Q1 2014 OMV AG Earnings Conference Call

OMV.VA - OMV AG
Q1 2014 OMV AG Earnings Conference Call
May 13, 2014 / 09:30AM GMT 

==============================
Corporate Participants
==============================
   *  David Davies
      OMV AG - CFO
   *  Jaap Huijskes
      OMV AG - Executive Board Member, Exploration & Production

==============================
Conference Call Participants
==============================
   *  Mehdi Ennebati
      Societe Generale - Analyst
   *  Haythem M Rashed
      Morgan Stanley - Analyst
   *  Matthew Yates
      BofA Merrill Lynch - Analyst
   *  Marina Postnikova
      UBS - Analyst
   *  Matt Lofting
      Nomura - Analyst
   *  Joshua Stone
      Barclays - Analyst
   *  Mukhtar Garadaghi
      Citi - Analyst
   *  Tamas Pletser
      Erste Bank - Analyst
   *  Bertrand Hodee
      Raymond James - Analyst
   *  John Meyer
      Societe Generale - Analyst

==============================
Presentation
------------------------------
Operator   [1]
------------------------------
 Welcome to the OMV Group's conference call for the Q1 2014 results. There will be a presentation of the results followed by the 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 the conference over to Mr. Davies. Please go ahead, Mr. Davies.

------------------------------
 David Davies,  OMV AG - CFO   [2]
------------------------------
 Thank you very much; and good morning, ladies and gentlemen. Today I have with me Jaap Huijskes heading our E&P business who will give you an update on things in E&P at the conclusion of my presentation.

 Let me start, as ever, with a summary of the overall results. Our clean CCS EBIT is at EUR668 million is down by 21% compared to the previous year, EUR849 million. Production was somewhat higher; 311,000 barrels a day, higher by 3%, predominantly due to the higher production in Norway, which was higher than last year by 28,000 barrels a day, given the acquisition that was closed at the end of last year.

 Against that, of course, our Libyan production was considerably lower by 18,000 barrels per day compared to the same period last year. And clearly, that's had an impact on the overall level of profitability within the E&P business.

 What's also negatively impacted the performance has been the oil price, which at $108 per barrel Brent, is 4% below the same number last year. What is also negative is the US dollar development which clearly is weaker against the euro at $1.37 versus $1.32. And if you combine the lower dollar Brent price as well as the foreign exchange rate, the total realizations from Brent at least in euro terms are down by 9% compared to the same period last year, which obviously has an impact on the performance.

 Given the acquired assets in Norway, and to a lesser degree in Romania following the higher investments there, the depreciation charge has increased in the quarter, which also had its impact on the performance of the division.

 Gas and power was affected by a reduced withdrawal from storage, lower gas demand, and generally the market environment in gas and power has continued to be very challenging, which has also impacted the result.

 In the refining and marketing business, our marketing performed relatively well against then unfortunately the refinery business was impacted, of course, by the much lower refining margins which at $1.63 per barrel were 46% below the previous year.

 The gearing ratio improved very slightly compared to the year end, clearly a lot lower than where we were a year ago when we had 15% debt to equity. But at the end of the year we had 30%, and this is clearly now improved, slightly down to 29% following a relatively strong quarter in terms of cash flow generation.

 Coming to the next slide, you see the key indicators as regards the economic environment on the left. I won't really say too much about this. The dollar has got weaker and the oil price has drifted slightly lower. I've said already enough about that.

 I think in the middle, however, you do see quite a lot of interesting developments. The gas prices in Europe per megawatt hour are reflected here. The lower line, the brown line, has been rising consistently since the beginning of last year. This is the regulated domestic gas price in Romania for non-household users; so 70% of the market, the industrial users. In fact, since quarter 1 2014, there's been a further increase from beginning of April which now takes the price up by a further 25% to something like EUR20 per megawatt hour.

 So quite a substantial increase that we've seen in the regulated gas price in Romania, which obviously has had something of a negative impact on gas demand. Gas demand is overall down by about 9% or 10% since the start of this price increase regime.

 I mentioned the price today of about EUR20 per megawatt hour. This unfortunately as regards the rest of the European gas market is perilously close to the current price of natural gas in Europe. Natural gas at the moment in the Central European Gas Hub is trading at around about EUR22 per megawatt hour. You can see at the end of March it was EUR25.

 What's also interesting is this yellow and orange line that you see at the top. What we're trying to indicate here is the orange line which is an index of -- a broad index of what's being paid to import gas into Europe. So a broad index for what people are paying for Russian gas imports in particular, oil based contracts; whereas the yellow line is the natural gas at the Central European Gas Hub here in Austria.

 You see how these lines have been getting closer together progressively towards the end of 2013, which is a reflection in large part of the fact that progressively people were renegotiating their supply contracts with Gazprom in particular, as well as other suppliers, in our case with Statoil.

 Unfortunately, you see in quarter 4 as the natural gas prices declined, as reflected at the Central European Gas Hub price here, you see unfortunately the gap which was causing so much of a problem last year has re-emerged. And although there's a much lower proportion of gas now which is now priced at the old contract price, the overall level of the lower gas price in Europe unfortunately is recreating the difficulties that we saw in the whole of the industry over the last three years.

 So the current level of low gas prices, which experts are not expecting to last all too long, but certainly as it stands right now, it is rather troublesome.

 On the right-hand side, you see the indicated refining margin. As I've already mentioned, we were quite a way down on last year, and you see that quite clearly represented here graphically; slightly higher than quarter 4 and quarter 3, but certainly lower than where we were a year ago.

 Going to the next page, you see a summary of our results going down to clean CCS net income. Our [lower] clean CCS operating profit was down by 21%. At the net income level we were only down by 13%. this is due to a number of factors, the most significant of which is the effective tax rate, if you see here at 29%

 We are higher than last year, but last year, if you cleaned it up, our tax rate was about 35% on a clean basis, because of course last year, we had the one-off gain from the sale of the strategic inventory reserves here in Austria, which was a by and large tax-free transaction.

 If you clean things for that, then 35% plays 29% this year. And why we are so low this year in quarter 1 is the fact that having taken FID internally now for the Nawara project in Tunisia, we were able to take advantage of a beneficial tax arrangement with regards to future investments. And we've booked that in quarter 1, the consequence of which is to reduce our tax rate by a little over EUR50 million -- a tax charge, rather, by a little over EUR50 million compared to where it otherwise would have been. So this lower tax rate has enabled us to produce a clean CCS net income which was only 13% down, whereas the operating profit was 21% down.

