OMV Petrom: Gazing confidently into the future
- Written by Lavinia Iancu
Most companies in the oil and gas industry have revised their strategies on the move, in conformity with price evolution on raw materials and services. This comes as a consequence of a challenging and complex business environment. And results measured up.
In 2015 the steep drop in oil price severely affected OMV Petrom’s financial results. The negative contribution from Upstream was partially compensated by the strong Downstream performance, which proves the benefits of the integrated business. Throughout the year, the company responded swiftly to the weakening market fundamentals and successfully delivered on its promises to contain costs and maintain a competitive position, while reducing CAPEX. Nevertheless, OMV Petrom managed to maintain a broadly stable hydrocarbon production (179 kboe/day), capitalizing on previous years’ investments and discoveries.
Moreover, together with ExxonMobil, OMV Petrom completed the second exploration drilling campaign in the Neptun block, which included in total seven wells drilled, most of which encountered gas, and a successful well test of the Domino structure. The results are sufficiently encouraging to continue to assess the commercial viability for developing the discovered resources.
“In response to the prolonged depressed market environment, we will continue to adjust our activity level, maintaining a strong balance sheet and protecting our free cash flow position. This includes management’s intention to propose that no dividends will be distributed in respect of 2015. A stable, predictable and investment-friendly fiscal and regulatory framework is crucial to enable us to maintain future investments for both offsetting natural decline and further onshore and offshore development,” Mariana Gheorghe, CEO of OMV Petrom, stated on the occasion of announcement of preliminary financial results of 2015.
Despite finishing 2015 with a deficit: a net negative result of 690 million RON, as compared to a net profit of 2.1 billion RON in the previous year, the OMV Petrom Group still sees an upside. The operational result, excluding special elements (EBITT CCA), stays positive.
In what pertains to the implemented strategy, things are as follows: the adjusting measures had the effect of reducing the investments by 38% in 2015 compared to 2014 (2015: 3.9 billion RON), also reducing the operational costs compared to 2014 and optimizing the portfolio in all activity domains.
An important red flag was raised to signal the drop in short and medium term hydrocarbon production because of additional reduction of investments and exploration expenses, as well as portfolio optimization (350 wells are up for closure in 2016).
Still, the head of OMV Petrom, mentioned that, with a price of Brent crude oil near USD 40 a barrel, the times ahead are not so discouraging. In these conditions the company expects 2016 to be a profitable year.