MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság (MOL) Earnings Call Transcript & Summary

All right. So good morning to everyone once again, and welcome to MOL's First Quarter 2020 Earnings Conference Call. My name is Robert Rethy, and I'm heading the Investor Relations at MOL Group. As far as I can see now, we have all -- at least all of our speakers online, which is very important for this call, but also quite a large group of participants. So thanks very much for joining this call. We -- I have senior management with me on this call, usual lineup. So we have József Simola, the Group Chief Financial Officer. We have Dr. Berislav Gaso, Executive Vice President of Upstream; Ferenc Horváth, the EVP of Downstream; and Péter Ratatics, the Executive Vice President of Consumer Services. On this call, as you probably have noticed, this is a slight difference in format due to the current situation. So we'll be using this Microsoft Teams platform for conducting this conference call. This is pretty much what we are doing everything internally and externally these days. Hopefully, it's going to work. The slight change is that this is a call without an operator. So I will be operating the Q&A session. [Operator Instructions] Otherwise, we will be using the presentation as usual. So we're sharing the slides in Teams but also, as usual, can be downloaded on our website, molgroup.info. And as usual, before we start just on Page 2, I would like to draw your attention to the disclaimer and cautionary statement. And with that, I would hand it over to József Simola, who will summarize the financials of the first quarter. Thanks very much.

Thank you, Robert, and good morning, ladies and gentlemen. I would start on Page 5. And just continuing what Robert said that that's a bit unusual. I guess in -- for you, it's less unusual because it's a bit of a technical change, but we actually used to sit together in a conference room with the other management members when we do this call. So it's a bit of a change for us, but I guess that's the new reality we have to get used to. And this new reality is actually already, I think, reflecting in the first quarter result, which is a bit of a 2-in-1 first quarter. The last 2 or 3 weeks already in the pandemic situation, and before that, actually 2.5 months of solid performance in a normal environment. And I think that's what you see in the results. So a strong CCS EBITDA number on one side, a pretty normal CapEx number in the first quarter. However, in the CCS revaluation and the [indiscernible] and actually a bit lower volumes in retail, already visible signs of the new reality. In terms of looking ahead and guidance, at this point of time, we don't think we're in a position that actually makes sense to give you any guidance in terms of refinery margins within a few weeks' time between the $15 and $4. Clearly, everything is very volatile. I think we will be in a position after the second quarter also in terms of the -- even at half year past, and I would expect by that time, more -- less volatility and a more clear outlook, what's this new reality means for us and for the industry. Again, CapEx guidance unchanged from the change, that $1.5 billion. So we took back this year. And actually, we may -- depending on supply chain issues and other things, we may spend slightly below that. In terms of EBITDA, I think the range is still why -- probably if you put in the kind of basic numbers in your spreadsheet and you can end up somewhere between $1.5 billion and -- or $1.6 billion and $2 billion. And as I said, we will see more clarity on this after the second quarter. So let's go to Page 9, a quick pandemic and ESG review. It's very important that -- because of business continuity and because of the [ urgent ] activity, we have to keep on the operations, and that's why the safety of our employees is very important. We are kind of fully equipped with PPE, masks, gloves, everything at the critical sites where regulation allows. We also do mass testing of our employees. For some of you who are not from the region, I think Central Eastern Europe, the core region, is much less hit than Western Europe and in the U.S., but I think we have to be prepared for a longer pandemic situation in this respect. On the ESG side, I think again the external confirmations coming in -- maybe the one I would highlight is that again, we score very high on the Sustainalytics review, the second lowest risk among the top 45 global integrated oil and gas. However, I think as a reminder for our industry, that earns us a mid-range position in the general company population. If you go to Page 11, EBITDA. So as I said, the CCS number is a strong number driven very much by Downstream and within that by refining. And in a few minutes, Ferenc will speak about that. In the Upstream and Consumer Services, already visible signs of lower oil and gas prices. And in Consumer Services, the kind of -- the volume hit in the last couple of weeks of the quarter did not allow us actually to surpass the year before results. If you go to next page, CapEx. No surprises here in the $300 million range as the year before. However, as I said, looking ahead, we expect much lower spending this year, $1.5 billion guidance with the continuation of the -- all the key strategic projects, like the polyol and the seasonal CapEx more to next year. And also that's true actually for the CMS spending. If you go to the next page. From the EBITDA and the CapEx numbers, again, a strong simplified free cash flow generation. Essentially, all the segments were cash flow positive in the first quarter, which, of course, we start to do in the remaining part of the year, but that will also depend on the -- on external environment. If you go to next page, the below EBITDA lines. And here, as I said already, very visible signs of the new reality. First is a large CCS modification, around 1/3 of the CCS EBITDA coming from the inventory holding evaluation, which was only partly offset by some hedging gains. DD&A was very much in the normalized level. The total finance loss, $288 million, a sizable part is coming from the weakening of the forint, 10% weakening of the forint compared to the dollar and 9% to the euro. But there is also, in $100-odd million magnitude, a special item which is an IFRS technicality that is related to the ESG transaction, where only of the revaluation of the liability side in the P&L and the gain on the asset side was booked to the equity through the other comprehensive income line. So that will show up in the FX -- or in the P&L and the FX losses/gains. Associates line is smaller. The Pearl contribution, which is positive, missing in Q1, will be booked later in Q2. And tax expenses, I have to say, unfortunately, very small because essentially, most of the larger operating companies did not have a corporate tax base in the first quarter because of the FX revaluation. Now if we go to the operating cash flow on Page 15. Probably the one item which probably catches your eye is the change in the working capital. That's very much a seasonal item and driven by the large decline in payables. Because of the low oil prices, we also started to see a decline in the inventory and in the value of the inventory and partly receivables, but the payables is very much connected to the CapEx spending, which is seasonally the highest in the fourth quarter, and that actually had the impact on the first quarter in a large decline in payables. And if we go to the last page of the financial part, which is 16. Essentially, no material change in net debt. Net debt to EBITDA is calculated with the IFRS EBITDA, and that's why actually a slight increase in the net debt to EBITDA, no change in gearing. And actually, it's slightly lower net debt at the end of the first quarter. And we -- after the ACG transaction, which was closed after the first quarter, we still have a $2.5 billion liquidity in cash and equivalents and long-term undrawn facilities with a relatively long maturity. So 75% is actually expiring in '22 or later. And our investment-grade credit rating has been recently confirmed stable outlook at all major rating agencies. So I think in terms of balance sheet and reserves and liquidity, I think we have a solid position to look ahead into the coming months. And with this, I'd like to hand over to Ferenc Horváth, who will present the Downstream results.

