Q1 2013 OMV AG Earnings Conference Call
May 14, 2013 AM CEST
OMV.VA - OMV AG
Q1 2013 OMV AG Earnings Conference Call
May 14, 2013 / 09:30AM GMT
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Corporate Participants
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* David Davies
OMV AG - CFO
* Jaap Huijskes
OMV AG - Executive Board Member, Exploration & Production
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Conference Call Participants
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* Haythem Rashed
Morgan Stanley - Analyst
* Nitin Sharma
JPMorgan - Analyst
* Daniel Ekstein
UBS - Analyst
* Henry Morris
Goldman Sachs & Co. - Analyst
* Mehdi Ennebati
Societe Generale - Analyst
* Tamas Pletser
Erste Bank - Analyst
* Matt Lofting
Nomura International Plc - Analyst
* Oleg Galbur
Raiffeisen Centrobank - Analyst
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Presentation
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Operator [1]
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Welcome to the OMV Group's conference call for the quarter 1 2013 results. There will be a presentation of the results followed by a question and answer session. (Operator Instructions).
You should have received a presentation by email. However, if you do not have a copy of the presentation, the slides can be downloaded at www.omv.com. Additionally, simultaneous to this conference call, a live audio webcast is available on OMV's website.
I would now like to hand over the conference to Mr. Davies. Please go ahead, Mr. Davies.
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David Davies, OMV AG - CFO [2]
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Thank you, and good morning, ladies and gentlemen. I'm joined today by Jaap Huijskes, the Head of our Exploration & Production business, and he'll take over when it comes to that division's results and give you a brief update on things that are going on in E&P.
Let me start with the overall results, the highlights for the first quarter.
Our clean CCS EBIT increase by 6% to EUR851 million in total compared to last year's EUR800 million.
E&P's production at 302,000 barrels per day was slightly up, 3,000 barrels per day versus the first quarter last year. Liftings were slightly lower, particularly in Libya. You'll recall the first quarter last year in Libya we had particularly strong liftings, given that most of our production in quarter 4 2011 wasn't lifted until 2012. So that's complicated the results somewhat.
Average Brent was down by about 5% compared to the same period last year, but its impact was not as significant, because you'll recall that last year, we still had 50,000 barrels a day of our oil production hedged at [$101.50]. So the full impact of that reduction didn't come through, because, of course, we were fully exposed to the [$113] this year.
Gas & Power benefited from new transportation capacities, the West Austria gas pipeline specifically being expanded and starting deliveries in January 1 this year. And of course, we also had the Brazi power plant in Romania contributing, whereas last year, it was still in its test phase.
Refining margins, and in particular Petrochemical margins, were very much stronger than last year. And very good news indeed on the gearing side, where our gearing ratio decreased to 15%, in large part as a consequence of the sale of the strategic inventory reserves in Austria, more of which I'll say during this presentation, because of course, it pops up in several places, but particularly popped up in terms of cash flow, the proceeds from the transaction being EUR627 million. And that, of course, reduced our net debt quite significantly.
On the next page, you see the economic environment which prevailed during the quarter, and indeed the quarters beforehand. The oil price since quarter 2 has been relatively stable. It's weakened of course now into quarter 2 this year. But at $113 as an average, you can see slightly down on the same period last year.
The dollar, quite volatile, but at 1.32, is more or less where we were a year ago.
The gas price on the middle chart shows quite an interesting development in two areas really. The top two lines show distinction between the Central European Gas Hub as an indicator of the market price, the spot price as it were in Romania; and then the border contract tracker, which is a proxy for the imported gas on the basis of the Russian contracts.
And you can see that the gap actually closed during quarter 1. In fact, there were one or two days where the spot price was actually more expensive than the contract price, and this was due to the prolonged winter in Europe and the level of gas supply and storage being substantially reduced as a consequence of this.
It remains nevertheless an issue, and things have normalized now, unfortunately, and the contract price is once again higher. But again, I'll come on to talk a little bit more about that later when I come to Gas & Power.
There appears to have been no movement in the gas price, on the regulated gas price, for industrial users in Romania, but in fact, you can see a little blip in the brown line as we go into quarter 1, 2013; and quarter 2 will show a similar development, because we've now had two price increases following the schedule to the end of 2014 which foresees full market liberalization for the non-household consumers in Romania.
So the first two increases have happened. It hasn't actually impacted the number significantly, but you can see a slight blip in the line, and we hope that will continue as the year goes out.
Far more volatile has been the Refining margins, which are shown on the right-hand side. You can see that the peak that they reached, over $5 in quarter 3 last year. We've come down progressively since then though. At $3.01 in quarter 1 this year, we remain substantially above last year's number, and that, of course, will reflect itself in the quarter 1 results in Refining & Marketing.
Coming to the next slide, the clean CCS net income is actually down by 8% at EUR349 million against EUR379 million. You can see this on the right-hand side as well where the numbers are shown.
EBIT was substantially higher, reported EBIT, at EUR1.261 billion, 38% up on the same period last year. Of course, that includes the gain of something like EUR427 million from the disposal of the strategic inventory reserves. We strip that out when we come to the clean CCS EBIT, of course.
Financial result was worse at EUR58 million against EUR10 million. This is largely due to the much lower contribution from Borealis during the year -- during the first quarter rather. Borealis last year generated EUR50 million of contribution positive into this line, whereas this year, it's down to only around about EUR20 million -- EUR22 million, I apologize. So that reduction is the major reason for the financial result deteriorating.
The tax rate at 21% compares to 31% last year. This is particularly low due to the favorable tax treatment of the disposal of the strategic inventory reserves. In fact, if you were to clean it for these special effects, our tax rate this year would have been around about 35% on a clean basis. On the same basis last year's would have been 32%.
So slightly higher this quarter than last year, and the reason for that again is Borealis, because the Borealis contribution when it comes into the financial results is already taxed, so the reduced level of net income from Borealis had the consequence of increasing our clean tax rate.
Clean tax rate for the full year is going to be round about somewhere in the mid-30s, similar to where we were in quarter 1.
Minorities were down slightly compared to last year. This is due to the reported net income of Petrom being slightly lower than last year on a clean basis. They were also ahead of last year, but reported was slightly lower.
EPS after all that comes out at EUR2.41 per share, 74% higher than last year; and on a clean basis, at EUR1.07, we're actually down 8% compared to last year, which is, of course, the same level as clean CCS, net income being lower.
