Struggle for MOL still in the cards

Implications: Chris Borowski (Reuters) in Warsaw reported in the August 8 issue of the International Herald Tribune that OMV, the Austrian oil and gas company, still holds 20.2% of MOL’s stock. MOL is the Hungarian national oil company which successfully resisted the merger attempt. OMV had expected a merger with MOL would make it a European giant oil company. Does it hold on for another chance or sell its stake? Now each of the two companies is trying to buy out the Croatian oil company, INA. The failed merger attempt comes at a sensitive time for Russia’s role in Europe’s energy business. European politicians worry that Gazprom could solidify its near monopoly. Fund manager Mark Mobius sees the impasse as an opportunity for MOL to combine with a Russian firm to create a force in Eastern Europe. Observers note that MOL’s successful defense resulted in a fall of the value of its stock which at its peak traded at a 43% premium. Some investors may flee the stock.

Analysis:  Not only Gazprom is involved in the quest for market share in Eastern Europe. Exxon Mobil’s recent formation of an exploration program in the Mako Trough in southeast Hungary is a signal that the fight is just beginning. Royal Dutch Shell and Total (France) are waking up to the opportunities for the extraction of unconventional natural gas all across Europe. In recent years both OMV and MOL have sought exploration opportunites everywhere in the world in the hopes of finding major reserves which could be transported back to Europe. MOL is a key company because of its location and long-standing ties to Gazprom. The two companies, even merged, would not really present much of a challenge to the big dogs. OMV has 13 oil fields, 905 wells and produces about 17,400 bbl/day. MOL has 54 oil fields, 875 wells and produces 16,400 bbl/day. OMV proved reserves are 50 million barrels as compared to 20 million for MOL. These are small amounts compared with those of Exxon Mobil, Royal Dutch Shell, BP and Total. But considering the flux of the market in Europe, the inability of the European Commission to install a unified energy policy and the possibility that both OMV and MOL could control large volumes of unconventional shale gas reserves give them a romantic niche in the world of international investors. Thus the stock values of both companies will fluctuate with each new hint that a consolidation could occur. As oil company speculations go, these two will remain interesting for some time.