OMV second-quarter earnings dive as turmoil chokes production in Libya and Yemen

Apart from production problems, OMV also suffered from lower refining margins and a weaker US dollar.

Vienna-based OMV, part owned by Abu Dhabi, yesterday warned that the “security situation in Libya and Yemen remains very difficult to predict” as it reported a sharp decline in second-quarter earnings.

“Whilst production in Yemen has been interrupted for about one month in 2014, Libyan production has been shut in for large parts of the year,” OMV said.

The company reported oil production of 13.2 million barrels in the second quarter, down 9 per cent from the same period last year.

Overall, cash flow from operating activities in the period was down 44 per cent at €680m (Dh3.32 billion).

In June, it was widely reported that Abu Dhabi’s International Petroleum Investment Company was in talks to sell its OMV stake to Russia’s Gazprom, though none of the companies involved have made any official comment on a potential sale.

Apart from production problems, OMV also suffered from lower refining margins and a weaker dollar. Earnings excluding special items and inventory changes declined by 62 per cent to €62m, driven by both lower margins and scheduled maintenance at several plants.

OMV said it has completed the sale of its Bayernoil facility and expects its divestiture programme to deliver on the target of up to €1bn this year. It warned though that “refining margins are forecast to remain under pressure in 2014 due to sluggish economic recovery and persisting overcapacity on European markets”.

There were some bright spots, which OMV’s chief executive, Gerhard Roiss, highlighted in his statement on earnings, particularly the prospects for the oil and gas discoveries in Norway’s Wisting area and in the Black Sea.

Also, the sale of Bayernoil and investment to upgrade the company’s Petrobrazi refinery should help to improve downstream prospects.

“Our participation in the South Stream project will play an important role in the future to safeguard the security of gas supplies for Europe and, particularly, Austria,” Mr Roiss said.

The South Stream is a controversial natural gas pipeline project that seeks to bring Russian gas under the Black Sea through Bulgaria and to central Europe. It has met opposition from the European Union even before recent sanctions related to Russia’s involvement in Ukraine.

In June, Gazprom and OMV signed a deal to build the Austrian leg of the pipeline, which is due to be completed in 2016, and Mr Roiss this past week reiterated strong support for the project, saying current sanctions against Russia will not have a long-term impact.

The close cooperation between Gazprom and OMV on the project has leant credence to the speculation about IPIC’s stake sale.

Also yesterday, the International Energy Agency offered some optimism for OMV and other producers in Libya, noting that rebels in the country’s east had lifted a month’s long blockade at two export terminals.

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