Downstream activities lifted Vienna-based OMV’s third-quarter earnings, beating analysts’ forecasts and signalling an easing in oil and gas budget cuts.
The company, which is 25 per cent owned by Abu Dhabi’s Ipic, yesterday reported net income rose to €367 million (Dh1.46 billion), up 3 per cent on a year earlier. This excluded a €1.03bn writedown on upstream assets announced last month.
“The results were better than expected, and it was better than the other quarters this year,” said Alexandre Andlauer, a Paris-based analyst at AlphaValue. He pointed to the downstream sector, which includes refining and petrochemicals, as offering a helping hand while many other companies continue to struggle amid weak oil prices.
The price of Brent crude, the global benchmark, has dropped more than 50 per cent since last summer. OMV’s downstream earnings before interest and tax were at €402m, spiking 83 per cent on last year’s third quarter.
However, OMV is preparing for a slowdown in its downstream sector, which includes the Borouge petrochemical company in Abu Dhabi. The company said that it expected the market to decline in the fourth quarter as a result of lower seasonal demand and overcapacity in Europe.
“Everyone knows that the high refining margin seen now will come to an end – the trend will not be as strong in two to three years,” said Mr Andlauer.
He added one of the biggest surprises was the amount of positive cash flow, which increased to €524m this quarter. “Everyone looks on the cash flow generation and these figures came better than expected,” he said.
Mr Andlauer added that capital expenditure had remained almost flat from the previous quarter, unlike many of the other integrated oil companies. “That points to a signal for all [oil and gas] services that maybe the worst is over and we will start to see stabilisation,” he said.
As a result of the oil rout, there have been sharp cuts in capital investment globally, estimated at 20 to 30 per cent, or more than US$100bn.
Rainer Seele, OMV’s chief executive, said the oil price slump forced the company to further reduce its forecast. The company’s assumptions for Brent crude are $55 per barrel for next year and $70 for 2017.
lgraves@thenational.ae
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