The next page shows cash flow and reconciles our net income to the free cash flow after dividend. It's a rather more complex chart than I normally show, and this again unfortunately is due to the inventory sale, which actually was effectively the disposal of a business. And because it was the disposal of a business, we have to show that according to IFRS in the cash flow statement as a cash inflow from divestment proceeds.
So let me just take you through what actually went on and reference here the bar charts on the left-hand side.
Net income was EUR951 million. You can see the light blue block within that. That's a gain of EUR440 million which relates to the disposal of the strategic inventory reserve. If you add back to that depreciation and amortization, you get to the operating cash flow. We reduced then others of minus EUR414 million, and what we're doing here predominantly is removing the profit that was earned on the sale of the inventory reserve, because we have, as I say, we have to show that as cash inflow from divestment proceeds. So that does confuse the picture a little bit.
Change in net working capital was positive overall by EUR391 million. There's obviously a lot of things gone on in here. We've been implementing some further measures as regards Energize, which has helped this number. But of course, in quarter 1, we always get a benefit from working capital, because we see inventory being reduced in the gas business as storage is reduced; and also, we have the reversal of the payment that we make ahead of time in quarter 4 in Germany for the mineral oil tax, and that of course reverses in quarter 1 when we don't make any payments.
Cash outflow from investments EUR650 million. I'll come on in a moment to talk about where we have been investing the cash. And then once again, we get the cash inflow from divestment proceeds, and this is predominantly the EUR627 million from the sale of the strategic inventory reserves plus the proceeds from the sale of the Bosnian gas stations.
And that basically means that our sale of business has funded our entire CapEx for the quarter. No dividends were paid in the quarter. They will come in quarter 2, and that produces free cash flow after dividends of EUR1.4 billion, playing against EUR777 million last year.
Where have we been investing is shown on the next page of the EBITDA that we invested; EUR1.7 billion. And this is on a reported basis. EUR568 million was invested in CapEx; EUR399 million in E&P, the lion's share, as one would expect. The majority of that EUR399 million has been in Petrom. Something close to EUR200 million of the EUR399 million were in various work-overs and developments in Petrom. Another just over EUR50 million was invested in Norway following the investments in Edvard Grieg and Aasta Hansteen which were done last year.
In Gas & Power, the biggest single operation continuing in terms of investment is the Samsun power station which will come on stream around the middle of the year.
And then EUR58 million was invested into Refining & Marketing, and here once again, the turnaround in Petrobrazi is a major factor.
EUR666 million was the EBITDA of Refining & Marketing, a huge number. And, of course, that does include the gain of EUR440 million from the Austrian stockholding business.
You'll see [that] once again on the next page, where the only significant special item really is the green block, which is the sale of the stockholding business, and that's the predominant reason for the reported EBIT and clean CCS EBIT being different.
What I'll do now is hand over to Jaap, who will take you through the E&P division; and then I'll join you again when we come back to Gas & Power.
Thank you.
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Jaap Huijskes, OMV AG - Executive Board Member, Exploration & Production [3]
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Thank you. Good morning; good afternoon from myself as well. The key messages on the first slide of the E&P have already been mentioned.
No hedging offsetting a lower oil price, so slightly higher realization. Volumes down, not because production is down, but because of a lifting issue last year in Libya where we lifted 2011 volumes in Q1 2012. But the next chart is starting to show you the production level quarter on quarter.
So what you see here is production picking up in Q1 2013 by 1,000 barrels a day. And that includes offsetting what happened in the UK in Q1. Two things happened at the end of the year. Our divestments of assets in the UK closed and, therefore, the production was taken out of our production forecast.
That, by the way, was also reflected in our reserves replacement rate for 2012; took a couple percent off there.
And also in January, the Schiehallion operation was shut down. Schiehallion -- that was planned. Schiehallion is going through a redevelopment phase and a new vessel will turn up in 2015, all according to plan. But the next result of that is a loss of 4,000 barrels a day production, a bit more than 4,000 barrels a day. And all in all, we've managed to offset that plus increase production at 1,000 barrels a day compared to the Q4 results.
If you then look at production costs, OpEx in US dollars per barrel, I think it does demonstrate good cost control. Costs are down quarter on quarter. What you see is a couple of things driving that; lower service costs in Austria, Romania and Tunisia. And also, you see -- not with this chart but in the EBIT, you see the impact off reserves provisions in Tunisia and Kazakhstan also reducing some of our depreciation; and, of course, suspending production in the UK also stops depreciation there.
So some of our depreciation charges down. That's in lifting costs. But in OpEx you see costs down basically because of cost control; lower service and material costs. And in particular in Romania, that's more than offsetting the increase that we see in salaries.
On the next chart you see Romania. Production flat year on year; encouraging trend there. And we see oil slightly up, gas slightly down. Of course, our realized per barrel oil equivalent, income per barrel, is much higher for oil than for gas, even though the gas price is starting to move. So that's clearly a good move.
You see EBIT up on that stable production partly because of that oil price gas mix, but also on higher realized oil price; again, [new] hedge disappearing. And, of course, higher gas price starting to flow through.
Lower production costs already mentioned. Good cost control offsetting the increase in salaries that we see year on year in Romania; that productivity gain, essentially which is what it is, continuing.
I've then got a couple of slides to update you on the portfolio slides that we introduced in the last quarter, starting with the major projects under development, what's happened during the quarter.
A couple of changes in the table, just to avoid you having to go through it with a very fine toothcomb. The reserves that we've associated with Habban have increased slightly in Yemen. That's in essence a correction. We left out some phase 1 reserves that should have been there from the start. Other than that, it's unchanged.
Key progress on these projects on your slide number -- I forget -- anyway, slide named Major Projects Under Development, are that Schiehallion is clearly progressing. That's evidenced by the drop in production in the UK. But more encouraging is the progress for the FPSO construction in Korea. And also, we've now committed to a five-year drilling contract. That rig is currently under construction as well. So that's actually progressing quite well.
On Nawara, our key gas project in the South of Tunisia, things are progressing as well. Again, avoiding comparing slide on slide, so I'll help you out there, CapEx has reduced significantly. In fact, we haven't mentioned the CapEx before; we said to be announced. That CapEx has come down on 100% basis from some EUR1.4 billion to less than EUR1 billion. And of course, our share of that CapEx is about half.
So significantly reduced, and that project now firmly on track for an FID in Q3 2013. We're progressing with the engineering. We're out for tenders on pipeline awards, and we'll shortly be out for tenders for the EPC contracts related to the upstream gas plant.
That's been a difficult route given everything that's happened in Tunisia, but it's now looking firmly on track. And of course, a reduction in CapEx makes decision-making significantly easier.
