By Balazs Penz

Dec. 8 (Bloomberg) -- Mol Nyrt., the largest east European refiner by market value, expects oil prices to rise next year and is seeking acquisition targets to gain control of producing fields and untapped deposits.

“A lot of overleveraged small independents will be on the market,” co-Chief Executive Officer Gyorgy Mosonyi said in an interview at the company’s headquarters in Budapest on Dec. 5, without naming targets. “It won’t be a very dynamic market for the next few months, then there will be opportunities.”

Crude oil for January delivery fell to $40.81 a barrel on the New York Mercantile Exchange on Dec. 5, the lowest settlement since Dec. 10, 2004, capping the biggest weekly drop since the Persian Gulf War in 1991. Mosonyi said he expects crude to recover to between $70 and $100 next year, making it profitable to develop more expensive fields.

Oil dropped 72 percent since reaching a record $147.27 on July 11, while the seizure of credit markets worldwide curtailed the amount of funding available for drilling and development.

There are “plenty of delays” in projects, according to Jennifer Fulton, executive director of natural resources at Goldman Sachs Group Inc., with the average break-even cost globally at $60 a barrel, rising to $85 for Canadian oil sands.

Mol, which controls refineries in Croatia, Hungary, Italy and Slovakia, has focused on expanding its production since 2005. The company, which has exploration projects in 10 countries, extracted 90,400 barrels of oil equivalent a day last year.

Unconventional Project

Mol this year bought an offshore oil field in Cameroon, an exploration block in Pakistan and a minority stake in an Indian natural gas field. It also started developing a so-called unconventional natural gas deposit in Hungary, in a joint project with Exxon Mobil Corp. and Falcon Oil & Gas Ltd.

The company also started exploration or production projects in Russia, Yemen and Kazakhstan and has signed agreements with governments in Iraq and Libya.

The average crack spread, or profit margin on refining fuels, is likely to be $80 a ton for unleaded gasoline and $160 a ton for diesel next year, according to company data. That compares with $79.9 for gasoline and $210.9 for diesel in October.

Mol fell 265 forint, or 2.7 percent, to 9,730 forint today. The company has lost 60 percent of its value this year, compared with a 52 percent decline in Hungary’s benchmark BUX index, giving it a market value of $5.2 billion. Polish rival PKN Orlen SA is worth $3.6 billion and Romania’s SNP Petrom SA $3.3 billion, according to data compiled by Bloomberg.

Defeated Takeover

The Hungarian company, which this year defeated a 2.8 trillion-forint ($13.3 billion) yearlong hostile takeover bid by Austrian rival OMV AG, will target companies worth up to $2 billion, Mosonyi, 59, said.

Mol has access to 1.5 billion euros ($1.9 billion) of loans and cash, and had net debt of 2.97 billion euros on Oct. 31, it said in a Nov. 26 statement.

The company on the same day had its long-term credit rating reduced to junk, or non-investment grade, by Standard & Poor’s because of the cost of expansion in Croatia. Mol will finance new investments from its cash flow and plans to keep available credit as reserve, Mosonyi said.

“We don’t want to touch the credit line,” he said.

As the price of crude oil drops and refining margins narrow, Mol is also facing deteriorating conditions in Hungary, where the government expects the economy to sink into its worst recession since 1993 next year.

Mol will cut capital spending by 30 percent in 2009 to 220 billion forint to save on costs, Mosonyi said. The reduction will be from a 2008 figure inflated by the 6.1 billion-kuna ($1.1 billion) spent to increase the company’s stake in Croatia’s Ina Industrija Nafte d.d. to 46.7 percent, he added.

The company will mostly postpone upgrades at some production units and renegotiate others, rather than scrapping them altogether, Mosonyi said.

To contact the reporter on this story: Balazs Penz in Budapest at bpenz@bloomberg.net.