 The financial result at EUR63 million was slightly higher than where we were a year ago. This is largely due to the fact that, clearly, our level of net debt now following the Norwegian acquisition is correspondingly higher; so the interest burden on that is reflected in this line.

 The taxes, I've already discussed. The minorities and hybrid capital owners is down on last year, predominantly because of the performance of Petrom, which last year produced -- had a net -- a minority share of EUR144 million, whereas this year, it's down to EUR118 million, given the lower level of profit recorded in Petrom this quarter.

 The next page deals with special items of which there were not particularly many. During the quarter just ended, we had EUR10 million gains on a number of small asset disposals. We also had a EUR22 million release relating to a provision that we had booked at the end of 2012.

 As regards our position at the Gate terminal in Rotterdam, the LNG import terminal, we booked a provision of just over EUR120 million in association with that commitment. And part of that provision had been released during the current quarter, and as the provision was booked as a special item, its release is similarly treated.

 Coming to cash flow. Cash flow for the quarter produced a free cash flow after dividends -- well, of course, there was no dividend paid in quarter 1 -- of about EUR26 million. The net income and depreciation combined to produce just around about EUR1 billion of gross cash flow, as it were.

 Working capital actually deteriorated slightly in quarter 1, which is the first time we've actually seen an increase in working capital for quite some time. As you will be aware, much of the cash flow improvement over the last two years has been generated out of working capital.

 There are a number of reasons for this, but one of them, of course, was the fact that we've had an extremely warm winter. And although we entered into the storage season last autumn with a relatively low level of inventory in storage, gas storage, we actually come out of this warm winter with almost record levels of post-winter gas storage utilization because of the very low off-take. And this has meant that we've had a high level of inventory trapped in storage because of the low demand.

 Cash inflow -- outflow, rather, from investments is EUR965 million. You'll see on the next chart that the actual amount of booked capital was about EUR200 million lower than this. This high number here in quarter 1 reflects the higher value of liabilities, partly relating to the Norway acquisition that was closed right at the end of the last year.

 But these liabilities have all been settled now, so the cash amount associated with investments was actually higher this year than the actual amount in quarter 1 booked as CapEx, as I'll explain and as I'll show you in a second.

 Against that, we had EUR84 million of cash inflow from divestment proceeds. Our divestment program continues, of course, and the biggest part of which should hopefully close in quarter 2.

 And as for the disposal of the Bayernoil refinery interest, which had actually produced the proceeds from that disposal in quarter 2, which will hopefully together with strong operating cash flow be able to offset the dividend that we will pay in quarter 2 to once again keep our head either slightly above water, or close to it at least in terms of cash flow generation in the coming quarter.

 CapEx and EBITDA is shown on the next page. As I mentioned, you see here the amount of CapEx is some EUR200 million lower than what was actually paid in CapEx for the reasons I explained earlier.

 Where we've been investing is also quite clear; the vast majority in E&P, EUR624 million. A little over EUR220 million of that was associated with investments in Romania, in Petrom. Another EUR200 million was invested in the developments which are being completed in Norway, Edvard Grieg, Aasta Hansteen and Gullfaks taking up the largest part of this.

 In Austria, we spent a little over EUR50 million, and a little under EUR50 million was spent in the UK, the largest part of which was our participation in the Schiehallion redevelopment, which is still ongoing.

 EBITDA against that was EUR1.2 billion, comfortably exceeding the amount that we invested.

 In terms of refining and marketing, the only other area where we invested, EUR113 million. Some [EUR80 million] of that approximately was in the refinery business, which is the completion of the butadiene project in Schwechat and Burghausen, as well as the final stages of our Petrobrazi turnaround in Romania which is going to be completed during the current year.

 Coming to the next page, you see the reconciliation of the profits of the exploration and production division compared to quarter 4 last year and to quarter 1 last year. Quarter 4's reconciliation is on the left-hand side. Compared to the previous quarter then, we clearly had substantially higher volumes, only producing 277,000 barrels a day last year -- last quarter 4, whereas quarter 1 this year, it's over 300,000 barrels a day.

 So that's clearly helped. The much lower level of exploration expenses, compared to those booked in quarter 4, has also contributed. What has been negative is the high level of depreciation, clearly, and this is then reconciled to the EUR603 million overall profit in quarter 1.

 Looking back to quarter 1 last year, what has been happening is somewhat different. You see the realizations were lower. This is down to the 9% lower oil price in Europe a barrel that I mentioned earlier on. Volumes are higher, but not as much higher compared to quarter 4. That's generated about EUR107 million.

 And the total depreciation impact, you can see, is EUR111 million, predominantly in Norway, having now four quarters of production from Norway this year, whereas last year, of course, it wasn't providing anything.

 Key performance indicators further in E&P on the next page. You can see what's been happening to production, in particular, the big step-up to 311,000 barrels a day versus where we were in quarter 4 this year. Compared to the previous quarter, therefore, we're higher by 12%. We now have a full contribution from Gullfaks. It was only for part of the quarter at the end of the last year.

 We also now have Maari back on stream which gives us a higher production in New Zealand. And Libya and Yemen volumes increased in quarter 1 compared to the quarter 4 position. But unfortunately, Libya ceased production during March, and to date, has not actually returned. So despite that, our production was quite a bit higher.

 OpEx has decreased compared to the previous quarter but is clearly somewhat higher at just over $16 per barrel than where we were a year ago. This is due to a number of factors. Clearly, our OpEx per barrel in the Norway production is higher than in the Libyan production which were missing, so this obviously is artificially inflating the number.

 Another factor is also since the beginning of the year, a new construction tax was implemented in Romania, which is basically a tax levied on the value of assets that one has invested. And the first payment of that was made recently, and of course it's been booked during the year.

 That amounts itself to about a $1 per barrel at a Group level of additional operating expense. At the Petrom level, of course, which is just based on their production, it's something equivalent to close to $1.40 per barrel.

 Turning to Petrom on the next page, you see there again our production, which is -- the stability has been maintained, 182,000 barrels a day; slightly lower than quarter 1 last year; slightly higher than quarter 4. So we've been able to keep production more or less on track, and clearly, are striving to do that out for a few more years.

