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OMV outlines new strategy for future

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Oilfield Technology,


The OMV Executive Board has announced the company’s new strategic focus for the coming years: “Over the past months we have carefully examined the company’s situation and the upcoming challenges. We are making OMV fit for a volatile market and fit for the future. The key steps have already been initiated”.

The priorities for the company in the coming years are as follows: Safeguarding cash flow, a sustainable resource base in the Upstream business, a further increase in competitiveness in the Downstream Oil division and restructuring the Downstream Gas business. The goal behind every project is an improved profitability.

Safeguarding cash flow

The company has multiple options available for strengthening cash flow. OMV CEO Rainer Seele: “This will be applied across the board – for investments, exploration expenditure and operating costs. No target is in place for headcount reductions, but we cannot rule this out completely”. Investments will take a further fall to €2.4 billion, marking an anticipated reduction of around 40% in 2016 against 2014, the most recent year of high oil prices. This will be coupled with a drastic cut in expenditure for exploration and appraisal: A reduction of around 60% from 2014 to 2017, from €700 million to €300 million. In addition, there will be further cost-cutting and efficiency enhancement measures which are set to yield around €300 million by 2017 compared to 2014. The overriding goal is to stabilise cash flow. We will generate additional funds by selling non-strategic assets. We have announced the sale of a minority stake of up to 49% in the regulated pipeline business Gas Connect Austria and the divestment of up to 100% of the Turkish subsidiary OMV Petrol Ofisi. It has not been possible to build up an integrated business in Turkey since initiating the takeover of OMV Petrol Ofisi in 2006. The goal of all of these measures is to generate a broadly neutral free cash flow after dividends.

Sustainable Upstream business

“OMV has taken initiative to become more efficient with regards to costs and investments. We are the operator in more than 70 percent of our portfolio”, said OMV CEO Rainer Seele. “The strategy of ramping up production volume at any price no longer holds. We are focusing on highly profitable barrels. What this means is that profitability has priority over production growth”. Until 2020, 90 - 95% of upstream investment will go to maintaining production at around 300 000 boe/d and, should the political situation allow, in reviving production in Libya and Yemen. The remaining 5 - 10% has been earmarked for the investment project Achimov IV and V in Russia. “Our goal is to make OMV’s upstream portfolio sustainable; this means that we replace in full the reserves that we produce”. The core regions are Austria and Romania, the North Sea as well as Middle East and Africa.

The main development regions are Russia, the United Arab Emirates and Iran. The planned asset-swap with Gazprom, which will enable us to access the production in the cost-efficient

Urengoy field, should establish Russia as an additional core region by 2020. On the basis of current data we will acquire additional reserves of approx. 600 million boe - this is equivalent to more than five times the OMV production of the year 2015. Additional prospects are currently emerging in Iran. Furthermore, OMV is intensifying its close cooperation with its Abu-Dhabi-based core shareholder IPIC. There are additional prospects in Abu Dhabi, on top of the joint Shuwaihat project with ADNOC. These two options, Middle East and Russia are our strategic response to the question, how we will fully and sustainably replace our reserves in the future.

Highly competitive downstream oil division, restructured downstream gas business

“A lot has been achieved in the Downstream Oil business thanks to the restructuring which has already been implemented”, said CEO Rainer Seele. “The priority now is to build on this division’s strong competitiveness”. Downstream Oil will continue to serve as a cash generator. The focus is on optimal capacity utilization of the refineries.

On the other hand, Downstream Gas restructuring has started: The planned full takeover of EconGas should lead to a streamlining of structures and to a significant increase of gas sales volumes. Furthermore, OMV continues to be committed to the Nord Stream 2 pipeline project. CEO Seele: “With Nord Stream 2 we are investing in a project with an attractive, non-regulated return, which increases security of supply to Europe”. This is also linked to strengthening Gas Connect Austria, as a large share of the gas which comes via Nord Stream 2 to Europe will be distributed via the Baumgarten gas hub. These measures to restructure the business will position Downstream Gas for a successful future.


Adapted from a press release by David Bizley

Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/18022016/omv-outlines-new-strategy-for-future/

 

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