reached this result in shorter than two years. From now on, clearly the focus will be on the continuous improvement of service level and operational efficiency. Generally, we will continue to keep our focus on efficiency and financial results in the coming quarters. With this, I'd like to hand over to [Marci] for the closing Q&A part of our session.
Thank you very much. That completes the formal part of our presentation. We would like to 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 of Teams. Anna, please go ahead with your first question.
Thank you very much for the presentation. I have a couple of questions, if I may. First starting with April and second quarter performance. Given that the flows via Druzhba pipeline restarted, but at the same time, fuel caps, margin caps remain in place, what level of margin capture can you realize since 22nd of April, if you can comment? The same question around the utilization rates. To what extent did you manage to increase the runs? Second question will be around the comments and news flow on the Croatia side. On the one hand, we heard this final award from a U.S. court for collection of the award. Do you expect it to happen this year? Do you expect to get the collection this year?
Another news was around Croatia discussing or considering to buy back the stake in INA. Can you share any thoughts on that regard? My final question will be a technical one on the cash flow from operations. Other category, other line which supported the cash flow. Can you explain what was in this other category? Thank you.
Thank you, Gabi. Yes, thank you very much. Thank you, Anna, for the questions. You answer the first question, please.
I will answer the first question. Regarding the utilization and the Druzhba supply, yes, as I mentioned that from 22nd of April, the Druzhba supply was restarted and is still operational. On the other hand, we believe that we will start processing the Russian REBCO and Ukrainian crude just the second half of May or end of May. We still run fully on the seaborne routes. In terms of the utilization of the processing capacity, in Slovakia, in Bratislava, we are back to 100% utilization or close to 100%. In Croatia we also run a full throttle, while in Százhalombatta we are still limited because of the unavailability of the AV3 units there.
I would pass the answering the second question to my colleagues. Thank you.
Thank you. I think, especially regarding the U.S. court decision on the international arbitration case, I think we are glad that the U.S. court endorsed the earlier international arbitration decision in favor of MOL. I think, the claim is now, will become enforceable. However, at this point, we are not in a position to say that when and how we, and what will be our next steps. There is still, a kind of a period before any enforcement actions can be started. We still believe and hope that, the claim can be settled voluntarily as well. Regarding INA, I don't comment on political statements. There is no sale process for now.
The final question about the cash flow. This is, a kind of technical item. We need to translate the P&L to cash flow, and some of the P&L item is considered as cash flow relevant and some of not. Well, what you just asked, the other categories here, this is mostly the adjustment, adding back some non-cash item in the profit, as per the income statement. The largest impact was due to the loss on unrealized hedges. Well, this is how we translate it from the P&L to cash flow. The hedge amount has swelled considerably in the first quarter, mainly due to the longer lead times of crude supply, as already we discussed and stemming from the switch to the seaborne crude sourcing. Thank you.
Thank you very much. Just a follow-up regarding the margin capture since the Russian flow restart. Do you expect better margin capture in the second quarter from second half of May?
Yeah, sure. On the other side, what I mentioned that there are, out of the 12 countries where we supply our production, out of those 12 countries, 10 applied some kind of regulation. I think that there will be some adjustments there, but so far, based on the run, I am rather positive.
Thank you.
Tamás, please go ahead with your question.
Yes. Thank you very much. Good morning. Couple questions mainly on the downstream side. First of all, when do you expect the agreement with JANAF to be signed? Would this agreement include the usual 2.5 million tons or higher? I presume this should be higher because in the last two months you bought much more crude via the seaborne route than because, yeah, the Urals was not available. When do you expect this agreement? That's my first question. Looking now your presentation that the Urals price is above the Brent prices, do you expect in the future to play a little bit and buy more seaborne crude if this situation persists?
