Romania’s OMV Petrom posts 17% drop in sales and profit on low oil prices

OMV Petrom, Romania’s biggest oil & gas company, posted a 17% drop in turnover and a similar decline of its net profit in the first quarter of 2016, due to the low oil prices. The group had consolidated sales of some EUR 795 million in the first three months, down from EUR 960 million in the same period of 2015. The net profit went down from some EUR 78 million to EUR 64 million. “In the first three months of 2016, the group financial results were impacted by the steep drop in oil prices. In response, we have further implemented measures to reduce both operating costs and capital spending,” said Mariana Gheorghe, OMV Petrom CEO. “Our investments were prioritized based on long-term value generation and CAPEX was reduced by approximately 28% year-on-year,” she added. OMV Petrom only invested some EUR 170 million in developing its operations, in the first quarter, down from almost EUR 240 million in Q1 2015. This new cut came after a 38% drop in capital expenditure in 2015 compared to 2014. The lower investments reflected in production declines on all segments. OMV Petrom’s total hydrocarbon production declined by 3% compared to Q1 2015. Crude oil production went down by 4% and the natural gas output was 3% lower. The average price for which the group sold its oil in the first three months of 2016 was USD 26.7 per barrel, down by 41% compared to Q1 2015. However, OMV Petrom benefited from higher gas prices. “On the back of our integrated business model, the negative Upstream result for Q1/16 was more than compensated by the positive contribution from both Downstream Oil and Gas. Downstream Oil benefitted from increased demand for refined oil products and lower cost for own crude consumed, whereas Downstream Gas further experienced a challenging environment on both gas and power markets,” Mariana Gheorghe said in a company press release. However, she emphasized that the company needed a predictable and friendly fiscal framework to cope with the difficult market conditions. “Considering a prolonged depressed price environment, we will continue to adjust our activity level, maintaining a strong balance sheet and protecting our free cash flow position. In this context, a stable, predictable and investment-friendly fiscal and regulatory framework is even more critical to continue investments for both managing natural decline and further onshore and offshore developments,” she concluded. Austrian group OMV controls 51% of OMV Petrom. The Romanian state holds a 20.64% stake and investment fund Fondul Proprietatea owns 19% of the company. OMV Petrom's shares are trading on the Bucharest Stock Exchange with the ticker SNP. The SNP share price went down by 42% in the past 12 months. However, the price went slightly up on Wednesday morning, after the company announced its first quarter results. Andrei Chirileasa, andrei@romania-insider.com