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

Good morning, ladies and gentlemen. Welcome to MOL's Second Quarter 2022 Results Conference Call. My name is Zoltan Pandi, the Head of Investor Relations. We have a lineup of management to discuss recent developments of the current quarter. Today, we'll have Dr. Gyorgy Bacsa, Executive Vice President of Group Strategic Operations and Corporate Development; Mr. Jozsef Simola, Group Chief Financial Officer; Mr. Berislav Gaso, Executive Vice President of Upstream; Mr. Gabriel Szabo, Executive Vice President of Downstream; and Mr. Peter Ratatics, Executive Vice President of Consumer Services, guiding us through the results. We continue to use Microsoft Teams as a platform to hold our conference call. The presentation can be downloaded from our website, molgroup.info, and we will be sharing the slides in Teams too. [Operator Instructions] Before we start, I'd like to draw your attention to the cautionary statement on Slide #2. Let me now hand over to Gyorgy Bacsa, who will take us through the highlights of the second quarter of 2022.

Thank you, Zoltan, and I would like to welcome everyone on this quarterly call. Definitely, I think one is looking back and analyzing the second quarter figures. But most importantly I think everyone is very, very interested how we see -- how you see the upcoming half year. So let's look at the financials. The delivery of the group is in line or even ahead of our target. So you could see that in the second quarter, our EBITDA -- group level EBITDA is USD 1.35 billion. The first half result is around USD 2.2 billion. The CapEx spending is however lower than 50% for annual guidance, but you also experienced that in our sector the first half is always lagging behind. There is always slower start. Operational KPIs are also largely in line and we will go into details at the segment part and sections. However, I think that if you look at the right side of a column -- of a usual chart or guidance 2022, we updated our guidance, but this update also represents the uncertainties. And here uncertainties, I mean, complex set of uncertainties -- regulatory uncertainties, market driven uncertainties, macro uncertainties, state, new and global level as well. So we need to take a cautious approach. We definitely cannot extrapolate the first half results to the second half. And if you see our update is around USD 3.3 billion EBITDA for the whole year. This cautious approach is fully justified. We have increasing government tax, especially in factory, where it was just recently announced that the Brent-Ural spread increased from 25% to 40%. We have to pay extra royalties, we have to pay increased retail taxes and we are still having a price cut in wholesale and retail in effect. Price capping is also in effect in other countries, and special taxes coming or windfall that is, was also applied in several jurisdictions. So there is a clear symptom of increasing government tax. The most driver behind is to have the fiscal issues on the host countries. There is also an early sign to slow down. I wouldn't say that recession, because economist say that still not recession. However, the probability of recession is very visible -- the increased probability. Petchem margins are shrinking, refining margins also came up from the highs. So all guidance also assumes the global slowdown or even a recession in the second half of the year, which will come sooner rather than later. And I didn't even want to go into details of the sanctions of the world. How our supply vulnerability could affect our operation since we are mainly exposed to the pipeline supply for crude index. So just going back to the guidance -- the financial guidance, the simplified free cash flow generation ability of the group, were still above USD 1.5 billion, even if the CapEx spend picks up. If you go to the next slide -- may I? So we don't normally show Hungarian operations standalone with this, but this time we have to do it. We have to do it, because here you can see that what would have been the Hungarian operations, so MOL Plc and MPC. So the combined petrochemical and refining marketing and upstream relation. So the standalone Hungarian operation, on the left-side, you can see the EBITDA generation potential. However, you could also see the very significant impact of the government take, USD 580 million. It's 90% of the total government take affecting our operation. There is a fuel price cap in wholesale and retail. There was a 25% Brent-Ural spread tax -- special tax payable, now we do the increase with 4% and we begin to do retrospectively. So the 25% was introduced retrospectively, so we should have booked it for the entire period. There is increased retail tax and of course in second half, we have to cut also with [indiscernible] basis. There is, of course, a significant working capital change that we have to also finance. So all in all, you can see that the cash flow of the Hungarian operation turned to red, so it's USD 1.57 million (sic) [ USD 157 million ] minus. If you go to the next slide, I don't want to go again into details. You can see the summary of the financial results. 2 main points, again, to be highlighted. The total government pay is around USD 640 million and 90% relates to Hungary. And there is also a positive news that finally ICSID arbitration resulted in a positive outcome. It's already the second international arbitration ruling in favor of MOL and rejected Croatia's claim on all charges -- criminal charges at all. And this award gave us USD 236 million damages -- U.S. dollar damages for the breach of contract. If you go to the next slide, there is no major change in the safety performance. So you could see that our TRIR over improving year-on-year. But of course, we are still little bit behind of our target this 1.2 [ level ]. And the last one, which is again, the new business, I would like to just briefly touch upon the 3 expanding into the circular economy. That we signed the 35 years concession for Hungary. It's a country wide concession for all municipal solid waste collection treatment, and we will be the single licensor for it. So we see the valuation creation potential of this business. It's a long term investment on our side. It's a long term commitment. And this is the first time that we discuss it, but from now on it will be a standard element, and it will be an increased part of operation and for report as well. So here, I would like to give the floor to Jozsef and who will guide you through the financials in details.

