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

Good morning, ladies and gentlemen. Welcome to MOL's Fourth Quarter 2022 Results Conference Call. My name is Zoltan Pandi, the Head of Investor Relations, and we have a strong lineup of management to discuss the recent events. Dr. Gyorgy Bacsa, Executive Vice President of the Group Strategic Operations and Corporate Development; Jozsef Simola, Group Chief Financial Officer; Mr. [indiscernible], Executive Vice President of Upstream; Mr. Gabriel Szabo, Executive Vice President of Downstream; as well as Mr. Peter Ratatics, Executive Vice President of Consumer Services. Particularly pleased to introduce to you Mr. Martin who has been in this call with us for the first time. He has been appointed to lead [ both ] exploration and production business as of February 1. Mr. [ Martin ] has a long track record in oil and gas, covering exploration and production downstream and finance. Besides other leadership roles, he will have more -- more Hungarian exploration and production business between 2017 and 2021. We continue to use Microsoft Teams as a platform to hold our conference [ for ]. The presentation can be done only from our website at MOL Group [indiscernible] Q4. We will be sharing the slides in Microsoft Teams too. After the presentation, we move to a Q&A session where you have a chance to ask questions by using the raise hand function of Teams. [Operator Instructions]. Before we start, I would like to draw your attention to cautionary statement on Slide #2. Now let me hand it over to Gyorgy Bacsa, who will take us through the highlights of the Q4 2022 period.

Good morning, everyone, and welcome to [indiscernible]. First, definitely the summary of the first quarter results and definitely to compare it to our updated guidance and return to our results. I would like to draw your attention that in '21 order figures including our U.K. operation, the updated guidance and inland results will not include the U.K. operation anymore. So that's why if you compare the Upstream production and it's also in the EBITDA level, you should also take it into consideration. But all in all, strong financial delivery in Q4. Again, we have 4 targets, or 4 updated guidance. The CCS EBITDA is at USD 4.7 billion. Strong internal performance, definitely but not [indiscernible]. So significant government take for [indiscernible] the end results is outstanding. But of course, the market was not always positive, if I reconsider the government and regulatory impacts even on EBITDA and on the [ EBITDA level ] as well. CapEx is in line with our positive report, so we are lagging behind in -- compared to the guidance. But definitely, we are constantly [ very ] disciplined, EUR 1.5 billion CapEx annually to be spent. Upstream production is in line with the guidance. The TRIR target is missed. I will talk a bit more later in this presentation. Just, not of course, I don't want to avoid the Q&A part, but the dividend proposals will be discussed on the Board of Directors meeting in March. So definitely, this presentation do not include any guidance about dividend or any discussion of the dividend. So next slide, please. Here is a summary in the presentation. As usual, I will not leave it out. But some of the points I would like to highlight: Organic reserve replacement, 185%. After the presentation we will give you details about it. We made all the preparations to increase of Russian processing capacities because this is a must -- as process development, especially in respect of course. Slovnaft refinery, successful [indiscernible] testing completed in Q1. So EBITDA level, Hungary is comparable to [ 100 EBITDA ] generation. There's something about the negative side, which impacted the operation. Important development, however, on the regulatory side, and there is no more price step in Hungary. The bank spread [indiscernible], so from 40% to [indiscernible]. So all in all, there are positive, negative developments as well. And but not only in Hungary, but of course Slovakia, Croatia are also inline. So that's taxation -- the new [ taxation measures ]. So the next slide, please. Here, definitely sad news that we missed the tolerable limit, on the [ 2 ] of the TRIR, which is now 1.4, mainly because of the injury rate in the third quarter. I need to remind you that last year was a low in maintenance period. We had 2 major turnaround or plant shutdown in the value of refinery, for example. So all in all, it was a very [indiscernible] and heavy year. Unfortunately, TRIR results are also showing this. The Q4 [indiscernible] showed some improvement. So going back to the historical trend or going back around tolerable limit, energy retained -- and we retained all the ratings [indiscernible] in the climate survey. So we continue to do the ratings in the previously [indiscernible]. And some of the guidance, 2023. Next slide, please. Due to the level of uncertainty at this stage in February, we are not ready to give an [ EBITDA ] guidance. And I don't think that it has to be to [ indiscernible]. There is the war time effects of the multiple effects higher, heavy regulatory impacts surrounding us. So we will [ render ] at such early stage in the year, we would better talk about the internal KPIs. So internal KPIs regarding the oil and gas production, 90,000-barrel a day, crude processing, 12 million tonnes. The CapEx again, USD 1.7 billion. And of course, the net debt to EBITDA we will keep under 1. So in the CapEx, we continue with the strategy projects. So that's why we're seeing that this high CapEx spending will be necessary for all our transformation and strategic projects. The TRIR, we also included the [ statute ], so not only the total tolerable limit at 1.1. I mean taking into consideration this year's results, it's a stage target. And we definitely will increase the efforts on our HSE processing practices. And now I would like to hand over to [ Simola ].

