Analysis OMV update July 28th, 2023
This is not a recommendation or proposal to do anything. It is my private personal opinion. The data written in this article is not guarranteed. It is my private personal opinion. I`m not independing as I own a position of OMV shares. I`m a shareholder of OMV since a few years.
OMV is going to become owned by ÖBAG (Austria) 31,5% and ADNOC 24,9% on condition of an approval of the EU.
OMV might generate in normal years revenues of > 30 bn €/a. It produces now about 360 kbl/day 1/2 oil, 1/2 gas (guidance 2023).
The production expanded fast under the former CEO Seele from 311 kbl/day in 2016 to 487 kbl/day oil equivalent in 2019. Since the conservative - green government took power in Austria OMV was brought back under (green) political control. Seele had to leave. OMV got the target to get away from oil/gas production and to focus on base chemistry. In Q1/22 OMV lost 90 kbl/day with its Russian assets due to Putin`s war. In Q1/23 production went down to 376 Kboe/day.
OMV is roughly 8 x smaller then RDS or XOM. Thats why it is better for OMV in the upstream business to concentrate on tier 2 & 3 opportunities that are less attractive for big oil. OMV main sources are in Romania, (Russia till Q1/22), Norway, Austria, Lybia, NZ... It plans to focus on downstream and base chemicals and keep the oil production flat within the next couple of years.
Potential reason to buy OMV is the significant lower valuation and better growth potential compared to its bigger competitors.
With a share price of 41€ (July 28,2023) and a quarterly profit of 1.16€ the PE is about 9. The share price has a lot of room to rise.
Thanks to 8-fold natural gas prices (Q3/22 vs. Q2/21) and nearly doubled realized oil prices (Q3/22 vs. Q2/21) OMV realized record eanings and Free Cash Flow in 2022. It seems likely that the prices for oil&gas will remain at around 80$/bl. OMV will earn good money but less than 2022 in 2023.
Thus the management recommend to pay a dividend of 2.8€ plus a special dividend of 2.25€ to the general assembly. It seem likely that the dividend for 2023 will remain at 2.8 €.
OMV fully impaired 1bn € amount including accrued interest on the Nord Stream 2 project. OMV had to write down its 24.99% interest in the Yuzhno Russkoye gas field in Q1/22.
OMV expects a total oil/gas production of 360 K bl/day in 2023.
OMV is getting obliged by the Romanian and Austrian government to pay some ad-hoc premium taxes (Solidaritätsabgabe).
OMV origin is that of a governmental company controlled by politics. The former CEO Seele acted very independent and successful from the Austrian political system. Seele was motivated to resign from his position by June 2022. The green communist government of Austria demands more efforts in "climate change" (24). There are plenty of articles about the restructuring of OMV by the new CEO Stern (26). OMV will reorient its business in favor of chemistry. The board member Pleiniger (oil& gas production) who was in favor of the oil&gas business was leaving (31). It seems that the oil business is more profitable than basic chemistry. Now OMV uses its precious drilling equipment - gas & oil prices are at a record level - to make geothermal tests rather than increasing gas production (35). OMV got a vehicle of the now (green) Austrian Politics again. I hope that Abu Dhabi as the second biggest co-owner will act in favor of an economic optimization.
With the Ukrainian war the Romanian Politics cleared the way for the development of the gas fields in the Black Sea (30). These gas fields are a growth opportunity for OMV. Romania is the biggest source of the OMV oil & gas production. The former socialist government increased royalties begin of 2019 and reduced domestic gas prices by regulation. Exxon/OMV stopped investments in the Black Sea(9) till now. Now it seems to have changed. Now, sept 23, it seems that Romania is playing bad games again by not changing its off-shore law (36). It is to hope that the development of the gas field is not delayed again.
A main specific risk is Lybia. The regular production from Lybia Al Sahara field* is about 35.000 bl/d (OMV share) if not disturbed. The production in Lybia is unstaedy and varies due to the civil war.