Thank you, József. Good morning to everybody. A few words on the first quarter and the short-term data in April and on recent trends. As you can see, as to the external environment, refinery margins were fairly supportive in January, February at around $4, $5 per barrel. And then it's even jumped to a double-digit range when oil prices collapsed less and stayed there until late April. Two things provided the strong margins in that period: the Urals-Brent spread, which was temporarily widened to $5 per barrel. Unfortunately, now it's around 0. And also, the distillate cracks has increased in -- markedly in the period. Currently, when we speak, we can see that the general refinery margin is back roughly around $3 or $4 level, and we see a quite high uncertainty for the future. Petchem margins started the year super impressive, even below EUR 300 per ton level, and they also jumped and doubled when the oil price collapsed. And now we have been enjoying than -- a higher margin than EUR 600 per ton. But even they -- we see quite a strong EUR 500 per ton petchem margin. I'm much more optimistic on the back-end external environment mainly because of 2 reasons: one, that the demand current situation and the output is still much stronger for our petrochemical product than for fuels; and the second thing, the very low oil price turned the quarter upside down, making the European naphtha base like our producers' most competitive crackers, allowing them to earn much better margins than the competitors. And now let's jump to the next slide, which gives an answer why our Downstream EBITDA has been doubled compared to last year, and we have reached almost USD 300 million, which, first of all, was very clearly driven by an outstanding refining performance as petchem was down year-on-year due to lower margins. So in -- what has happened in refining, as you can see on the page, our headline margin doubled year-on-year and improved more than $3 per barrel. This was a huge impact. On top of that, this margin is also hardened materially at the time of radical falling prices, and we are also focusing very much on the sales margin currently. We also benefited from significantly lower energy cost and -- as well as from favorable FX [ due to dip in ] Hungarian forint. It's also true that comparing to the base year, the base was relatively low, and that's why the jump was bigger. As to the volumes, what you can see that the -- on the volume part, we were a little bit negative comparing to last year. Although I have to tell you that, that 5% decline was coming in March and it was mainly originated from Italy and from our outlet markets. And that's why it has no significant or even no little impact on our EBITDA generation. Generally, what I can confirm that in the first quarter, our sales and market shares were very much flattish comparing to the last year. And now a little bit about the April and the current operational issues. As we also said earlier, our refineries in April were running between 70%, 75% capacity utilization in order to match the declined demand mainly in April. And the steam crackers were above 90% given the much better demand trend from the -- for our key plastic products. All logistics are operational with smaller or bigger hiccups and challenges here and there but up and running, and we can fulfill all the value chain tasks to deliver the goods to our consumers. Due to the recent relaxation measures and the pickup in demand, what we experienced already end of April, we now see potential for a small increase in our refinery [ rounding ] in May at the level of roughly 80-ish percent, and we see even higher potential to increase the capacity utilization of our crackers in the petchem area where we are targeting -- or we are -- we have reached already 98% -- 95% and we are targeting to go even higher. And now with that, I would hand it over to Péter, Péter Ratatics, who will walk us through the Consumer Service segment.

