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OMV: Higher Profit than Expected

Published: August 8, 2012; 12:37 · (Vindobona)

In the second quarter, clean CCS EBIT was at € 865 mn, up 82% vs. Q2/11. Sales grew by 25%. Gearing ratio down to 31% vs. 34% in Q2/11.

OMV: Higher Profit than Expected / Picture: © Wikimedia Commons / Waerfelu [CC BY-SA 3.0 (]

Gerhard Roiss, CEO of OMV: “In the first half year of 2012, we continued our strong operating performance despite a very volatile political and economic environment. The implementation of our strategy which focuses on growth in upstream is taking shape. On top of the gas discovery in the Black Sea offshore Romania in February, we recently recorded important milestones such as the award of 30% of an exploration block in the Bulgarian Black Sea adjacent to the Neptun block, the signing of an upstream agreement with the Abu Dhabi National Oil Company, a number of asset deals in the UK as well as the acquisition of a 15% stake in a deep water gas development in the Northern Norwegian Sea. The selection of Nabucco West as Central European option for gas delivery from the Shah Deniz II field in Azerbaijan is a major step towards the final investment decision. In Downstream, the divestment program announced last year is on track. We have also started the full roll-out of the group-wide performance program, which is set to deliver the announced ROACE increase of 2% points by 2014. All in all, I am glad to see our strategy implementation is gathering pace.”

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 significant spread between oil-linked gas prices and hub prices is expected to remain. In Romania, the regulator published a gas price liberalization schedule, which foresees a gradual adjustment of gas prices for domestic producers until full liberalization in 2018. Refining margins, which spiked in Q2/12, are expected to deteriorate as crude prices recover from recent lows. Petrochemical margins are anticipated to come down from recent highs as a subdued economic environment weighs on prices. Marketing volumes and margins are expected to remain suppressed due to lower economic growth and historically high crude price levels. The overall marketing environment in Turkey is expected to remain challenging.

For 2012, OMV entered into oil price swaps, locking in a Brent price of approx. USD 101.5/bbl for a volume of 50,000 bbl/d (thereof 30,000 bbl/d at Petrom level), which will expire at the end of the year. OMV targets an investment level for average net CAPEX (excluding acquisitions) from 2012 to 2014 of approx. € 2.4bn p.a.

Exploration and Production

In Romania, key activities will be the progressing of the appraisal of the Totea field as well as the preparation for further exploration activities and the appraisal of the significant deep offshore gas discovery Domino.

In Libya, production is expected to stay at current levels for the time being. In Yemen, production recommenced at a low level in July following the repair of an export pipeline, but the security situation remains uncertain. In the Kurdistan Region of Iraq, extended well test facilities for Bina Bawi are in preparation and production is expected to start in H1/13. Further appraisal drilling is ongoing.

E&P will further increase its exploration and appraisal expenditure vs. 2011 focusing on bigger, high impact exploration targets and on an accelerated maturation of discoveries.

Gas and Power

Further progress on the Nabucco gas pipeline project depends on the decision of the Shah Deniz II Consortium in favor of Nabucco West vs. the Trans Adriatic Pipeline. Further expansion of the West-Austria-Gas (WAG) pipeline is expected to be finalized by the end of this year . The power plant in Samsun, Turkey, is expected to be commercially operational by H1/13 . In Turkey, OMV will follow its growth strategy in natural gas sales and will prepare power sales activities

Refining and Marketing

In the marketing business, the ongoing streamlining of the retail network in areas with low integration will further contribute to efficiency gains. The divestment program with the aim of generating up to € 1bn will be further progressed. At Petrol Ofisi, further integration and synergy realization with OMV’s supply structures should contribute positively to the overall R&M result.

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