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OMV income slumps in

Q2 on COVID-19 havoc

AUSTRIA AUSTRIAN oil group OMV suffered an 86% the business.”
tumble in second-quarter operating profit, it OMV has cut its capital spending target for
OMV also suffered reported on July 29, owing to much weaker 2020 to €1.7bn, versus a previous forecast of
disappointment in the upstream income. €1.8bn and €2.3bn of investments last year. It also
North Sea. Its clean current cost of supply operating said on July 28 it had cut its dividend proposal for
result came in at €145mn ($171mn) for the three 2019 from €2.00 to €1.75 ($2.05) per share, given
months ending June 30, down from €1.05bn in the tough market conditions.
the same period last year. Its upstream business OMV struck a deal to acquire an extra 39%
swung to an operating loss of €152mn, from a stake in plastics maker Borealis in March from
€650mn profit a year before, and its downstream Abu Dhabi state investor Mubadala, in a bid to
income also fell 28% to €309mn. expand its petrochemicals footprint. On July 28
Like other oil and gas firms, OMV struggled it said it planned to raise €1.5bn from a bond sale
as a result of a collapse in prices. Its oil sold for sometime within the next year to help finance
61% less at $25.64 per barrel, whereas its gas went the €4.7bn deal.
for 33% less, at $97.8 per 1,000 cubic metres.
Weaker demand also forced OMV to cut pro- Hades setback
duction by 5% to 464,000 barrels of oil equivalent Some of OMV’s upstream operations are in the
per day (boepd). Its gas output grew by 4% to Norwegian North Sea, where the company this
287,000 boepd, but this was more than offset by week significantly downgraded its estimate for
a 17% fall in liquids extraction to 177,000 boepd. the size of the Hades gas discovery.
OMV’s revenues tumbled 48% to €3.14bn, After drilling a second well at the 2018 find,
while operating cash flow more than halved to OMV has reduced its estimates to between 2 and
€545mn. Free cash flow (FCF) before dividends 7mn cubic metres of oil equivalent, or around
was down 85% at €111mn. 12.6-44.0mn boe, the Norwegian Petroleum
The company’s downstream margins shrank Directorate (NPD) said on July 28. Previously it
29% to $2.3 per barrel, owing to a slump in fuel set a range of between 3 and 23mn cubic metres.
demand, although one bright spot was a 21% Hades is located in licence 644, where OMV
jump in downstream gas sales volumes to 32.32 serves as operator with a 30% interest. Its part-
TWh. ners are Equinor, DNO and Spirit Energy with
“We view the results as a positive for the shares of 40%, 20% and 10% respectively.
stock,” Berenberg Bank said in a research note, OMV made an adjacent discovery, also in
“demonstrating good resilience in downstream 2018, called Iris. It drilled a second well there in
earnings despite an extremely challenging envi- October last year, and again the result was less
ronment and generating positive free cash flow, than ideal. The midpoint estimate for the find
highlighting the strong cash-generating ability of was lowered from 85mn to 50mn boe. ™

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