Thank you very much, Ferenc, and good morning to everyone. I really hope that you are still healthy, and I wish you to stay like that. I also would follow the pattern of what Ferenc just started. I would also break it into 2 parts, my brief update to you: first, quickly summarize and cover the first quarter results; and then to give you a bit of an overview or highlights about the [ April ] trends and figures. So first, I can say that as Mr. Simola just mentioned, the first quarter was quite a 2-phased quarter for us. The first 2.5 months actually was extremely good. We just followed the previous year's pattern and trends both from fuel and also from nonfuel point of view. We were above the base in every categories, and the year just started very nicely. And then after actually the last 2, 3 weeks of March was a very big negative surprise because of -- that's one for us. Actually, with all of the region-wide lockdowns, practically both the fuel and the nonfuel numbers were hitting very heavily. However, as a combined 3 months first quarter effect on numbers, I can say that I'm still quite satisfied with it because it's practically on the level -- or even on local currency terms, we are above the last year similar period. However, here, I have to emphasize that as you can see, even in the first quarter reported numbers and that's what we experienced through April as well. The very strong dollar compared to the local currencies would deteriorate further the reporting numbers of the consumer segment. However, on the underlying business performance in the first quarter, actually, it was solid and positive. And now actually, what has happened since mid-March and actually throughout the April period? Let's start with the fuel first. Actually, the fuel sales collapsed but we -- I think we reached the bottom quite quickly at the end of March, beginning of April. At that time, actually, the lowest numbers were minus 40%, 45% sales figures compared to the base period. And then later on, throughout April actually, a slow recovery trend started to formulate. And by the end of April, actually, we reached the 30 -- around 35% sales performance compared to the base. This is more about the fuel volumes, a slight positive kind of compensation on this part in terms of the fuel margins that the relatively low crude price and bottom price environment gives us more maneuvering possibilities to optimizing the unit margins. So that actually helped us a bit to manage better the general -- the overall fuel margin. On the nonfuel part or the nonfuel side, that was also a real roller-coaster. The initial decline was even steeper than for the fuel, obviously caused by the very harsh, immediate regulatory restrictions, the hygienic measures, ban of fresh food sales, closure of restaurant areas that hit very heavily the gastro sales. But actually, we started to get better very quickly, partially external reasons that helped us in a few countries, actually with some other traditional retailers who had closed down entirely either through the weekend or after 5 p.m. in the working days as well. And obviously, that channeled the customers into our network, into our sales, into our shops. And parallel with that, obviously, we immediately started to increase the SKU numbers or the product numbers of the groceries and hygienic products. And as a combined effect of that, practically at the end of April, we reached roughly 10% negative performance compared to the base period. And as far as the financial concerns and a bit of -- on outlook for the upcoming period as well. Obviously, all the measures, what we made for the OpEx revisions and decrease the OpEx spendings and also the CapEx measures, we postponed several projects that was in the pipeline. We did not cancel it. We just postponed it. And we are actively looking at the external environment when we can continue those product -- projects. But as a result of the OpEx and CapEx measures, actually even appropriate, we believe the bottom was the retail and the consumer segment was comfortably positive both from EBITDA and free cash flow point of view. And I really hope that -- as Ferenc also mentioned that in the upcoming few weeks and months, we're not just continuing the increase in trends, but also we can get quickly to the normal kind of operational, more-than-normal sales figures, what we experienced before this crisis. So thank you very much. That was on my end. And I would like to hand over the word to Beri, who will give the color on the Upstream part. Thank you.

