VIENNA (Reuters) – Austrian energy giant OMV said on Monday it was unlikely to resume production in war-torn Libya or Yemen before winter, after headline profit fell by half as low oil prices weighed on its upstream business.
It also said overcapacity in Europe would drive an improved refining margin down again. OMV’s bigger rivals including Chevron, Exxon Mobil and Royal Dutch Shell, have leant on their refining divisions to buffer profit slumps when oil is cheap.
OMV had previously reported first-quarter output fell to 303,000 boe/d from 318,000 in the previous quarter . In peaceful times its production was supported by a combined 40,000 boe/d from Libya and Yemen.
But OMV did not expect production in Libya to resume this year and force majeure declared last month in Yemen would stay in place for six months, Jaap Huijskes, head of exploration and production, told analysts on a conference call.
Outgoing Chief Executive Gerhard Roiss earlier said the firm had no plans to quit either country.
OMV’s shares fell 7.2 percent to 28.14 euros at 1042 GMT, while the European sector was off 0.6 percent.
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OMV’s clean current cost of supplies earnings before interest and tax (clean CCS EBIT) in the first quarter halved to 333 million euros ($380 million).
The headline figure, which strips out special items and inventory gains or losses, still beat the average estimate of 322 million in a Reuters poll of analysts.
OMV’s refining margin rose to $7.45 per barrel in the quarter from $1.63 a year ago, benefiting from low oil prices. But overcapacity in Europe would bring it down again, it said.
It also said it expected regulatory problems that had capped margins on its petrol station business in Turkey to continue.
Low oil prices, which slumped to about $45 per barrel at the start of the quarter, forced OMV to scale back its investment plans last year and give up on its aim of reaching output of 400,000 barrels of oil equivalent per day by 2016.
It expects 2015 Brent crude oil prices to average between $50 and $60 per barrel. “Our portfolio is in a position to deliver a positive operating result even with an oil price of around $50,” Chief Financial Officer David Davies told a conference call.
OMV, which has reduced its workforce by 6 percent from last year, is restructuring its downstream business. In terms of divestments, OMV will focus on assets most recently acquired.
OMV said it had entered into oil price hedges between July 2015 and June 2016 for a volume of 50,000 barrels per day.
Davies said OMV would not reach its goal of staying cash flow neutral after dividends this year.