Thank you, George, and good morning, ladies and gentlemen. On Page 9, I will start with the EBITDA summary. And as you heard, I'm sure -- so we had year-on-year very strong business here and the EBITDA generation, including a somewhat softer Q4 compared to the previous quarters. As usual, for Upstream, Downstream and Consumer Services, we will hear the details from the business leaders. A couple of words on the gas business, with $163 million contribution, clearly above the expectations we had from this business a year ago. The underlying situation is essentially that Europe had a very turbulent year, as you know, in gas supply from Russia, while supply flows and includes in and towards Hungary, [indiscernible] generally opened throughout the year. And that resulted in a much higher than planned cross-border capacities, transmissions and higher transmission volumes. In terms of expectations for this year, clearly, we will go back to business as usual. The number will be smaller. Now whether this is going to happen this year or not, there is clearly a very high level of uncertainty. As for the C&O, you will see instead of the usual expense line, you see a positive contribution of [ $49 million ]. That's actually coming from a positive $102 million intersegment number for Q4. The reason for this was a strong drop in the gas prices in Q4. But I also like to point out that the other leg of this elimination, the negative lag you will see in the Downstream business, and Gabriel will cover the details on that. But you go to next page, Page 10, the CapEx business in Q4 large but expected item $459 million coming from the closing of the Lotos retail transaction in Q4. And as for the yearly number, the [ $1.5 billion ], I think it's somewhat lower than the guidance, which was somewhat below the $1.7 billion. But I think generally, the overall pattern of the year, including a very strong Q4 and a few million dollar lower spending it's I think [ usual ] for us. If you go to next page, Page 11, below EBITDA line items. I'd like to point to as to the special EBITDA items for this year. And we will see the details of the other -- for the other lines on the next page, Page 12. CCS FX of the whole year is $101 million, from which $100 million contribution coming from Q4 as a reason of the falling crude prices and resulting in an IFRS EBITDA being around $100 million smaller than this CCS EBITDA. DD&A, all in all, $1.26 billion with $453 million for the last quarter. Again, the usual Q4 seasonality shows up. For the whole year number, I'd like to remind you that in H1, we had a sizable impairment we were [ reserving ] in Croatia. So the $1.26 billion is probably at the lower end of the go-in grid, which we should generally expect for next year. Total financial gain in Q4 of $20 million and expense or loss for $206 million for the full year. In Q4, this whole reversal before indicating compared to euro dollar, there was a foreign strengthening in Q4, and that's the main driver beyond the [indiscernible]. However, still for the [indiscernible] was weakening plus net expense and other items resulting in this minus $206 million financial expense. Income from associates, again the expected Q4 and seasonality. However, a much higher negative number, minus $107 million in Q4. And usual -- the reason for this is coming from our joint venture industry, the [indiscernible]. As we communicated earlier, we brought down the net book value of this joint venture to 0 in our book in Q4, and that was the largest contributor to this negative number. As for the income taxes, in line with the very good EBITDA results and essentially a sizable increase in profit before tax in all major jurisdictions, Hungary, Slovakia, Croatia, Azerbaijan, we see it was a much higher number for the year. On Page 13, the operating cash flow. Essentially, if you take profit before tax and the usual adjustments of DD&A income tax paid than other. We see an operating cash flow before working capital higher than $5 billion, which is a bit higher than the $4.7 billion CCS EBITDA. And as in the previous quarter, a major item on this page in the working capital, which for the whole year, it's still a $1.5 billion build up. But it's important that the reverse of what you were expecting started in Q4. So this $1.5 billion actually the number, already contains $582 million decrease in Q4 incoming from the falling prices. And that leads us to an operating cash flow of around $3.6 billion, which, of course very convenient and covers the [ 1.6 ] organic CapEx. So the last page on the finance part of the balance sheet. And actually, I think the chart in the bottom left corners summarizes, from a cash point of view, of course, the for me the story of the year. So we had a simplified cash flow generation of $3.2 billion coming from the $4.7 billion, EBITDA minus [ 1.5 ] organic CapEx. The aforementioned working capital buildup of negative $1.5 billion. The mentioned M&A, mostly the Lotos transaction, around $500 million. The dividends paid in decline after the year of '21, but cash went out in '22, $600 million. Other items, all actually leading to a net decrease of more than $700 million in net debt, ending close to $1.4 billion net debt for the year. Another of course shows up in the net-to-EBITDA number, [ 1.3 ] and also in the gearing 17.6% for the end of last year. And with this, I'd like to hand over to Gabriel to cover the Downstream business.