Thank you, Gyorgy, and good morning, ladies and gentlemen. Let's start on Page 11. As usual with a quick segment EBITDA overview. As in the previous quarter, the 2 major contributors or the 2 major engines of the EBITDA generations are our traditional hydrocarbon businesses, the upstream and the downstream. We see increase also in the upstream business on a quarter-on-quarter basis. And clearly, major and significant increase in the downstream business. As usual, you will hear a detailed coverage of the 3 major segments later on from the business leaders. Gas Midstream, the first half year results, very much similar to the previous year. But clearly, the outlook for the second half of the year is much weaker. The high gas prices where gas is used as energy source for the gas transportation business, clearly will have a negative impact on the EBITDA generation capability. The C&O intersegment segment higher than usual number. The reason for this one-off items in the magnitude of around USD 50 million in the C&O line and an increase, i.e., higher negative number on the intersegment line due to the higher inventory elimination increased number. Let's go to Page 12 to CapEx. The last quarter's figure USD 334 million, very much in line with the previous quarter and with the previous year pattern. As Gyorgy mentioned, we clearly expect the seasonality to kick in, in the fourth quarter. And with this, we keep our guidance at the original level. Clearly, we have no restrictions -- financial restrictions on CapEx spending or no -- any change in the plans. However, I think we, as probably everybody else is experiencing, smaller supply chain issues. So with this, probably we'll expect to be on the lower end of the guidance. Now let's jump to Page 14, the below EBITDA items. The CCS modification is a small positive number essentially coming from the generally much higher positive replacement modification impact, which was counterbalanced in the first half of the year with the results of the derivative hedge transactions. So the CCS number, overall, a small positive number. No special items in the first half of the year. DD&A and impairment USD 495 million. Please note that the indicated USD 131 million reversal for the first half of the year from this USD 121 million was already booked in the first quarter. So actually the remaining net number for the second quarter, USD 306 million DD&A is fully in line with the indicated quarterly going rate -- what we indicated in the last call around USD 300 million. Total finance loss, which is the USD 68 million minus for the first half of the year, and actually, the Q2 number is minus USD 71 million. The key driver is the weakening of the forint, 14% to the dollar, 7% to the euro, quarter-on-quarter. And please keep in mind that as usual that this number is -- already includes the result of the net investment hedge accounting. Income from associates, USD 12 million coming from Q2 from Pearl and BTC contribution. And income tax expense on the cash line -- under the corporate income tax line, slightly higher number in Q2 than in Q1, but generally indicates the higher profitability of our major businesses. Non-controlling interest, again, a negative number in the Q2, but that essentially represent a positive business contribution from INA to the MOL Group business. Now let's go to Page 15, the operating cash flow. The other item in Q2 similarly to Q1 is the commodity derivative fair value change contribution to the operating cash flow. And probably the most interesting item is a change in the working capital which was a build off of USD 1.2 billion in the first quarter and an additional USD 453 million in Q2, partially coming from price impact. We had a USD 10 quarter-on-quarter Brent increase, but also volumetric impact. This represent, I think the -- essentially all of our tanks full before the turnaround season and due to the uncertainties in the current situation. We expect here also the usual seasonality. So a flat, almost likely, even decreasing number in the next 2 quarters due to volume impact and also potentially due to price impact. And let's go to Page 16, the balance sheet. I mean, the positive cash flow generation is visible in the net debt to EBITDA gearing and also in the decreasing net debt. And with this, I'd like to hand it over to Gabriel Szabo who will cover for you the Downstream business results.