The other thing that's happened is that Aasta Hansteen did take FID late last year. Main contracts have been awarded for the hull of the [sparred] topsides; both gone to South Korea. There's preparations ongoing related to the drilling program. Basically it's on progress.
There's been a little bit of press on Aasta Hansteen and tax rates in Norway. Just to address maybe those questions before they appear, tax changes in Norway we do not expect to impact Aasta Hansteen. They relate to projects that have not just -- not yet got their plan of development approved.
Plan of development for Aasta Hansteen was approved by the Government, not yet by Parliament. It's still winging its way through the final steps of Parliament but it was approved by government. And we do not expect these tax changes to affect Aasta Hansteen.
There's also some speculation on the economics of Aasta Hansteen. We can't comment on what gas price assumptions the Norwegian Government is making when they're looking at the economics of this project. Clearly, we looked at it, and we expect this project to be economic. What's more it's driving infrastructure that will lead to further developments close to the infrastructure of Aasta Hansteen.
We then go to the major project under appraisal, so the next slide. No huge changes there. Just to update you, Bina Bawi is going through testing. The key changes in the -- or the key activity in the first quarter was the declaration of commerciality; a key step towards ultimate full field development at Bina Bawi.
Still huge uncertainties. We've got three tests ongoing. The original discovery well is now being put on production. First production is flowing. In fact, we've just been paid for the first production coming out of Bina Bawi. But we're talking about hundreds of barrels net to us, thousands of barrels gross when you add it all up; not significant in a barrel term, but clearly significant in the data that we collect from there, and that will go into the planning for full development of the field.
Also the two appraisal wells drilled over last year and finished early this year; Bina Bawi 4 and 5 are going through their well testing. Not the same as the testing of Bina Bawi 3. Bina Bawi 3 is basically a project; it's flowing through semi permanent facilities. Bina Bawi 4 and 5 are testing through the rig. So they're rig-based production tests where you test through the drill stem and burn whatever comes up the drill stem, production tests.
So that's ongoing. The next step will be to submit all of the field development plan. And the timelines as dictated by the [PEC] would dictate that that happens at the end of Q3 this year.
Other than that, key updates on our exploration activities in Q1 2013. You saw in the EBIT summary some slight shifting in exploration spend; nothing significant. Mainly timing issues from when in the previous years dry well charges were taken and the activity levels had started this year; slight changes there.
But we're busy with our commitment programs to high-impact wells for '13 and '14. On the high-impact wells, I've already mentioned Bina Bawi 4 and 5 going through their test phase. And Bianchi 1 is on our high-impacts wells as well -- list as well. That's currently drilling. That's effectively a Zola appraisal well, or looking for a Zola lookalike structure, just to the south of the Zola discovery well in Australia.
Other drilling ongoing in the first quarter. We drilled Jorvik, which was an extension test to Edvard Grieg. That came up dry. Pakistan, we're drilling two exploration wells currently; work in progress. In Tunisia, we've made some small discoveries; one gas discovery and one oil discovery. And we're drilling further oil wells in the South of Tunisia.
In the deepwater in Romania, we have almost finished our Neptune deep 3D seismic survey. That's is in essence finished. And the shallow end of that block, where we're actually 100% owner of the exploration rights, we've also finished our 3D seismic survey; a bit smaller, but still significant at 1,600 square kilometers.
Other than that, nothing really left to update. We're still in the final throes of committing to the rig for the remaining deepwater, and we do expect to recommence drilling in the Black Sea towards the end of this year.
On the next slide, you see again an update of the slide that we introduced in the last quarter. So the key activities in Q1 I've already walked through. They key changes to this slide are that some wells have gone forward, some wells have come back.
Apollo was planned in 2013. That's now moved to 2014. Bina Bawi 4 and 5, already mentioned, are now on tests. Bianchi 1 was planned to start drilling in 2013; that indeed happened. And Campbell 5 was listed as starting in Q2 2014. We actually expect that to happen in Q2 2013.
So some shifts forwards and backwards on the wells in 2013/'14, or the big ticket wells in 2014 and '13, mainly driven by rig availability. But they're all still on schedule and they're all essentially happening.
With that, hand back to David for the rest of our results.
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David Davies, OMV AG - CFO [4]
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Thanks, Jaap. Coming now to Gas & Power, the reconciliation between last year's results and this year's, we are slightly up compared to last year.
As you can see, Supply, Marketing & Trading, despite selling our storage quite down, reducing the level considerably, in fact, putting in some fairly low cost levels as well in terms of the gas that was held on storage, and also despite the contract price and the spot price coming closer together in quarter 1, we still showed a worse result compared to last year in the Supply, Marketing & Trading business.
The pressure remains in terms of the contract structure. We are, as you are aware, in negotiation with Gazprom. As I've said, we have the rights under the contract to have the price revised to April 1, 2013. So whatever the outcome of the negotiations are, which are not yet finally resolved, then it will be backdated to that point. And we look forward further progress and hopefully resolving it during the course of the next few months.
Gas Logistics, as I've mentioned earlier on, has increased compared to last year. The West Austria Gas pipeline in particular had its capacity expanded.
Power, we had no contribution from Power, or rather a negative contribution from the fixed costs that we had. And this year, we've moved into profit, clearly because Brazi is now operating, although Brazi itself had a relatively challenging first quarter given the quite depressed of the power prices in Romania in quarter 1.
The other position of [five] principally relates to costs that we were still carrying on the closure of the Doljchim Fertilizer plant which we've included in the Gas division since we acquired Petrom way back in 2004.
Closing, we had EUR102 million clean CCS EBIT against EUR99 million last year.
Coming to the next page, KPIs. You see the volumes that we're selling are increasing continuously. These volumes, however, are predominantly driven by the very high level of traded volumes. The physical volumes, as it were, are shown in the lower part of those bar charts. And you can deduce from that that both in EconGas and indeed in Petrom, our sales volumes were lower during the year, which is really reflection -- during the quarter, rather, which is really a reflection of the depressed level of economic activity, which continues.
The Gazprom renegotiations I mentioned already. They have started. The market in Austria was converted to an entry/exit model in terms of booking transit transport capacity. That now enables us to actually show you on the charts on the bottom the gas transportation volumes that have sold on the entry/exit in terms of terawatt hours, and we'll continue to disclose this as we go forward.
You can see also on this chart that our utilization of the storage came down a little bit from quarter 4, but was quite considerably higher than where we were a year ago.
