OMV Sees Q3 Profit Drop, but Brighter Prospects
Austrian energy concern OMV reported October 31 a Q3 net income of €393mn ($446mn), down 28% on the same quarter last year. Consolidated sales rose 21%, €5.6bn, primarily driven by higher prices in downstream. Operating profit, based on the current cost of supplies (CCS), was up by 31% to €1.05bn - mainly driven by a considerably higher upstream result of €554mn, compared with last year's €300mn.
Production rose by 65,000 barrels of oil equivalent (boe)/day to 406,000 boe/d compared with Q3 2017, while production costs fell 22% to $6.8/boe.
Net market effects had a substantial positive impact of €216mn, following higher average oil and gas prices that were partly offset by hedging losses. The downstream CCS result of €484mn suffered a little from downstream gas, but was partly offset by downstream oil.
Another disappointment in the quarter was the decision to buy upstream assets from Gazprom in Russia, rather than swap them for its own upstream assets in Norway as the two had hoped, before they met with opposition from Oslo.
According to one industry source, there had been concerns that Gazprom would have too much access to information regarding the Norwegian export pipeline flows and other commercially valuable information about its major competitor for European gas supplies.
The clean group tax rate was 38% compared to 19% in Q3/17, related to a considerably stronger upstream contribution, particularly from high tax rate fiscal regimes such as Norway and Libya.
Half the net special items of €319mn were related to the recycling of foreign exchange losses following the sale of its Turkish power plant. Cash flow from operating activities grew over the year, from Q3 2017's €792mn to Q3 2018's €970mn, supported by an improved market environment.
Debt rose to €2.306bn as of September 30, 2018 compared to €450mn the year before, impacted by the acquisition of a 20% stake in an offshore concession in Abu Dhabi in Q2/18 and the acquisition, last December, of German Uniper's 24.99% share in the Yuzhno Russkoye natural gas field, one of the sources of gas for Gazprom's Nord Stream project. On September 30, 2018, the gearing ratio stood at 16% (September 30, 2017: 3%).
Organic capital expenditure rose by 17% to €459mn following upstream activities in Romania, Norway and the United Arab Emirates. Gas sales volumes are projected to be higher in 2018 than in 2017, while margins on those sales are expected to be at a similar level to last year's.
In 2018, average European gas spot prices are anticipated to be considerably higher compared with last year. And OMV will continue to finance the Nord Stream 2 pipeline.
The contribution from Gas Connect Austria weakened from €24mn to €19mn, mainly attributable to higher energy costs as well as to the expiration of long-term contracts, but was partly offset by additional short-term contracts. Natural gas sales volumes declined slightly from 24.0 TWh to 23.3 TWh, primarily due to lower sales volumes in Romania and Turkey, which were partially offset by higher sales in Germany. Net electrical output decreased to 1.4 TWh, mainly as a result of lower spark spreads and the divestment of the Samsun power plant in Turkey.