Do you see a better economics on buying Urals crude at the moment? Now it's not obvious that Urals has a cost advantage versus the seaborne crude oil types. My third question would be about the strategic reserves. I think you received both from Slovakia and Hungary some strategic reserves. When do we expect them to give it back or fill up the strategic reserves? If I remember correctly, you said last time that the deadlines are September, October, so I wonder how this would look like. Finally, how do you proceed with the upgrade projects regarding the decoupling from the Russian crude oil? I think the original deadline was the mid-next year. Do you still see this as a realistic deadline? Thank you.
Yes, thank you very much. I will go one by one, but please chip in once you see that I missed something. Regarding the agreement, very good observation. The agreement with JANAF is still not signed. There are still few pending issues there, which are, from our side, rather critical. I don't want to elaborate on those because we are tied with some confidentiality, and I believe that in terms of the good partnership, we should not negotiate publicly. What is very important with JANAF, and this is not a contractual term, this is our interest to test the whole system of the crude supply, where we cannot reach an agreement with our partner operating the Adria pipeline.
We would like to test the whole system, while the counterpart would rather test just the partial part of the system. This is what I also, from my side, this is also a very critical point there. The other question, could you, Tamás, please?
Yes, yes. Basically, the second point.
Yeah
Second question was, that would you buy more, crude.
Yes, right.
seaborne direction?
Now having two pipelines operational, which I believe is a huge advantage currently or a benefit, we can optimize based on the economics more. This is also a good point that the Urals or the REBCO is now traded with a premium delivered to India. Of course, we have to adjust the logistics cost there, but still, I think having those two options, it's the right way how to move on with the security of supply. Also taking into account that there were some problems at the TAL pipeline and the other countries having just one supply route. For example, Austria, they were also forced because of these problems of the TAL pipeline. They were forced to ask for a state reserve release in Austria.
Also I heard that the other partners in Czech Republic, they also asked for a state reserve release. It's just proving our standpoint that one route, this we believe is not sufficient. Coming back to your question, now there are more options and of course that based on the economics, based on the technical feasibility, we will now use both of those option. The third one was regarding the DCU. Am I right?
Yeah. It was like feeding back the strategic reserves that you received.
Yes. The strategic reserves. Actually, MOL has processed crude from the state reserve, Hungarian state reserves in February, March, in the amount of 144kt . Slovnaft has processed from Slovakian state reserves, 105. We stopped the state reserves pumping or utilization in MOL on 23rd of March, and in Slovnaft at the end of March. In Slovnaft, we already refilled all those 105kt , while in MOL, we need to refill that until August this year.
Finally, the upgrades of the.
Yes. The upgrade. We are starting up the facility. There was a public announcement that the mechanical completion is done. Once fully operational, so far we see that there are no hiccups there. I think that till the end of this year we will experience higher processing in our refinery in Rijeka, which will be also reflecting in roughly 30% higher diesel output.
I was actually referring to the upgrade for the decoupling projects from the Russian crude oil.
Oh, okay. Yes.
Like what you said, you would do by the mid next year. How do you go on with them?
Yeah. It's fully online with the schedule. We are working hard. There are some learnings from the recent period, how we can operate our refinery fully on seaborne, different, available crudes. From my perspective, we learned a lot and I hope that till 2027 we will be ready to process alternative crudes fully.
Okay. Great. Good. Thank you very much.
Thank you. Thank you, Tamás f or your question. Thank you.
Thank you. Oleg, please go ahead with your question.
Yes. Good morning, and thank you for the presentation. I have several questions. If you don't mind, I'll ask them one by one just to, because some of them are a bit longer. Starting with the first question. Market expects the new government to improve the business climate in Hungary. When it comes to MOL, in which business area would you see potential for positive impact or improvement? What I can think of are the abolishment of the CO2 tax and other special tax, maybe higher visibility on the future royalty regime, less interventional fuel price regulation, et cetera. It would be interesting to know what are your expectations, if any. That would be the first one.
I mean, thanks for the question, Oleg. You know that, it's very speculative to ask us about the future political economy, so economy politics will bring us and how the political development will affect us. But definitely based on the statements, and let us also confirm our understanding that I think normalization and standard solutions that we expect and we hope. Regarding some of the points that you mentioned, I would like to emphasize that the royalty regime is already cleared out, the, especially in Hungary.