The next page shows Refining & Marketing. Here, the steps from last year's to this year's results are all positive. Clearly, the biggest contribution has been the EUR85 million contribution from improved bulk refining margins.
Quarter 1 last year, I will remind you, was a particularly difficult quarter, that worst that we had in the whole of last year, actually producing a loss at the EBIT level of minus EUR30 million; improved by EUR85 million, due to fuels. Petrochemicals were also very strong during the quarter, helped in large part by the fact that the oil price was softening. And of course, the prices for petrochemicals are in large part set at the beginning of the quarter. So with the oil price softening, the naphtha cost came down. Then clearly, our Petrochemicals margins improved.
Marketing also improved, although here what we see is more margin improvement rather than volume improvement. Volumes, both in the commercial and the retail side were actually lower than the first quarter last year, but we did see in a large part, also due to the oil price coming down and some improvements in margins.
So all three of those areas contributing to an improved result, which at the end of quarter 1, stood at EUR112 million on a clean basis.
And then a few KPIs from R&M. Our utilization was broadly the same, although it was higher in the east and lower in the west. Our development in Petrobrazi continues in terms of the turnaround that should be completed next year.
Borealis' contribution, not shown in these EBIT numbers, but was lower at the net income level, in some way due to the planned turnaround in Bourouge, which is, of course, a significant part of Borealis' profits.
We sold our Bosnia Herzegovina business. That was executed and closed during the year. And Croatia was also signed. And need I say it again, but in R&M, we obviously had this massive gain from the disposal of the stockholding business.
Then to recent strategic highlights, slide number 19. Our production in Romania and Austria is in line with our medium-term goal, between 200,000 boe per day and 210,000 boe per day. We're at the upper end of that range at 209,000 boe per day.
You may be aware that as regards Neptun, Exxon actually disclosed their expected production from the first discovery that we've made there and put the number at 630 million cubic feet per day, which is equivalent to 107,000 boe per day on a 100% basis.
Final investment decision, as Jaap has mentioned for Aasta Hansteen, was taken. Bina Bawi started production. As he also mentioned, we've actually started to receive cash for the production that we've been able to sell from that discovery.
In terms of gas, the Nabucco shareholders signed a cooperation and equity option agreement with the Shah Deniz II partners. It's expected now as they move towards their own investment decision on the Shah Deniz II development in the Caspian, the decision one way or the other on Nabucco or on TAP, the alternative project bringing the gas into the South of Italy, will be taken in the coming months. And we look forward finally to having certainty one way or the other on this project in the near future.
The price renegotiations continue. The power plant in Samsun is ready to come on stream. It's being tested successfully and we hope to bring it into commercial operation around the half of -- around the middle of the year.
Romania, as I mentioned also at beginning, the first two steps of the gas price liberalization have been implemented in February and in April.
In Refining & Marketing, the disposal of the stockholding business once more was very significant. The sale of the marketing subsidiaries I've also mentioned; likewise the Petrobrazi modernization.
Key financial indicators. Our gearing has fallen now quite substantially from its peak at quarter 2 last year at 31% down to 15%. Our net debt now stands at the end of quarter 1 2013 as EUR2.4 billion, whereas at the end of quarter 2 it was EUR4.4 billion.
So a significant improvement in our net debt position driven by the profits from improved working capital, and particularly in this quarter driven by the very substantial cash inflow from the sale of the strategic inventory reserves.
Our payout ratio remains consistent with the long-term target of 30%. We'll be paying 29% on last year's profit out when the dividend is proposed to the General Assembly tomorrow.
And our return on capital employed has also been improving. In fact, on a reported basis, actually hit our long-term goal of 13% during the quarter. But of course, here we were helped by the gain on the disposal of the inventory business.
Then to the outlook for the rest of the year. We believe the Brent price will stay somewhat above $100; not significantly, however.
Gas market; the hub price influence is clearly given now and we're in feverish negotiations with the suppliers to ensure that that's something we can convince them of.
Gas price liberalization is being implemented in Romania. We of course await further developments. There is a schedule of increases going right out to 2014 which should get the market to a liberalized level by that point, and the first two of those steps have already been implemented.
Refining margins will clearly be more modest than 2012. We've clearly already seen that in quarter 1. And the early part of quarter 2 will also reinforce that.
No change to our CapEx guidance, EUR2.8 billion before acquisitions, the majority of which, as expected, will go into E&P.
Energize, the program to improve our ROCE by the end of next year up to 13% will continue.
Production will stay broadly similar to last year's level. We have, as Jaap has already explained, six high-impact wells planned for 2013. The renegotiations of the gas supply contracts is clearly of critical importance for the Gas & Power business. The power plant will come on stream around the middle of the year.
At the Petrobrazi refinery, modernization will continue, as will the disposal program in the Refining & Marketing division.
So that summarizes where we've been in quarter 1 from both Jaap and myself. We now are available for any questions that you may like to ask.
Thank you very much.
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Questions and Answers
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Operator [1]
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(Operator Instructions). Haythem Rashed, Morgan Stanley.
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Haythem Rashed, Morgan Stanley - Analyst [2]
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Two questions, if I may, firstly just on the upstream. It's good to see OpEx coming down in Q1 '13. I just wondered if you could tell us a little bit about we should think about it going forward for the rest of the year. I'm thinking in particular with regards to project startups and some ramp-ups in some of the projects that you have, whether that would start to adversely impact costs and whether that cost profile changes as we go through the year.
The question, the second question is perhaps more of a question for Jaap, and again, it's on the upstream. We've had a good quarter for cash generation; clearly, gearing obviously looking much more healthy now as well. Looking at the portfolio as a whole, you've talked about looking at adding to the upstream portfolio. Sub-Saharan Africa is an area that you've also discussed in the past as well as other areas. But should we be now thinking about perhaps you accelerating that process and maybe looking at being perhaps more active on the acquisition front, given your ability to do that going forward?
That would be great. Thanks.
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Jaap Huijskes, OMV AG - Executive Board Member, Exploration & Production [3]
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Okay. Let me start with the OpEx. So our forecast for the year, I would have to check the very detailed number, but I know that when we put originally the plan together, our forecast was that the average for the year would be marginally up on the previous year; very, very marginally. On the performance of the first quarter, we might come in actually come in slightly below that.
So overall, we should be comparable to the previous year. There shouldn't be much of a change.
On the acquisition front, of course, we get this question more often, but the reality is that the fact that we generate a lot of cash doesn't change the way we look at acquisitions.