 The impact on the OpEx you can see here. Stepped up in quarter 4 because in particular we had to make provisions for certain retirement obligations given a change in the law in Romania. This inflated our OpEx in quarter 4. It's come back since then, but as I mentioned, you've got $1.40 in there in addition as a consequence of this new construction tax which was implemented as from January this year.

 On the next page, you see the performance of our gas and power business. Clearly, we've had some quite severe challenges, in particular, in the supply, marketing and trading business. Not only have we seen margins being squeezed given the declining gas price, overall level of demand given the extremely mild winter, the production business, the electricity production business is clearly not consuming as much gas across our marketplaces as we would have expected.

 And what has been particularly painful has been the profitability of our storage business. As I mentioned, storage was very under-utilized during this warm winter, and particularly when you compare it to the winter before where we were busily extracting stored volumes, some of which were at a relatively low carrying cost. Well, that's basically comparing what is a very weak quarter 1 with a relatively strong quarter 1 in comparison last year, and the decline is, therefore, quite significant at EUR48 million in total.

 The logistics business was similarly impacted by the lower level of utilization of the storage. And in our power business, this was particularly impacted by the lower spark spreads in Romania, in part due to lower power prices generally, but in particular of course in Romania, we're seeing the high gas price, as I've mentioned already in an earlier slide. The regulated gas price has been getting increased, and as power prices have come down, then clearly the spark spread has been squozen to quite painful levels.

 So overall, a quite disappointing result in our gas and power business, down from over EUR100 million last year to EUR36 million this year.

 On the next page, you see a couple of the KPIs in our gas and power business. The lower-left shows our net electrical output; clearly, higher than last year. Both plants are now fully available, but lower than at quarter 4, in particular, due to the low spark spreads in Romania which led to a very low level of utilization of the Brazi plant.

 The top bar shows our gas sales and trading volumes. Gas sales volumes, which are the lower segments; have actually been declining by 20%. Again, the mild winter comes into play here.

 What has been increasing has been our traded volumes which in part are due to our trading business now taking over the responsibility to sell our Norwegian equity gas into the Northern European market.

 Then refining and marketing, a difficult picture, but [a rather] clear one. The refining -- the fuels margin is substantially lower for the reasons I've already explained given the much lower indicator refining margins. And that's cost us something in excess of EUR70 million versus the same period last year when refining margins were considerably higher.

 Petrochemicals remains encouraging in terms of its performance, although broadly flat compared to last year.

 And the marketing business has improved in quarter 1 compared to the same period last year, in large part due to lower cost. And this despite the challenges in Petrol Ofisi, which will unfortunately accompany us for the rest of the year, given that at the end of quarter 1, the Turkish Government imposed a cap on the level of margin that can be earned across the industry in both refining, fuel retailing and fuel distribution. So this will be something we'll be wrestling with during the current year, the rest of the current year.

 Looking at a few KPIs in refining and marketing on the next slide. Our refining utilization, despite the lower refining margins, increased by 3% at 89%. Our sales volumes and marketing as a consequence are also slightly increased. Commercial was up 6% and retail by about 1%.

 Our number of filling stations was further optimized. You can see that we went down from last year 4,367. We're at 180 lower at the end of Q1 2014, the largest part of which, of course, has been the sale of the activities in Croatia.

 Then on the key financial indicators. The gearing ratio stepped up in quarter 4 after the Norwegian acquisition, the Statoil acquisition, rather; up to 30%. We've kept it more or less the same, in fact down slightly, given the strong cash flow in the first quarter. And one would hope, as we've said already in our guidance, that our cash flow will be covering both our dividend and our capital investment needs. So we'll be able to maintain that level of gearing going forward for the rest of the year, hopefully.

 Payout ratio and dividend per share. We've increased our dividend, which will be presented to the General Assembly tomorrow here in Vienna, and that would represent a payout ratio of 35%.

 Our ROACE and clean ROACE. You see our clean ROACE is down by 1 percentage point. Clearly, we've got the full impact of the Statoil acquisition to absorb now, not all of which is in production, as you'll be aware.

 On a reported basis, you have a somewhat of an anomaly. It appears to have declined quite significantly from 11% to 8%. And of course, the reason for this is that its calculation is a 12-month moving average and we'll lose quarter 1 last year, which included on a reported basis the very substantial profits made on the sale of the strategic inventory reserve.

 So we drop that quarter out, and bring in this year's quarter 1, which on a reported basis is considerably lower, hence the apparent decline in reported ROACE. The clean CCS ROACE is a far more reliable indicator.

 Then as we look to the end of 2014, the rest of the year, our guidance remains broadly intact. One thing we have decided to change is to really reflect the fact that the situation in Romania -- in Turkey, rather -- sorry, in Libya, Libya, rather, is extremely difficult to predict.

 In the last few days we've heard the one or two encouraging noises potentially about production in [Mutsuga] restarting. But what we've decided to do is really give the range basically which at the lower end ignores -- excludes any further production from Libya. So if we actually have no further production from Libya, our production's going to be at around the 310,000 barrels per day level, whereas if Libya were to come back in immediately, then we'd be at the top end of that range.

 When we gave the previous production target of 320,000 to 340,000 barrels per day, clearly, we had had some production in Libya and we were making what we thought at that point was a relatively conservative estimate for Libyan production going forward. Unfortunately, the events of this year basically have led us to conclude that it's better to be completely clear in terms of what the lower end. The lower end here ignores all Libyan production going forward from the 11,000 barrels per day that we averaged in quarter 1 this year from Libya.

 So we would expect this to be our production, and we'll see what happens in Libya.

 CapEx will stay about the same, on EUR3.9 billion. We've guided already on that level; and our exploration and appraisal expenditure similarly will be what we've already indicated, around about the EUR700 million level.

 So thank you for that, and I'll hand over to Jaap now who can give you briefly update on where we are now with E&P. Thank you.

------------------------------
 Jaap Huijskes,  OMV AG - Executive Board Member, Exploration & Production   [3]
------------------------------
 Thanks, David. David's talked you through the performance. What I'm going to do is just highlight some of the project milestones that we've had in the last quarter. And I'm taking the quarter not quite literally. Some of these happened in the month of April.