It is a major risk for oil/gas companies that as soon as companies had done their investment and getting cash out of it it is always the risk that governments get big eyes and squeeze the successful foreign investor.
One of OMV best assets is the share in Borrealis. Borrealis is a plastic manufacturer situated in Austria with a participation in Borrouge. Co - owner is Abu Dhabi. The plastic business is a good compensation to the oil upstream business.
OMV states Dec. 31, 2022 proven reserves of 1037 M boe including 380 M boe from Petrom (Romania) with a reserve replacement of 80%. The proven and probable reserves are stated to 1892 M boe including 741 M boe from Petrom (Romania). This decline is caused by the elimination of the Russian business.
Dec. 31, 2022
Proven Reserves 1037 Mboe
Years of Production (380k boe/day) 7.5
Proven & Probable Reserves 1892 Mboe
years of Production 13.6
Reserve Replacement 80%
The contribution from upstream and downstream varies acc. to realized oil/gas prices and refining/Ethylene margin. Now the Downstream business is split in Refining & Marketing and Chemicals. The chemical business is the bigger and more profitable one.
The numbers of 2022 are not completly comparable due to reorganization
OMV has a large downstream and plastic business (75% share Borrealis/Borrouge). In the economic crises caused by the corona rampage of the political systems all businesses went down. Big ethylene/propylene capacities are coming on stream in countries with low feedstock costs as the US, Canada and Middle East. This is a risk for the chemical PP and PE business field.
The oil price is still high compared to the years after 2014. OMV will earn a lot of money.
The realized gas price follows the spot market price with a delay due to long term contracts. It gives stability in the fluctuations of the market. Prices came back from its high at the beginning of the Russian "Special Operation).
The refining margin in $/bl. Data changed in Q2/22 from a mix of Ural and Brent oil to Brent only as Ural is not used anymore due to Putin`s war. The refining margins climbed to a record level. This is partly due to an accident in the Schwechat refinery that reduced production on the one hand but increased margins due to significant lower production. OMV generates record earnings from its refinery business. It declined a bit but still highly profitable.
The Polyethylene margin seems still profitable.
Source: OMV Investor relations data from business reports.
Some more Data
Number of Shares: 327 mio. 31.12.2021
Share Austrian Government ÖBAG: 31.5%, Share Abu Dhabi ADNOC 24.9%
*The Lybian Al Sahara oil field is organized in the Akakus comp. with the Lybian national oil company, Repsol (operator), Hydro, OMV, Total as share holders.
Name Shares %
Government of Austria ÖBAG 103,090,000 31.5%
ADNOC Abu Dhabi 81,490,900 24.9%
The Vanguard Group, Inc. 3,778,203 1.15%
Norges Bank Investment Management 3,618,370 1.11%
JPMorgan Asset Management (UK) Ltd. 2,881,824 0.88%
BlackRock Fund Advisors 2,584,764 0.79%
APG Asset Management NV 1,988,155 0.61%
Amundi Asset Management SA (Investment Management) 1,890,464 0.58%
Grantham, Mayo, Van Otterloo & Co. LLC 1,389,379 0.42%
Erste Asset Management GmbH 1,310,000 0.40%
51% in the Romanian integrated oil and gas company OMV Petrom
75% in Borealis, one of the world’s leading producers of polyolefins
50% in the Malaysia-based E&P company SapuraOMV
50% in the Malaysia-based E&P company SapuraOMV
OMV has a share of 75% at Borrealis, the remainder ist owned by Abu Dhabi. Borrealis founded together with the oil company of Abu Dhabi the Venture Borrouge. The combined polyolefine capacity exceeds > 8 Mio. to/yr. or annual revenues of about 8bn
2023/06/21 The Neptune gas fields were discovered already some years ago by OMV/Exxon. But the tax scheme of that time did not motivate OMV & Exxon to develop this field. With the Russian "special operation" in Ukraine Romania changed its tax scheme and the project is kicked off.
