OMV Petrom had a 21% reduction in operating income to 975 million lei in the first quarter of this year. In the Upstream segment (exploration and exploitation of oil and gas) the quarterly decline was 81%, mainly under the influence of declining oil and gas prices.
In response to the current context – depressed international prices and the decline in demand due to the Covid-19 pandemic, OMV Petrom estimates a 30% reduction in investment spending for 2020 up to 3 billion lei. Also, the investment for exploration and operational expenses will be reduced by approximately 320 million lei compared to 2019.
OMV Petrom closed the first quarter of 2020 with revenues of 6 billion lei, up 12% compared to the same period last year, and a net profit of 653 million lei, lower by 43%.
The value of consolidated sales revenues increased by 12% supported by higher volumes of natural gas sales, even though prices were lower and electricity sales decreased.
Upstream
In the exploration and production segment, the operating result was 157 million lei, lower by 81%. The decline in daily production was below 2%, supported by the increase in production in Kazakhstan. Production cost improved 7% to $ 10.9 per barrel of oil equivalent (boe), “due to improved operational efficiency and favorable exchange rate.”
Downstream
In the distribution segment, which sums up the results from the sale of oil products, data show that in Q1 / 2020 the operating result was 514 million lei, higher by 133%, due to better refining margins.
In the Downstream Gas division, where gas and energy sales are cumulated, the results show that operating income was 147 million lei, down by 6%. Natural gas sales volumes were 52% higher, covering all sales channels, while net electricity production was 1.12 TWh, higher by 3%, in the context of positive but lower margins. In Q1/20, OMV Petrom supplied to regulated markets 5.52 TWh of natural gas.
Downstream Oil sales accounted for 63% of total consolidated sales, while Downstream Gas sales accounted for 35% and Upstream sales for 1%; Upstream sales are, for the most part, sales within the Group, not to third parties, the company states.
Forecasts
In 2020, OMV Petrom expects the average price of Brent crude to be $ 40 per barrel, revised down from $ 60/bbl; in 2019, the average price was $ 64/bbl. Thus, refining margins are estimated to be above $ 5 per barrel.
Due to the impact of COVID-19, the demand for oil, natural gas and electricity products is estimated to be well below the level recorded in 2019.
The group has planned investments of about 3 billion lei this year, excluding acquisitions (compared to 4.2 billion lei in the previous estimate and the value in 2019). The reduction results mainly from the prioritization of the drilling activity, but also from the postponement of some projects in the petrochemistry and retail.
In 2019, OMV Petrom reported revenues of 25 billion lei and a net profit of 3.6 billion lei.