Thank you very much, Jozsef. Good morning, ladies gentlemen. So as you can see in the reported period, Downstream delivered a strong CCS EBITDA of USD 860 million. This is almost double the result compared to the same period last year. While in 2022, the performance was driven mainly by petchem. In 2022, the extremely high macroenvironment coupled with the increased demand for fuels in the region were driving our performance in Downstream. Generally, the demand of fuels in -- increased in the region, but Hungary stands out with the 11% increase year-on-year. Asset operation is extremely demanding due to the several complex turnarounds this year. So we have just come back from more than 60 days turnaround its long enough and also accomplished in the reported period, the Life Time Extension program for the Steam Cracker in MPK, which was also done parallelly with the turnaround there, and this is also reflected in the lower sales of petrochemicals. Speaking about the demanding maintenance period, we just started this week the turnaround in our batta refinery -- Szazhalombatta refinery. When we speak about the projects and MPC, I have to also mention our major investments Polyol. So there are no critical construction works left on site. But in spite of this, I have to report a shift of the mechanical completion to 2023. So what we see that the contractor has difficulties in pre-commissioning activities and because of market tightness and this is causing delays of some units' handover. So now I would like to turn your attention to the macro. So in terms of the macro environment indicators, I'm pretty sure that you are aware of the changes in publishing the data due to the recent events, including also the governmental measures, which makes the performance calculation based on refinery margin only rather complex. So now we report the refining margin based on Brent quotation separately from Brent-Ural spread. Speaking about the Brent-Ural spread, so during the reported period, all of us learned that the market can achieve extremes, not imagined before, so USD 34-USD 35 discount on Ural crude still valid today. In terms of the refining margin, there is generally still stretched fuel market reaction on several embargo packages drove the refining margins to the levels of USD 20, but it started to normalize in July. In terms of the petchem margin, more than 1/3 lower year-on-year. And currently, as my colleagues mentioned before, reflecting the slowdown of petchem segment. In my last slide, the bottom flowchart showing the breakdown of EBITDA difference of the reported period and also the 6 months year-on-year. So as mentioned before, the refining business, thanks to the macroenvironment and with this mainly thanks to the Brent-Ural spread were the driving force of the results. Petchem performance as mentioned, had having negative impact due to the lower margin but also lower sales as the result of the major turnarounds in the second quarter this year. I would like to also speak about the energy prices, which have not just the negative impact for the -- for our production units, but also for the other areas in downstream as logistics, and this is clearly seen in the category of others in the graph. Speaking about the negative impacts, there is also another one, which is not projected on my slide, but I believe very important to mention, and this is, I would call it, opportunity lost category due to the governmental measures. The negative impact of these measures in Downstream is around USD 450 million and rough majority of this is coming from the Hungary because of the price cut and windfall tax from Hungary. As Mr. Bacsa mentioned, also a recent change, so from August on, a windfall tax will be increased from 25% to 40%, but there are also some changes related to the customer segment eligible for the regulated price of fuel. I believe that much more visible impact of these negative impacts and the governmental measures is seen within the Consumer Services segment. And with this, I would hand over the presentation to Peter. Peter?