 On the first slide, you see some of the -- you see the key ones. Starting with the first one, Cambo; we took over Hess' operated share in Cambo in the month of March. That's basically increased our equity in Cambo to 47.5%.

 Cambo is effectively an un-appraised or under-appraised discovery. The first activity that we plan to undertake in Cambo is to do a production test, and we're currently sorting a rig to do that in the summer of 2015. And depending on the result of that test, we will then progress further with planning the development of Cambo. Current estimated resources for the share that we procured is about 60 million barrels, and for that, we've paid about $50 million.

 With that package also came a further set of exploration licenses, some of which we were in. And we increased equities on which we were not in, but we are now the operator of. And again, we're looking at maturing drilling opportunities in those licenses next year. So further supporting our concentration on the West of Shetlands in the UK. Quite a portfolio now, including Rosebank. We'll come back to that further down this slide.

 Another highlight, not strictly in Q1, it happened in Q2 even though it was planned originally to happen in first quarter, was the start of Gudrun. So a bit later than what we'd originally planned. Having said that, the performance of the first well is extremely encouraging, and we do expect to recoup a little bit of that late startup during the course of this year.

 First well is producing some 7,000 barrels per day net to OMV; and the second well is currently being drilled and should come on stream towards the end of June.

 The next bullet, Internal Nawara, FID taken. Let me just talk you through the subtlety as to why we say Internal Nawara.

 Basically we are ready to go and we've signed the first gas commercial agreements in Tunisia following our internal approvals. We're currently awaiting government approvals for the award of the key contracts. And as soon as that's out of the way, that's the final step to effectively be executing Nawara.

 So in effect, we've taken FID, but execution hasn't quite started pending that approval of the Tunisian Government, which if all goes well we should be getting in the next two weeks with the Council of Ministers next week, and hopefully a publicized event the week thereafter. But as most of the post-Arab Spring countries, progress is a little bit unpredictable. So far, so good.

 Rosebank, you'll see very little in the press these days. Basically, we're hard at work, both Chevron and ourselves. We do see the Rosebank reengineering, which is the best way of describing what's currently ongoing, going in the right direction.

 So we are taking cost out. We are putting volumes in. Both of those are the levers that we've got to reestablish the commercial viability of Rosebank. And both Chevron and ourselves, and of course Dong, the minority partner also in the Rosebank JV, are working in unison. Not much to report progress-wise, but what we do expect is by the end of the year it should be clear whether or not we're going to hit FID next year. So far, so good.

 Edvard Grieg and the Lundin operated project due to come on stream. Operator estimate is in 2015. We currently carry this for 2016. In Norway, the project's on track. The sub-structure of the jacket was installed this quarter, and we will see a jack-up appear there to start pre-drilling wells during the course of this quarter. So all on target for a startup back end of 2015/2016.

 And then finally, not a new project really, the offshore version of what we do in Romania and Austria, field redevelopments. We're also now field-redeveloping, if you want, offshore Romania and New Zealand. We're both in the Romanian shallow waters, so nothing to do with Neptune. This is shallow water.

 And in New Zealand, we've got jack-ups in place and we're side tracking, and additional -- making also additional production drilling in New Zealand and also exploration drilling in Romania.

 So in Romania, exploration drilling, side tracks and new production wells; and in New Zealand, new production wells and side tracks with these jack-ups driving in Romania the stability of production, and in New Zealand actually an increase in production over the next year/1.5 years. And then of course, when drilling stops, a natural decline will recommence there.

 Finally, FID schedule. A slight change from was previously planned. We've now got Zidane [ocean] plant in the second half of the year. Work in progress. Whether or not that takes an FID decision really depends on the commercial package we receive from the house platform this project will produce through, Heidrun; and also of course some gas price expectations in Europe.

 If we then go the next slide, our infamous or famous project pipeline. Still more than 1 billion barrels on the way. There are changes happening in there. Also, the reduction in the development execution, not because something's gone wrong, but because Gudrun has started up. So this pipeline only reflects the projects we've got on the development in its five different phases. When something starts up then effectively it's taken out of here, and that's what happened to Gudrun.

 So those volumes have now been taken out. And you see that reflected in the volumes under development execution. That's dropped from EUR550 million to EUR500 million; and also the production contribution in 2016 has dropped from EUR90 million to EUR100 million to EUR70 million to EUR80 million because the Gudrun volumes are again taken out of there.

 Other than that no major changes other than the fact that we've added Madagascar and Namibia under the exploration countries.

 If you then look under the major projects under development, won't spend much time on this, but it's there for completeness. We promise you to include this every quarter. That's what we're continuing to do. A key change there should happen next quarter following regulatory approval update and Nawara numbers, but effect, it's pretty close to what you see in here.

 In fact, peak production we think will be marginally higher by about 10%, and also CapEx marginally higher by about 10%. But by and large, that will be an unchanged number and we'll reflect that as soon as we've got the final regulatory approvals.

 A few more words on Gudrun. The key highlights I've already given you. The project started up in April 2014 with the first well currently doing some 7,000 million barrels [to us], and the second well being completed at the moment. It's a pre-drilled well, so second well follows pretty closely on the first one with two more of those to go. The second one should come on stream in June, and the third one should come on stream the two months or so after that. After that, normal drilling will start. Then it will take longer to add additional wells.

 We'd expect Gudrun to be rising to about 14,000 barrels a day by the end of the year, rising slightly further next year, so contributing to our 2016 target of 400,000 barrels a day.

 If you look at the projects under appraisal, again, some of the key highlights already mentioned. All the detailed changes are in here. The key one is Cambo on the third line. It's included in our West of Shetlands under appraisal portfolio. And their equity has gone to 47.5%, so those volumes are now reflected in there.

 The two other key projects in there, Domino and Wisting, are both being progressed. The rig for Domino we'll show you in one of the next slides it's being reassembled in the Black Sea. So I think Constanta being ready for start some time in June, and Wisting appraisal is actually ongoing right now.

 So if we go to slide 24, exploration update, that reflects those highlights. So first of all drilling. We've had two small discoveries in Austria; Hoeflein and Prottes. These are not enormous but these are new field opportunities, of course, so they tend to be tied in quite quickly. Both of these wells are currently being tested prior to tie in, and of course, that makes them economic, very economic.

