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OMV Announces Higher Profits

Published: May 9, 2012; 11:16 · (Vindobona)

The Austrian oil and gas company published results for the first quarter of 2012. EBIT was up by 7%, net income rose by 17%.

OMV Announces Higher Profits / Picture: © Vindobona.org

Today, the Austrian oil and gas group presented its results of the first quarter of 2012. OMV achieved a clean CCS EBIT of € 800m,which was up by 9% vs. Q1/11. The contribution from Petrom to clean CCS EBIT increased by 34% to € 379m. OMV´s clean CCS net income attributable to stockholders increased by 37% to € 379m. The gearing ratio was down to 28% vs. 47% in Q1/11.

Gerhard Roiss, CEO of OMV: “The year 2012 started very favorably for OMV. On February 22, we were able to announce a potentially significant deep water gas discovery in the Black Sea offshore Romania. This is a good example of how we are delivering on our strategy by focusing on bigger, high impact exploration targets. In Libya, production has quickly returned to approx. 85% of pre-crisis levels and these volumes contributed positively to the operating result in Q1/12. Stronger oil prices and the very cold Central European winter supported the results of our E&P and G&P business segments respectively. In the R&M business, both refining and marketing margins have been under pressure, a situation which is expected to persist in the rest of the year.”

The Exploration and Production Segment (E&P) result was supported by increased oil price and higher sales volumes from Libya.

The Brent price in USD was 12% above the Q1/11 level, while the Group’s average realized crude price rose by 11% to USD 104.87/bbl, reflecting a negative hedging result in Q1/12. The OMV Group’s average realized gas price in € was 2% above the Q1/11 level.

Clean EBIT increased by 13%, mainly due to a higher oil price, higher sales volumes and favorable FX effects, which helped offset higher exploration expenses ( € 130m vs. € 55m in Q1/11). The latter mainly related to the write-off of unsuccessful wells in Norway (Peking Duck) and the UK (Aberlour), both in Q1/12. The net result of oil price and EUR-USD hedges also adversely impacted EBIT by € (64)m vs. € (24)m in Q1/11. As no significant special items were recorded in Q1/12, reported EBIT was in line with clean EBIT.

Total OMV daily production of oil, NGL and gas was 2% below Q1/11 at 299 kboe/d. Petrom’s total daily production was also 2% below the Q1/11 level. Total OMV daily oil and NGL production fell by 2%, mainly reflecting the missing production from Yemen and the reduced production from New Zealand, which were almost compensated by the higher contribution from Libya and Tunisia (inclusion of Pioneer assets). The lower production in New Zealand was due to a planned maintenance shutdown in Pohokura and a temporary shutdown in Maari. Total OMV daily gas production was also down by 2%, mainly due to lower volumes in Austria and Romania caused by severe weather conditions, which were counterbalanced by higher volumes in Kazakhstan and Tunisia. Significantly higher sales volumes in Libya stood against lower volumes in Yemen and New Zealand, resulting in a 2% increase in total sales quantity.

The Gas & Power segment (G&P) benefited from improved margins at Petrom. Petrom’s gas business recorded improved margins and a 5% volume increase, total gas sales volumes increased by 60% mainly driven by trading activities.

Clean EBIT increased by 35% and came in at € 99m vs. € 73m in Q1/11. This improvement was mainly driven by the increased contribution from Petrom’s gas business due to higher margins on gas extracted from storage, better domestic gas sales contracts and higher volumes. In addition, the gas logistics business showed a good performance in Q1/12 with an increased result contribution compared to Q1/11.

The business unit supply, marketing and trading recorded a 60% increase in total gas sales volumes, which was mainly driven by increased trading activities. Trading volumes accounted for approximately 50% of total gas sales volumes in Q1/12. The volume increase in EconGas was mainly driven by trading activities but higher sales in Germany and Italy also contributed. Spot prices remained below long-term gas prices. In this market environment, margins achievable on wholesale and trading volumes were very slim, which led to a lower margin level compared to Q1/11. Storage effects contributed positively to the result. In Q1/12, Petrom’s gas sales volumes increased by 5% to 17.32 TWh as severe cold weather triggered an increase in extraction from storage facilities. The estimated natural gas consumption in Romania decreased by 2%, mainly due to a drop in demand from the chemical industry. Despite the burden imposed by the import obligation for internal non-technological gas consumption, gas margins improved due to gas stored ahead of the cold season and better domestic gas sales contracts. The average actual import price, which was retrospectively published by the Romanian regulator for January and February 2012, was USD 505/1,000 cbm (EUR 36/MWh) whereas the domestic gas price recognized by the Romanian regulator remained at RON 495/1,000 cbm (EUR 11/MWh). In Turkey, OMV started direct gas sales activities in January 2012. The Turkish LNG business, which was previously managed by Petrol Ofisi, is now also fully reported in the G&P segment. Volumes from both operations are reflected in the total gas sales volumes and contributed positively to the result.

