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UPDATE 3-Austria's OMV takes 700 mln euro charge, slashes capex
January 29, 2015 / 10:41 AM / 3 years ago

UPDATE 3-Austria's OMV takes 700 mln euro charge, slashes capex

* Q4 charge of 700 mln euros for Petrol Ofisi, Petrom

* Cuts annual capex to 2.5-3.0 bln eur from 3.9 bln

* Will not achieve 2016 output target of 400,000 boe/d

* Still committed to dividend payout targets

* Shares down 1.7 percent versus 2.6 percent sector drop (Updates with details from analyst call, updates share price)

By Michael Shields and Shadia Nasralla

VIENNA, Jan 29 (Reuters) - Austrian oil and gas company OMV warned 2015 would be tougher than last year as it cuts investment plans , reflecting falling oil prices and uncertainty in Libya.

It marks the latest test for Austria’s biggest company, which has struggled to present a convincing strategy to investors amid a management shakeup.

Outgoing chief Gerhard Roiss said the company would keep its focus on upstream activities, a direction he had pushed for. But no details have yet emerged about its new downstream division or replacements for top-level departures this year.

OMV will take net special charges of about 700 million euros ($791 million) in the fourth quarter, mainly due to impairments related to regulatory costs affecting its Turkish unit Petrol Ofisi and the power business of OMV’s Romanian arm, Petrom .

The charge is higher than the net profit of 665 million euros after minority interests the group made in the first nine months of the year.

“Q4 was extremely difficult, but the outlook in 2015 is even tougher,” Roiss told an analyst call.

OMV said it would cut average annual capital expenditure from 2015 to 2017 to between 2.5 billion euros and 3.0 billion, of which the lower end was based on an oil price assumption of approximately $50 per barrel for the next three years.

Cuts will mainly affect projects under appraisal and development, but also mature operations in Austria and Romania, where OMV plans to halve the number of rigs in operation in 2015, said Jaap Huijskes, head of exploration and production.

It had previously targeted 3.9 billion in annual capex until 2016. As before, around 80 percent of investments will go into OMV’s upstream business.

OMV is still committed to its target of producing 400,000 barrels of oil equivalent per day (boe/d), but said it would not reach this by 2016.

The group also said it stood by its dividend policy, based on a payout ratio of 30 percent. If the oil price stays at around $50 per barrel in the next three years, this aim might come under pressure, Chief Financial Officer David Davies said.

Oleg Galbur, analyst at Raiffeisen Centrobank, said: “The future doesn’t look so gloomy. That they have the flexibility to cut capex, can stay cash neutral and keep the dividend is positive. At the same time, the impairment is a bit of a surprise.”

OMV said it produced 318,000 boe/d in the fourth quarter, up from 311,000 in the third quarter and 277,000 a year earlier. Production growth in Norway more than offset a decline in Libya.

Its refining margin rose to $5.19 per barrel.

OMV’s fourth-quarter results are due on Feb. 19. Its shares were down 2.8 percent at 1228 GMT, against a 2.2 percent drop in the European sector. Reuters reported in October OMV might slow investments.

$1 = 0.8855 euros editing by Jason Neely ans William Hardy

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