Thank you very much, Gabriel, and good morning to everyone. Well, unfortunately, I can't have too many good news after the recent period. Obviously, the EBITDA decreased significantly actually by 72% year-on-year to USD 46 million, mainly due to the price cap regulation in numerous countries, starting with Hungary, Slovenia, Croatia, Serbia, Slovenia and also Bosnia and Herzegovina and also on the other countries, what I haven't listed on those countries, the high total price environment put a significant pressure on the unit margins. Well, in the entire half year compared to the previous period, the decrease is 60%, and that obviously hit negatively the free cash flow generation as well. Just the fuel price regulation itself cost us in the first half of the year USD 140 million loss or opportunity lost -- profit loss from the fuel margin generation. And out of this USD 140 million, USD 90 million came from the Hungarian price regulation. And if that wouldn't be enough, then an additional negative impact hitting the Hungarian operation is the retail tax -- well, the special tax and the supplement of the special tax. So actually, we are talking about now 2 type of taxes here in Hungary based on the revenue, what we generate in the retail operation. Actually, the one-off effect is USD 19 million for the entire year. However, we booked it in the last month of the second quarter, so actually in June that was hit additionally significantly the second quarter result. But all in all, in this half year period, including this one-off inclusion, the retail tax achieved or reached the USD 34 million in total. And as a third kind of negative effect alongside of the increasing utility prices and also the salary or wage pressures, the inflation, the OpEx also increased and that's something that we also have to manage with the different efficiency improvement initiatives. But the only and probably the positive side of this entire situation, what I want to highlight here is not just in offshore margin where we were capable to continue the sales increase and also the margin increase, but obviously, we have to consider this period as a customer acquisition opportunity. The supply chain disruptions or the problems of the market, create us an additional opportunity to try to focus as much as we can on the customer satisfaction and the fuel availability for the customers. That's where we can be better at the moment than the competitors. And that's what probably gives us some additional opportunity to acquire new customers and let them try what we can offer next to the fuel. So let's turn the page -- to the fuel one that I can have a bit deeper dive. If I just look at this slide, then I should be very, very happy. Obviously, on this slide, I can just explain the fuel or the volumetric performance. And you can see that from volumetric consumption point of view, sales numbers point of view from the fuel side, results are extremely good, extremely high, both from the total volume sales and also fuel throughput per site. Practically, in some of these sites, some of the regions we even faced with logistical and capacity problems to satisfy more and more demand. So I think in this point, we have nothing more to wish, only the unit margin is the problem at the moment. If you turn the page to the non-fuel one, to the next slide. Then this is the real highlights. From sales point of view compared to the previous year same quarter, 11% more sales on local currency terms. And from non-fuel margin generation capability, that means 22%. So, 2 main message. Sales is booming at higher. The transaction number is significantly higher. Also, we were capable to manage fairly good the basket size constitution, so more value-added product, we were capable to offer to the customers, and they seemingly like to use it. That results a higher non-fuel margin increase percentage. The hero product in this period was the hotdog and the sandwich for us, so mainly the grocery category was the higher or the highest contributor. And within the gastro the hotdog was now the hero where actually 60% higher sales were generated, but also the sandwich category we improved significantly the assortment, completely new ingredients and also placement and product pricing strategy we introduced. And as a result of that even the sandwich sales grew by 40%. The Fresh Corner sites, reconstructions and the pursuing of this strategy did not change. So we're still continuing the reconstruction and the transformation of the whole industry or the whole operation from our end and we also prepared ourselves for the Polish market entry, not just from network development but also from offer point of view. And if we turn the page -- to the last one, then I can just clearly represent here or present to you the Hungarian situation. Obviously, from economic point of view it's a disaster. The free cash flow generation in this period turned to negative. And if we compare it to the previous year same quarter, then the difference is roughly USD 55 million. Now, for the second half, we have a bit higher hopes since recently the Hungarian government changed the eligibility regulation for the 480 regulated priced customers. And out of we hope that the unit margin can be improved and potentially we can somewhat come back to the positive territory. As a closing words, the focus -- the clear focus for us now is the customer acquisition. As I said, the loyalty customer base increased significantly over on this period. For example, the application download reached more than 1,100,000 customers, and that's an increase of 176% compared to the last year first half and also the active loyalty customer number reached 1,500,000. That's a significant increase and a significant customer base. So this is what can be of good hope for the future once the external situation, environment, the regulations would change and we can turn back to the normal conditions and the normal competitive environment. So thanks very much for listening me and now let me pass the word to the Upstream part to Beri.