 The other one, Hanssen, which is a Wisting appraisal well. Don't ask me why the name has changed. that had to happen in Norway. We're proud of the fact we're managing to drill that appraisal well right now within seven months following the discovery that was made in September last year. It was very fast, especially given rig availabilities in Norway. And what we've done is we've [sold] our portfolio, dropped an exploration well that we decided was less attractive than then appraisal of Wisting.

 We are currently in the reservoir, we're drilling, and we expect the current drilling to be followed by production tests, which are key for this discovery and for further planning of the development of it.

 We've also in the quarter secured additional acreage. You saw the farming in Namibia early in the first quarter. And then towards the end of the second quarter, we announced an entry onshore in Madagascar. You'll remember last year we -- our first entry in Sub-Saharan Africa was offshore Madagascar. That's being worked. And now onshore, we joined Tullow into onshore licenses where we should be [shooting] seismic this year, followed by drilling of first well in one of the two blocks during the course of 2015.

 I'll update you on the next slide on the high impact wells coming, but high impact wells past, unfortunately the first two were dry: Padouck Deep in Gabon, and [Pyrochea], a non-operated well in Barents Sea also came up dry.

 But if you look at the next slide, slide 25, we've got a lot of drilling activity coming up in the next couple of months. Two wells currently drilling. The first one on that list, Affanga Deep in Gabon, is currently drilling; and Hanssen, the Wisting appraisal well further down, number 6 or so, is also currently drilling.

 But if you then look at the rest of that list, Okala will be drilled back to back with Affanga, so that will be drilled further still in the second quarter. Apollo is about to be started. Brugdan in the West of Shetlands -- sorry, in the Faroe part of West of Shetlands, is about to be spud, and Sula-Stelkur will be drilled back to back with that.

 Atlantis will be drilled back to back with Apollo, and then Domino-2 is the appraisal well that we expect to spud in the Black Sea around about the middle of the year.

 So other than follow-on exploration in Neptun, Stripfing, and then the two wells near the bottom, Hagar and Lyon [align], all those wells in that summary will be drilling within the next half year. So a lot of activity coming up; exciting.

 Let me finish with the last slide. And again, it's a slide that you've seen a few times before. No changes. We're projecting to produce 400,000 barrels a day in 2016. The one change in this slide is the green tick for Nawara which, as stated already, has now got our internal approvals. Just finalizing the regulatory approvals, in particular the award of key contracts. And as soon as that's done, we're in the execution of Nawara.

 Thank you very much.

------------------------------
 David Davies,  OMV AG - CFO   [4]
------------------------------
 Thank you, Jaap. I think we'll go back to the moderator. We'll be taking your questions.



==============================
Questions and Answers
------------------------------
Operator   [1]
------------------------------
 (Operator Instructions). Mehdi Ennebati, Societe Generale.

------------------------------
 Mehdi Ennebati,  Societe Generale - Analyst   [2]
------------------------------
 I will ask you two questions, the first one regarding the gas and power division. Last year, there had been some rumors that you would have to recapitalize your EconGas subsidiary which is continuously losing money. Given the environment, the current environment for the gas and power division, which remains extremely challenging, should we consider that recapitalization of this subsidiary is more likely today than it was last year?

 And the second question is related to your Romanian hydrocarbon production. Petrofac highlighted last week that the Ticleni project is performing below original expectations. Could you please give us some color about that? What were you initially expecting in term of production, recovery factor for this project, and will it materially impact your production expectations in the near term?

 Thank you.

------------------------------
 David Davies,  OMV AG - CFO   [3]
------------------------------
 Let me take the EconGas question, and then Jaap can deal with Petrofac in Romania.

 EconGas is a subsidiary which we fully consolidate but which has other shareholders who are basically three of Austria's leading gas and power utilities. I would say the likelihood of needing to recapitalize now compared to where we were last year is probably lower, to be perfectly honest, because as we entered last year, we hadn't resolved the Norwegian negotiations, we hadn't resolved the Russian negotiations, we still had various commitments with some of our partners on the storage obligation which we've resolved since then.

 And the -- those items have by in large been resolved. I wouldn't certainly want to awake any over-optimistic expectations of the challenges that we face in the gas and power markets. And clearly, if EconGas is to -- is going to produce losses as a consequence of that, then clearly, its shareholders will have to take a careful look about what we need to do to its balance sheet.

 But strictly on the question is the likelihood today higher or lower than where we were 12 months ago, 12 months ago, frankly, my concern level was higher.

 I think we do see a relatively -- well, an extremely low gas price right now. In fact, there was a short period when it was actually below the Romanian price here in Vienna, which is frankly unheard of. So it actually led to the Romanian regulator openly considering now whether or not the market in Romania is in fact now a liberalized market, which compared to where we were 1.5 years ago, is a remarkable transformation.

 So things have been -- developments in the gas and power market have been quite dramatic and they continue to be challenging. And clearly, if EconGas need to do balance sheet strengthening, then like any other subsidiary, we'd obviously look at that.

------------------------------
 Mehdi Ennebati,  Societe Generale - Analyst   [4]
------------------------------
 Okay. And you know in the slide 4 of your presentation, you showed the border contract tracker and the Central European Gas Hub. Given that in Q2 you know the Central European Gas Hub prices collapsed. Who do we expect that the losses of the gas and power division should follow with this increasing gap, meaning it should be quite high?

------------------------------
 David Davies,  OMV AG - CFO   [5]
------------------------------
 I think you can deduce from that that feverish phone calls are going on with Gazprom. As you would expect, with Statoil the situation is fully resolved. We pay a market price and sell it in that same -- and sell it in the market and earn a small margin on that. With these oil-based contracts, even though the proportion we now take on that basis is a small fraction of what it used to be, with the gap between the price then that's not sustainable in the long term.

------------------------------
 Mehdi Ennebati,  Societe Generale - Analyst   [6]
------------------------------
 All right. Thank you very much.

------------------------------
 Jaap Huijskes,  OMV AG - Executive Board Member, Exploration & Production   [7]
------------------------------
 And then on the [Seakraine], maybe the Seakraine production, and I'm not going to give you very precise numbers because you'll appreciate there's commercial debate's happening between ourselves and Petrofac. But just to put it in perspective, the Seakraine production is in Europe 4,000 barrels a day, and the deviation that you're seeing there is in Europe 10% of that. So clearly, from an overall perspective, it is entirely insignificant in the performance for Romania.

