OMV 1Q Earnings Meet Expectations

Austria's OMV recorded a €167m adjusted operating profit in the first quarter, down 50% year-on-year, but above market expectations of €158m. Its May 11 statement also indicated that cash flow from operating activities increased to €579m, up by 43% from 1Q 2015.

Capital expenditure was down by 34% and lower exploration costs fell by 24% from 1Q 2015. OMV expects 2016 capital expenditure of around €2.4bn, of which roughly 70% will be spent on upstream. 

For the year 2016, OMV said it expects the gas market environment to “remain challenging in 2016”, the Brent oil price to average around $40/bbl, and even refining margins – last year’s bright spot – to be below 2015 levels due to persisting overcapacity in Europe. Upstream, production in Libya and Yemen is expected to be affected throughout 2016 by security issues, said OMV. Excluding these two countries it expects average net production of some 300,000 boe/d. 

"In this environment, as outlined in our strategy, we are focusing primarily on cash and costs," wrote CEO Dr Rainer Seele: "In restructuring our downstream gas business, we are currently preparing to fully integrate EconGas within OMV to enable us to develop a strong gas sales business in Northwest Europe."

OMV on April 1 provisionally agreed a deal with Gazprom in which a share in an OMV North Sea subsidiary will be discussed for the proposed swap for a 24.98% strategic stake from Gazprom in the project to develop blocks 4A and 5A of the Achimov deposits at the Urengoi field in Siberia.

Back on its 1Q results, OMV said its drilling campaign at the Neptun block offshore Romania, where it partners Exxon rather than Gazprom, are encouraging enough to progress more detailed work to determine commerciality with a final investment decision expected in around two years.

The full takeover of EconGas has now been cleared by Austria's competition authority and will be fully integrated into OMV, which already owns a 64.25% stake in it. A final investment decision for the Nord Stream 2 pipeline project and the disposal of Gas Connect Austria are still expected in 2016.

OMV continues to invest in existing fields and new developments, such as drilling and workover activities in Romania and Austria, and on major new assets such as Norway's Edvard Grieg and Aasta Hansteen, plus Tunisia's Nawara and the UK's Schiehallion fields. 

"For our divestment of OMV Petrol Ofisi in Turkey, both Turkish and foreign companies interested in the asset," incoming finance chief Reinhard Florey told analysts in a conference call. The subsidiary is Turkey's biggest motor fuel distributor and marketer, with 1,785 outlets and sales of 10 million tons in 2015. Florey is to replace David Davies, OMV's finance chief since 2002, who is to join Uniper's supervisory board.

Murat Basboga