Good morning, and welcome to the Upstream presentation of second quarter results. I'm pleased to report that E&P improved again. Excluding U.K., EBITDA stands at USD 576 million for the second quarter. That's a 14% improvement quarter-on-quarter and over 104 percentage points year-over-year. That of course led also to significant improvement in simplified free cash flow generation. We see material improvement of USD 504 million for the second quarter or USD 924 million year-to-date, which makes Upstream the largest free cash flow contributor of the group. Maybe 2 reflections on the macro environment. Oil prices reached a USD 113.8 per barrel in the second quarter and gas averaged a EUR 100.2 a megawatt hour. The equivalent in dollar per barrel terms is a USD 195.8 million. And I think what we did is previously gas was represented on a CEGH their hub basis. We changed this now to TTF months ahead, which significantly better reflects basically underlying realized prices. The second thing, as that question might probably come during Q&A, so I'm just going to give you a quick insight into impact of spot gas prices. Unrealized Upstream gas prices and spot exposure for the relevant CE parts, we've had that also in prior calls, but Hungary roughly 66% of the volume is spots driven. Again, that's quotation the rest is regulated. And in Croatia, we actually do not have exposure to regulated gas, but the portfolio is split between flexible and longer-term contracts with various pricing methods. However, short-term spot exposure -- and there again, CEGH quotation prevails decreased from 45% to 75% by the second quarter or in terms of second versus first quarter. And in addition, the contracted portfolio realized gas prices improved by roughly 10% quarter-on-quarter. If you move to the next page that's the standard page about unit free cash flow. Strong in the second quarter, above USD 60 a barrel or USD 62 to be precise. In terms of unit free cash flow, USD 57 million, if you think of it in terms of year-to-date basis. Now what is going to happen in the second part of this year, if you assume everything else being equal, i.e., basically macroenvironment being roughly similar, then royalty increases in Hungary, of course, will be impacting both oil and gas starting August. So for 5 months -- for the residual 5 months of the year starting August, the windfall taxation package will kick in. And the best way for you to think about this or to model this is, if you assume that royalty rates will be increased around 3x impacting 70% of the Hungarian production. So there wouldn't be a full impact on the entire portfolio. You think about 70% of the royalty base or the 70% of the Hungarian production and then that multiplied by 3, that should give you a good proxy. Next page. It's the usual EBITDA bridge. Large positive price impact, both quarter-on-quarter and year-over-year, mainly driven basically by stronger Brent prices and by growing gas prices, partly offset volumes mainly caused by somewhat lower working interest volumes in ACG, and again, that's to some extent also down to the PSA mechanism. And the slight production decrease in CEE where we managed to successfully manage basically decline. You can see that also on the next page. Our production stands now at 92,000 barrels per day in the second quarter. In terms of quarter-to-quarter comparison we're down roughly by 1,700 barrels per day, 600 barrel coming from associates. Pearl decreased due to lower seasonal gas demand. You see that basically every summer. And then ACG down 600 barrels per day due to natural decline plant turnarounds and production deferrals. On a year-over-year comparison, we're down 5,900 barrels. The ACG difference of 3,300 barrel is due to natural decline and partly change in entitlement share. I think the one positive thing that I would like to highlight here on top of everything else is that CEE declined on a year-by-year basis only by 2,100 barrels per day, which is only a 3.6% year-over-year decline ratio. For the rest of the year, our production guidance of 90,000 plus remains intact. And then the last page basically business as usual, very strong unit OpEx performance. And unit OpEx of continuing operations, i.e., excluding U.K. decreased USD 4.8 per barrel quarter-by-quarter, also in line with stronger dollar or stronger FX that we see in the second quarter. Average unit OpEx improved by more than a USD 1 due to the impact of the U.K. divestment. And I think on the CapEx side, we're down basically USD 32 million year-over-year. That decrease is fully driven basically by our -- by the exit of Norway and no more exploration spending there. This is for the Upstream division. Thank you very much. And now I'd like to hand back to Zoli to start the Q&A.

Thanks very much, Beri. So indeed, at this point, we'll open up for the Q&A. [Operator Instructions] I believe we have a question coming in from Ildar Khaziev, HSBC.

Just a clarifying question on the impact of the fiscal measures in Hungary and other countries. Could you quantify separately the impact of the windfall profit tax and the fuel price cap separately as possible. And then maybe a second question was about the royalty tax rate changes. Could you maybe clarify what exactly is happening and what kind of tax rate are you expecting.

So if I may start just as a kind of magnitude guidance and can give that the impact of the governmental interventions. So, 75% is because of the price caps, so the wholesale and retail fuel price caps, and 25% is the impact of the windfall taxes. Of course, for the past it's, we could quantify for the future. Of course, it depends. It depends on quantities spread of the that was there. But the magnitude so far is what I said that 3 forces is the effect of the caps, and [indiscernible] forces the effect of the before taxes. Sorry what was the second question?

Yes. I think you mentioned when talking about Upstream, you mentioned the royalty tax changes. Maybe if you could elaborate what is happening exactly.

So the royalty effect for this year is circa USD 200 million. So that's increased level of royalty, because of -- so new rates introduced this is the change in our strategy.

And what are these rates exactly? I mean from -- is it a single rate change or it's a number of different taxes?

It's a formula, the royalty rate. I think it's publicly available. So there is 2 variable elements and the government changed both. So not only the percentage rates, but also the -- I have problem with the English term, but if someone can help me out that -- [Foreign Language]. But that one also changed.

Thanks Ildar. Then I believe we also have a question from Tomasz Sokolowski, Santander.

Tomasz Sokolowski, Santander. Just 2 questions. The first one refers to Urals. What was the share of Urals in your throughput in the first half? And what do you expect it to be in the remainder of the year? And the second question refers to the environment in Downstream. And actually, I'm wondering what effect -- what is the effect of the price regulations on the structure of the wholesale market in Hungary. Whether you increased your market share or whether you saw some new competitors exiting permanently or how do you think it will evolve going forward?