 Commercially, of course, deviation 10% of 4,000 barrels a day is significant, and that's a debate that's happening at the moment.

------------------------------
 Mehdi Ennebati,  Societe Generale - Analyst   [8]
------------------------------
 All right. Thank you very much.

------------------------------
Operator   [9]
------------------------------
 Haythem M Rashed, Morgan Stanley.

------------------------------
 Haythem M Rashed,  Morgan Stanley - Analyst   [10]
------------------------------
 A couple of questions from my side, please. Firstly, just on your production guidance of 310,000 barrels per day to 330,000 barrels per day, could you just perhaps confirm whether the variation around that is purely Libya or whether you do see other areas in your portfolio where there potentially is upside in terms of production for this year?

 The other questions I had were just more clarification just on the tax benefit you got from Tunisia through the taking of the FID. Is that something that has been fully booked in 1Q, or do you expect or intend to see further benefits of that in the coming quarters?

 And then my final question was just relating to actually the gas and power division again. And I know you alluded, David, to the challenging environment there, but just perhaps if you could provide any sort of color around profitability for this year versus last year; whether we should expect, given that last year did include some benefits of some renegotiations, if there are no major renegotiations expected during the course of this year whether actually we should be thinking of gas and power as a largely break-even EBIT business this year. Or just to get a sense around that would be very helpful.

 Thank you.

------------------------------
 David Davies,  OMV AG - CFO   [11]
------------------------------
 Okay, Haythem. Thank you for the questions. As regard the production guidance, clearly, within the overall portfolio, you always get ups and downs. But if you were to look at the shift in the guidance, it's solely down to Libya. There's nothing which would --

 Had we not had the issues in Libya, we would have been coming in as we'd expected. Of course, we had a range already in there, but had we been ticking over in Libya, then we wouldn't have changed our guidance at all. It's solely down to that.

 Tunisia as regards the tax implications, then we had been taking advantage of that cash-wise, as it were, expecting this decision to come, but we'd never been booking the tax benefit. We now have addressed that now that the FID has been taken internally, so the full impact of the tax benefit has actually been reflected in the tax line to the extent that we've now earned it. So there's no further impact to come going forward on that.

 And as regards the gas and power division, I'd be extremely disappointed if it was a break-even business, although I wouldn't want to underestimate the challenges it faces on a number of fronts.

 We've talked about LNG and the obligation to bring in liquids into Rotterdam. We've made a provision for that. We have a storage in Germany. Storage is extremely difficult across Europe right now. And a commitment -- a liability was booked last year to-- a reflection of the losses we're making on that.

 The power stations; power spreads across Europe are extremely depressed. There's more opportunities in our market given that they're quite different from Western Europe. But nevertheless, we're seeing challenges there, not least of which in Romania is the fact that the gas price has been increasing so dramatically.

 And of course, now in Turkey, as we mentioned already earlier this year, we have a challenge in that the volumes that we import for distribution into the Turkish market are competing against Botas, which is the state-owned dominant player in the market.

 And since the beginning of the year, although the currency has been very volatile and depreciated quite considerably, although it's recovered partly now, Botas decided not to increase its prices in local currency. And as a small supplier competing with them then, clearly, we were eating a loss, because just like them we're paying in US dollars for the natural gas we bring into Turkey, but if you're selling it against a dominant player who hasn't changed his local currency price, then that's going to be rather painful to you as well. So that's going to cost us EUR30 million to EUR40 million just from that position alone.

 So some considerable challenges as the market really is going through some quite substantial dislocation, but I still think we'll be booking a small profit this year. But it will not be as high as last year, that's for sure.

------------------------------
 Haythem M Rashed,  Morgan Stanley - Analyst   [12]
------------------------------
 Great. Thank you. Very clear. Thanks.

------------------------------
Operator   [13]
------------------------------
 Matthew Yates, Bank of America.

------------------------------
 Matthew Yates,  BofA Merrill Lynch - Analyst   [14]
------------------------------
 I actually want to follow up on the previous question around gas and power. I think you've been very open about the challenges that that business is facing. I'm just wondering at the Company level what you're actually doing besides contract renegotiations to try and reduce your cost base, or any strategic evaluation of the longer-term need to own some of these assets.

 Given Jaap is on the call as well, I'll ask and E*P question. I think you said that Gabon, the next Gabon well, is drilling at the moment. Can you just remind us what the big risks around that well are? And I guess it's a different play from the first one you did, so just what the main uncertainties pre-drill on this well were.

 Thank you.

------------------------------
 David Davies,  OMV AG - CFO   [15]
------------------------------
 Clearly, as regards gas and power, its current situation, we are obviously viewing options on the cost side, how we can improve the position within the business. But we need to be -- we need also to be cautious, because as our -- as we look to our long-term planning in E&P, in particular when you look at the volumes of production going up, although we will maintain a strong proportion of oil within that mix, there will be a lot more in absolute volumes of gas coming into the marketplace as well.

 And this is equity gas that's going to be coming into our market, and the actual distribution, storage, trading and suchlike of gas into that market is going to remain a crucial skill set that we want to retain.

 But clearly, as the market has changed for all competitors, then we clearly need to review how best to address that, and we're currently doing that.

------------------------------
 Jaap Huijskes,  OMV AG - Executive Board Member, Exploration & Production   [16]
------------------------------
 On the -- maybe I'll address all three Gabon wells, if I may. Padouck Deep was the first of two pre-salt wells. So salt, it had to drill through a salt layer for Padouck Deep. The key challenge was whether or not there was actually a salt seal. Turned out there wasn't.

 Affanga Deep is a post-salt, so it's basically an extension from the onshore and shallow water play, and therefore is far more conventional in its nature. Key challenges is reservoir [in charge], but not this salt seal.

 Okala is then the well that we'll drill back to back with that. That's again going to be a pre-salt or sub-salt well. We see far more certainty around salt seal there. The reason we haven't drilled that first but we drilled Padouck first is because Padouck was significantly larger than Okala.

 So that's the sequence of three wells.

------------------------------
 Matthew Yates,  BofA Merrill Lynch - Analyst   [17]
------------------------------
 That's it. Thanks very much.

------------------------------
Operator   [18]
------------------------------
 Marina Postnikova, UBS.

