Analysis OMV update Jan 18th, 19
This is not a recommendation or proposal to do anything. It is my private personal opinion. I`m not independing as I own a position of OMV shares. I`m a shareholder of OMV since a few years. I regularly prefer OMV to RDS B were I have as well some shares. OMV performed much better in this period than RDS B but it is stagnating this year. I assume that OMV will outperform big oil as well in the long run.
OMV generates revenues of about 22 bn €/a producing 447.000 bl/day oil equivalent end of 2018 (6). It is about 10 x smaller then RDS or XOM. Thats why it is better for OMV to concentrate on smaller opportunities that are not that attractive for big oil. OMV main sources are in Romania, about 1/2 of the production, Norway 1/4, Austria 1/10, Lybia, NZ... It plans to increase the upstream production to 600k bl/day till 2025. I do not see this move positive. The portfolio consists of plenty of small projects. The risk is that the focus get lost.
Potential reason to buy OMV is the lower valuation compared to its bigger competitors.
EPS (2018) app. 4 € -> PE 12, OMV plans to increase the dividend of 1.5 €/share.
A major risk for OMV comes from Romania, that makes up 1/2 of the production. Members of the romanian government claim for higher royalties stretching to the past. It is the question how much backing OMV can get from Austria and the EU. This is as well a threat for all oil&gas companies working in countries were the rules of law are weak. As soon as companies had done their investment and getting cash out of it it is always the risk that governments get big eyes and squeeze the successful foreign investor.
One of OMV best assets is the share in Borrealis. Borrealis is a plastic manufacturer situated in Austria with a participation in Borrouge. Co - owner is Abu Dhabi. The plastic business is a good compensation to the oil upstream business.
A decline of the oil price is a risk for all oil/gas companies. OMV seems to be a better choice in such a scenario. The strong downstream business, a low debt rate "Consequently, net debt/EBITDA is equal to 0.5x, which is phenomenally low." (5) might be an opportunity for OMV to aquire good assets for low.
OMV has a large downstream and plastic business (Borrealis/Borrouge). It seems as the downstream margins has kept quite stable yet. This is a sign for a strong economy. Big ethylene/propylene capacities are coming on stream in countries with low feedstock costs as the US, Canada and Middle East.
Number of Shares: 326.5 mio.
Share Austrian Government: 31.5%, Share Abu Dhabi 24.9%
- Cash Flow of 3.3 bn € from operating activities 01 - 09/18
- EPS (01 - 09/18) 2.54 €
- Production cost decreased to USD 6.8/boe (q3/18)
- Capex 2018, 1.9 bn €
- OMV indicator refining margin stood at USD 5.7/bbl
- Net debt 2.3 bn €.
Name Shares %
Government of Austria 103,090,000 31.5%
Government of United Arab Emirates 81,490,900 24.9%
The Vanguard Group, Inc. 3,778,203 1.15%
Norges Bank Investment Management 3,618,370 1.11%
JPMorgan Asset Management (UK) Ltd. 2,881,824 0.88%
BlackRock Fund Advisors 2,584,764 0.79%
APG Asset Management NV 1,988,155 0.61%
Amundi Asset Management SA (Investment Management) 1,890,464 0.58%
Grantham, Mayo, Van Otterloo & Co. LLC 1,389,379 0.42%
Erste Asset Management GmbH 1,310,000 0.40%
OMV has a share of 36% at Borrealis, the remainder ist owned by Abu Dhabi. Borrealis founded together with the oil company of Abu Dhabi the Venture Borrouge. The combined polyolefine capacity exceeds > 8 Mio. to/yr.
2019/01 OMV and co-owning companies, OMV share 25%, plans to increase the production of the Wisting oil field off the coast of Norway. It is planned to invest 6bn$. The expected yield is 440 mio. bl of oil. Production start is 2026 (7)
2018/11 The US administration threatens to use coercive measures to stop Nordstream 2 from Russia to Germany.
(7) 2019/01/18 https://industriemagazin.at/a/omv-plant-milliardeninvestitionen-in-norwegen
(6) 2019/01/14 https://de.reuters.com/article/sterreich-omv-idDEKCN1P80KW
(4) 2018/11/14 https://www.boerse-express.com/news/articles/die-usa-verschaerfen-gen-omv-und-co-den-ton-63098
(3) 2018/11/09 https://kurier.at/wirtschaft/omv-laesst-sich-malaysia-bis-zu-800-mio-dollar-kosten/400319748
(2) 2018/11/07 https://www.offshoreenergytoday.com/panoro-buying-omv-tunisia-for-65-million/
(1) 2018/10/31 https://www.sn.at/wirtschaft/oesterreich/omv-chef-seele-sieht-bestes-ergebnis-seit-zehn-jahren-59688301