The result of the Refining and Marketing segment (R&M) was burdened by a low margin environment in both refining (incl. petrochemicals) and marketing.

At € (30)m, clean CCS EBIT decreased vs. € 15m in Q1/11 reflecting a very difficult market environment in both refining and marketing. No significant special charges were recognized in Q1/12. Increasing crude prices over the quarter contributed to a positive CCS effect of € 112m, which led to a reported EBIT of € 84m (vs. € 98m in Q1/11).

The clean CCS EBIT in refining was significantly below the level of Q1/11. The OMV indicator refining margin decreased from USD 2.30/bbl to USD 1.85/bbl, mainly as a result of increased crude prices, which led to higher costs for own crude consumption. At € 7m the clean petrochemicals EBIT was below the € 37m of Q1/11, due to lower olefin margins. Refining West mainly suffered from the weak local market price levels compared to the Rotterdam product market. At Petrom, the refining result suffered from the decline of the OMV indicator refining margin East from USD (0.88)/bbl in Q1/11 to USD (3.58)/bbl as a consequence of increased costs for own crude consumption due to the higher oil price. This was, however, compensated by an improved cost and operational performance.

Overall capacity utilization stood at 87% vs. 85% in Q1/11. In refining West, the utilization rate was at a level of 89% vs. 86% in Q1/11, when the Neustadt site of the Bayernoil refinery had a scheduled four week routine turnaround. The utilization rate of the refinery Petrobrazi reached 79% in Q1/12 compared to 81% in the same period last year. Total OMV refining output was 1% above the level of Q1/11.

The contribution from Borealis (which is accounted for at equity and therefore shown in the financial result of OMV Group) decreased by 20% compared to Q1/11 as a result of the difficult market conditions, especially for the European polyolefin business segment. Both Borouge and the fertilizer business, however, continued their strong performance. The Borouge 3 expansion project is progressing as planned and will increase the annual capacity of the integrated olefins/polyolefins site in Abu Dhabi from 2m t to 4.5m t by 2014.

The clean marketing EBIT was below the level of Q1/11, due to the high oil price and persisting difficult demand and margin environment across regions and in both retail and commercial businesses. Petrol Ofisi, however, increased its contribution vs. Q1/11 supported by an improved operational performance and achieved synergies in international product supply. Overall, marketing sales volumes were down by 6% compared to Q1/11 influenced by extreme winter conditions.

As of March 31, 2012, the total number of retail stations in OMV Group stood at 4,480 compared to 4,742 at the end of March 2011, mainly due to the sale of filling stations in Germany and Cyprus.

At € (30)m clean CCS EBIT of the business segment R&M came in significantly lower than the € 85m in Q4/11, in spite of the increase of the OMV indicator refining margin supported by higher gasoline prices. The refining performance was negatively influenced by falling middle distillate spreads and very weak local market price levels compared to the Rotterdam product market. The increasing crude oil price contributed to positive CCS effects but burdened the indicator margin due to increasing costs for own crude consumption. The petrochemicals business was burdened by substantially lower margins, especially at the beginning of the year, due to the subdued economic environment. The marketing business suffered from seasonally lower volumes and depressed margins influenced by the increasing oil price. Petrol Ofisi’s contribution, in spite of seasonally lower volumes, improved vs. Q4/11 mainly due to an improved operational performance.

For 2012, OMV expects the average Brent oil price to remain above USD 100/bbl, whilst the Brent-Urals spread is anticipated to remain tight. In the European gas market, the margin environment is expected to remain challenging. Romania is required to implement the Third Energy Package in its legislation. This is expected to increase the pressure towards achieving a liberalized gas market in Romania in order to eliminate the current distortion in the market. Refining margins, while expected to improve from the lows in Q1/12, will remain under pressure exacerbated by still high crude oil price levels. The petrochemical business is anticipated to improve slightly. Marketing volumes as well as margins are expected to remain suppressed due to historically high crude oil price levels. The overall marketing environment in Turkey is expected to remain challenging.

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