Die wichtigste Highlights des Neptun Deep-Projekts (100%) umfassen
- Die Gesamtinvestitionen für die Erschließung werden auf bis zu EUR 4 Mrd geschätzt, die hauptsächlich im Zeitraum 2024-2026 erfolgen werden.
- Die erste Produktion wird für 2027 erwartet.
- Die Plateauförderung wird auf etwa 140 kboe/Tag für nahezu 10 Jahre geschätzt, (etwa 40Kboe/day für OMV)
- Die geschätzten förderbaren Mengen liegen derzeit bei etwa 100 Mrd m³ (~700 Mio boe).
- Die Produktionskosten pro Einheit werden auf durchschnittlich 3 USD/boe geschätzt (für die gesamte Lebensdauer des Feldes).
- Anteile OMV Petrom, als Betreiberin, entwickelt das Gasprojekt in einer 50/50-Partnerschaft mit Romgaz , Die OMV Gruppe hält einen Anteil von 51% an OMV Petrom. Damit beträgt der OMV Anteil 25%.
2022/07/21 A new Ethanecracker went in production today at Bayport Polymers LLC („Baystar“), a 50/50-Joint Venture of Borealis and TotalEnergies. It has a capacity of 1 M tons/yr. Investment 2bn$, It is integrated in the Total refinery in Port Arthur, Texas, USA, errichtet.
Evaluation: In the past the PE and PP markets of North America and Europe were separated. With extreme feedstock and energy costs in Europe it seems likely that OMV and other company`s will will transfer the production for the European market to North America and Middle East.
Bayport PE plant with 400000to PE/yr, A 625 K to/yr plant in construction in Bayport, the 1 M tons Ethane cracker
2022/06/24 During maintenance work at the Schwechat refinery the destillation column was damaged. The capacity is reduced by 80%. It is expected that the refinery can resume operation with full capacity of 200 Kb/day end of september. Damage at 9$ refining margin 130 M€.
2022/06/02 AGROFERT hat OMV die Übernahme des Stickstoffgeschäfts von Borealis, das Pflanzennährstoffe, Melamin und technische Stickstoffprodukte umfasst für 810 Mio. Euro angeboten.
2022/04/04 OMV will make the final investment decision on the Neptun Deep natural gas project in the Romanian section of the Black Sea next year, pending a new offshore law from the Romanian parliament
2022/02/12 OMV is going to sell its 285 gas stations in Germany to Esso (Exxon Mobile)(28).
2021/07/16 Borealis intend to sell the fertilizer business and expects 500 - 600 Mio. € from iOMV will make the final investment decision on the Neptun Deep natural gas project in the Romanian section of the Black Sea next year, pending a new offshore law from the Romanian parliamentt. Borealis has 2 plants in Austria and France where nitrogen fertilizer are produced. Main feed stock is natural gas. The process requires plenty of energy. Natural gas and electricity is far more expensive in Europe than in North America or the Middle East. The Green Religion/Climate Fraud will further decrease the competitivness. It make sense to sell this business. The question is if the (regrettable) potential customer will pay the expected price. (25)
2021/04 Rainer Seele, CEO, will not extent his contract bejond June 30, 2022.
2021/02 OMV builds the biggest hydrogen plant in Austria for 25 M€ with a capacity of 1500 tons/yr. It is good that they does not spend more on this green nonsense.
2020/05 There seems to be some disorder in the OMV management team of OMV. The board (Aufsichtsrat) decided to examine the travel expensis and sponsoring ex. a soccer club that is tied to the Russian president of the CEO Seele.
2020/03 OMV beabsichtigt seinen Anteil an Borrealis von 36% auf 75% zu erhöhen. Mit Mubadala werde derzeit den Erwerb eines zusätzlichen 39% Anteils für einen Kaufpreis von USD 4,68 Mrd. verhandelt, teilt die OMV mit. Die potenzielle Transaktion würde die Wertschöpfungskette der OMV im petrochemischen Bereich erweitern. Die Beteiligung der Mubadala an Borealis würde nach Closing der potenziellen Transaktion 25% betragen.
