OilVoice - OMV Reports 2009 First Quarter Results

OMV Reports 2009 First Quarter Results

Friday, May 08, 2009

Financial Highlights

In Q1/09, results reflected the strong decline in crude prices. The average Brent price decreased by 54% compared to Q1/08. Furthermore these lower average crude prices led to negative CCS effects in refining. The Group’s reported EBIT of EUR 266 mn was therefore significantly below the level of Q1/08. For the same reasons the contribution of Petrom to reported EBIT was only EUR 77 mn. The net financial result was below the Q1/08 level, as the MOL sale as well as Borealis’ and Petrol Ofisi’s results made a negative contribution. Net income after minorities of EUR 40 mn was down compared to EUR 446 mn in Q1/08. Clean CCS EBIT was down by 54% at EUR 340 mn excluding a minor net special income of EUR 8 mn and CCS effects of EUR (82) mn. Petrom’s clean CCS EBIT was EUR 93 mn. Clean CCS net income after minorities was EUR 126 mn and clean CCS EPS after minorities was EUR 0.42. At the end of March, net debt of the Group was EUR 3,336 mn and the gearing ratio stood at 33.9%.

In Exploration and Production (E&P), clean EBIT decreased by 69% compared to Q1/08 to EUR 227 mn as oil prices fell dramatically, only partly compensated by the positive impact of FX developments. The Group’s oil and gas production was 308,000 boe/d, 4% below the level of Q1/08.

In Refining and Marketing (R&M), clean CCS EBIT was EUR 22 mn, versus EUR (7) mn in Q1/08. Timing effects (crude oil bought at higher price levels than prevailing at the moment of sale of finalized products) led to negative CCS effects of EUR (82) in refining. The petrochemical business suffered from depressed margins. The marketing result came in well above the level of Q1/08, mainly due to higher sales volumes and cost reductions in Petrom.

In Gas and Power (G&P), clean EBIT decreased by 2% to EUR 86 mn compared to Q1/08, with good results from gas supply, marketing and trading partially compensating for negative effects from Doljchim.

Significant events in Q1/09
• On January 21, OMV announced the planned sale of additional 70 OMV and Avanti filling stations in Austria. OMV’s strategy is the expansion of premium station locations and quality leadership with the VIVA convenience store brand.

• On February 12, OMV was awarded an additional offshore exploration license in Norway, which is located in the Barents Sea, and will be operated by OMV (Norge) AS in a joint venture with Sagex Petroleum Norge AS. OMV now has interests in seven licenses in Norway.

• On February 23, OMV announced the planned sale of its subsidiary, OMV Italia S.r.L. with a network of 96 filling stations in the Northern-Italian region of Triveneto (Trentino, South Tirol, Friuli-Venezia Giulia, Veneto) by year-end 2009.

• On February 25, OMV announced first oil from Maari, New Zealand, operated by OMV New Zealand in a joint venture with Todd Energy, Horizon Oil International Ltd and Cue Taranaki Pty Ltd. A peak production level of approximately 30,000 bbl/d is expected in 2010 (gross).

• On March 9, OMV announced the start of the extended well test of Latif-1 located in the Latif Block about 100 km from Sukkur in southern Pakistan’s province of Sindh. During 9m/09 the testing gas rate is estimated to reach approximately 1,000 boe/d.

• On March 25, the OMV Supervisory Board reconfirmed all Members of the Executive Board. Wolfgang Ruttenstorfer will serve as CEO until March 31, 2011 and will be succeeded by Gerhard Roiss.

• On March 30, OMV announced the sale of its 21.2% stake in MOL to Surgutneftegaz, for a total consideration of EUR 1,400 mn.

• On March 31, OMV announced its debut EUR 750 mn Eurobond transaction, with a maturity of five years. Due to high demand the bond issue was later increased to EUR 1,000 mn.

Wolfgang Ruttenstorfer, CEO of OMV:
“Against the backdrop of a deteriorating economic situation and crude prices only slightly recovering towards the end of Q1/09, the operational environment remained difficult for OMV. While earnings came under pressure we managed, at the same time, to strengthen our balance sheet, notably through the sale of our 21.2% stake in MOL but also through the issue of a Eurobond and German Loan Notes. More encouragingly, the Maari oil field in New Zealand has been brought on stream and current production rates look very promising. Overall, OMV is well prepared to cope with the global economic downturn. Its operational and financial strength allows the Company to continue pursuing its growth strategy in its core regions, which will offer attractive growth rates in the medium and long term.”