Thank you, Péter. I won't spend too much time either on the first quarter as that's largely history now but allow me to start with saying that Upstream EBITDA fell to $185 million in the first quarter, reflecting actually 2 months of strong performance, like you have seen in the other businesses. And then that, of course, was hit by the collapsing oil price in March. And quarterly average Brent was down 21%. Gas prices have been falling further. But on the spot price side, Brent fell actually into the teens by the end of March, and that is a phenomenon that we have not seen in quite a while. This, of course, also drove down our cash flows in the first quarter and, as you've seen, hit the entire oil and gas industry, specifically upstream players, brutally in April. There's probably 3 more things I'd like to highlight on the first quarter, and then I want to move over to where we see April and how we stand today. In the first quarter -- on the slides behind basically in the rest of the Upstream material, you can see that we still made a comfortable $11 per barrel free cash flow in an oil price of $50. You will also recognize that our unit OpEx remained very competitive at $6.4 a barrel, which, of course, is very helpful in crisis times like this. And our production was broadly flat in the first quarter. In Q1, quarter-on-quarter, Hungary recovered a bit, as we expected, adding a bit to our volumes as well. Now if we move on to April and where I see things standing now. First thing that I want to mention is ACG. You all are aware of the fact that we closed the transaction and consolidated the asset onto our balance sheet as of April 16. We expect now actually ACG to contribute volumes in the range of 20,000 to 30,000 barrel per day entitlement to MOL Group, and that will largely depend [ in April ]. So the 20,000 to 30,000 per day volume range reflects basically a $30 to $60 oil price range. That's the nature of the PSA that your entitlement production is changing. It's going actually up with a lower oil price. Please feel free to reach out to Robbie and IR if you're interested in the details and if you want to understand more. Now for April specifically, this means that ACG added roughly 11,000 barrels per day to our production. However, what you need to take into account here is that the April entitlement is a preliminary entitlement which is being set when oil prices are still high. And our initial April allocation reflected also in the guidance that I just gave is at the bottom end of the range that I mentioned earlier. So it will be eventually adjusted to the top end of this range when actual prices are taken into account. Again, feel free to reach out to Robbie and IR if you need more details on that. Pakistan, if I move on, was affected strongly by the crisis in April. The simple reason is that the refinery runs in the country are significantly curtailed and that is, of course, curtailing liquid production on our side. So we have been producing at around 50% of capacity for a while now. That is kind of unfortunate, but that's clearly virus-related and COVID-related demand decline which should disappear in the future. Catcher U.K., production in the U.K. was also unfortunately negatively affected. We had an outage on the FPSO vessel in the last 10 days of April due to a gas release. Now every week that Catcher is not producing takes out annualized 250 barrels of our production. So we expect Catcher to be onstream again in the next few days. Production in general, 2020. Other international assets have also been affected at some stage but have so far been running uninterrupted. So as a result of all what I have mentioned right now -- and please take into account that there will most likely be future adjustments. On ACG, our April production averaged 110,000 barrel per day, so flat versus the second quarter. And for the full year, I expect now a production -- our production to stand at around 115,000 to 120,000 barrel per day. Again, visibility at the moment is, of course, much lower than usual, and uncertainty is elevated even in the short term, but 115,000 to 120,000 is a reasonable guidance that I see feasible for the rest of the year. Similarly, like everybody else in the industry, we have again taken, of course, crisis measures with the ultimate objective to reduce our cash breakeven costs for 2020 as much as possible. And after those crisis measures, which would be CapEx cuts, OpEx cuts and the usual things that we do when oil price actually hits a bottom, so we expect our cash breakeven costs at around $25 per barrel for 2020 for our portfolio going forward. So that's a reduction by $5 to $6 per barrel. That's all on my side, and I think we're ready to take your questions in that case.