2019/07 Die OMV beabischtigt mit dem indonesischen Chemiekonzern Chandra Asri zu kooperieren. Ich wäre nicht erstaunt wenn das nächste Projekt der OMV in Indonesien statt findet. Aus Sicht eines Aktionärs ist es nicht ideal wenn OMV seine Aktivitäten auf zu viele Länder verstreut.
2019/07 Die OMV, hat die Investitionsentscheidung über EUR 64 Mio zum Bau einer ISO C4 Anlage getroffen - nun beginnt die Bauphase: Die Errichtung der neuen Anlage wird im Sommer 2019 in der Raffinerie Burghausen starten, die Inbetriebnahme ist für September 2020 geplant. Ab diesem Zeitpunkt kann in Burghausen hochreines Isobuten mittels einer neuartigen Technologie hergestellt werden. (15)
2019/01 OMV and co-owning companies, OMV share 25%, plans to increase the production of the Wisting oil field off the coast of Norway. It is planned to invest 6bn$. The expected yield is 440 mio. bl of oil. Production start is 2026 (7)
2018/11 The US administration threatens to use coercive measures to stop Nordstream 2 from Russia to Germany.
OMV Production of Hydrocarbons/Country 2021
Austria 19 Romania 127
New Zealand 33
Total Proven 1P Reserves Dec. 31, 21
Region mm boe
Central & Eastern Europe 476
Middle East & Africa 379
North Sea 95
Asia Pacific 151
(34) 2022/07/21 OMV News Bayport Polymers LLC („Baystar“), ein 50/50-Joint Venture von Borealis und TotalEnergies, kündigt heute den Start des kommerziellen Betriebs ihres neuen Ethancrackers an, der über eine Produktionskapazität von einer Million Tonnen Ethylen pro Jahr verfügt. Das Projekt, das durch Investitionen in Höhe von 2 Milliarden USD ermöglicht wurde, wurde in der Raffinerie von TotalEnergies in Port Arthur, Texas, USA, errichtet.
(33) 2022/06/24 IR Mail Update zur OMV Raffinerie Schwechat
(32) 2022/06/02 https://www.omv.news/include/html2pdf.php?url=http%253A%252F%252Fwww.omv.news%252Finclude%252Fnewsletter2.php%253FOutput%253Dpdf%2526p=z0edf086d2d5f110a59eee06c54a28af9d6002bfcf31aeb9c9c653a5b5b816441
(30) 2022/04/25 OMV vor Durchbruch bei Erdgas aus Schwarzem Meer 21.04.22, 16:00 INDUSTRIEMAGAZIN
(24) 2021/05/11 https://industriemagazin.at/a/rainer-seele-der-unterlegene-2
(11) 2019/04/10 https://de.reuters.com/article/sterreich-omv-idDEKCN1RM0SX
(10) 2019/03/18 https://orf.at/stories/3115460/
(9) 2019/02/07 https://industriemagazin.at/a/omv-macht-nach-dem-abu-dhabi-deal-pause-bei-zukaeufen
(8) 2019/01/28 https://kurier.at/wirtschaft/omv-kauft-um-22-milliarden-euro-raffinerie-anteile-in-abu-dhabi/400389947
(7) 2019/01/18 https://industriemagazin.at/a/omv-plant-milliardeninvestitionen-in-norwegen
(6) 2019/01/14 https://de.reuters.com/article/sterreich-omv-idDEKCN1P80KW
(4) 2018/11/14 https://www.boerse-express.com/news/articles/die-usa-verschaerfen-gen-omv-und-co-den-ton-63098
(3) 2018/11/09 https://kurier.at/wirtschaft/omv-laesst-sich-malaysia-bis-zu-800-mio-dollar-kosten/400319748
(2) 2018/11/07 https://www.offshoreenergytoday.com/panoro-buying-omv-tunisia-for-65-million/
(1) 2018/10/31 https://www.sn.at/wirtschaft/oesterreich/omv-chef-seele-sieht-bestes-ergebnis-seit-zehn-jahren-59688301