Thank you, [ Jozsef ]. Good morning, ladies and gentlemen. Let me sum up the downstream performance in the last quarter of 2022 as well for the whole year 2022. So the Downstream reported CCS EBITDA of $384 million in last quarter, representing a 9% increase compared to the year 2021, and a growth of 48% compared to the third quarter of 2022. The composition of EBITDA in the last quarter of 2022 is very much different compared to the base a year ago. So while in 2021, almost 1/3 of the performance were driven on the petchem side, today, we report a loss of roughly $80 million on petchem side and the majority of the performance is driven by R&M segment only. Sales of own production decreased significantly, which was mostly in line with the delayed start-up of the new refinery or in the heavy Q3, Q4 maintenance. At the same time, the annual financial delivery was very strong despite government intervention as Clean CCS EBITDA exceeded $2.2 billion in 2022 and representing a 15% uplift against 2021. Regional fuel markets continue to decelerate. On the one side, we still see an increase on annual consumption level around 4% compared to 2021. But the fuel demand decreased in both Hungary and Slovakia by roughly 4% in Q4 year-on-year. On the next slide, let me describe the macro development. So I believe all of you are in picture in terms of the Brent-Ural spread. So it went around $25 in the last quarter. But it started widening again at the end of the year and today is still about $30 per barrel. I discussed that the -- I mentioned that the petrochemical performance was a loss-making last quarter. So let me explain it with the help of the revisited petrochemical margin. So we have implemented an important methodology change, sorry. The new approach is more consistent with underlying EBITDA generation since it not only captures the product spreads, but it now also reflects changes of the energy cost component. This is also more consistent with our refinery margin. As you may remember, we did some changes last year, which also reflects margin developments, net of energy and CO2 cost. I believe presenting this updated [ timeline ] petrochemical margin also explained better why Q4 EBITDA dropped below breakeven levels, being exposed to high energy costs on the one side and sluggish demand environment at the same time. And on the other side, the high CO2 cost. I believe that this revisited our new petchem margin calculation will help all of us to better understand the performance and to forecast the performance of the petrochemical segment. Now let's get to my final slide discussing the evolution of the CCS EBITDA in Q4. So we clearly see the impact of factors I mentioned before. So on the one side, this is the petchem price and margin, and also the strong R&M performance. But I would like discussing R&M, I would like to highlight 2 factors. So on one hand, as presented on the sales volume side, we had a period of reduced utilization in the new refinery following that we completed the scheduled turnaround in November, and we were unable to ramp up processing in line with our original plans. So we missed with this around 20% of the distillation capacity in Q4 compared to our plants. In addition, there are also items that drove the $109 million negative impact next to our usual price and volume effect. So what we did, we had to impair the gas inventory in Croatia in line with the introduction of the regulated gas price regime that was introduced as of Q4 2022. Further [indiscernible] losses before they must be connected to gas that we purchased from upstream as gas prices fell during the period on which we have no CCS adjustment. This is a negative in Downstream, but now on group as Mr. Simola, our CFO, mentioned before, and it's also mentioned in the [ pass ] bullet point of Slide 9. And it's eliminated on the intersegment plan. Additionally, payroll expenses grew and were mostly beyond by year end provisioning. So approaching the results from another aspect, the price regulation and meaningful taxation as Mr. Bacsa said, there was a phaseout of the price step in Hungary, which is, I believe, significant positive development operationally since the market-based pricing prevails, again, allowing imports well into the country. On the financial side, however, the overall picture is mixed since Brent-Ural taxation was introduced at the level of 95%. So with this, I would like to hand over to Peter at Consumer Services. Thank you.

