OMV Sees 3Q Profit Boost in Spite of 'Weak' Upstream Performance
Austrian oil and gas firm OMV announced its third-quarter results Thursday, revealing that its integrated business model is helping it to thrive even amid the current low oil price environment.
OMV said that its clean CCS (current cost of supplies) net income increased 31 percent to EUR 367 million ($400 million) during the third quarter of 2015 when compared to 3Q 2014. This was as a result of a "very strong" contribution from the firm's downstream operations.
OMV also reduced its capital spending during the nine months to 2015 to $2.18 billion, which was down by 28 percent compared to a year earlier.
Meanwhile, OMV confirmed that its expects its average production to amount to 300,000 barrels of oil equivalent per day (boepd) for the whole of 2015, which would be in line with production achieved during the year to date.
OMV CEO Rainer Seele commented in a company statement:
"Cash flow generation remains a priority, which is visible in the improvement of the free cash flow before dividends which increased to EUR 524 million [$570 million] this quarter. Given the ongoing challenging oil price environment, we have decided to reduce our future oil price assumptions resulting in asset impairments in the upstream business.
"Despite these impairments, the effect of the strong cash generation is reflected in the gearing ratio, which improved to 38 percent compared to the previous quarter. Recently, we have achieved several strategic milestones. We have signed a term sheet with Gazprom for OMV's participation in the project Achimov IV/V based on an exchange of assets as well as the shareholder agreement for the Nord Stream 2 pipeline project.
"Additionally, we decided to sell a stake of up to 49 percent of Gas Connect Austria and reached a provisional agreement on the full takeover of EconGas by OMV, both of which mark important steps towards the optimization of the Downstream Gas portfolio. The review of the group's strategy is progressing well and we will present the results in February 2016."
Analysts at investment bank Jefferies noted that OMV's results were ahead of consensus estimates but also pointed out that the "underlying upstream results look weak and the outlook unchanged in a messy 3Q 2015 set of results".
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