OMV Sees Strong Oil Price, Awaits Putin Visit
At its results presentation May 3, Austria’s OMV highlighted its key transactions this year, both of which mark a diversification away from Russia.
But its CEO Rainer Seele insisted there was no reason to change OMV’s business in Russia as a result of tightening sanctions, that it will honour its Nord Stream 2 financing undertakings, and hinted that further agreements might be signed with Gazprom during next month's visit to Vienna by Russian President Vladimir Putin in celebration of OMV’s 50 years of Russian gas agreements.
The two deals were OMV’s $1.5bn acquisition of a 40-year, 20% interest in two Abu Dhabi oilfields signed on April 29, and the March 15 deal to pay Shell $578mn for its New Zealand upstream gas assets. Seele said that the NZ decision to halt new exploration licence awards “does not affect our assets.”
Seele also said that he expects subsidiary OMV Petrom still to proceed to a final investment decision (FID) on the deepwater Neptun gasfield offshore Romania within 2H2018 with its partner ExxonMobil, as the project is “of high strategic importance to Petrom” but said the challenge is still to find a “proper monetisation of the gas.” Hungary is blocking the planned BRUA pipe that might let Romanian gas be exported to Austria. ExxonMobil last month began awarding certain Neptun contracts, subject to FID.
OMV net income fell by 35% year on year to €531mn ($636mn) in 1Q2018.
Clean current cost of supply (CCS) net income attributable to stockholders was €377mn, down 25%, reflecting business performance. OMV’s clean CCS operating result was up 2% at €818mn. Earnings for its upstream division fell 6% to €478mn, while those downstream fell 23% to €417mn. Overall sales were impacted by divestment of its Turkish downstream, Petrol Ofisi.
Upstream sales increased following the acquisition by OMV of its stake in Yuzhno Russkoye gas field and the higher production contribution from Libya, but higher realised oil prices in dollars did not offset the negative foreign exchange impact of the US dollar against the euro. Downstream Gas had a strong result due to higher sales volumes, coupled with increased margins, and successful arbitrage trade.
OMV production increased by 31% year on year to a record 437,000 barrels of oil equivalent per day in 1Q2018; of that oil grew just 1%, whereas gas (thanks to Yuzhno Russkoye) was 69% higher at 1.5bn ft3/d.
Putin, Miller to visit Vienna in June
On Russia, Seele said OMV will execute its Nord Stream 2 pipe project undertakings with Gazprom. Asked if OMV would sign further deals during Putin's visit to Vienna in June, Seele said: “Wait and see.” OMV though would “take advantage of [Gazprom CEO Alexei] Miller’s visit to celebrate our 50-year partnership, and if there’s an opportunity, we’ll sign agreements.”
OMV became the first company in western Europe to sign a contract to buy Russian pipeline gas in 1968; flows began in 1972.
Seele though told NGW there had been no progress to date on an “embryonic” project to co-develop with Gazprom a liquefaction unit on the Russian Black Sea to supply the marine LNG bunker market.
'$70/b oil for rest of 2018'
Looking forward, OMV expects the average Brent oil price to be $68/bl in 2018. It had previously forecast $60/b. CEO Seele indeed said that meant OMV expects the oil price to be about $70/b for the remainder of 2018. He said that Opec had successfully rebalanced the market, and anticipated “further oil price upside” if US President Donald Trump were to withdraw from the Iran nuclear deal.
European gas spot prices and margins are expected to be on a similar level compared to 2017, the company said, with its own sales slightly higher. OMV refining margins though would be lower.
OMV capital expenditure was 22% higher year on year at €255mn in 1Q2018; Seele said it is expected to be €1.9bn in full year 2018.