Thank you very much, Gabriel, and good morning from my side as well. Let me start first with the fourth quarter results. Altogether, the EBITDA decreased 23% compared to the last year same period. And actually, we finished that quarter at $89 million. Obviously, the biggest impact was the price gap through the whole year, and that was also valid in the fourth quarter as well. However, at the very end of December, as it was already mentioned, the Hungarian price cap regulation were lifted. But still, the Croatian margin regulation is enforced. And also in several other countries, the price -- the [ total ] prices are under pressure. All together the price caps, the former regulation caused us $50 million negative impact on the fourth quarter and through the whole year, obviously, it was significantly higher. Next to the price cap, the other impact, the other negative impact is the retail special tax. At the moment here in Hungary and also next to that, the OpEx increase throughout the year was significant in the fourth quarter. So we have roughly $38 million additional burden, $38 million additional burden mainly due to the increase in salaries and also the increase in utility costs and the increase in transaction reports on, for example, bank charges. On the other hand, we also continued the good performance of the nonfuel in the fourth quarter, both on sales side and the margin side. And if I have a big broader outlook or overview on the entire year, then probably with the qualitative, sometimes I can say that, that was a perfect storm in the life of the Consumer Services so far during the -- at least during the past 5, 6 years. We -- I think we positively performed in all of the previous difficulties and crisis like during the COVID, but our weak spot is now seemingly the government regulation in our operation. Also, I can say that the business operation is steadily resistant against the high total price environment on the fuel side, but the government takes and the different -- and the increasing OpEx pressure is something that causes us a difficult year. All in all, the good news, I think the MOL post [indiscernible] starting of the operation in December, in the fourth quarter in December, actually, the reported EBITDA from Poland from the newly acquired network site was $6.9 million. And all in all the entire year from free cash flow [ 0.03 ] on the consumer side. We were able to contribute at least some free cash to the group operation. And let's go to the next slide, where I can also highlight was probably the positive news that the fuel consumption, the fuel sales from a quantity point of view is significantly increased and still increasing. Practically, all of our countries and the performance, they're positive not just in the fourth quarter compared to the previous -- or the last year fourth quarter, but also in each every quarter of the year. Primary Hungary, the increase was 36% on a year-on-year basis in the fourth quarter, but also in Slovakia, up to 16%, we increased the sales. That also helped our share throughput site performance. I think, the biggest task is to keep the market share but increased significantly during the last year. The biggest increase was in Hungary, where the market share increased was 10 percentage points, but also in Slovakia and in Croatia. We were able to acquire and gain additional market share. The biggest task for this year for 2023 will be to keep as much as we can from this increased market share. Yes, we will continue the reconstruction of the Polish network recently opened the first [indiscernible] branded network. That's an addition because it was a newly built. And from now, actually, we will also consider the rebranding of the service stations. If you turn the page to the non-fuel side, I mentioned that we continue the good performance on this segment of the business operation. I think this is seemingly the most resistant part of the business operation, both from sales and margin point of view, the increase was continuous. The -- on a constant currency, the sales increase was 19%, while the margin increased, overpassing the sales increase. Actually, it was 31% on a constant basis. And there, as it was already mentioned, the FX and the different volatility of the different currencies in this region overall negatively hit the operation or the business result of the consumer services, calling more throughout the entire year. $44 million is the difference between the cost of [indiscernible] and the reported FX unfortunately on the negative side. But I believe that it will be better in this year. A few positive things again. So on the back of the significant fuel transactions and the increase in market share, we also focused very much on the loyal-ization and [indiscernible] of the loyal customers. The yearly active customer number reached the 3 million, which is a very large number, I think, and still increasing. And also, we continued the digitalization of the customer experience through the whole network. Actually the downloaded application reached 1.7 million, almost 1.8 million downloaded application versus the target, which was 1.3 million. So seemingly the acceptance and the likability of our new loyalty platform is very convincing. And that's a good news because just in a few days' time, we will introduce the same rewards loyalty platform in Slovakia and Czech Republic. And thus will be the platform for more action we expect, that we can keep relatively high number of the market share. And last but not least, on the last slide, a bit of an outlook from my end. As I said, probably this year was -- I mean the last year was -- 2022 was perfect storm around us in the consumer services. But still, I can say that I'm happy and positive because probably that was the lowest point, and that's a low base for us for this year. And I really believe that sooner or later in all countries, the regulatory environment will go back to the normal competitive market operation. And that will also help us to go back to the normal growth as what we originally said. I still have confidence that by 2025, we would be able to overpass the $700 million Clean CCS EBITDA plan. What we said for us in the Consumer Services -- and with the acquisition, what we made and also the consolidation of what we see on the market, we will have a good opportunity to grow further. So thanks very much for your attention, and we hand over the word [indiscernible].

