OMV First Impression 1Q 11 Trading Statement: Libyan disruption not as bad as feared

OMV's partners in Libya (only one field is operated by OMV itself) produced until February 20, since then, the production is disrupted. Hence, total Libyan production stood at 18,700 bbl/d on average in 1Q 11, down from 32,800 bbl/d on average in 2010. Production in Yemen (6,600 boepd avg. in 2010) is also interrupted since March 14 due to an attack on the export pipeline there. The positive surprise is that in Romania, production optimization initiatives to mitigate natural decline have led to a higher daily production level in 1Q 11 compared to 4Q 10 (overall 2010 avg. was 173,900 boepd in Romania). The newly acquired Tunisian assets were fully consolidated by March 2011, adding 2,200 boepd to the production in 1Q 11, also a positive surprise to us. Upstream sales were on a similar level as in 4Q 10 due to increasing figures in Austria, whereas production costs and also exploration expenses fell qoq.

We assume that the positive impact in refining comes from the closure of the Arpechim refinery and favourable middle distillate spreads. The planned shutdown of Bayernoil's Neustadt refinery (in which OMV holds 45%) reduced sales volumes and costs came in lower than in 4Q 10, when the result was impacted by one-off effects. Olefin margins were strong, thus contributing to a goof petchem result. As was the case with OMV's peers, the marketing business was weak due to low margins and insufficient sales. Petrol Ofisi will be fully consolidated into the results for the first time in 1Q 11.

The supply, marketing and trading of gas increased sales by 18% yoy due to higher wholesale volumes of EconGas. Mild weather in March and margin pressures are negative factors on the gas business' results.

Borealis shows a strong performance in 1Q 11, due to the healthy eceonomics in petchem and the contribution of the Borouge Joint Venture. Net specal charges related to Arpechim will amount to EUR 20 mn. OMV entered into oil price swaps for 50,000 bbl/d production, locking in a Brent price of USD 97/bbl. This was already reported in the last report. Together with EUR/USD hedges at 1.37, the negative impact from these contract will be EUR 24 mn.

We expected worse operating figures for OMV and thus expect a positive market reaction. We intend to confirm our 'buy' recommendation on the back of our higher oil price assumptions.