Thank you very much. Gabriel Szabo speaking. So in terms of the Urals processing, so in the first quarter, we still process some seaborne crude, but the economics has driven our direction for full Urals during the second quarter this year. So there was, of course, some minor part from the domestic crude reservoirs, but vast majority was Ural. In terms of the second question, yes, so I mentioned several times that there is a stretch market situation in the area. So probably you are very much aware of the difficulties in OMV and their distillation unit there. There is also an issue in Litvinov, the Czech PKN refinery there. And those unplanned shutdowns are causing extra stretch in the market. So we do not see the export in the volumes as it was in 2021. And as a reflection of it, our market share is increasing. I believe that once the refinery -- and hopefully, they would, both OMV and Litvinov will get on stream, and I believe it will on what I learned in autumn in case of OMV, and I believe Litvinov in the current days will get back. That my outlook to the end of the year is that it will be still stretched, but this situation will get normalized. Thank you for the question.

If I could follow-up. What do you expect the share of Urals to be in the second half of the year?

Well, the answer is rather complex. So probably you are aware of the sixth embargo package, which from February on next year. So this will definitely shift our crude basket and group processing to the different modus operandi as it is today. And it will then have an impact of having a higher portion of seaborne crude. I know that you were asking the second half of this year, but this embargo is pushing us to several tests. So I believe this year, we will have to do some complex tests to run the refineries on a different basket. And it will be reflected also in the portion of the Ural processing.

Thanks. We also have Tamas Pletser from Erste.

I have 2 questions. First of all, can you just elaborate a little bit about the current maintenance shutdown at Danube refinery? I mean what units that was shutdown. The fact what is your current production capacity utilization in this refinery and when we expect this maintenance shutdown to be finished? And my second question would be regarding your investments. Can you just tell us an update about the delayed coker investment? And how do you proceed with those efforts to decouple from the Russian crude? I think we said, if I correctly last quarter that they come up with initiatives to the management on this -- the [ decoupling issues ]. So how will you proceed with that.

So in terms -- Gabriel Szabo speaking. So in terms of the turnaround, yes, so as I mentioned, this week, we started the turnaround in Szazhalombatta. It's a complex one. We believe we are back in autumn -- early autumn this year. We are doing a major overhaul of our distillation unit 2. So the capacity as far as Danube is around 8200 tonnes a day. So I would count with roughly half capacity of the refinery there. In terms of the -- I mentioned several times the challenging year because of the maintenance. There is another maintenance planned in October, where we plan to do an overhaul of our hydrocracking unit there, which will have an effect on diesel production. And this is it. Your second question was related to the DCU. In DCU, I mean, similarly to the Polyol, we have some difficulties there. So currently, we are discussing with the main contractors, the extra cost because of the COVID. And what we see that the -- still the construction works are not on the path which were forecasted. So still heavy negotiations ahead of us. So today, I would not go to any projections in terms of the delay. I believe there is a delay but today, I can't judge what will be to delay there. And your third question was? Sorry, once again, please?

No. I would just ask about these initiatives to decouple in their supply.

Right. So as I mentioned, the situation from February on will be, I believe, very much difficult as it is today. There is much higher exposure for our refinery in Bratislava as we export 2/3 of our production to the market. So probably you are aware of the 6 embargo package, which allows us to still export the Russian-based products to Czech Republic. And then again a different situation will be from 2024 on when even this will be sanctioned. We have -- we set up 4 stream consisting of engineers, economists and optimization runners. We launched around 26 projects to cope from the new situation from next February. We also get an extra advice, an extra counsel from [indiscernible]. It is a Texas-based technology company. So I believe we have a very good projection to run the refineries. The rough estimates for the CapEx is around USD 500 million, USD 700 million. Of course, that the time spend needed for this investment is longer than February next year. But as I mentioned, we are going to have some complex different or seaborne crew baskets. And I believe that with this exception for Czech Republic, we have a kind of -- or I'm rather positive. So what I see the task is clear. Team is engaged, and I believe we have all the competence. So I'm rather confident that from a technology point of view, with this extra CapEx, we can handle the situation. This is the whole exercises kind of 3 dimension chess play. So there is the crude basket, optimal crude basket, then there is a technology question and of course that there is the economics. So we are trying to find a proper balance there.

Just probably one, a little bit of follow-up. Is this the maintenance or overhaul [indiscernible]. But is this considered to be like a major maintenance what you do, might be 4 or 5 years or is this throughout their life -- exercise.