Thank you, Peter. I'm very glad to be here on volume to everybody. I'm also very glad to present with the strong results of Upstream for also the fourth quarter and also for the year 2022. So as for the fourth quarter, we almost reached $0.5 billion EBITDA which is [indiscernible] higher than last year's same period. This funded also ex U.K. because we successfully closed the divestment. The realized prices were also decreasing, also the Brent around [ 19 ]. And then also the [indiscernible] month ahead was $213 per barrel. But all these diminishing prices were resulting still higher than $100 total realized hydrocarbon prices, which actually helped us to reach this quarterly EBITDA for the [ Upstream ] segment. For the annual result, the EBITDA is $2.2 billion. And still, the [ EBIT ], excluding special items, is $1.6 billion. The decreasing -- let's say, quarterly EBITDA from the third quarter, it resulted by newly introduced regulatory change. We significantly influenced our performance, because in Croatia price cap for the gas, [indiscernible] below per megawatt hour in as well as the Hungarian by RP labels combined implicated our results only on the fourth quarter, $150 million. And for the full year, it's about $270 million. If we go further on, it's just a reminder slide that despite of the fourth quarter lower price environment, for the year we still have a very healthy unit EBITDA and unit cash flow. For the barrel, it's the $58 per barrel. And for the total year, it results USD 1.84 billion cash flow generation for the Upstream segment. If you go for the EBITDA bridge, you will see again, it's no impairment page because we closed the deal. For the quarterly results, you see that we still employ the very good volume and internal performance on the production, which affected slightly positive for the EBITDA contribution. However, you see a more than 30-barrel down in the realized hydrocarbon prices and that's both competitive price decrease and also the Croatian gas regulation on the price cap, which was introduced. For the full year EBITDA, it's still very positive on the high price impact on the brand, more than $50 uplift for the year and 3.5x more it is on the oil and gas prices. Regarding the volumes for the full year, it's much more smaller negative impact than it would have been as we do a do-nothing scenario. So this [ minus 400 ] is a result of the natural field decline. And on the production side, I will talk a little bit more in detail on the next slide. So the production performance of the group is very stable. You see that fourth quarter, and we remained over 90,000 barrels, [ 90,900 ] barrels for the group. And at the end results for the full fiscal year 93,000 barrels. Even if there is an increase from Q3 to Q4, which is actually driven by higher gas production in the Central Eastern Europe, both Hungary and Croatia, and also the recent [indiscernible] discovery is already in production and is producing now 900 barrels compared to the initial rate of 600. For the 2023 as an outlook, you see that we had a very good January results. We have at first that we'll be able to deliver at 90,000-ish barrel production in average for 2023. And for beyond that, for the next 3 to 5 years, we expect a positive contribution from our international assets from an ACG Azerbaijan from the Shaikan asset in Kurdistan and also the first gas from [ Kazakhstan ] is coming online in next couple of years. We move on to the [indiscernible]. Despite of the fairly high cost pressure of the inflation environment, we were able to keep very strong cost discipline and only had 12% upwards. Still, we are under 6 barrels. I also need to say that the strong dollar helped us slightly as well as the [indiscernible] from the U.K., which favorably impacted our [indiscernible], our top right figures. On the project side, we are in line with the base. Our spending is on the base level of 2021. However, the composition is slightly different. Our exploration spend is down from 20% share to [ about 15% ], and we have more spend on the development side. It's largely contributing both Shaikan and the Croatian [indiscernible] offshore company. And I would like to close the presentation with the very positive news on the reserves. It has already been mentioned in the summary as well. We had a very good year. We will affirm after the arbitration is closed, and we have also positively development in CE driven largely by Hungary. Our net increase in revisions for 60 million barrels, and we're calculating 33 million as our annual production and up to 185% reserves replaced by [indiscernible]. That is all of us and makes this production ratio, the 2P reserves life was 10.5 years. So at this time, I would like to thank your attention and give back the word to Zoltan for the Q&A. Thank you.

Thank you. So the formal part of the presentation is over, so we open up for the Q&A. [Operator Instructions]. I think we have a question from Jonathan Lamb, Wood. Jonathan, please go ahead.

I wanted to ask a question about income tax. So in the fourth quarter, you paid -- you had a very, very high level of income tax. And I understand there's all kinds of taxes going on at the moment. Does that reflect simply a catching up from previous quarters? Or is there something else happening there? And how -- what can we expect from tax in the coming quarters.

Jon, this is Jozsef Simola. The Q4 number includes $521 million contribution -- tax contribution from the EU solidarity tax. I think the other lines are probably normal or in the range what you would expect. In terms of any tax guidance for next year, I wish I would have one, but as you kind of see it's a very fluid and volatile situation, taxation and all decisions in our industry right now.

But would that solidarity tax, that's for previous quarters as well, right? So it wasn't it for the second half of the year? And is that less dollars, or is it foreign?

Is it these speak in dollars.

Yes.

And I mean, generally, most of the taxes, as discussed in the previous quarters, are already reflected in the EBITDA number. In addition to this, it's only in Q4. And again, the CEO solidarity impact, which shows up in the kind of taxation or in [ CapEx ] numbers.

Okay. And one follow-up, if I may. There's a number of things going on -- but the underlying number seemed weaker than what I expected, despite high refining margins, I understand that there were -- that was lower volumes because of maintenance. But is there tax something issues in refining there in the EBITDA?

Yes. So compared to Q3, I reported that the impact of governmental measures resulted in the $2.40 million in take. So price -- bigger price of it was the price cap within [ 350 ]. And I reported in Q3, the euro brand tax around $90 million. for Q4, it's around $210 million.

And the next question comes from Tamas Pletser, Erste.

I'm interested in 2 areas basically. I mean, the first issue is regarding your purchase of Russian crude. I read some articles that the Argos, which is the main data provider, in the future may not provide data for the oil prices. I mean what kind of price agreement do you have with the Russians? What reference do you use when you buy Russian crude from Russian partners? And how do you calculate the tax -- under tax based on the realized crude purchase price from Russia? Or is it based on some let's say, benchmarks? That will be my first area of questions. Second topic I'm very much interested in, how do you see now the situation with the Slovnaft refinery, especially after February 5 when the new sanctions step in. Will you be able to get non-Russian crude to this refinery? What do you expect about the agreements with the [indiscernible] regarding the further supply of this refinery? And I'm particularly interested in whether you can export any products now to [ Ukraine ] after this regulation came into the picture. Thank you very much.

