The executive board of Austrian oil and gas business OMV has laid out a new strategy for the firm that focuses on safeguarding cash flow and a sustainable upstream business. But the firm's CEO did not rule out possible job losses.
Accompanying the firm's fourth-quarter results Thursday, OMV's new strategy aims to make the company "fit for a volatile market and fit for the future".
OMV CEO Rainer Seele said that the company has several options available to it for strengthening its cash flow.
"This will be applied across the board: for investments, exploration expenditure and operating costs. No target is in place for headcount reductions, but we cannot rule this out completely."
Cuts in the firm's exploration and appraisal activity will see spending in this area fall by around 60 percent between 2014 and 2017 to EUR 300 million ($333 million). Total investments by OMV between 2014 and 2016 are set to fall by 40 percent to EUR 2.4 billion ($2.7 billion).
OMV expects to generate additional funds by selling non-strategic assets. The firm has already announced the sale of a minority stake of up to 49 percent in its Gas Connect Austria pipeline business as well as the divestment of up to 100 percent of Turkish subsidiary OMV Petrol Ofisi.
In the firm's upstream business OMV plans to see 90-to-95 percent of its upstream investment go into maintaining production at around 300,000 barrels of oil equivalent per day and, should the political situation allow, into reviving production in Libya and Yemen. The remaining 5-to-10 percent of the firm's upstream budget will be earmarked for the firm's Achimov IV and V project in Russia.
"The strategy of ramping up production volume at any price no longer holds. We are focusing on highly profitable barrels. What this means is that profitability has priority over production growth," Seele said. "Our goal is to make OMV’s upstream portfolio sustainable; this means that we replace in full the reserves that we produce."
OMV's core regions currently are Austria and Romania, the North Sea along with the Middle East and Africa. Its main development regions are Russia, the United Arab Emirates and Iran.
Seele also confirmed that "a lot has been achieved in the downstream oil business thanks to restructuring which has already been implemented", and that the firm's downstream priority now is to build up the division's strong competitiveness. The division will continue to serve as a cash generator with the focus being on optimal capacity utilization at its refineries.
OMV's 4Q 2015 results showed that the firm's clean current cost of supplies (CCS) net income for the quarter was down by 48 percent compared with 4Q 2014 at EUR 180 million ($200 million).
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