------------------------------
 Marina Postnikova,  UBS - Analyst   [19]
------------------------------
 Just two questions from me, please. Firstly, on the construction tax introduced in Romania, could you please quantify its impact on Group profits going forward?

 And then the second one, Petrobrazi upgrade. What uplift in margin are you expecting to achieve given the current macro environment?

 Thank you.

------------------------------
 David Davies,  OMV AG - CFO   [20]
------------------------------
 As regards Petrobrazi, we'll give more detail towards the end of the year on that, if you'll forgive me. But one of the things we've said consistently is we will be improving the proportion of middle distillate in the crack. We'll be reducing the volume of heavy crude. We'll be reducing the volume of gasoline. And we'll be progressively improving the own utilization of energy with [all of that].

 Now some of that's been happening. This has been a long program. It's been several years that we've been working on this exercise, cleaning up this enormous site that we inherited with the Petrom acquisition. But I'll give you a bit more guidance as we get closer on that.

 But it will certainly on a pro-forma basis add several dollars to our refining margin expectation. What we actually achieve, of course, will depend on what those refining margins are.

 As regards the construction tax, the impact there is going to be approximately $30 million over a full year, and that's why we've equated that to about $1.40 on the production expenses.

 There's been some discussion about changing the basis for that calculation, and we hope to be able to see that coming through. But that's not finalized yet, and as a consequence of that not being finalized, we've booked the larger amount.

------------------------------
 Marina Postnikova,  UBS - Analyst   [21]
------------------------------
 Thank you.

------------------------------
Operator   [22]
------------------------------
 Matt Lofting, Nomura.

------------------------------
 Matt Lofting,  Nomura - Analyst   [23]
------------------------------
 Two questions, please; firstly, just on the upstream. I guess looking at profitability in Q1, certainly from a quarter-on-quarter perspective, exploration expenses were significantly lower. I wonder if you could just talk a little bit about some of the key moving parts there?

 And within that I'm wondering if cost associated to the Gabon wells are in there yet in terms of whether or not that [farm-in] has settled yet and whether you're accruing it, or whether there's a catch-up expected later in the year.

 And then secondly, just on Romania, any update in terms of the status of discussions on the fiscal regime 2015 plus would be helpful.

 Thanks.

------------------------------
 Jaap Huijskes,  OMV AG - Executive Board Member, Exploration & Production   [24]
------------------------------
 So second one's for David. The first one, the exploration bookings, we simply take those when they come along. And in the first quarter, you've seen the two dry wells. The additional well, of course, we talked about that when we did the full-year results. It's Matuku in New Zealand which was always also taken in the first quarter. So we simply take those when they come along.

 The Gabon wells are an exception though, because that deal was not yet closed. We're awaiting final approval from the Gabonese Government. We've got a conditional approval that's one of two things that [Ofia] needs to do to get that closed, and as soon as that then closes, that will have to catch up.

 As it stands, the only booking we would do today is the dry Padouck well in which we only had a 10% stake. So that will be relatively minor. The current well we're drilling we've got a 30% stake in, and it remains to be seen whether we would take that or not. It depends on whether it's successful [or not].

------------------------------
 David Davies,  OMV AG - CFO   [25]
------------------------------
 As regards Romania, I think, as we've indicated on the fiscal regime discussions, as we feared given that there's going to be a presidential election at the end of this year, we believe it's unlikely to be something that's going to be addressed concretely ahead of that decision. And we rather expect it's going to be after the election and into the early part of next year.

 The election, by the way, is in December, or the end of November, but right at the end of the year. So we're not expecting any concrete proposal ahead of then, frankly.

------------------------------
 Matt Lofting,  Nomura - Analyst   [26]
------------------------------
 Okay. Very clear. Thanks.

------------------------------
Operator   [27]
------------------------------
 Joshua Stone, Barclays.

------------------------------
 Joshua Stone,  Barclays - Analyst   [28]
------------------------------
 A couple of quick questions on the upstream, please. I see the turnaround planned at Gullfaks for May/June this year. Are you able to give any indication of the frequency of future turnarounds at Gullfaks, and perhaps also maybe also at Gudrun going forward?

 And then secondly, partly related to that, I see your production is planned to rise about 40,000 barrels a day this year. Are you able to give an average contribution from these fields, Gudrun and Gullfaks, in 2014?

 Thank you.

------------------------------
 Jaap Huijskes,  OMV AG - Executive Board Member, Exploration & Production   [29]
------------------------------
 Well spotted on the Gullfaks annual shutdown May/June. I must admit I'm sure we have it, but I don't have any guidance at hand as to how often and how much we will shut these platforms down on an annual basis.

 Clearly, they're [old animals], so there will be shutdowns, but these are planned events and they will be reflected in our production guidance going forward because they basically impact the average. So I need to owe you an update on what sort of frequency. I do not know from the top of my head.

 You're right that we are projecting rise to about 40,000 barrels of oil a day. The big uncertainty there is not the Gullfaks performance. Gullfaks is actually doing a bit better than what we've planned so far.

 If we look at actual performance that we see out of Norway, we've actually touched 40,000 barrels a day already on one or two days. That's with the single well at Gudrun. We expect to actually end the year higher than 40,000 barrels a day.

 The big uncertainty over the next couple of months is the ramp-up profile of Gudrun. Now we haven't given any further guidance on that, and I would prefer not to do that, because the whole performance right now is based on the very first well; and you really want the next and third well to come on stream before you firm up the guidance.

 So far, it's been somewhat later, but [then] it started up better than planned, and the second well will be coming up in the month of June. So by the time we give you the Q2 results, I may be able to give you a little bit more guidance as to what we expect for the year.

------------------------------
 Joshua Stone,  Barclays - Analyst   [30]
------------------------------
 Very clear. Thank you very much.

------------------------------
Operator   [31]
------------------------------
 Mukhtar Garadaghi, Citi.

------------------------------
 Mukhtar Garadaghi,  Citi - Analyst   [32]
------------------------------
 Just two quick questions. One on the ROACE. How much lower do you expect this to go beyond the [low 10%] before we start seeing a recovery?

 And my second question just on Romania in terms of both OpEx and CapEx. We have seen a bit of a climb since this fourth quarter and the first quarter this year. Do you expect that trend to continue, or should the cost stabilize at the new level?