Yes. Thank you, Tamas. Thank you very much for the question. So -- the first part of the question was regarding the Brent [indiscernible] prices. So both the -- our contracts are based on the official publication of the Brent-Ural spread. So -- and I do not have the information you just mentioned that there won't be any kind of this by Argos. I don't know. The other is that, yes, in terms of the extra 95% of the Brent-Ural taxation, this is based on the realized price. And the third part of your question that we assume that this year [ installable ] process roughly 30%, 35% of alternative crude, which then will turn from December 5 this year. And for the next week, it will be around 60%.

I see. And can you -- do you -- or are you able to export crude products, The Russian crude to Ukraine?

Yes. There is an exemption that we can, but it's not as easy because there are some logistics constraints. So the market or our market pattern was set in the way that we exported the majority of our products to Western Europe. The only Eastern country, I believe, was Romania so far. So it's real logistics optimization issue.

Okay, okay. And just to clarify, you said that you use 30%, 35% of alternative supply now to Slovnaft. Is this going to remain until December 5 and this derogation, would keep you to supply that. Is this the right thinking?

Yes, you are right.

Okay, okay. Great. And one more thing which I have to think in my mind.

Some disclaimer that my basic learning from last year was that it's really hard to forecast -- or it's easy to forecast. But the real life change really very significantly. So there are some learnings from last year that there are several changes in the governmental measures in the market supply, which can then shift this 30%, 35% to different number. But I would say my forecast, I might plan is 30%, 35% for the next year.

And does it also mean that the agreement that you have with [indiscernible], that crude which comes from the sea, is it mainly coming now to the Slovnaft refinery not to the Danube previously?

Well, so the 30%, 35% of alternative group definitely currently is coming from the Adriatic pipeline, from the Adriatic Sea. Yes, you're right.

We have another question coming in from Oleg Galbur, Raiffeisen.

I have a few questions, and let me start with the one on the working capital. So you had quite a high buildup of working capital last year, with a large part already being released in the fourth quarter. So I was wondering, taking into consideration the price development, but also probably other moving parts, how much of the last year's increase in working capital would you see being released this year? Also on the cash flow components. Can you maybe say a few words about the expected cash outflows for windfall or solidarity tax payments this year? And I refer to the taxes, which were calculated already for 2022, including this USD 520 million of solidarity tax. So I guess on a small part, if any of this was already paid in 2022. So the large chunk should come next year? And then on the Retail segment, how realistic is to -- or would it be to keep the fuel throughput refilling station at the last year's level, especially in Hungary, where the filling stations benefited in a way from the fuel price cap by attracting higher traffic? And last but not least, we noticed that you skip the 2023 guidance for EBITDA and free cash flow generation. Any particular reason for that?

As for the working capital. I mean, one major change what happened this year, but generally because of the war situation, rather than try to minimize actually inventory level, repeating much in the mode of trying to maximize inventory levels, essentially make sure that in a case of a potential disruption, we have kind of maximized our reserves. That's actually, as I see now, we don't expect it to change in the coming months. And that means that generally, on the volume side of the working capital, we don't really expect any change. Of course, there can be a pattern of turnarounds and other things. But I would not expect going back to the pre-war level in terms of volumes. And the other factor, the price level, again we will see. Further price decreases would be a reduction and increase would, of course, mean an increase in the [ lever ] we put up. As for the -- the tax payments and tax payments. I mean, as you just mentioned, we don't give an EBITDA guidance. And with this connected to a couple of steps, we don't give guidance or kind of income-related taxes for '23. As for the $521 million, most of it -- actually or the vast majority expected to be paid in '23 in cash.

The second question was this year's throughput, if I remember well, for Hungary. How realistic that would be to keep it on the level as it was last year. It's not realistic to keep it on that level. A lot happened last year, a lot of cross-border fuel to reason as well. So obviously, some level of fuel sales decrease would happen on the Hungarian network. But in general, in the regional sales and the regional market share? Excuse me.

No, it wasn't me. it was someone else.

Yes. Okay, sorry. So then in general, I would say that in Hungary, the fuel sales will decrease. But the market share ambition is very high from our end to keep as high as possible. Thank you.

So the final one, as I mentioned at this quarter, we are not able to give you a... -- Sorry, somebody is talking. So we just answer your last question, Oleg, that the EBITDA guidance, we didn't include in this presentation. Of course, you could see that trends are quite similar end of last year, then a few on this year. However, to give you a full year guidance in such a turbulent macro environment, so early stage in the year, it would not be to say well-funded enough. We have such a wide range of drivers that we need to take into consideration. And these drivers are not pointing to the same direction. So as I mentioned, the board is also giving a lot of risk, infrastructure supply base. Also risk of government, regulatory risk. There's also -- but of course, it gives us driver on the prices and the margins. Of course, you could have experienced, but there's also a negative driver that it could also turn economies to a downturn as well. So level that in February, we don't give [indiscernible] divide range. Trends are continuous. As you can see, we give you the patterns at the internal -- the internal KPIs. And of course, without EBITDA, we can't give you free cash flow guidance. Either or if you put free cash flow guidance, you could calculate an artificial EBITDA guidance out of it so -- that's handling that.

