OMV AG will deemphasize growth of oil and gas production under a new strategy that safeguards cash flow, focuses a restructured downstream oil business on utilization efficiency, and restructures downstream gas operations.
The Austrian company described its strategic changes while reporting a €1.1-billion loss attributable to shareholders for 2015 after a €278-million profit last year.
“The strategy of ramping up production volume at any price no longer holds,” said Chief Executive Officer Rainer Seele. “We are focusing on highly profitable barrels. What this means is that profitability has priority over production growth.”
The company plans to invest €2.4 billion in 2016, down 40% from 2014, the most recent year of elevated oil prices.
Under the new strategy, the company expects annual spending on exploration and appraisal to fall to €300 million by 2017 from €700 million in 2014.
In addition to slashing spending, it is selling nonstrategic assets.
“The goal of all of these measures is to generate a broadly neutral free cash flow after dividends,” a company statement said.
Until 2020, OMV will dedicate 90-95% of upstream investment to maintaining production at 300,000 boe/d. Other investment will target fourth and fifth phases of the Achimov development in Urengoy oil, gas, and condensate field in Russia (OGJ Online, Nov. 9, 2015).
OMV operates more than 70% of its producing interests. The company identifies Austria and Romania, the North Sea, the Middle East, and Africa as “core regions.”
Its main “development regions” are Russia, the United Arab Emirates, and Iran.
With restructuring complete, OMV’s downstream oil business will be “a cash generator,” the company said. “The focus is on optimal capacity utilization of the refineries.”
Restructuring of OMV’s downstream gas business includes takeover of EconGas, a distribution joint venture and business-to-business gas marketer in which the company now holds a 64.25% interest, and its commitment to the Nord Stream 2 project (OGJ Online, Aug. 6, 2015).