OMV Petrom 2Q Net Profit More Than Doubles To RON691M

08.12.2015 By Bogdan Neagu

OMV Petrom, Romania’s largest oil and gas company, Wednesday reported a net profit of 691 million lei (EUR155.6 million) for the second quarter of the year, more than doubled from RON312 million in the same period of 2014, when the group registered an impairment at its Kazakhstan subsidiary.

During the quarter, Petrom cut down its investments in the upstream sector (exploration and production), while its downstream operations (refining and sale of oil products) benefitted from improved refining margins and increased fuel demand, the company said in its financial report.

Consolidated sales in the April-June period were at RON4.54 billion, 16% lower than in the year-ago interval, mainly due to lower sales revenue of petroleum products, following the steep decline in oil prices.

Petrom’s sales of natural gas also declined in the second quarter, as demand on the Romanian market is subdued.

“The group’s earnings before interest and tax amounted to RON786 million, higher than the result recorded in Q2/14 of RON626 million, which was affected by the impairment of assets in the TOC subsidiary, as a result of the unsuccessful redevelopment of the field. Nevertheless, the Q2/15 result was negatively impacted by lower selling prices for petroleum products, following the decrease of international quotations, and by higher exploration costs,” the financial report reads.

For the first six months, Petrom reported consolidated sales of RON8.81 billion, down 18% on the year, mainly as a result of lower selling prices of petroleum products. The net profit for the January-June period was of RON1.04 billion, down 25% from RON1.39 billion in the same period of 2014.

The group’s profit in the first half was significantly impacted by the unfavorable crude price environment that more than offset the effect of one-off charges related to Kazakhstan assets registered in the year-ago period. Higher operating income from a legal dispute was counterbalanced by higher exploration costs and increased bad debt provisions.

“In the first six months, we have focused on ensuring a sustainable and profitable business in a potentially persistent low crude price environment. We have implemented measures to reduce operating costs and increase the efficiency of our operations, (…) our investments were prioritized based on long term value generation and therefore the group achieved a capital spending drop of around 30%, in line with expectations,” said Mariana Gheorghe, chief executive officer of Petrom.

The company continues its exploration program in the Black Sea and finalized drilling of four deepwater wells in partnership with ExxonMobil so far this year.

Petrom, a unit of Austria’s OMV, said its investment budget for 2015 is expected to be at around EUR1 billion, of which 85% is dedicated to upstream operations.