OMV AG (ADR) (OTCMKTS:OMVKY) (ETR:OMV) (FRA:OMV) has just revealed its financial statements for 3Q2013 and has realized a clean CCS EBIT of EUR 619 million, down 21% on a YoY basis. The Austrian firm also realized a clean CCS net income of EUR 263 million, 17% down YoY.

OMV’s EBIT dragged down

EBIT was dragged down by decline in incomes of all three business segments. The EBIT of the exploration and production segment dropped 6% while the EBIT in gas and power segment went negative. The earnings of the refining and marketing segment were the primary issue, however; the EBIT of that segment dropped 60% YoY.

Figure 1: EBIT contribution of different business segments

OMV EBIT
Source: OMV

The refinery utilization of OMV stood at 93% for the quarter and 91% for 9 months. A sufficiently high utilization rate in the refining segment pulled up the topline, which was down 2% YoY but increased over the previous quarter. The management further attributes the decrease in topline to the 3% QoQ drop in average price of Brent crude oil.

Performance of E&P

Production of crude oil and gas both dropped significantly due to the security concerns in Libya and shut-in in New Zealand. They key factors of performance in E&P sector, the largest contributor to OMV AG (ADR) (OTCMKTS:OMVKY) (ETR:OMV) (FRA:OMV)’s bottom line, are shown in the table below.

Table 1: Exploration and production business segment statistics

OMV Activity
Source: OMV

Improved cash flows for the quarter

The cash flow from operating activities of OMV AG (ADR) (OTCMKTS:OMVKY) (ETR:OMV) (FRA:OMV) improved 11% YoY to EUR 1,081. This resulted in reducing the gearing ratio of the company to 12% over 15% in the previous quarter and 28% in the same period last year. The gearing was also down because net debt was down 54% YoY. However, capital expenditure of the company increased significantly (75% YoY) to EUR 829 million in 3Q 2013.

“In the first nine months of this year, we have substantially enhanced our upstream portfolio. The acquisition from Statoil of a portfolio of offshore assets lays the foundation for achieving our key strategic targets for 2016, i.e. delivering a production of around 400 kboe/d and a three-year average reserve replacement rate of 100%. Proceeds generated through working capital reductions and disposals from the downstream business have enabled us to largely fund this transaction through cash generation. Our E&P portfolio was further enlarged through the acquisition of an exploration block in Madagascar, while our development pipeline was strengthened by discoveries in Norway, Pakistan and Libya,” says Gerhard Roiss, CEO of the company.

Outlook

Recent major developments for OMV include:

  • OMV AG (ADR) (OTCMKTS:OMVKY) (ETR:OMV) (FRA:OMV) has recently acquired a 40 percent stake in offshore Madagascar
  • Large oil discovery in Barents Sea
  • Gas-fired power plant in Samsun has come in to operation
  • Recent transactions with Statoil are expected to add 25,000 barrels of oil equivalent (boe) in 2013 and up to 40,000 boe in 2014

All these developments will add to the revenues of the company. However, the security issues in Libya and Yemen will continue to pull down the output of the company. Furthermore, OMV AG (ADR) (OTCMKTS:OMVKY) (ETR:OMV) (FRA:OMV) expects Brent crude prices to remain above USD 100 per barrel, which should keep the top line stable and earnings at a reasonable level.