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2025 Strategy: OMV set to become bigger and more valuable

On March 13, 2018 the Executive Board of OMV Aktiengesellschaft is presented its 2025 OMV Strategy to representatives of the media and the capital markets in London. The international oil and gas company headquartered in Vienna, Austria, intends to substantially increase its market position and operating earnings in the coming years. The proven business model of the integrated production, processing and marketing of oil and gas will be expanded internationally, along with an increase in petrochemicals capacity. The company’s goal is to achieve a Clean CCS Operating Result in excess of 5 billion euros by the year 2025. This would mark a 70% rise on the basis of 2017.

OMV will make the most of its good starting position in this favorable market environment and forge ahead with its integrated growth. Goal is to make OMV bigger and even better. Four-pronged approach will be deployed: firstly, leverage on proven concept of integration to generate growth. Secondly, the production, processing and marketing of oil and gas will be substantially more international. Thirdly, strong gas market presence in Europe. Fourthly, the optimization of processes and continuation to improve performance will be expedited.

The growth should be borne equally by Upstream and Downstream and will be achieved both organically and through acquisitions. In terms of the bottom line, OMV forecasts an increase in the Clean CCS Operating Result to more than 5 billion euros in 2025.

From 2015 to 2017, OMV’s Upstream division slashed its costs by 42%, increased production volumes by 15% and achieved a ten-fold increase in its Clean Operating Result to 1.2 billion euros. The portfolio restructuring coupled with efficiency increases helped slash production costs to 8.8 US dollars. Increases in production in Libya and Norway in particular, along with the acquisition of the Siberian gas field Yuzhno Russkoye, led to a new record production level in 2017 of 348,000 barrels of oil equivalent per day.

From this solid starting point, OMV intends to achieve further increases in the value and size of its portfolio by 2025. Production should grow to 600,000 barrels per day by 2025. This growth will be secured through acquisitions in cost-effective regions rich in reserves, whereby average production costs should not exceed 8 US dollars. Substantial, long-term contributions are expected to come from the Russian fields Yuzhno Russkoye, Achimov IV and V, as well as the Neptun gas field offshore Romania.

Between 1.3 and 1.7 billion euros in annual investment has been earmarked for financing organic growth and ongoing operations until 2025. OMV plans to invest 300 million euros for the exploration and appraisal of potential resources, with an average of 15 to 20 exploration drillings expected per year.

The strategic measures implemented in the Downstream business made 2017 a record year. With a Clean CCS Operating Result of 1.8 billion euros, the unit achieved the best result in its history. Free cash flow underwent a two-fold increase to 1.7 billion euros from 2015 to 2017. The return on net assets of 18% meant that Downstream achieved an industry-wide high in Europe.

OMV Downstream will further strengthen its competitive position in line with the waning demand for fuel and growing demand for petrochemicals in Europe. By 2025 a cumulative 1 billion euros will be invested in the Schwechat, Burghausen and Petrobrazi refineries, facilitating the production of more and higher quality petrochemical products and aviation fuels. 

Gas sales should grow to more than 20 billion cubic meters by 2025. Here OMV is aiming to secure a 10% share of the German market by 2025. Other plans include feeding additional equity gas from Norway and Romania into the European grid. The construction of Nord Stream 2 is of critical strategic importance for OMV as it will secure consistent, long-term gas supplies to Europe in combination with the Central European Gas Hub in Baumgarten and the pipeline network of Gas Connect Austria.

As part of the Downstream strategy, OMV will export its successful refining and petrochemicals business model to international growth markets. One goal here is to draw on the burgeoning demand in the Middle East and Asia for further growth, facilitated by higher production capacities coupled with better margins. Initial steps in this direction have already been taken, for example with the MoU signed with ADNOC in Abu Dhabi.

Approximately 5 billion euros has been earmarked for financing the international growth in Downstream through acquisitions by 2025.

For the period 2018 to 2025, OMV plans to make annual investments averaging 2.0 to 2.5 billion euros in addition to an acquisition budget of 10 billion euros to 2025. Furthermore, the company will continue to enhance its operating efficiency. The goal of the new efficiency program is to reduce costs by 2020 by a further 100 million euros against 2017.

Under its amended dividend policy, OMV aims to increase dividends annually in line with financial performance – especially the development of free cash flow and the Group’s net income – or to at least maintain the level of the previous year. In order to ensure financial stability, OMV will continue to maintain a long-term gearing ratio of below or equal of 30 percent.

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