We have a question coming in from Piotr Dzieciolowski, Citi.

I have a couple of questions. So the first one regarding your recent takeover of Alteo. So can you please elaborate what you bought? And what are your ambitions regarding the renewables going forward? What kind of investment CapEx do you foresee in this field? And second, on the solidarity tax. Do I understand this is a one-off tax or that's a recurring element? And what's the basis how you calculate it in your case? And the third question, the final one would be on the petrochemical EBITDA. It kind of was below zero in the fourth quarter. How do you see this development? Like is the current decline of the gas prices enough to bring it to the positive territory? Or you could struggle for medium term in this subsegment?

Okay. For the first one, regarding renewable, we started real investment right after the announcement of the [ 2060 ] strategy. So far, the organic [indiscernible] top portfolio of renewable power, also value investments also in the circular economy investments, it will continue now with 2 threads. One is that the circular investments were mainly focused on the waste concession-related investments and anything which is adding our capacities to use [indiscernible] as a feedstock for any kind of production. So already, the CapEx includes the first wave of circular economy investments. In renewable, Alteo is a platform for us. So we acquired -- and we are acquiring since the deal is not completed yet, we expect to complete it by the end of March. So the -- then mandatory takeover is over and we can financially close the deal with the majority shareholders and the minor shareholders. They have to stay listed. So Alteo will be a listed company because, for the time being, we consider it's a kind of platform, which is -- which has its own strategy. We joined, of course, the [ Alteo story ] in this case. But it's not integrated fully into the MOL story yet, but we will continue on organic investment, and we will use Alteo platform to grow further.

For the solidarity tax, as discussed the kind of number in Q4 is $521 million. Now given the uncertainty -- and the scope is in the EU countries where we operate and the such tax was issued. No, because there's a high level of uncertainty, given the kind of technicalities of this calculation and also potential legal questions surrounding the validity of this tax, plus the level of disclosure we can make at this point of time, including that we clearly cannot give you any details on our guidance for '23.

But is it a percentage based on revenues? Is it based on your gas Upstream? Like what's the basis of it? Like how did you come up with that $520 million. And I said, is it recurring? So in we should have another $0.5 billion or whatever the number is in 2023 numbers?

As I said, this is coming from more than one country, in countries where we potentially may be subject of this tax. And this is current or current best estimate for the total number. As I said, beyond this, we don't feel comfortable given all the uncertainties. Again, in terms of the quantity, the calculation and the potential legality of the tax, we don't feel comfortable sharing any more details at this point of time.

Just the tax regimes, there's news [indiscernible] taxes that they introduced, anything but not stable. The -- even they change it even after introducing in many countries several times throughout the year. And it's a constantly, how to say, moving targets for us. So we have our best estimate. But let us then give you learned of last year uncertainty, we cannot give you detail. Now this is the best estimate on the magnitude of the impact. And you could see that these extra taxes are every single [indiscernible] stable. So whether it's a onetime how it is calculated, whether it would be changed in [indiscernible] effective or not enough for it the rollout because it's slowing down the economy, all aspects are ready than to before.

I understand. And on this petrochemicals, how do you see the kind of your loss going into the '23? Is the recovery on the way?

Yes. So as probably you saw realize that the difference between the old and the new integrated petchem margin was around 2020 -- so 200 -- sorry, EUR 220 per ton. So currently, this difference between the old and new is around 150, 160. So with this, I believe we can cover the fixed cost. In January, end of January, we saw the significant demand drop, or the deceleration of the demand in general. So beside of the cost, we also have to take into consideration the revenue side, once calculating the profitability. But what we see that in February, we covered. So it's a mixed picture. While in January, the demand was rather very low, and the petchem margin was also low, mainly pushed by the sales price of the final product. In February, we see some recovery.

We have our next question from Anna Kishmariya, UBS.

I actually have two. One also on government take, but in this time, fuel price cap. We saw that Hungarian government [ abolish ] price cap replacement with higher taxes on Urals Brent spread. But my question is, to what extent the fuel price cap in other countries will affect the business in first quarter '23? And another one is the outlook for OpEx. This year, you managed to maintain OpEx at a relatively low level despite the inflation. Do you expect the higher increase in OpEx coming this year?