Yes. Thanks very much, Beri. And indeed, we would be more than happy to answer any questions.

[Operator Instructions] And now I can already see the first question coming from Alex Burgansky. So Alex, please.

So I have 2 questions. So one to Ferenc, please. So can you please confirm these capacity utilization numbers that you mentioned? So in April, you're saying that it's down to 70%, 75%, and then you expect it to go up. What was the actual number in the first quarter? I calculated it at around 78%. And also, can you confirm the current sort of capacity number is correct? I think the most recent number on your website was 20.9 million tons of throughput or something of that. So I just want to put the capacity utilization numbers in line with the actual for the first quarter and also your current actual capacity. And the second question on the Upstream. So I appreciate the guidance now is 115,000 to 120,000. But if I were to use the first quarter numbers, 111,000, and then add on top of that the 20,000, 25,000 for Azerbaijan and maybe even higher than that given the lower oil price, then I'm struggling to get the 115,000 to 120,000. It will require a very significant offset in other places. So can you please just maybe elaborate on that guidance? Because it just seems low compared to the first correction plus Azerbaijan.

Thank you. Then I would start with the Downstream question regarding the capacity utilization. The numbers, what I told you, this is -- these are the aggregate numbers over -- for the entire MOL Group. And that's correct that the aggregate number for the first quarter was more than 80%, around 80% to 83%. But in order to understand it, probably it's better if we go through on the different sites. As you probably know, in our Danube refinery, the total capacity, what we calculate, is roughly 8 million tons, but generally, we only use 7 million because of the secondary units. So there is always a kind of more than 10% utilization what we only use in a very extreme environment if the margins are really very high due to the conversion unit bottleneck. Currently, let's say, our Százhalombatta unit is running around 70%, and the estimation to go higher -- the aim is to go higher by 5% to 75%. In our Bratislava refinery, actually, first quarter and also the second quarter, we are running much close to 100%. Currently, it's between 80% and 90%. Sisak refinery, as you know, there is no processing there. So the utilization is 0. And in our Rijeka refinery, the current utilization is between 60% and 70%, which is the optimum utilization for that refinery.

Can I just confirm the total capacity number? So the number on your website that I just checked today is 20.9 million tons. So is that the full number, including Sisak and doing the 8 million for Danube refinery, Százhalombatta?

Yes, yes.

So when there's -- when you calculate your 82% or whatever it is for the first quarter, do you divide your throughput by 20.9 or you divide it by a lower number to remove Sisak and remove the 1 million tons for Danube?

No. We are removing Sisak but we are not removing the 1 million tons in Danube refinery. So as you see our yearly numbers, probably that gives you our yearly processing, a good hint that last year and in the previous years, we were able to produce between 14 million and 16 million tons of products out from our refineries in circumstances when our refinery capacity utilization were almost at the maximum level in Hungary and in Slovakia and in an optimized level in Croatia.