So you're entirely right with the type of acquisitions that we're looking at. They need to be growth prone. They need to either build on existing positions, as you saw us do in Norway last year, or they need to relate to exploration access. And in particular, there indeed we're chasing Sub-Saharan Africa.
Now all of that has been active; all of that is active. The fact that we've got money in the bank hasn't changed how we look at those activities. Clearly, we look at those activities from a point of view of doability and whether or not they add value to us at the end of the day. And if they add value, then we put offers in.
So that has been active, still is active, but the reality is these things are opportunity constrained, take time. But you should expect us to -- you should expect to see us do exactly what it is we said we would do. So build on existing positions and get exploration access to Sub-Saharan Africa. And I don't think how we look at those has changed because of the cash that we've now got around.
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Haythem Rashed, Morgan Stanley - Analyst [4]
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Okay. Thank you. Very clear.
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Operator [5]
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Nitin Sharma, JPMorgan.
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Nitin Sharma, JPMorgan - Analyst [6]
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Two questions, first one is on Petrom. This is regarding the gas price realizations. Now my understanding is that gas price liberalization calendar seems to suggest that gas prices in Romania for industrial sector should be liberalized by end of 2014; and, therefore, is it fair to assume an uplift in the realization price of Petrom?
And second one in relation to contract renegotiations at Gazprom. Do you think you'll be able to close deals by the end of 2013, please?
Thanks.
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David Davies, OMV AG - CFO [7]
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Nitin, can you just run the second question again? I missed that one. I'm sorry.
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Nitin Sharma, JPMorgan - Analyst [8]
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The timeline for closure of [the] renegotiations at Gazprom, is it 2013? Or should we expect an extended discussion over the subject?
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David Davies, OMV AG - CFO [9]
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Let me take both of those. Certainly, if the schedule which has been published in fact on the website of the domestic regulator in Romania is adhered to, and also based on the agreement that we have reached in terms of the split of that, approximately 60/40 between the Government take and the Petrom take, then that will undoubtedly lead to higher realizations than is currently the case.
There are several steps. I can't remember the precise number, but there are several steps which then get us to the end of 2014, and two have been taken. And the remaining steps are not without their challenge because, of course, the current price in Romania is less than 50% of the final endpoint target from these mini steps, let's say, that need to be taken. So there will be quite some pain to be borne by Romanian industry, shall we say?
So we'll see how the whole thing develops, but the Government has already -- not already, in terms of something changed, but they said right at the beginning that they may choose to extend that timetable out by a year.
So we'll see which -- the way the whole thing plays out. But certainly, as these increases come in, 40% flow into the net income of Petrom, and that clearly is through higher realizations. And the more the increases come through, the more those realizations will improve.
There is no set timetable for the resolution of the Gazprom negotiations. There is a -- it is a negotiation. We have the right to have the price reviewed, and I think it would be fair to say that's recognized by Gazprom.
I think the market reality is also increasingly recognized by suppliers, but we're not there where we would like to be just yet. We hope to be able to get there. If we're unable to do that with negotiations, then we have the right to actually have the process arbitrated upon which would, of course, lengthen the time of the process and is something that we would both like to avoid, I rather think.
So we're trying to agree a negotiated settlement, but there's no formal deadline contractually agreed as to at which point we need to say, no, this isn't working, we need to go to arbitration. We'd clearly like to achieve a negotiated settlement, however. But whatever the result is, it will be backdated to April 1, 2013.
------------------------------
Nitin Sharma, JPMorgan - Analyst [10]
------------------------------
David, one follow-up. I apologize for this, but on Petrol Ofisi, its EBIT contribution is around EUR27 million in this quarter. Now there is an improvement versus the low base of 2011, etc., but this is still much below the historical run rate of -- I think you flagged in the past of EUR60 million to EUR70 million at an operating income level. How do you see the earnings outlook for this business?
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David Davies, OMV AG - CFO [11]
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I think the very high margins that you refer to going back four or five years ago are going to be difficult to get us back to, to be perfectly honest. A large part of that was due to what was a very substantial what we call a import advantage, and this really derives from the fact that, as you will be aware, the refining margins earned by Tupras in the Turkish market have been reflecting the fact that Tupras is the only refinery operator in the country.
So their refining margins have been high. We have substantial import capacity. And that enables us to buy product on the Med or the Black Sea at different prices, at lower prices, import it into Turkey, and basically sell it under the umbrella of the very high Tupras end product prices.
That has been something which has been coming under increasing pressure over the last few years. It was actually relatively high in quarter 1 and it was helped by the fact that the oil price was coming down. But that it will return to the historical levels that we saw maybe five years ago I think is quite unlikely.
I think another factor is that in those five years, the oil prices stayed very high. It's even higher now, of course, than where it was five years ago. The Turkish consumer is paying the highest pump prices of anyone in the world, and that's not simply due to the high oil price and the high refining margins; of course, the tax take is extremely high in Turkey. And in the last five years, that tax take, in fact, has been increased very substantially. Only as recently as last year it was increased, I think, by 10%, so really quite substantial. So I think that probably makes us think that those very high margins that we would have seen five years ago are unlikely to be achieved.
But the business performance has been improving. It last year had a very good year, certainly compared to what was quite a weak 2011, and we would expect it to make further progress during this current year as well.
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Nitin Sharma, JPMorgan - Analyst [12]
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Very clear. Thank you, David.
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Operator [13]
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Daniel Ekstein, UBS.
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Daniel Ekstein, UBS - Analyst [14]
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First question is on the capital structure. So your gearing target has been for a long time to be below 30%, and you're now quite clearly below that, which implies there's a potential chunk of flexibility there. How do you prioritize excess cash flow going forward between dividends and growth?
And then perhaps as a follow-on from that, or an alternative perhaps, a number of your peers have concluded that post-financial crisis and post-Macondo, their appropriate level of gearing has come down. Do you think you're in the same spot there? Are you seeing the world the same way?
And secondly, on Libya, there have been some reports from your peers that the situation on the ground could be deteriorating. I wonder if you could just provide an update on what you're seeing at your assets.
Thanks.
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David Davies, OMV AG - CFO [15]
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Okay. I'll let Jaap obviously answer the Libyan question, but let me come to the first two questions that you asked. The expression excess cash flow for a company that only in 2011 was raising equity is not the easiest to get our head around. Clearly, we've had a very good run in terms of operating performance.
I think what also comes through is the fact that our primary investment focus is on one business now, and historically, of course, we were spreading our resources a bit more thinly and that was stretching us.
