In Q1 2023, OMV Petrom recorded a sales revenue decline of 20.4% YoY, an EBITDA decline of 19.7%, and a net income of RON 1.48bn, a 15.3% decrease YoY.

Starting off with the revenue, the Company’s consolidated revenue amounted to RON 9.47bn, a decrease of 20.4% YoY. This decline came as a result of lower commodity prices and lower sale volumes of electricity, which was partially offset by higher sale volumes of petroleum products and gas. OMV provides a breakdown of its revenue stream, and those are the Refining and Marketing segment (63% of total sales), Gas and Power segment (36%), and Exploration and Production segment, which has only 0.1% of the total, mainly due to the fact that the sales in these segment are largely intra-group.

In terms of the „Refining and Marketing“ segment, its revenue amounted to RON 783m, a decline of 4% YoY. In terms of the Gas and Power segment, its revenue amounted to RON 751m, a slight decrease of 1% YoY.

In terms of profitability, OMV provides us with „Clean Operating Result“, which is adjusted for the special items, such as inventory holding effects resulting from Refining and Marketing, among others. This number amounted to RON 2.095bn, a decline of 6.5% YoY. This came as a result of lower prices in the Exploration and Production segment. On the other hand, in the Refining and Marketing segment, the lower refining margins were broadly offset by improved sales channels performance, while in the Gas and Power segment, this result was supported by strong margins from storage of gas and power transactions outside of Romania.

Looking at the expenses, the largest came from the purchase of inventory, amounting to RON 4.75bn, a decrease of 14% YoY, also under the influence of lower commodity prices. Production and op. expenses amounted to RON 1.095bn, remaining roughly the same YoY (-1%). Production and similar taxes were also lower, amounting to RON 869.2m, a decrease of 51% YoY, mainly due to a decrease in the amount of industry-specific taxes.  Taken together, this resulted in an EBITDA of RON 2.35bn, a decrease of 19.7% YoY, which is in line with the revenue decrease. As such, the EBITDA margin actually improved, increasing by 0.22 p.p. YoY to 24.79%.

The net financial result meanwhile, amounted to RON 154m as compared to RON -82m in Q1 2022, mainly due to higher interest income on bank deposits. Finally, the net income of the Company amounted to RON 1.48bn, a 15.3% decrease YoY. This would imply a net income margin of 15.6%, an increase of 0.94 p.p. YoY.

OMV Petrom key financials (Q1 2023 vs. Q1 2022, RONm)

Source: OMV Petrom, InterCapital Research

In terms of CAPEX, it amounted to RON 959m, a 52% increase YoY, of which RON 550m went to Exploration and Production, RON 380m to Refining and Marketing, and finally, RON 17m to Gas and Power investments.

OMV Petrom also provided an outlook for 2023. In terms of the market environment, they expect the average Brent oil price to be above USD 80/bbl (2022: USD 101/bbl). They also expect the refining margin to be above USD 9/bbl (2022: USD 16.6/bbl). They also estimate that the demand for oil products in retail in Romania will be slightly above the 2022 level, while demand for gas and power to be lower compared to 2022. Finally, the 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.

In terms of the financial highlights, they expect CAPEX to increase by app. 70% to around RON 6bn, with higher investments dedicated mainly to the Neptun Deep project, accelerated low and zero carbon projects, and the Petrobrazi refinery turnaround. Of course, they also note that in order for these investments to be made, a predictable and stable regulatory and fiscal environment is required. OMV also expects to have positive free cash flow before the dividends, but for it to decrease YoY, mostly due to higher investments. Finally, they noted that they already approved RON 0.375 DPS at the OGSM, and they expect to announce a special dividend on top of it, whose exact value will be communicated in mid-2023.

If you would like to read the full report, click here.