Alex, this is Beri. Let me take the Upstream question that you have had. And probably the easiest way to answer is if we quickly decompose together the April 110,000 number, 110,000 includes ACG, okay, of 10,000 barrel per day, and I'll come to that in a second. So excluding ACG, the April estimate is roughly 100,000 barrels, okay? Now you can see that, that would be 10% down compared to the earlier quarters. There's 3 reasons for that, that I mentioned. We have a heavy hit basically on the Pakistani production because it's curtailed and it's running at 50% of capacity only in April. We had outages of the FPSO vessel in -- on the Catcher field in the U.K., which I mentioned, for almost -- yes, almost 2 weeks in April already. That took out a sizable part of production in April. And we see, of course, also some decline in Hungary and in Croatia, and that's due to 2 reasons. One is, of course, natural decline, which is inevitable and is there. The other is that we have postponed certain CapEx activities. And as a result of that, as a -- as our response to the crisis basically when we cut back on CapEx, as a result of that, there's some slight influence on the production figures. So that gives us 100,000 for the portfolio excluding ACG. Then you need to add 10,000 barrels for 2 weeks consolidation of ACG. There, however, you need to note basically that 10,000 is half of 20,000, and I gave a range of 20,000 to 30,000 depending whether it's $30 or it's $60 oil price environment. The lower the oil price, the higher your entitlement. However, April entitlement estimates are set at a higher oil price. So later on in the -- as we progress now and the real April, basically, oil price kicks in, there will be probably an adjustment to the April figure on the ACG side. So it's going to move up. And again, please reach out to Robbie. The ACG PSA, it's not the easiest thing but you will fairly quickly understand how it works if he provides you with a few more details. Now if we take all these things together, that gives us a production guidance of 115,000 to 120,000, also for the reason that we just simply don't have the same, how should I say, foresight today in April for the rest of the year as the external environment remains extremely volatile and difficult to judge. So 115,000 to 120,000 seems a reasonable, actually, production for customer side. I hope that answers your question.

And the next question will be coming from Henri Patricot. Henri? Henri, we can't hear you. Probably you're still muted.

Yes. Sorry, I was on mute. Three questions, please. First one on refining and one on CapEx. So on refining just to follow up on these comments. I was wondering if you can give us an idea of where the bottleneck is to get back to full capacity in terms of utilization. What should we be watching, gasoline, diesel demand? Can you get back to full capacity even with much lower jet fuel demand? Or is that the bottleneck? And then secondly, I was wondering if you have been adjusting your crude slate, in particular whether it's more interesting to run crudes from the Middle East rather than Urals at the moment, taking into account the discount but also the higher freight rates. And finally, on CapEx, you mentioned just briefly that CapEx could be lower than expected because of supply chain problems. How low could CapEx get this year? And what are the implication in terms of project start-ups, in particular latest expectations for the polyol project?

As to refining markets, in April, what we have experienced, that was a very quick and sudden drop in the demand overall, the whole region. For gasoline, in average, it was 40%, 50% in the first days and in the first weeks. In case of diesel, it was around 30%, 35%. After that, what we see now end of April and beginning of May that the gasoline drop is only 25%, 30-ish percent, and the diesel drop is 10% to 20% in the region. Even in some countries, we already see that the demand is very close to the last year's demand. So generally, what -- I would like to say that the demand recovery -- the demand drop was very sudden and very big, and now the recovery is very healthy. So we have good hopes that the easing of all the sanctions in our countries, the demand not quickly but slowly will get back to the normal. As to the different types of crude, that's right that as we all also did earlier, we are optimizing the [ net ] cargoes and the [ record ] deliveries by pipeline to the very hectic sweet and sour and high-sulfur and low-sulfur crude differentials. It's difficult to say what is better from the financial point of view for a longer run. Currently, we are doing the same what we did earlier that roughly 70%, 75% of our crude is coming from Russia and 20%, 25% of the crude we are supplying from the Mediterranean Sea.

And just for the CapEx -- and thanks for the question because I think it's an important clarification point that the $1.5 billion, essentially, we came to this as a financial number and the partially kind of cut project but that was more kind of shifting projects, kind of maintenance and life cycle type of projects to the next period. And essentially when arriving at the $1.5 billion, we did not take into account the external environment. But actually, in terms of actual sizable delays, I think at this point, we don't see any kind of actual risk that we may have -- I mean sizable, I mean like several hundred million dollar lower CapEx utilization from the $1.5 billion. However, in terms of -- I think there is an estimate decrease to this that I think it's highly unlikely that we will spend more than $1.5 billion, but it's possible that we will spend less than $1.5 billion.

