Falling crude oil prices and sales down 11 percent plunged OMV Petrom's 2014 profit by 56 percent to 2.1 billion lei, the worst financial result since 2010. The anticipated decline accelerated in the last quarter of 2014 when the company reported a financial loss of 307 million lei.
The group's hydrocarbon production remained stable overall, with a marginal year-on-year growth in Romania, while gas sales volumes increased by 5 percent.
“In 2014, we continued our stabilization effort, with the second year in a row of marginal hydrocarbon production increase y-o-y in Romania. In exploration, we have made the largest onshore and offshore investment since privatization. The success rate of our traditional exploration (excluding deep offshore) stood at 60%. We have resumed our drilling activity in the Neptun block with two new wells spudded, Domino-2 and Pelican South-1; in 2015, we will continue our exploration program as planned,” explained Mariana Gheorghe, CEO OMV Petrom.
“In G&P, business challenges persisted due to lower gas market demand and negative spark spreads which led to a deteriorated result of the Brazi power plant. In R&M, we have successfully completed the Petrobrazi refinery modernization, which delivered the planned increase of USD 5/bbl in the indicator refining margin, contributing to a good end-year result, and strengthened the integration value of the company,” she added.
Consolidated sales for 2014 fell by 11 percent y-o-y to 21.5 billion lei as a result of lower crude oil and petroleum products sales that more than offset higher sales of natural gas. The refining&marketing (R&M) segment accounted for 77 percent of total sales, gas&power (G&P) represented 19 percent, while exploration&production (E&P), 4 percent.
OMV Petrom's earnings before interest and tax (EBIT) dropped to 3.34 billion lei, 44 percent below 2013's level (5.96 billion lei), impacted by declining selling prices for petroleum products given the decrease of international prices and by the impairment in the G&P and E&P segments in Kazakhstan. The group's EBIT was further affected by the introduction of the construction tax and higher additional tax on natural gas sales in Romania.
In this context, OMV Petrom will reduce investments by 20 to 35 percent, thus, the budget will be in the range of 2.84 – 4.88 billion lei, of which circa 85 percent will be dedicated to exploration and production operations.
“In light of the volatile and potentially prolonged weaker market fundamentals, we are scaling back our investment plans for 2015 and have intensified cost optimization programs whilst maintaining our potential growth projects in the Black Sea. In 2015, we expect public consultations on the fiscal and regulatory environment to continue, as announced by the authorities, and we aim for a stable, predictable and investment-friendly framework, which is a key precondition for future investments,” concluded Mariana Gheorghe.
Last year, the group's investment budget totaled 6.24 billion lei, up 18 percent over 2013.