Record loss

Struggling Oil Firm OMV Pivots East

omv_reuters
OMV is preparing to open the taps to Russian gas.
  • Why it matters

    Why it matters

    Following its losses, OMV is having to make radical cost cuts while exploiting opportunities where it can cheaply tap new sources and expand into new markets, such as Germany.

  • Facts

    Facts

    • OMV is an Austrian energy company that supplies 200 million Europeans with energy.
    • Its 2015 losses mean it is cutting investment by €400 million ($444 million), having already reduced it by €1 billion last year.
    • The company has struck a deal with Russia’s state-owned oil giant Gazprom to gain access to Arctic extraction technology.
  • Audio

    Audio

  • Pdf

The Austrian oil group OMV, which supplies 200 million people in central and eastern Europe with energy, has responded to the drop in oil prices with a radical cost-cutting program.

The aim is to become “a streamlined, focused technology group in the oil sector,” says boss Rainer Seele, who has been in post since July. The former head of Wintershall, Germany’s largest producer of crude oil and natural gas, wants to cut investment as well as the company’s dividend and to divest unprofitable areas of business such as the group’s Turkish operations. At the same time, he plans to step up OMV’s collaboration with Russian state-owned energy giant Gazprom.

OMV recorded a net loss of €1.1 billion ($1.2 billion) in 2015, having achieved a profit of €278 million in the previous year. Group sales totaled €23 billion, a year-on-year drop of 27 percent. “We have been living beyond our means for years,” Mr. Seele has complained. The company has debts of €4 billion.

OMV admits that its results would have been even worse without the strong contribution made by its downstream business – its refineries and gas stations. It says that 93 percent of capacity in its refineries was used.

As with other oil groups such as French company Total, it has been able to absorb losses due to the sharp decline in crude oil prices. Since mid-2014, oil prices have fallen by more than two-thirds to around $34 per barrel. Mr. Seele believes they may not recover until 2020, when he expects a barrel of Brent crude oil, the industry benchmark, to cost $75.

Want to keep reading?

Subscribe now or log in to read our coverage of Europe’s leading economy.