And the next question will come from Oleg Galbur. [Operator Instructions] Oleg, you're the next.

Yes. Can you hear me?

Yes, we can.

Yes. I have a few questions. First of all, on the Upstream segment, despite weaker oil and gas prices, you did not book any asset impairments in the first quarter as other regional peers of yours did. So I was wondering is it because of your long-term price assumptions which did not trigger any impairments or there are other reasons behind not booking any impairments. And then on the Downstream segment, I understand that oil price and refining margins did help a lot the segment's astonishing performance in the first quarter. But still, I was wondering whether you could provide a little bit more color in order to understand this record high level for CCS EBITDA in the quarter, which was the highest since 2016, if I'm not wrong. So besides this positive impact of macro environment, were there other factors such as inland premium or maybe the -- some specific products which helped you realize this impressive earnings level? And just a short one on polyol. I understand that COVID could have -- or is already having an impact on the project time line. However, I was wondering whether we could expect any impact on the CapEx of the project either to increase or maybe to lower the CapEx because of COVID.

Let me start with the question on Upstream and comments. And I think the answer is fairly simple. It's 2 things basically. Number one is we have a high-quality portfolio which is break-evening at a very, very low oil price. We don't have the same issues of some guys out there who have $50 or $55 per barrel breakeven points of their assets. And that, of course, kind of requires a different accounting treatment. Secondly, impairments are not executed based on spot pricing. As you very well know, impairment is managerial judgment. We do usually asset recoverability testing towards the end of the year, and that's when impairments come on the table. And then it's a function of basically, of course, also the view that we take not only short term but also mid- to long term in terms of oil prices in which we believe.

And just extending on the impairment, as Beri said, it's usually a year-end exercise. If and when we see that there is more clarity in terms of longer-term trends on the crude price, we may come to this issue at the end of the second quarter. But generally, this is not -- so we don't react in terms of weekly changes on a crude price but wait to see kind of longer-term trends.

Okay. As to the Downstream-related questions. First of all, that -- what is the reason of this higher level of EBITDA, again, I need to repeat probably what I said at the beginning that last year first quarter was relatively weak. So the comparison -- if we compare, we need to take that effect into consideration. Secondly, that's right that the prices were falling. And in a falling price environment, the sales margins are normally higher. On the other hand, as I mentioned, we are working very hard on keeping or increasing the so-called inland premium for our products. It's also true that due to the low crude prices and due to the low energy prices, we could significantly save money on the lower energy costs. So these were -- or these are the main reasons of that performance comparing to the first quarter of last year. As to the polyol, unfortunately, that's right that it's not our decision and it's not a decision or the intention of the main contractor, thyssenkrupp, to slow down a little bit the project. Our aim is to push it as hard as we were doing so far and as we planned it. Unfortunately, because of the COVID impact, we see that the mobilization of the workforce goes much slower, and we have much more issues and problems how to mobilize the workforce. Also, we have experienced delays in procurement mainly with the major parts coming from Europe or also from China or from Thailand. These are not jeopardizing the project implementation, and the project is ongoing. Even today, more than 1,200 people are working at the site and they are already constructing. But for sure, there will be a delay due to this effect. It's currently difficult to judge. If I may forecast from my end, what I see now that it probably might be 3 to 6 months depending on the new measures and in the next month's COVID situation. As to the overall CapEx, we don't see a main reason why it should be higher, but unfortunately, we don't see the opportunity that we can lower the overall CapEx, which was planned for the project.

Very clear. Just a short one. Could you please remind us what is your long-term oil price assumption?

Sorry, it was a question to me or to you, Oszkár?

To anyone, but I can -- I think we are -- at least for midterm, we're using $50 to $70 as an oil price assumption. So basically, it's around $60. And then the next in line is Ekaterina Smyk. Please, Katya, go ahead.