There are some big plans ahead in E&P, in particular the Black Sea, which clearly goes beyond the period 2016 in terms of major investments, and that's not fully reflected in the guidance that we've given so far because we simply don't know yet exactly what the program will be. It's a very early stage.
I think the long-term 30% gearing ratio target has served us very well over the years. It's not something that we've just invented. We've held it consistently now for more than 10 years, and we're certainly not looking at redesigning or reshaping that at this point.
To your point about post-Macondo, post-financial crisis, I think the world is a volatile place and this industry is no exception to that. And this certainly isn't the industry to be having excessive levels of gearing in; that's for certain. But 30%, as I say, has served us well, and at this point, we're certainly not thinking that we're so concerned about the general environment that we really need to be addressing the gearing target and perhaps coming in with a lower number. We're happy with the targets we have and happy with where we're at at that, quite frankly.
I'll hand over to Jaap for Libya.
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Jaap Huijskes, OMV AG - Executive Board Member, Exploration & Production [16]
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There are varying reports around Libya. Let me first react to the statement that one of our competitors pulled their non-essential staff out of Libya last week. The reaction to that is very simple. I don't understand why they had non-essential staff in Libya in the first place.
So we do have staff in Libya, but only the essential ones. And then we've got our local staff that also kept their operations together as much as they could during the crisis year of 2012.
So our operating performance has actually been very good this year, better than in the last couple of quarters of last year. So operational performance has been excellent. But clearly, the security situation continues to be giving us concerns, not so much directly relating to the operations, but what we are concerned about is who ends up being in power, in particular with the recent law passed that would exclude potentially quite a few of the current players from continuing in their current roles.
And clearly, that is cause for concern. It leads to further slowdowns of decision making, and therefore doesn't allow you to take the business further. That is cause for concern because it changes, or it impacts our ability to change the future in Libya. But our current operating performance is excellent.
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Daniel Ekstein, UBS - Analyst [17]
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Okay. Thank you.
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Operator [18]
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Henry Morris, Goldman Sachs.
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Henry Morris, Goldman Sachs & Co. - Analyst [19]
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I have a couple of questions, please, David, the first on Romania. You mentioned last quarter that you thought, given the increase in the tax associated with the gas price increase in Romania, that the overall impact on Petrom in 2013 would be relatively negligible from an earnings point of view. Is that still what you think, or [just to] I think from your previous comments today that actually we will see an improvement in profitability?
And then secondly also, can you just remind me what exposure you have to industrial consumers versus household consumers?
And then the last bit on Romania was just in terms of the overall tax renegotiations. Could you just give us a bit of an update on potential timing you think there of any potential new announcement on the overall tax take in Romania post-2014.
And then secondly for Jaap, just on Pakistan. Obviously, this is one of the key drivers of your growth in the near term. Could you let us know what sort of gas price you might realize there or what margins you get from these Pakistani barrels?
Thanks.
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David Davies, OMV AG - CFO [20]
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Henry, the 2013 impact is likely to be not significant, because not only do we have this increase which is clearly positive on the gas price, but there was a special tax introduced for users of natural resources, which isn't restricted to Petrom or the oil and gas industry, but actually catches things like forestry and such like. And that will compensate to a certain degree the benefits this year.
But there is no doubt if the timetable is implemented in accordance with that which has been published by the energy regulator, which would bring us to a level of gas prices twice the level of where they're currently at, more than twice in fact, by the end of next year, which is quite a challenge, but nevertheless that's what's on the time schedule at the moment, then by -- at the time we get into next year, the impact will start to become far more significant.
But this year, we rather expect, because of the relatively shallow nature of that increase curve as well, that the impact, such as it will be, will be compensated to a large extent by this other special tax, which is just in for this year.
The level of industrial, the industrial market's between 60% and 70%. It's the vast majority of the production. And the -- there is also a timetable in place, by the way, for the households to have their price also raised to the same level, but that goes further out. I think that goes out to 2018 before that market is intended to be liberalized. And that's understandable, clearly, because the last thing one wants is that prices increase at such a rate the people actually struggle to heat their properties.
There is no timetable as per -- as such, in terms of the tax, the general renegotiation of the tax regime in Romania, other than the tax stability clause that we signed when we bought Petrom expires at the end of next year. So clearly, it's in everybody's interest to have certainty; not just Petrom, clearly, and OMV, but also beyond that, as particularly following the discovery in the Black Sea and the general level of interest in Romanian hydrocarbon resources, not just from ourselves, but from other players in the industry.
The energy industry, the oil and gas industry specifically in Romania, has the potential to be quite an investment driver going forward. So everybody is interested to understand what will the regime be and can they rely on its stability.
So we clearly share that aspiration. We'd like to reach a settlement as soon as we can, and we've had exploratory discussions already. But it's too early to get hung up on a timetable, but clearly, we'd like to reach a conclusion at the earliest opportunity, because clearly, almost all the investment decisions we're making in E&P, in fact, to be honest, all investment decisions we're now making in E&P, bring all of their benefits, or the vast majority, beyond the period when the tax stability ends.
So we clearly need to make estimates and assumptions in terms of what we expect that environment to be, and it will be preferable to have certainty as to what that environment would be, quite frankly. So we are working on it, but there's nothing concrete to report at this point.
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Jaap Huijskes, OMV AG - Executive Board Member, Exploration & Production [21]
------------------------------
On the Pakistani gas price, we've got a wide portfolio price, as you'll see reported on gas in Pakistan; goes as low as $2.10 [per millions gas], and it goes as high as $12 per millions gas. What we're getting generally from most of our projects is around the $2.5, $2.6, to be precise, per million standard cubic feet.
We've got two projects on the go, and they reflect that the scene is changing in Pakistan. One project, Mehar, will indeed get about $2.6 per million standard cubic feet. There's quite a bit of condensate that comes with that gas project, and that will get effectively market price with logistics corrections, but nevertheless, very close to market price.
The second project we actually stopped for one or two years whilst we were arguing about the gas price.
Now Pakistan is very short of gas, and we've been arguing that if they up the gas price only a little bit, nowhere near import parity, but a little bit from the $2.60, that will be further gas that you could put on stream. Indeed, we had one project that was not economic at the $2.60, or not sufficiently economic at $2.60, and we now get through quite a complex arrangement, two types of gas price, with result of an average gas price for that project of about $4.5 per million standard cubic feet.
That's the Latif project, which is now in execution and will come on stream in the second half of the year. And I think that reflects a recognition that further gas projects can be delivered in Pakistan, albeit at a higher gas price than the $2.60.