Exploration and Production (E&P)

• Low oil price environment burdened Q1/09 results; stronger USD could mitigate this effect to some extent
• Production volumes below Q1/08 level: Lower volumes in Libya and in Romania could not be fully offset by start of production of the oil field Maari, New Zealand
• Positive OPEX development: A stronger USD had a positive effect on OPEX in USD/boe, supported by an improved overall cost situation

Beginning with Q1/09 OMV is reporting its segment results before taking into account the necessary elimination of intersegmental profits. The change in these unrealized profits is reflected in the consolidation adjustment. Segment sales decreased significantly in Q1/09 - despite a stronger USD - mainly due to the weaker oil price environment. The Brent price in USD was 54% below the Q1/08 level, while the Group’s average realized crude price fell by just 49% to USD 45.88/bbl. The Urals crude price, the reference oil price in Romania, decreased by 53%. The Group’s average realized gas price in EUR was by 9% below Q1/08 reflecting the gas price decline lagging behind the oil prices. EBIT fell by 69% compared to Q1/08 mainly due to the weak price situation and lower lifting volumes. Higher volumes in New Zealand and Yemen could not compensate for a significant volume reduction in Libya, as well as for lower volumes in Romania, Pakistan and the UK. Also the negative effect of higher exploration expenses due to the write-off of parts of the Barracuda field in Libya burdened the result. These effects were partially mitigated by a positive hedging result (EUR 58 mn) and the beneficial effect of the stronger USD. The latter had a positive effect on oil revenues, while the weakening of the RON against the EUR (compared to Q1/08) had a strong favorable impact on RON-denominated costs in EUR terms. Romanian gas prices in EUR terms were adversely affected by the weakening of the Romanian currency since they are fixed in RON. As no special items were recorded in Q1/09, just as in Q1/08, the decline in clean EBIT was the same, 69%.

Production costs excluding royalties in USD/boe (OPEX) decreased by 12% versus Q1/08. At Petrom, OPEX/boe was even down by 15%. The positive effect from the stronger USD and weaker RON more than compensated for the negative volume effects. Exploration expenditure declined by 13% to EUR 51 mn compared to Q1/08, mainly due to lower exploration activities in Romania and Russia despite higher activities in Libya and the UK.

Total production of oil, NGL and gas was down by 4% versus Q1/08 at 308,000 boe/d. Oil and NGL production was slightly below Q1/08 primarily due to Libya (production down by 7,000 boe/d mainly as a result of the lower OPEC quota) and lower volumes in Romania, the UK and Tunisia, which could not be compensated by the start of production of Maari (New Zealand) and higher volumes from Habban (Yemen). Gas production fell by 6% compared to Q1/08, mainly due to lower market demand in Romania. As of Q1/09 non-hydrocarbon gases (mainly inert gases) produced in Austria and Pakistan that can not be sold, will no longer be shown as part of the production. This was only partially compensated by the additional volumes from the Strasshof (first phase) and Ebenthal fields, which were start-ups in Austria in Q3/08. Also, to a large extent due to underliftings in Libya and Tunisia, the total sales quantity was 5% behind Q1/08 volumes. The new Maari field had no liftings in Q1/09.

In Q1/09, OMV decided to stop its exploration activities in Bavaria, Germany and in the Mehr block in Iran. Thus OMV is active in 17 countries in the E&P segment.

Compared to Q4/08, clean EBIT declined by 17%. The negative effects of lower oil prices (Brent and Urals down by 20%) and lower volumes in Q1/09 were only partially mitigated by cost savings and the positive hedging result. Reported EBIT increased significantly due to net special charges (EUR 244 mn) booked in Q4/08 reflecting provisions for litigations in Romania as well as restructuring provisions and write-offs in Iran and Russia. The contribution from Petrom benefited from a weaker RON against the EUR (lower costs in EUR terms) but was adversely affected by decreased gas prices in EUR terms. Sales volumes were down, largely due to lower volumes in Libya. Oil production decreased, also mainly due to Libya (Libyan volumes down by 9,000 boe/d), as the effects of the lower OPEC quota could not be offset by the start-up of Maari. Gas volumes slightly declined as volumes from the new Austrian fields Strasshof and Ebenthal could not compensate for the deduction of non-hydrocarbon gases in reported volumes from Pakistan and Austria. Gas volumes in Romania were stable.

Refining and Marketing (R&M)

• OMV indicator refining margin under pressure towards end of Q1/09 due to weak middle distillate spreads; positive margin effect from reduced cost for own crude consumption
• Lower average crude prices resulted in further negative CCS effects of EUR (82) in refining
• Petrochemical business suffered from a strong decline in olefin prices due to the economic downturn
• Stable marketing sales volumes despite weakening environment; higher sales volumes in Petrom (+12% vs Q1/08)

Gas and Power (G&P)

• Higher sales volumes and result for gas supply, marketing and trading business compared to Q1/08
• Storage business positively affected by Russian/Ukrainian gas dispute
• Result of Petrom’s fertilizer plant Doljchim was affected by low demand