August 13, 2013 / 7:42 AM / in 4 years

UPDATE 2-OMV profits fall on lower sales, crude price, dollar

* Q2 clean CCS EBIT 733 mln eur vs Reuters poll avg 743 mln

* Refining and Marketing EBIT 160 mln eur vs poll avg 124 mln

* Shares up 1 pct (Adds details on business segments, cash flow, shares, analyst comment)

By Georgina Prodhan

VIENNA, Aug 13 (Reuters) - Surprisingly strong refining and marketing results helped take the sting out of a steeper-than-expected drop in second-quarter underlying profit at Austrian oil and gas group OMV on Tuesday.

OMV said its results were hurt by lower sales volumes and crude prices, a weak dollar and write-offs, mainly in the exploration and production areas on which it is focusing.

OMV, which like its peers has been hit by declining demand in Europe, said underlying operating profit (clean CCS EBIT) fell 15 percent to 733 million euros ($974 million) and underlying net income fell 29 percent to 321 million euros.

Average forecasts in a Reuters poll were 743 million euros and 336 million euros respectively.

OMV said lower sales volumes in Libya, Britain and New Zealand hurt its profits, as had exploration expenses that rose 72 percent to 98 million euros mainly due to write-offs in Tunisia and Britain and increased seismic activities in Norway.

Its upstream exploration and production business, which it is expanding, reported disappointing results, as did its gas and power segment, but its downstream refining and marketing operations reported a 24 percent rise in underlying profit.

OMV said marketing - which includes the filling stations it is selling off - had made a strong contribution thanks to better cost positions and higher margins in retail.

Cash flow from operating activities more than doubled to 1.2 billion euros, thanks to an efficiency programme that reduced working capital and disposals of assets including hundreds of filling stations.

Shares in OMV rose 1 percent to 34.87 euros in early trading, and were the biggest gainers in a flat European oil and gas index.

“Despite weaker-than-expected results of the E&P and G&P segments, we believe the market will appreciate the improvements achieved in the downstream segment, as well as the strong cash generation in 2Q,” wrote analyst Oleg Galbur of RCB.

The company said it expected refining margins to remain at lower levels this year due to subdued demand and persisting overcapacity, and retail volumes would remain under pressure due to the weak economic environment in its core markets.

OMV reported last month its second-quarter refining margin fell 18 percent to $2.48 per barrel on weaker spreads, and production slipped due to issues in Austria, Kazakhstan and Libya.

On Tuesday, OMV said production levels had largely returned to normal in Libya after interruptions during the first half of the year. The north African country accounted for about 10 percent of OMV’s total production before the 2011 civil war.

OMV is switching focus from refining and selling oil and gas to exploration and production, as Europe’s refining industry battles declining domestic demand - which has forced a painful consolidation - and growing competition from Russia. ($1 = 0.7523 euros) (Reporting by Georgina Prodhan; Editing by Michael Shields and David Cowell)

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