After years of special royalties, now we have a progressive royalty regime, which is I think is mutually beneficial both for E&P companies who are running exploration campaigns, helping the production level to not just to a little bit cut the decline, but also to keep the production level even to increase in certain parts, but also benefiting the state in case of higher hydrocarbon prices rising. There is a progressive royalty regime, which I don't think that needs changing. The CO2 tax was before the European Court of Justice. European Court of Justice already ruled that the CO2 special tax is not in line with the EU regulation. That was also public information. Definitely we expect the CO2 tax in its current form to be abolished.
Fuel price regulation, I think it's not unique. We think that, and we believe that it's temporary, and it's, as I mentioned, it's about shielding the consumer, the vulnerable consumers against these volatilities. Of course, it has a cost. The cost is mainly borne by the wholesalers, and as you could have seen because we are exposed to global supply volatilities. Our domestic markets are regulated and normalized, which is definitely flattening the hikes of these price volatilities. I strongly believe, and I strongly hope that there will be, we have a practical chance, both global macro normalization and of course these price regulations will fulfill its goal, and then will be abolished.
As Mr. Szabó mentioned, 10 out of 12 countries we are now facing with some sort of regulation. Definitely we are always positive if governments are announcing market-friendly, normalized and predictable economic policies.
Understood. Thank you. The second question refers to the downstream segment. I was hoping you could tell us what would have been the clean EBITDA of the segment, assuming no disruption to the oil supply via Druzhba. This would allow us to better understand the first quarter developments as well as to make better projections for the rest of the year.
I see all of your point, I'm sorry. I did not elaborate the scenario of having Druzhba operational. I would need more time to guess the figure, which could help you.
Okay. No, no.
Thank you.
Fully understood. Okay. The next question, I guess, it's also addressed to you, because I noticed that the petchem margins have sharply increased in April, and I was hoping you could tell us what level of petchem margins would MOL require in order to break even in petchem. Also, maybe assuming that the EUR 100 million CO2 tax is abolished, so in this scenario, for example.
I'm rather positive about the petchem performance, seeing now the petchem margins. On the other side, once the world gets normalized again, there we see that the supply is really robust. In terms of the growth, Mr. Bacsa at the beginning mentioned his concern about the growth perspective, and I believe you are also aware of those. Probably the petchem margins will get normalized, which means that they will get to the break-even level or even below.
In other words, this almost EUR 600 per ton margin in April is still not sufficient to-
It is. I said that I'm rather positive. I'm positive.
Okay.
Yeah.
Okay. Okay. I see. All right. Thank you.
In the long run, I'm worried that it will get back to the couple of.
Yeah, yeah.
months level. Yeah. Yeah. Okay. Thank you.
Okay. Thank you. Lastly, you mentioned that the negotiations for the acquisition of NIS are ongoing, and they're quite complex, but maybe you still can tell us when do you expect the transaction to close? Looking a bit more into the future, can you also tell us if the supply of Russian seaborne crude oil to NIS would be possible, or you would have to rely mainly on non-Russian seaborne crude oil? Yeah.
Let me, let me answer the question. I mean, to the extent I can answer it. The closing of the transaction, I think it's two phases down the road, so I don't want to predict when closing could happen. If you mean when the agreements could be signed, we have a negotiation license till 22nd of May. We are deep in the negotiation phase. We completed all the due diligence and other phases that were practically preconditions. We are heavily negotiating and working on to practically to meet these deadlines and by this time to conclude some sort of arrangement. Of course, I, currently I cannot say that with full certainty because we are in negotiation. The other one is the Russian crude supply.
Russian crude supply is not permitted to NIS. Currently NIS is running on non-Russian seaborne crude supply.
That will not change in the future, or this is not expected to change in the future?
We don't count with changes.
Okay. Understood. Thank you very much. That was it from me.
Yeah, Ricardo, please go ahead.
