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Rising Production at OMV

Published: February 3, 2012; 11:19 · (Vindobona)

Due to the resumption of works in Libya, the Austrian oil and gas group announces rising production volumes and slightly improving refining margins.

Rising Production at OMV / Picture: © Vindobona.org

The data on the economic environment shows the evolution of the relevant crude prices and exchange rates. For the E&P segment, we provide details and comment on the expected development of production volumes and the key drivers of this development. An overview on refining margins and performance drivers for the G&P and R&M businesses is also included. The OMV Group Q4/11 results will be published on February 22, 2012. The information contained herein is hence subject to change and may differ from the final numbers that will be reported. Overall production increased compared to the previous quarter, mainly due to the resumption of production in Libya in November (average production in Q4/11 of approx. 10,000 boe/d) and a rise in production in the UK. This increase was however partly offset by the shut in of production in Yemen. In Romania, production increased by approximately 1,500 boe/d compared to Q3/11 as first volumes from the exploration well Totea contributed to production.

Despite the absence of liftings from Libya in Q4/11, overall sales volumes were slightly above Q3/11, mainly due to the sale of volumes produced in Yemen in Q3/11. The impact of hedges entered in Q1/11 is explained in more detail on page 2. The strengthening of the USD against the € had a positive effect on the Q4/11 result as the oil price in € terms increased.

Exploration expenses were lower than in Q3/11.Sales volumes in the supply, marketing and trading business increased by 36% vs. Q4/10, mainly driven by increased short-term trading on international gas hubs. Overall, margins remained under considerable pressure with spot prices continuing to be significantly below longterm gas prices. The negotiations with Gazprom on price revisions for the long-term gas supply contract were successfully concluded and contributed significantly to the result. Petrom’s sales volumes in Q4/11 decreased by 9% vs. Q4/10 due to lower sales to distribution companies triggered by warmer weather. The construction of the power plant in Brazil was successfully completed by the end of 2011, however, final tests were interrupted due to external technical factors. Full commercial operation is now anticipated for H2/12.

In Q4/11, the OMV indicator refining margin increased slightly vs. Q3/11 as somewhat lower crude prices and higher middle distillates spreads were able to compensate for the negative effects from gasoline and naphtha margins. Decreased crude prices contributed to negative CCS effects. In petrochemicals, lower margins and volumes caused by slowing economic activities impacted the performance in Q4/11. Lower costs in Q4/11 vs. Q3/11 positively influenced the refining performance. The Marketing business suffered from seasonal effects compared to Q3/11. Petrol Ofisi’s performance suffered from seasonally lower volumes and margins vs. Q3/11 and was further affected by increased competition and margin pressure.

Despite a strong contribution from Borouge, Borealis’ performance was burdened by lower polyolefin volumes and margins compared to Q3/11. Net special charges in the quarter include personnel related costs but relate mainly to the provision of approx. € 120m for the fine imposed on Petrom as a result of the antitrust investigation by the Romanian Competition Council. The company believes this fine to be unwarranted and is preparing its defense. At the end of January 2011, OMV entered into oil price swaps, locking in a Brent price of approx. USD 97/bbl for a production volume of 50,000 bbl/d, and into €-USD average rate forwards (at USD 1.37), covering those volumes until the end of 2011. In Q4/11, the net result of these hedges adversely impacted EBIT by € 48m.

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