So we do expect further projects to benefit from that same complex arrangement through which you get a composite gas price with a net result of more than $2.60. And like I said, in the case of Latif, that results in about $4.5 per barrel -- per million standard cubic feet.
------------------------------
Henry Morris, Goldman Sachs & Co. - Analyst [22]
------------------------------
Very clear. Thanks very much.
------------------------------
Operator [23]
------------------------------
Mehdi Ennebati, Societe Generale.
------------------------------
Mehdi Ennebati, Societe Generale - Analyst [24]
------------------------------
Just two questions, please, the first one regarding the Petrobrazi refinery which posted an unusual positive clean EBIT. Is this mainly due to the refinery upgrades you've started since 2010/2011, if I remember well? And if, yes, do you expect positive EBIT contribution from Petrom Refining from 2013, despite the fact that Refining margins are decreasing versus 2012?
Second question is regarding EconGas contractual negotiation with Gazprom. Could you just remind us, please, the EBIT contribution from EconGas in 2012 and if it is reasonable to think that after the contract renegotiations conclusion it is highly probable that EconGas will be not loss-making any more?
And if I can, I would like to add a third question regarding the free cash flow. Free cash flow generation should be good, and very good, very strong, certainly in 2013. But 2014, given your gearing level, and given it's very difficult for you to find assets with an appropriate value creation, can we expect that -- or do you think about the possible potential share buyback to return cash to shareholders?
------------------------------
David Davies, OMV AG - CFO [25]
------------------------------
Thank you. Let me go through those. Petrobrazi clearly is benefiting progressively as the turnarounds continue. It's not going to be one big bang in 2014. It will be completed by then. But as we progressively go forward, we're reducing the own-consumption, we're improving the yield, in terms of middle distillates against gasoline and heavy products.
So there have been many improvements we've -- we're executing, and the improvements so far this year have contributed undoubtedly to the improved turnaround. Although as you look at the first quarter last year, of course, as I mentioned generally when I looked at R&M, we had the worst Refinery margins in the whole of the year. So that's perhaps a difficult reference point.
If we had the same Power margins last year as we have -- this year, rather, as we had last year overall, then Petrobrazi would certainly produce a better result, likely EBIT-positive. But frankly, given that we're expecting Refining margins to be a bit softer, that's a bit more difficult to really predict.
EconGas; let me just dig out its EBIT contribution last year. But of course, last year was particularly impacted on a reported basis, that we made a very substantial accrual, you'll remember, for the burden of the gate terminal, which was about EUR128 million which we booked right at the end of the year. So to the extent that we don't have to book that accrual again this year, then that will clearly help its business to turn around.
But before I can tell you whether we're confident on the basis of the renegotiations with Gazprom that we'll actually put EconGas into a break-even position, we'd really like to know what the outcome of those negotiations has finally been. Clearly, that's the target that we get EconGas into a sustainable profit position once more, but we're not there yet, hence the negotiations continuing, although we have seen some progress in terms of the proposal.
The free cash flow, yes, you're right. The gearing has -- the free cash flow's been very strong these last two years, and it's been particularly helped this year by the inventory sale that we did in Refining & Marketing. But really thinking about [the target], the question was asked previously by changing our capital structure, I think it's too early to think of that. These long-term goals have served us quite well, and we'd by and large like to continue with them at this stage.
The option of a shareholder -- a share buyback, however, is something which in terms of any material impact I would exclude because, of course, we have two co-shareholders who together control about 51% of the Group, and I know neither of them are interested in selling any shares into a share buyback. The Austrian Government in particular would need a parliamentary approval to do that, and no such approval has been sought.
So on that basis, I think it's unlikely that we would exercise a share buyback. Rather, if we were to do something, it's more likely to be that we would look at the dividend. But as I say, it's far too early at this point really, as I said.
Only two years ago, but less than two years ago, we were out in the market raising equity, so to actually think about distributing some of that equity back in the form of share buy backs or an enhanced dividend at this early stage I think is not appropriate, to be perfectly honest.
The EconGas contribution last year, on a clean basis, so that's stripped of the EUR128 million provision, was minus EUR46 million. We would certainly hope that the situation will improve this year, but it's rather too early to say. The market for EconGas remains difficult; clearly, with the current prices from Gazprom, very difficult.
------------------------------
Mehdi Ennebati, Societe Generale - Analyst [26]
------------------------------
Thank you very much.
------------------------------
Operator [27]
------------------------------
Tamas Pletser, Erste Bank.
------------------------------
Tamas Pletser, Erste Bank - Analyst [28]
------------------------------
Three questions, if I may. First of all, could you tell us more about your divestments? Can we expect any further sales in the next quarters? I'm especially interested in whether you can sell Bayernoil in your view this year.
My second question is regarding the Romanian electricity business. You mentioned in the presentation that Power had around EUR4 million contribution. Was it the -- was it coming from the Brazi power plant? And also, how does the increasing gas price affect Brazi profitability going forward?
And finally, on the Samsun plant, you mentioned also in the presentation that there is a new electricity law in Turkey. What does it exactly mean?
Thank you.
------------------------------
David Davies, OMV AG - CFO [29]
------------------------------
Okay, fine. The divestments, you will recall hopefully that the divestment target of EUR1 billion out of Refining & Marketing was intended to be achieved by the end of 2014. And we keep to that target. So we still have another just over a year and a half to go. Clearly, there's no law that says we can't do it earlier. And if we could, then we'd go for that.
If you look at where we are right now as regards Bayernoil, we said that we're in negotiations. In fact, we have two interested parties. So hopefully, we'll be able to find a successful outcome from those discussions.
And, of course, if we could do it earlier, we would do it earlier. Actually, I think in fairness, to actually close the transaction this year, given the inevitable nature of the cartel reviews that you get into whenever you sell an asset as big as this, I think closing it this year is almost impossible, to be perfectly honest. But the target remains to do it by end of 2014.
Romanian power; the majority of the contribution that I mentioned did, in fact, come from the Brazi plant. The point I made when I talked about the prices in quarter 1 is that last year, the prices were particularly high. We had, in particular, a very low level of water in the rivers and dams, and that led to a much lower level of hydro production in Romania. And that, coupled with other factors, led to prices being really extremely high in Romania.
That is not the case at the moment. The winter has actually filled the rivers and the dams, and the hydro is producing very effectively right now, which has had a depressing impact on prices, hence the contribution from Brazi in quarter 1 being lower than what it would have done in the comparative quarter last year.
