OMV Notes 1Q Results
OMV reported its first quarter sales.
- Oil price increase drives improved results: The average Brent price increased by 72% vs. Q1/09; production was in line with the 2009 level at 317,000 boe/d; refining margins recovered to a certain extent in Q1/10 but middle distillate spreads remained at low levels
- Cost management further enhances performance: Clean CCS EBIT increased by 90% to EUR 647 mn; clean
- CCS net income after minorities was up 136% at EUR 297 mn driven by a stronger contribution from associates and a lower tax rate
Outlook for 2010:
In E&P, we expect production to increase; in R&M, Q1/10 saw tentative signs of improvement in the margin environment, however, uncertainty remains going forward; in G&P, the various projects are progressing steadily and help to strengthen our growing gas and power operation Wolfgang Ruttenstorfer, CEO of OMV, "In Q1/10, we saw a continuing rise in crude oil prices and a further reduction in operating costs which led to a strong set of results in our E&P segment. We are particularly pleased to have achieved a considerable advancement in the R&M result, where a somewhat improved OMV indicator refining margin compared to Q4/09 was further supported by cost reductions and a better petrochemicals result. The G&P business contributed an encouraging result driven by harsh weather
conditions, while continuing its internationalization strategy of supply, marketing and trading. The expansion along the gas value chain into power is on track. The Company continues to focus its investments on the physical integration of all three business segments in order to extract the highest possible value for our shareholders."
First quarter 2010 (Q1/10)
In Q1/10, results were driven by a favorable crude price environment. The Brent price rose steadily, exceeding last year's Q1 average by 72%, more than offsetting the impact of a lower OMV indicator refining margin compared to Q1/09. The Group's reported EBIT of EUR 710 mn was therefore well above the level of Q1/09 and Petrom's contribution to reported EBIT was up to EUR 230 mn. The
net financial result was EUR 76 mn better than the Q1/09 level, as an improved at-equity contribution of Borealis and Petrol Ofisi more than compensated higher net interest charges. Net income after minorities of EUR 346 mn was up compared to EUR 40 mn in Q1/09. Clean CCS EBIT increased by 90% to EUR 647 mn. The clean CCS EBIT is stated after eliminating net special income of EUR 16 mn and positive inventory effects of EUR 47 mn. Petrom's clean CCS EBIT was EUR 222 mn, 139% above last year's level. Clean CCS net income after minorities was EUR 297 mn and clean CCS EPS after minorities was EUR 1.00.
In Exploration and Production (E&P), clean EBIT increased by 145% compared to Q1/09 to EUR 556 mn mainly due to the favorable oil price environment. At 317,000 boe/d the Group’s oil and gas production was above Q1/09.
Significant events in Q1/10
On January 7, OMV announced that IPIC, one of its main shareholders, increased its shareholding in OMV to 20.0%. The consortium ÖIAG/IPIC now holds 51.5% of the registered capital.
On January 7, OMV announced that Jaap Huijskes will become successor of OMV Executive Vice President Helmut Langanger, responsible for Exploration and Production. Jaap Huijskes joined OMV on April 1, 2010, Helmut Langanger will leave the Company as scheduled by the end of September 2010.
On January 12, OMV announced the planned disposal of OMV Wärme VertriebsgmbH by the end of 2010 as a consequence of the reorganization of its sales structures within the heating oil business. In future, the distribution of heating oil to private customers will be exclusively carried out via so-called OMV brand partners. Corporate customers and brand partners will continue to be directly managed by OMV.
On February 16, OMV announced the discovery and successful testing of gas and condensate within the Jenein Sud exploration block in southern Tunisia. This was the fifth successive discovery in this area in the last four years and underpins the significant potential of the block.
We expect the Brent oil price to remain volatile during 2010 trading broadly within a range of USD 60-85/bbl, similar to that experienced in H2/09. The Brent-Urals spread is expected to broaden compared to the previous year. We see a slightly weakening EUR vs. RON and USD in a continuing volatile environment. Despite the encouraging start to the year, the market for refined products is expected to remain challenging throughout the year 2010. Petrochemical margins will face the additional challenge of new production capacity being brought on stream in the Middle East. Marketing volumes as well as margins are expected to remain under pressure until the broader economy shows clearer signs of improvement. To partly protect the Group's cash flow from the negative impact of lower oil prices in 2010, OMV entered into crude oil hedges in Q2/09 for a volume of 63,000 bbl/d of the 2010 production securing a price floor of USD 54/bbl via the sale of a price cap of USD 75/bbl. OMV plans to increase CAPEX excluding major acquisitions to approximately EUR 2.8 bn in 2010 while staying firmly committed to maintaining its strong investment grade credit rating.
Production in E&P is expected to grow to 325,000 boe/d in 2010 mainly due to the new oil fields Maari in New Zealand and Komsomolskoe in Kazakhstan which will be on stream for the full year for the first time. Those assets will contribute considerably to overall production by reaching their daily plateau production levels. In order to further strengthen its E&P portfolio, OMV plans to drill about 40 exploration and appraisal wells, 25% more than in 2009. Work on the recently acquired Kultuk oil discovery in Kazakhstan will commence with a 3D seismic acquisition. Substantial investments will be made in one of OMV's major field development projects, Habban Block S2, in Yemen. Preparation work on the Central Processing Facility and pipeline, which are planned to be operational in 2012 enabling an increase in oil production, are ongoing. Another considerable part of OMV's investment program will be spent in Romania on the compressor station in Hurezani to facilitate gas production from the low pressure wells, on the drilling of development and production wells, well workovers, production facilities and infrastructure. E&P will continue to prioritize its investments and apply strict cost management. In order to cater for future production growth, emphasis will be put on acquiring reserves and production.
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