The CCS operating result before special effects, which is decisive for the industry, rose from EUR 1.69 billion to EUR 5.96 billion, the net income for the period almost doubled to EUR 2.8 billion, and sales more than doubled to EUR 35.56 billion high as in the previous year.
In the fourth quarter, group sales increased by 169 percent to EUR 13.35 billion, primarily thanks to increased gas sales volumes and higher gas prices. Of course, one benefited from the market environment, said OMV boss Alfred Stern to the APA, but more than half of the operating performance came from refining, which did not benefit directly from the high oil and gas prices.
Clean CCS Operating Profit (adjusted for inventory effects) rose from €524 million to a record €2.0 billion in the fourth quarter. Exploration & Production clean Operating Profit grew from EUR 184 million (Q4 2020) to EUR 1.16 billion, while Refining & Marketing clean CCS Operating Profit increased from EUR 161 million to EUR 351 million improved. In the Chemicals & Materials division, the operating result before special items rose to EUR 512 million (after EUR 208 million in the fourth quarter of 2020).
“Our portfolio shift towards chemicals and materials is what accounts for OMV’s record results in both the fourth quarter and the full year 2021,” said Stern. Cash flow from operating activities excluding net working capital increased from EUR 2.8 billion in the previous year to EUR 8.9 billion, of which EUR 3.5 billion was achieved in the fourth quarter alone, “that’s really great Result”.
The profit distribution to shareholders is to be increased by 24 percent to EUR 2.30 per share. “We have a progressive dividend policy, we want to increase it every year or at least keep it at the previous year’s level in particularly crisis years like the Corona year,” explained Stern.
At the same time, with cost discipline and through investment policy and sales, it was possible to bring the gearing back to the level of 2019, namely 22 percent. The stated goal was to get to 30 percent or less.
Two weeks ago, OMV announced depreciation and value adjustments of EUR 1.7 billion. Around 40 percent of this (ie around EUR 680 million) was attributable to the stake in ADNOC Refining. OMV holds 15 percent of the company and paid 2.4 billion dollars for it in the summer of 2019 (at the time 2.18 billion euros). “Compared to the entry three years ago, the long-term market expectations have changed,” says Stern, they are no longer so positive for refined products. “You could also associate that with the energy transition and the speed of the efforts in the energy transition.”
35 percent of the EUR 1.7 billion in impairments related to Oil & Gas Exploration (E&P) and the rest to Borealis’ Fertilizers business, which is now being sold to fertilizer maker EuroChem, it was announced today.
OMV expects an average Brent crude oil price of around $75 per barrel in 2022 (2021: $71). The average realized gas price is expected to be above 25 euros/MWh for 2022 (2021: 16.5 euros/MWh). Organic investments are expected to amount to around EUR 3.5 billion this year (2021: EUR 2.6 billion), of which EUR 1.3 billion are expected to flow into exploration and production. Production is expected to drop from 486,000 barrels per day (2021) to 470,000 barrels per day in 2022. Natural gas sales volumes are expected to be slightly below those of 2021 this year, and the utilization rate of refineries in Europe should be about the same as last year (88 percent).
Stern wants to overweight gas production
According to OMV boss Alfred Stern, the EU Commission’s taxonomy regulation “recognizes that a very significant CO2 reduction can be achieved with gas as a transitional energy compared to coal”. That’s why OMV will continue to rely heavily on the gas business in the future, Stern told APA on Thursday.
“It’s clear to everyone that we need to move towards sustainability and reducing carbon emissions as quickly as possible,” Stern said. “But the fact is that in the past year the generation of energy from coal in Europe and worldwide has risen sharply.”
In 2021, OMV produced an average of 486,000 barrels of oil and gas per day, with gas accounting for more than half of the total production. “We will continue to work on this overweight position in gas in our portfolio,” Stern said.
The currently very high gas prices have various causes, said the OMV boss. The demand for gas has increased and the gas business has been globalized via LNG (liquefied natural gas). “In 2021 we saw that relatively little LNG came to Europe, especially due to the increased demand in Asia. It was only at the end of the year, when gas prices had risen to a very, very high level, that it was attractive enough that LNG imports increased to attracted to Europe.”
“We had started 2021 with a long winter, so we lost a few weeks and gas was taken out of storage where it would normally have been stored in other years.” Due to the shift in demand, it was also not possible to refill the storage facilities.
Global gas consumption increased by 4.6 percent in 2021 compared to 2020 and thus above the level before Corona, Stern referred to a report by the International Energy Agency IEA. “OMV natural gas sales volumes increased to 196 terawatt hours in 2021, around 20 percent higher than the year before.”
At the same time, gas production in Europe, especially in the Dutch gas field Groningen, has steadily declined in recent years. “Of course, we have also seen in recent years that investments in gas have not been at the same level as maybe five years ago.”
Stern does not share concerns that the Ukraine conflict could lead to a lack of Russian gas supplies. As early as 1968, OMV was the first western country to conclude gas supply contracts with Russia for Austria. “One can say that we have always seen a high level of reliability in Russian gas supplies over the entire period.” Even now, Gazprom is complying with all of its contractual delivery obligations to OMV. OMV only extended its supply contract with the Russian gas monopoly in 2018 to 2040. For legal reasons he could not go into the details of this contract, Stern said when asked whether an early exit would also be possible in view of the criticism of the dependence on Russian gas.
The conflict between NATO and Russia also jeopardizes the commissioning of the Nord Stream 2 Baltic Sea pipeline, which OMV is helping to finance with EUR 729 million. You have a financing agreement with Nord Stream 2 AG in Switzerland, Stern said, and the first repayments were received last year. “We expect it will continue to be like this,” Stern said.
In Vienna, the OMV share is currently falling by 3.18 percent to EUR 53.04.
ivn/tsk
APA