Then the Samsun position and the Turkish law change. There was a recent change in the law in Turkey, because you may have picked up from various media sources that there were some legal challenges to the zoning of the Samsun power plant in Turkey. By zoning, I mean the rights to use the land, or rather the rights to use the land for an industrial purpose rather than agricultural purpose.
This is a legal process that's been going on for the last couple of years, which didn't directly involve our assets or any of our companies, but was a dispute between two Turkish entities, one being the local authority which granted the approval for us to use the land for industrial purposes, and a local body of architects/an agricultural lobby.
That process has been going on and it was distant from us but started to actually complicate our operations in terms of our ability to get a license to operate from the energy regulator.
The recent law that was passed last year, particularly given that Turkey has a desperate need for more power given the very high prices in Turkey and also the increasing level of demand, was to basically put an embargo on these disputes and give us a two-year clean window to operate the asset and get these matters resolved. And that's the law which has been changed, and that, of course, now gives us a clear run to get the plant operating, and that's what we expect to do by the middle of the year.
------------------------------
Tamas Pletser, Erste Bank - Analyst [30]
------------------------------
Okay. So it means that it's now easier for you to operate at least for two years?
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David Davies, OMV AG - CFO [31]
------------------------------
Well, within two years. I've no doubt at all that the matter will be resolved. But it basically gives us the green light to switch it on and start selling power, yes.
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Tamas Pletser, Erste Bank - Analyst [32]
------------------------------
Okay. Great. Thanks very much.
------------------------------
Operator [33]
------------------------------
Matt Lofting, Nomura.
------------------------------
Matt Lofting, Nomura International Plc - Analyst [34]
------------------------------
Two quick questions left, please, firstly on the upstream development side. I just wondered if you could talk a little bit about the ban in the Yemen and progress there. I think you highlighted in the press release this morning that slow or low activity levels have restarted there more recently. I just wonder how -- as things stand today, how confident you are of being able to deliver that one for a production startup next year in the context of the wider environment there.
And then secondly on Nabucco West. If we do see project advancement there later on in the year, I just wonder if you could give us a sense of what you think the appropriate equity stake for OMV is in that project, given the acquisition of RWE's stake there a couple of months ago.
Thanks.
------------------------------
Jaap Huijskes, OMV AG - Executive Board Member, Exploration & Production [35]
------------------------------
Thanks. I'll take the Habban question first. We've been spending quite a bit of time upgrading our security measures in the field. We've made the camp and the drilling sites a lot more secure. We've extended what we call the [burn], which is basically an [urban] defense wall which protects you from ingress of, in particular, little pickup trucks.
So we've been investing in that for a while, and what that's allowed us to do is in the first quarter slowly restart the project. At the moment, we've got two drilling rigs back in operation, again, cautiously and slowly. But nevertheless, we've got two drilling rigs that were stacked there in the process of finishing wells, and we left them there in -- back end of 2011/early '12; have been drilling since start of April, and so far so good.
So we're drilling new wells, and we've also now recommenced our project activities.
Now it won't be as simple as coming on stream next year. What will happen is we will replace the production that's currently coming through, the production systems, open tanks, flares, etc., with the permanent production facilities. That was always the design and that's what will happen.
So you won't see a major step change in production, but if we can continue drilling, you will see production creeping up. And what should also happen is our flares will be extinguished when the permanent facilities come on stream.
And then eventually, though that's not part of the project that we've currently recommenced, we may build an export pipeline. Clearly, given security in Yemen, that's the bit that we're most reluctant to start.
So at the moment, we're still trucking crude, and we would continue to truck crude, even with the current project coming to completion.
The export pipeline is something that the Government would very much like us to build, but we're really going to watch security in our area of operation for a bit longer before we commit to that pipeline.
So all in all, you should see production creeping up. The big step change that won't be so visible to the results that you see will be a reduction in flaring volumes when we go through permanent production facilities. And you should see reliability creeping up as well as we get bigger tank volumes and therefore are less vulnerable to small trucking interruptions.
That's effectively what we're busy with in Habban at the moment.
------------------------------
David Davies, OMV AG - CFO [36]
------------------------------
And as regards to Nabucco, there were originally six shareholders; well, originally five, but then RWE came in and there were six. We've purchased the RWE stake, and that takes our stake up to now two-sixths, so one-third. So we own about 34% of the Company
There was, as we've discussed, a project financing agreement signed with the Shah Deniz II consortium whereby they are now financing the project up to FID.
And then at FID, a shareholder accession agreement will come into force whereby the Shah Deniz II consortium, if they vote for the Nabucco West project, would come in and take a stake of what's likely to be around 50% in the Company.
That would then dilute our 34% down to 17% automatically. And we've already indicated that we are in negotiation with another party to potentially sell part of our stake down. So that's 17% on that basis. Again, assuming that Shah Deniz II decides for Nabucco West would go down to a level probably closer to 10%, maybe even slightly below. And that would be the level with which we would feel comfortable with the project going forward.
------------------------------
Matt Lofting, Nomura International Plc - Analyst [37]
------------------------------
Okay. Very clear. Thanks, guys.
------------------------------
Operator [38]
------------------------------
Oleg Galbur, Raiffeisen.
------------------------------
Oleg Galbur, Raiffeisen Centrobank - Analyst [39]
------------------------------
I have only one question left. Taking into consideration that the situation on the European gas market has slightly improved in the previous quarter, I was wondering whether you intend to sell more gas from the storages in the current quarter or in the next quarters.
------------------------------
David Davies, OMV AG - CFO [40]
------------------------------
No. At this time of the year now, the gas is flowing into the storage in a different direction. The storage was largely exhausted by the prolonged winter, and it's quarter 2 and quarter 3 where you're typically rebuilding your storage. So, no, we're not proposing to reduce the storage level more by -- in quarter 2.
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Oleg Galbur, Raiffeisen Centrobank - Analyst [41]
------------------------------
Okay. Understood. Thank you.
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Operator [42]
------------------------------
Thank you. That was the last question. I will now hand back to David Davies for his closing remarks.
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David Davies, OMV AG - CFO [43]
------------------------------
Well, thank you, ladies and gentlemen, for an interesting round of questions, and we look forward to speaking to you in the days ahead. Meanwhile, if you have any further questions, of course, you can always contact our Investor Relations team.
Thank you very much. Bye bye.
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Operator [44]
------------------------------
Thank you. That concludes today's conference call. A replay of the call will be available for one week. The numbers are printed on the teleconference invitation. Or alternatively, please contact OMV's Investor Relations department directly to obtain the replay numbers.
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