So just for the first part that -- in Hungary, the price cap was -- price cap was a fixed, price is maximum price, both for retail and wholesale. So it was a wholesale price cap as well. It started as a retail price [ regulation ], but ended up a combined for a universal one, on that one. So they have eliminated both elements. And the present that taxation was yes, in quite a short period of time, increased. But that one was introduced in earlier, but with a lower tax rate. And of course, it's affecting all the import only. The price allocation in other countries are different nature. Most of them are margin regulation and only retail price regulations, and they have nothing to do with the crude supply or crude imports. So we don't see a kind of a trade-off in that sense in other countries. The question is always how long they keep the margin regulation, or what is the calculation base of margin regulations? So what is the formula they are using there, as long as they are deemed to use? So it was a different price regulation that was in place in Hungary, more fixed price and more universal regulation and that is over. And I think it's, to a certain extent in terms of government, it's the Brent spread taxation that we are having for this year for [indiscernible].

But from a country's point of view, actually, we have a regulated market environment in Serbia, in Croatia and also in Slovenia. Out of the 3 countries that really had the most negative result or effect on our results is in Croatia, that's margin regulation, which combines the wholesale and the retail margin. And it shows the government on a detailed bi-weekly basis, said the price, the maximum total price, what the retailers can put on the performance. And that also should cover the post or the import cost as well. In Slovenia, we have our reimbursement regime, that the prices are regulated the government reimburse some of the negative effect of this. And in Serbia actually, though we have a regulated price environment that's typically quite close to the other markets in the margin environment. So the effectivity is not that negative at the moment.

I mean on the OpEx side can make, I think just a general comment that we see probably kind of opposite forces in this field. Clearly, the dollar and euro clear and visible inflation, which was not part of our life in the last couple of years, will have an increasing impact on the OpEx level for us as for any other companies. I think on the other side, the [ foreign ] weakening which happened last year, and we have a sizable part of our operating expenses in foreign. Not something pointing in the other direction. And it's clearly, I think, the overall question of the recession and the visible decrease in kind of government CapEx, and investment gives us a high level of valuating over -- with a certain pool of our suppliers. So all in all, I think the question is clearly on the table in a different way as like a year before. But at this point of time, we see indicators on both directions. So generally, I think our internal targets is keep OpEx flat in dollar-euro term. And there will be clearly exceptions from this general.

We also have a question from [ Tian-Huat ], CSA Asset Management.

I've got a couple of questions here. First of all, regarding the 95% tax on the Brent-Ural spread, it was mentioned earlier that this is based on the realized price. So can I confirm that the 95% would be the realized -- the difference between the realized and Ural? That's my first question. The second question will be, where is this tax showing up in the financial statement? Is it built into the EBITDA? Or is this showing up under the corporate tax line? That will be my second question. I would also like to have a bit more information on the impairment in Russia. After the impairment, what will be the status of the assets in Russia and what are the assumptions behind the assets going forward? My last question would be, I think the presentation did mention that the intersegment transfer this time now turned positive because of rapidly falling gas price in Q4. Can you please explain a bit more about how this falling gas price lead to a positive transfer? Maybe if you can point out how the dynamics between the selling price and the transfer price takes place, that will be helpful.

So in terms of the Brent-Ural spread, you asked, so we measured or we calculate 95% of the actual realized price. So for the price to be both the Brent core crude. In terms of the -- last part of your question regarding this transfer pricing. So Downstream is buying the natural gas on the market price from the Upstream which means the [ TGF ] month plus 1. We have an inventory -- average inventory of natural gas in the last quarter around 80 million tons, which is 850,000 megawatts. So when the price dropped from roughly 100 -- in average [ 60 to 80's ] is causing this revaluation of the price and causing a negative effect on the Downstream EBITDA. And it's compensated on the other side, on the Upstream market price revenue. As for the [ biotechs ], I think a bit background, that I mean, I'm sure as you're aware that because of the sanctions situation and the kind of, I would say, sanctioned board-driven regulation in the EU and in Russia. We are in a situation that we cannot and don't want to put in additional -- any additional funding into the company. And for all practical terms, it's impossible to get out any dollars or rubles from this company. So from a financial point of view, we are cut off from the subsidiary. On the other side, the subsidiary capital and operating in ruble terms, locally, I would say in a normal way. Now given the uncertainty, given the current situation, what I described, and the uncertainties, we heard that the -- as the best actually to bring down the book value of this investment to zero, that does not change any kind of legal title or anything to this investment. And frankly speaking, we have to see whole and full quickly the whole situation develops, regarding the war between Russia and Ukraine.

Thank you. Regarding the line which you booked, the 95% tax, would you'll be able to share on that?

That's in the EBITDA, essentially.

Thanks, indeed. I think that actually completes the Q&A. Piotr and Jonathan still raised hand but that's probably from the previous cycle. So if there are no further questions that completes our Q4 call. Thanks very much for joining and any follow-ups by our team remain at your disposal. Thanks so much. Bye-bye.