In 2023, OMV Petrom expects the average Brent oil price to be above USD 80/bbl. CAPEX is to be increased to around RON 6bn, a 70% increase. They also proposed a dividend of RON 0.0375/share, with a DY of 8% based on yesterday’s closing price. An intention of a special dividend proposal for 2023 was also announced, with the exact amount to be announced in mid-2023.
Starting off with the 2023 outlook, OMV Petrom spoke broadly of their expectations for the market environment, financial highlights, as well as their strategic direction, divided into 3 subcategories.
In terms of the market environment, for FY 2023, OMV Petrom expects the average Brent oil price to be above USD 80/BBL (2022: USD 101/bbl). The refining margin is expected to be above USD 9/bbl (2022: USD 16.6/bbl, based on the Brent oil price). In Romania, demand for oil products in retail, gas, and power is expected to be broadly stable compared to 2022. Legislative measures introduced for the gas and power markets were prolonged until the end of March 2025 with regard to prices, margins, storage, and contributions. Measures applicable in H2 2022 to reduce fuel prices on a voluntary basis were removed from 1 January 2023.
Moving on to financial highlights, CAPEX is anticipated to increase to around RON 6bn, by approximately 70%, with increased investments dedicated mainly to the Neptun Deep project, accelerated low and zero carbon projects, and the Petrobrazi refinery turnaround. Investments require a predictable and stable regulatory and fiscal environment (2022: RON 3.6bn). Due to higher investments, the Company expects marginally positive free cash flow before dividends (2022: RON 8.2bn).
In terms of the strategic direction, the first goal is to “Optimize traditional business”. In the Exploration and Production segment, they expect production to be around 110 kboe/d (kilo barrel of oil equivalent per day) excluding possible divestments (2022: 119 kboe/d). They will continue with portfolio optimization, with a continued focus on the most profitable barrels, through assessing selective fields. Investments are expected at around RON 2.9bn, including Neptun Deep (2022: RON 2.6bn). They also expect to drill 55 new wells and sidetracks and perform around 450 workovers (2022: 55 new wells and sidetracks, 647 workovers).
In the Refining and Marketing segment, the plan is to continue the partnership with Auchuan, with 400 MyAuchuan stores in all Petrom-branded filling stations by YE, one year ahead of the initial plan. The refinery utilization rate is expected to be above 85%, as compared to 95% in 2022. Total refined product sales are forecasted to decline slightly YoY (2022: 5.5m tons), on lower production due to the refinery turnaround, retail fuel sales are expected to be broadly flat YoY.
In the Gas and Power segment, the total gas sales volumes are estimated to be lower YoY (2022: 46 TWh), mainly on lower supply, both from equity and third parties, as well as still low demand. Net electrical output is forecasted to be lower YoY (2022: 46 TWh), mainly on lower supply, both from equity and third parties, as well as still low demand. Net electrical output is forecasted to be lower YoY (2022: 5 TWh).
In the 2nd strategic direction goal, “Grow regional gas”, the Company noted that they are progressing with the Neptun Deep project towards the final investment decision, which is planned for mid-2023. Also, two other projects are noted, the Han Asparuh offshore Bulgaria, which dug one exploration well in 2023-2024, as well as the Georgia Offshore Exploration Block II, where the seismic acquisition remains on hold.
The 3rd strategic goal is the “Transition to low and zero carbon”. In this category, they target to reduce carbon intensity by 30% until 2030 vs 2019 (2022 preliminary is app. 11% lower than 2019). In terms of alternative mobility, they plan to continue to expand the EV charging network with the plan to double the existing number of charging points, at the YE 2022, 120 fast and ultra-fast charging points installed. They also commented on green energy sources in the filling stations, with a plan to have photovoltaic panels installed in app. 50% of their filling station network by 2025. They also plan to continue developing renewable power portfolios via partnerships, as well as to have further developments toward producing sustainable aviation fuel and second-generation bioethanol.
Finally, looking at the dividend proposals, the Executive Board of the Company proposes a base gross dividend of RON 0.0375 per share, which before the announcement, would amount to a DY of 8%. The dividend amount is a 10% increase YoY, at the high end of the 5-10% range stated in the dividend guidance. The Executive Board also announced the intention to propose the distribution of a special dividend in 2023, with the exact amount to be announced in mid-2023. The base dividend proposal is subject to approval at the GSM (to be held in April 2023), while the special dividends proposal is subject to a future GSM meeting.
OMV Petrom dividend per share (RON) and dividend yield (%), (2013 – 2023*)
Source: OMV Petrom, InterCapital Research
*Currently, 2023 only includes the ordinary dividend proposal as no special dividend amount has been disclosed yet