Hi, good morning. A couple questions on the crude supply, if I may. The first one, given just how volatile the first quarter was because of Druzhba and then having to access some of those seaborne and the strategic reserves, if you could just comment, what are the major learnings that you had during those weeks? Was that getting access to those seabornes or on the prices, just how did MOL perform according to your expectations on almost overnight not having access to Druzhba?
The second question that I have is, when we look at towards the end of the year, if we assume the current situation remains with some disruptions on the global supply side, and you have your full capacity back, would you expect to have a mix on your feedstock from both Druzhba and seaborne, or would you just go back to how you were operating until last year? Thank you.
Yes. Thank you. I mentioned that there are several learnings. Firstly, the first one, and I believe you also realized it, that this was the kind of decoupling of the paper and the physical market. There were really high premiums asked for the physical deliveries of crude oil. Then we even learned that some of the big traders tried to issue kind of tenders to run, so we got a confirmation for a vessel, then next day we were asked to submit a bid. This was the learning there. In terms of the processing itself, we had our view what kind of crudes and crude baskets we would like to process once the Druzhba is stopped.
In terms of this, we did not get all the time those crudes or those crudes were rather expensive, so we were forced to go for a different crude basket. In terms of this, I would like to praise the team that we were very agile to select the proper crude basket, and we were able to run the refineries and to supply the market. There was another learning there. The third learning I would share is the backlog of the vessels. There is some experience that the European refineries book the vessels for one month in advance. The Asian countries for two months, while in the U.S. it's rather very much on time. There was another learning.
In case of these disruptions and volatility, probably one month is not sufficient once those elements of extra bidding and problems comes. The fourth one was with the Adria pipeline. We learned that the crudes with higher density and the low temperature environment, so there could be some hiccups in the system. For this reason, we are pushing even more that we would like to test the whole system. Yeah. Regarding your second part of the question, what would happen or how we are going to or what is the scenario once there is another Druzhba stoppage. I think that we are ready. We keep a high level of inventories. Now we got an experience processing different crudes. Yeah. I think that we are ready for this situation. A good question.
Thank you very much.
Okay. Thank you.
Thank you. I see Anna has a follow-up question. Please go ahead.
Yes. Thank you very much. A follow-up to Oleg's question. You mentioned which taxes, special taxes could be in theory, uplifted or where you see more probability. You didn't mention windfall tax on Urals spread differential. Do you think there is possibility for it to be abolished at some point? Of course, currently the price, and the differential is not there, but in normalized environment.
In case, if I may answer. In case of the normalized environment, I believe that this Brent to Urals crude differentials get back to normal. Historically, I believe it was around $1 and $2. This would be my best guess, yeah.
Probably not that normalized. Meaning like we will be back in the sanction regime, and there could be a bit higher differential on Urals again. Do you think with the new government in Hungary, the windfall tax on the difference, could be abolished or will it stay?
Let me take this question. Thank you very much, Anna, for pointing out. The Brent-Urals tax has been extended until the end of 2026. At the moment, this is the information we have. There is no signs pro or contra whether the position is going to be changed. On the other hand, as George mentioned, we are all always welcoming the business-friendly environment. I think down the road, how the government is going to decide, I think this is, you know, this is not to comment by ourselves, but also I think it's quite important to mention that if there is a premium, Urals is traded, I think the whole notion of the taxation is questionable.
Thank you very much.
Thank you. Thank you. Adam, please go ahead with your question.
Hi. Hello. Just to confirm, because you showed that there is premium of Urals oil to Brent oil, but it's Indian market. In the European market, are you paying also premium, or are you paying, or there is differential? It seems, based on my estimate, that there could be differential. Thanks.
I would not share with you the specific number, but it's heavily dependent, and it's good observation. I also mentioned it that the DAP India has to be adjusted by the different logistics route. The logistics cost have a very high impact of that number, which is varying a lot, the logistic cost itself. Thank you for the question.
Okay. Thank you very much, ladies and gentlemen, for your participation on today's call. Please do reach out to Investor Relations if you have anything to follow up with. Have a nice day, and thank you very much. Goodbye.