Yes. So I have a couple of questions. The first one is a follow-up on what you mentioned earlier in the presentation, saying that CEE region, in general, was like much less hit compared to Western Europe. Can you please elaborate more and give some color -- quantify? Did the demand drop maybe on a project level? Because I mean, we are sort of limited in terms of actual data, right? We only have anecdotal evidence of how much demand dropped in each country. So if you can just -- and also different countries obviously entered lockdown periods in different period of times. So if you can just elaborate the current situation. For example, how CEE has compared to the rest of the Europe would be helpful. And the second question is on the petchem. Obviously, even judging by the utilization rate at your crackers and reported petchem margins, petchem was much more resilient compared to refining through this downturn -- market downturn. What are your sort of expectations going forward? Because obviously, before this COVID, we were sort of in a very tough situation. On the petchem market rate, margins were deteriorating. We had these new capacity additions coming from U.S., which could have potentially further pressured the margins. So is that thing like moving to backstage, and for the foreseeable future, you're expecting unless -- until we see a recovery, some massive recovery in oil prices, you're expecting these strong petchem margins to remain? Or do you think that it's one-off and in the near term -- in the near future, that will change?

Thank you. As I mentioned, the demand drop or the demand changes were very hectic in each and every country and very much depending on the local regulations, which were introduced in different times, as you mentioned. So -- and even that's the situation today. So what -- we can say that that's right, that the demand drop probably was and is bigger than in Western -- or smaller than in Western Europe. Currently, again, as a kind of a regional outlet from our sales point of view, what we see shows a higher drop still in case of gasoline. The different countries are varying, but the average -- I would say, the main direction is between 20% and 30% for the gasoline demand drop comparing to last year. And in case of diesel, again, there is a big variation between the different countries, but we may say that the drop is between 10% and 20%. We are -- what we see that our domestic countries are relatively strong, good news where we are supplying the biggest volumes. As to petchem, I also mentioned that I'm much more optimistic about the petchem market today, first of all, because the demand is still very stable. And that's true that the automotive industry demand is very low. But on the other hand, packaging and other plastic usage, the demand has been increasing. And from financial point of view today, it gives us the opportunity and the aim to try to reach even in May close to 100% capacity utilization of our crackers because we can run our crackers, we have feedstock and we can sell the products. It's also true that we are now delivering utility to further distance in this environment. And generally, as I mentioned at the beginning, the demand is only one thing that we see a steady demand for the petchem products. The other thing is the very low crude prices, the very low naphtha prices, which made the naphtha refineries like us much more competitive comparing to it -- in refiners or the other Arabic countries' plastic producers. So there is an overall competitiveness increase in case of the naphtha refineries.

Yes. And if I can add to this a little bit, Katya, that on the demand numbers that Ferenc mentioned, I mean things were much worse at the low point. And things are changing very fast. So the numbers, what Ferenc just gave to you, these are more or less the current or recent numbers. The low point, the drop in demand was much steeper for each product. And for jet, basically, it's 90% or more if practically jet is gone. And on the petchem margin, I mean, firstly, we wish we knew where margins will be. But again, as Ferenc mentioned, it's not about the next up cycle in petchem. So it's not like we're suddenly moving towards peak of the cycle margins because of an up cycle. It's very much a cost curve merit order issue and very sensitive to oil prices. And you can see that even in very short-term movements as the brand -- dated brands moved from $15 to $20 to $23, our margin went down from 600 to 500, still very strong. But -- so if oil price continues to go up or normalize, then I think these excess margins will be probably gone. But as long as oil price is at these depressed levels, then the petchem is giving us a nice sort of offset or the usual integrated nature of the business and the resilience, what it gives to us.

So that's how I thought it works.

Thank you. And I actually don't see any further questions. So again, if someone wants to ask a question, then this is, I would say, the last chance for now. I'm not sure if anyone has any other questions. Because if not, then as usual, obviously, you can reach out to Investor Relations any time you want. We are here to help. Otherwise, we will see each other or hear each other in 3 months' time with the second quarter numbers. Hopefully, no need to make any interim announcement and things will improve in the meantime. And stay healthy and well, and see you soon. Thanks very much. Buh-bye.