Page 16 - Euroil Week 17 2020

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NEWS IN BRIEF
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OMV books Q1 loss, slashes production forecast
Austrian energy group OMV posted a net loss for the first quarter due to significant inventory costs and lowered its production target and crude price forecasts in response to tumbling oil demand in the wake of the coronavirus pandemic.
OMV said on April 29 it lost 68mn euros ($74mn ) in the three months through March after making a profit of 496mn euros in the same period a year before.
With economies around the world locked down and travel halted to arrest the coronavirus pandemic, storage capacities are filling up fast globally, an additional cost for energy companies. Investors worry that recently agreed supply cuts might not be deep enough to counter falling demand.
Clean current cost of supplies (CCS) earnings before interest and tax (EBIT), which exclude special items and inventory gains or losses, fell 8% in the quarter to 699mn euros, above an average estimate of 573mn euros in an OMV poll of 15 analysts.
Oil prices sank 65% in the first three months to lows of $22 per barrel as strict movement restrictions led to a collapse in demand for transportation fuels.
April has seen some of the most turbulent days in oil trading as investors confronted the reality that worldwide supply will overwhelm demand for months or years. U.S. crude futures fell into negative territory for the first time.
OMV said it expects the Brent oil price to average $40 per barrel this year and saw the realised gas price at 11.9 euros per megawatt hour.
The Austrian company now sees its 2020 output at around 440,000 barrels of oil equivalent per day (boepd) instead of its previous target of 500,000 boepd.
CEO Rainer Seele has said he was considering reducing working hours for OMV staff and shutting down a refinery due to the slump in demand. It is also open whether the proposed dividend of 2.00 euros per share will be paid.
The group, which has a global workforce of around 20,000, announced last month it would cut spending by about 20% this year and said it had reached a deal to pay for
its stake buy in plastics maker Borealis in stages to free up cash.
OMV had agreed earlier in March to purchase a 39% stake in Borealis from Abu Dhabi state investor Mubadala [MUDEV. UL], to lift its own stake to 75% and make it one of the world’s leading polymer producers.
To fund the $4.7bn acquisition, OMV
plans sell $2.3bn of assets by the end of next year.
A large number of parties have already expressed interest in its nearly 300 filling stations in Germany, it said on April 29.
Due diligence for the planned divestment of its 51% stake in gas pipeline operator Gas Connect Austria to hydropower specialist Verbund was making progress.
Quarterly cash flow from operating activities was 838mn euros and its cash position at end-March was 2.8bn euros.
UK’s Buzzard oilfield comes back online
The Buzzard field in the UK North Sea has resumed production following an unplanned shutdown last week.
The disruption was caused by an electrical fault on the power generation system, which has now been repaired, according to the field’s operator China’s CNOOC.
Buzzard produces medium sour
crude and is normally the largest single contributor to the Forties stream. The
field’s contribution to unstabilised Forties production dropped to 5% in the week to April 26, compared with 23% the week before, according to Forties Pipeline System (FPS) operator Ineos.
This means the Forties blend was lighter and sweeter last week, with a gravity of 43.2°API and 34pc sulphur content.
Prior to last week’s shutdown, Ineos had forecast that Buzzard’s contribution to Forties would average 26.9% this month, yielding a gravity of 39.6-40.3°API and sulphur content of 0.62-0.69%.
Okea warns of delay at Yme field
Norwegian independent oil firm OKEA will ask its bondholders for a waiver of bond covenants and sees a risk of the Yme field development being delayed until 2021, the company said on April 28.
The firm co-founded by Norway’s former oil minister Ola Borten Moe and majority-owned by Thailand’s Bangchak Corporation operates the Draugen oilfield and has a 15% stake in Repsol’s Yme project.
“The current plan is to start production at Yme by the end of 2020, but given the situation with COVID-19... there is a clear likelihood that we will go into 2021,” Knut Gjertsen, OKEA’s head of projects and technology, said as the company presented
first-quarter earnings.
The company booked a non-cash
impairment of 634mn Norwegian crowns ($60.47mn) on assets due to the sharp fall in oil and gas prices.
OKEA’s CFO Birte Norheim said the company hired DNB Markets to advise in talks with bondholders as it prepares to seek waivers on bond covenants that were at risk of a temporary breach in 2020 due to the fall in oil prices.
The company’s Oslo-listed shares
were down 1.7% by 0859 GMT, underperforming a 0.2% rise in European energy stocks, and have fallen by 55% year- to-date.
EnQuest to axe 530 jobs
More than 500 North Sea workers are expected to be made redundant by EnQuest as oil prices plummet.
EnQuest has started a six-week consultation with UK staff as it tries to make $300mn in savings this year.
A spokeswoman said: “EnQuest can confirm it has begun a six-week collective consultation with UK employees as it takes decisive action to manage the business
in the current challenging economic environment.
“Given the prevailing low oil price and global demand, the group has reviewed each of its assets and related spending plans.
“This reduction in operational activity will inevitably lead to resource reductions, although EnQuest is seeking to keep this to a minimum.
“EnQuest expects to reduce the number of roles by 530.
“The company expects to have the new organisation established in Q3 2020.”
It comes after Oil and Gas UK warned up to 30,000 jobs could be lost in the sector.
Companies have been squeezed
in recent weeks as the price of Brent crude, the main benchmark used by UK producers, dropped to lows not seen in more than 20 years.
Mike Cash, general secretary of the Rail, Maritime and Transport union, said: “An unprecedented crisis is unfolding in the North Sea and across the industry and this is just the latest evidence of the carnage we face.
“RMT is demanding urgent Government intervention before the whole energy industry and its vital supply lines are tipped over a cliff edge.”
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Week 17 30•April•2020