Higher upstream spending lift H1 capex at OMV Petrom

Austro-Romanian oil company OMV Petrom saw capital spending rise by an annual 15% to 1.4bn leu ($289.5mn) in H1 2022, just as it prepares to take over control of the Neptune Deep offshore joint venture with US major ExxonMobil, in the run up to a final investment decision (FID).

The majority of that investment went to upstream activities, which absorbed 1bn leu of capex versus 993mn leu in the first six months of 2021. Petrom generated a headline pre-tax profit of 3.4bn leu in the April-June quarter, surging by 62% on the year ago period.

Petrom must finalise Neptun Deep's FID by the mid-2023. By that stage, it will have taken over the Black Sea development site's day-to-day operations from ExxonMobil, with the official transfer set for July-September this year.  State-controlled Romgaz reached a deal to buy ExxonMobil's 50% share in early May, for over $1bn.

First gas from Neptune is expected by 2026. Romgaz wants to re-evaluate the development based on the option of using existing Black Sea infrastructure. It says undertaking the project on a "staged basis" could accelerate the runway to first gas.

With the EU in dire need of common market energy supplies, Neptun Deep fits the bill and a positive sanction is more likely with the adoption of Romania's new offshore legal framework in May, as upstream producers now face less red tape and a reduced offshore tax burden.

Petrom's upstream segment booked a 10.2% output decline in April-June. Much of this was owed to the divestment of its Kazakh production assets, which erased 2,700 barrels of oil equivalent/day in net production.

In Romania output fell by 8.4% yr/yr to 120,100 boe/d, falling short of Petrom's internal 7% reduction target. The 7% target reflects efforts to cope with dwindling returns from ageing Romanian onshore fields.

Across Petrom's upstream portfolio from January-June, around 2.6bn leu was allocated to drill 60 new wells and sidetracks. This was up from 36 new wells/sidetracks in the first half of 2021.