OMV resilient in the current oil price environment
OMV has adjusted its medium-term planning in light of the rapid fall of the oil price in recent months. Since the year high in mid-2014, the Brent oil price has fallen by approximately 58%. The Group has acted decisively to maintain profitability and its strong balance sheet.
According to OMV CEO Gerhard Roiss, “there has been a seismic shift for the industry in recent months. OMV has a responsibility to react accordingly and with caution.”
Adjusting the investment program and further cost cutting are at the heart of the measures, which have also been announced in a Trading Statement to the financial markets. OMV Group’s annual investments have now been adjusted to a range of EUR 2.5 to 3.0 bn for the years 2015 to 2017, down from the previous investment plan, which aimed at annual investments of EUR 3.9 bn for the period 2014 to 2016. The majority of investment will continue to go to the Upstream business segment (Exploration and Production).
“In light of the current backdrop and in line with the industry, we have adjusted both our CAPEX as well as our exploration budget and introduced cost-cutting measures. We are prepared to make further reductions to our investment program if required. Our solid financing structure and comfortable liquidity position means that we are well-equipped for the future,” OMV CFO David C. Davies added.
The goal of positioning OMV as an integrated oil and gas company with a focus on Upstream remains unchanged, also mentioned Gerhard Roiss. “On a forward looking basis, we remain positive on our flagship projects in execution; however, we are reducing the speed of implementing certain projects which will inevitably lead to a delay in reaching our previously stated 2016 production target of ~400 kboe/d.”
OMV has a sufficient portfolio to achieve production increases even in a challenging environment. Production stood at 318,000 boe/d in the fourth quarter 2014. This represents an increase of 15% against the fourth quarter 2013, even though large parts of production from Libya have not come through. Activities in Norway are the most important driver behind the rise in production. The integrated business model allowed OMV to profit from the positive development in the Downstream business in the fourth quarter 2014.
Turbulence on the oil and gas markets has also led OMV to reappraise parts of the portfolio. Asset impairments and provisions totalling approximately EUR 700 mn have been applied in the fourth quarter 2014. These relate primarily to Petrol Ofisi in Turkey and the gas-fired power plant Brazi in Romania.
“The steps we have taken, demonstrate OMV’s flexibility and ability to take appropriate measures. The entire OMV Executive Board is fully committed to these measures and devotes its full energy to implement these new steps to make OMV fit for the new oil price environment,” Roiss underlined.