The integrated business model, beneficial for OMV Petrom
- Written by Daniel Lazar
In the first half of this year, OMV Petrom’s net profit decreased by 25%, to RON 1.04 billion (EUR 234.1 million) in the context of sales decline by 18% to RON 8.81 billion (EUR 1.98 billion), caused by lower selling prices of petroleum products. In the first six months of last year, OMV Petrom reported a net profit attributable to shareholders of RON 1.39 billion against sales of RON 10.72 billion. The investment program for 2015 is estimated to about EUR 1 billion, of which approximately 85% will target upstream projects.
Downstream Oil sector saves the results
“In the first six months, we have focused on ensuring a sustainable and profitable business in a potentially persistent low crude price environment. We have implemented measures to reduce operating costs and increase the efficiency of our operations, while maintaining safety as a top priority. In order to preserve cash flow and maintain a strong balance sheet our investments were prioritized based on long term value generation and therefore the Group achieved a capital spending drop of approximately 30%, in line with expectations. In Upstream our previous investments continued to show benefits and, as a result, our Group hydrocarbon production slightly increased, driven by higher contribution from well workovers and field (re)developments. In the Black Sea, so far this year we finalized drilling at four deepwater wells in partnership with ExxonMobil and the exploration program is continuing. The lower Upstream results were partially counterbalanced by the strong Downstream Oil performance, supported by growing refining margins and lower cost for crude, thus capitalizing on our integrated business model. In addition, we increased marketing sales volumes benefitting from higher oil products demand. In Downstream Gas, our gas sales volumes increased by 10%, despite the weak market environment. For the second half of the year, the Romanian authorities have announced public consultations on the fiscal and regulatory environment. As outlined before, we aim for a stable, predictable and investment-friendly framework, which is key requirement for future investments,” Mariana Gheorghe, CEO of OMV Petrom SA stated.
Oil and gas output, slightly higher
The group’s oil and gas output was of 33 million boe, while the overall oil and gas output in Romania peaked to 31.3 million boe, against 31.1 million boe registered in the same period last year.
The domestic oil output was of 13.9 million boe, down by 1%, according to the natural decline of the Suplacu deposit.
The domestic natural gas output has increased by 2% to 17.4 million boe, reflecting the offshore capital repairs and sidetrack drillings, as well as the increased production of the Totea key-wells. The oil and gas output in Kazakhstan increased by 4% to 1.69 million boe.
Sales increased by 1% in H1 against the same period last year, due to higher sales of condensed gas in Romania.
Profit before interest and taxes (EBIT) and excluding special items has fallen by 73% as compared to the same period of the previous year, to RON 726 million, mainly reflecting lower prices of crude oil, gas and condensate as well as higher exploration expenditures and depreciation, partially offset by lower production costs and by the favourable effect of the exchange rate (USD appreciation against the RON by 22%). Exploration expenditures amounted to RON 200 million against RON 133 million during January - June last year, mirroring the record of two unsuccessful wells. In Q2, the net profit attributable to shareholders rose two-fold to RON 693 million against RON 311 million during the similar period of last year.
OMV Petrom counts on the level of USD 50-60/barrel in 2015
For the rest of the year, OMV Petrom anticipates the average price of Brent crude oil to an average level of USD 50-60/barrel, with a relatively small Brent-Urals differential. The company also estimates for H2 that the refining margins will decline against the level recorded in H1, due to persistency of the refining overcapacity on European markets. Also, the company does not expect Romania’s gas demand to recover in the second half of the year, which will increase competition and thus will further put pressure on prices and margins.