Hungarian energy giant MOL posts heavy first-quarter loss

May 19, 2009, 10:16 GMT

Budapest - Hungarian oil and gas company MOL posted a first- quarter net loss of 507.1 million dollars on Tuesday, almost double the level predicted by analysts.

However, shares in MOL were riding high amid news of the company having secured a 10 per cent stake in a huge Iraqi gas field, and signs that a a Russia firm was interested in acquiring a stake in Hungary's largest listed company.

MOL, a major player on the Central European energy market, put its grim balance sheet figures down to exchange rate losses and shrinking margins on its oil refining and petrochemical business.

However, MOL chief executive officer Zsolt Hernadi said he believed the firm was capable of weathering the deep recession at home and the global economic downturn.

'The measures implemented by management at the first signs of the crisis have positioned MOL to endure a recession as well as any in our peer group,' Hernadi said.

Shares in MOL jumped over 8 per cent on the Budapest Stock Exchange on Monday, closing at their highest price since October 6 last year.

The financial news website Portfolio suggested on Tuesday that the rise was due not only to MOL's acquisition, announced on Sunday, of a stake in an Iraqi gas field, but also to rumours that Russian company Surgut could be interested in increasing its stake in the firm.

MOL announced on Sunday that it had acquired a ten per cent stake in Pearl Petroleum Company, which holds the rights to large gas reserves in Kurdistan in northern Iraq.

MOL exchanged 6,271,142 treasury shares, or 6 per cent of its registered capital, for its stake in Pearl.

This means that the sellers, Crescent Petroleum and Dana Gas, both registered in the United Arab Emirates, now each hold a 3 per cent stake in MOL.

Along with the national energy companies of Turkey, Bulgaria, Romania, Austria and RWE of Germany, MOL is a member of the consortium behind the planned Nabucco gas pipeline.

The European Union hopes Nabucco will reduce Europe's dependence on Russian gas by providing a direct route into the EU from Central Asia and the Middle East.

MOL said in a statement that the Iraqi gas fields it has bought into could potentially produce enough gas to fill the Nabucco pipeline to capacity.

However, analysts have noted that the investment is made risky by the reported rejection by Baghdad on Sunday of any deal that does not involve the Iraq's federal ministry of oil.

Austria's regional oil and gas giant OMV, another member of the Nabucco consortium, also acquired a ten per cent stake in Pearl.

OMV and MOL's investment in the Middle East comes shortly after an encroachment by Russia into the EU energy market through Hungary.

At the end of March, Surgut paid double the market rate for a 21.2 per cent stake in MOL, prompting fears that Russia is moving to increase its control over energy supplies to Europe.

Concerns were heightened when the Hungarian gas distributor Emfesz was bought earlier this month by a little-known Swiss-based company called RosGas.

Energy is expected to top the agenda at the forthcoming high level EU-Russia summit in the far eastern Russian city of Khabarovsk starting on Thursday.