 Thank you very much.

------------------------------
 David Davies,  OMV AG - CFO   [33]
------------------------------
 The ROACE we said when we had the E&P day in the beginning of this year and also -- in London also following the Norwegian acquisition, we're not giving specific guide because it depends on so many things, clearly, when we're investing EUR3.9 million per year, the vast majority of which is in E&P.

 Then as a number of you have already commented upon, the volume of non-producing assets within our overall balance sheet is clearly going to increase, which is going to be diluted to ROACE in the medium term.

 When we see some of these big developments coming on stream in two or three years' time in particular, then you're going to see that situation start to reverse. But these next two or three years in particular, I think, are going to see some dilution of our ROACE as we add to our balance sheet with these developments that we're pursuing.

 There's no broad -- there's no indication really absent some event of which I'm not yet aware to expect our OpEx per barrel in Romania to move dramatically from where we are.

 Let me take this opportunity, however -- one answer I gave earlier was incorrect, unfortunately, the impact of the construction tax. I said it was $20 million to $30 million. It's actually going to be $70 million to $100 million. I picked up a wrong piece of paper that was [erroneously shipped, I'm afraid], if I can just correct that information. And that's reflected currently in the OpEx that we saw.

 So from here on out, I'm not expecting any further deterioration all things being equal. Of course, events can happen of which we're not yet award.

 As regards CapEx going forward in Romania, that all rather depends, because of course, as Jaap has mentioned already, we'll be spudding further exploration and appraisal wells over the next period in Domino, and we're clearly very excited about what we've discovered in the Black Sea. And that will hopefully in the fullness of time lead to an investment decision which clearly could be associated with very significant capital expenditure, none of which is reflected in absolute guidelines that we've given so far and clearly isn't in the EUR3.9 billion for the next couple of years because it will be beyond that period. But that could certainly, when we look at the long term, have an impact on what our investment needs in Romania would be.

------------------------------
 Jaap Huijskes,  OMV AG - Executive Board Member, Exploration & Production   [34]
------------------------------
 Just to reinforce that, that the onshore CapEx, there's basically no change. It's stable give or take a little bit, but it's stable with past years in the forecast that we've previously given you.

 And there's no underlying cost shift in the OpEx in Romania. It was the one-off that we had in Q4, and it's an impact -- it particularly impacts to the tax base in Q1. The underlying cost, in particular when you look at it in [rons], is very stable.

------------------------------
 Mukhtar Garadaghi,  Citi - Analyst   [35]
------------------------------
 Thank you very much.

------------------------------
Operator   [36]
------------------------------
 Tamas Pletser, Erste Bank.

------------------------------
 Tamas Pletser,  Erste Bank - Analyst   [37]
------------------------------
 Two questions, if I may. First is regarding your gas and power. It might be a follow-up question. Do you think about exiting some of these low return assets in gas and power? Or is it too much linked to your upstream business? So do you have any plans similar to refining and marketing in the area of gas and power?

 And my second question regards the Romanian gas realization. Do you, or are you able to realize the gas price in Romania according to the [former] schedule? Or are these prices on the market different from the past?

------------------------------
 David Davies,  OMV AG - CFO   [38]
------------------------------
 As regards gas and power, I think I gave the question earlier on that clearly in a difficult environment like this you're looking at best ways to optimize your situation. I'd probably prefer to leave my answer at that frankly at this point in time, although clearly, the gravity of the situation is something of which we're very much aware.

 Your question as to Romanian gas realizations I think is becoming more critical, of course, as we move to this nominally liberalized market. And we await with great interest the next wave of developments because, clearly, we do have a market process going on now where there are discussion with major customers in terms of volumes; there are indications from the energy minister that he wants to see the creation of an exchange in Romania and more volumes being traded over this exchange.

 So whereas historically since we bought Petrom we were going through a fairly mechanical process of price determination for the gas really being derived from a formula that was given by the regulator, as we've gone through this quite dramatic schedule of increases over the last 1.5 years, when and particularly unfortunately the European gas prices have been very cooperative and come down to meet them halfway as it were, then we actually find ourselves in a situation where the market is establishing itself.

 But where that will lead in terms of price, particularly given that Romania is effectively an island, there's no real export opportunities to bring gas out of Romania. So clearly, both domestic producers as well as the Russian volumes are still being imported to the extent that they're still economic. That combination is going to create a market price in some way, shape or form, but those developments are happening as we speak.

------------------------------
 Tamas Pletser,  Erste Bank - Analyst   [39]
------------------------------
 Are there any plans to use these existing interconnectors for export in Romania, or you are not aware of any plans like that?

------------------------------
 David Davies,  OMV AG - CFO   [40]
------------------------------
 To the extent that that might be available to us, clearly, that's something we'd look at. But the volumes available there in relation to the overall size of the market and our production are really quite marginal.

------------------------------
 Jaap Huijskes,  OMV AG - Executive Board Member, Exploration & Production   [41]
------------------------------
 There's also a time gap, because most of those interconnectors operate at a higher pressure than the domestic network, and so they're built to put gas into Romania, not to take it out.

------------------------------
 Tamas Pletser,  Erste Bank - Analyst   [42]
------------------------------
 Okay. Thank you very much.

------------------------------
Operator   [43]
------------------------------
 Bertrand Hodee, Raymond James.

------------------------------
 Bertrand Hodee,  Raymond James - Analyst   [44]
------------------------------
 I have one question on your OpEx in E&P. I know there is a lot of moving parts with Romania. Special construction tax is impacting your volume from Norway probably having a higher OpEx. And you have which all the -- and also the missing barrels from Libya, but are you able to give us a guidance in terms of OpEx in E&P for OMV in 2014?

 Or I can also ask the question differently. Is the $16 plus we had in Q1 is a good assumption for the full year?

------------------------------
 David Davies,  OMV AG - CFO   [45]
------------------------------
 I think the very extensive way and nature of the way you phrased your question almost answered itself, to be perfectly honest, because the factors which led it to be a little bit high in quarter 1 are the factors which could lead it to come lower in quarter 3 or quarter 4 later in the year.

 Clearly, as you pointed out, the Norwegian barrels on an OpEx basis are higher certainly than the barrels which were missing from Libya, much higher, of course. And if things happen to the Libyan barrels, that could compensate that.

 We're certainly not expecting any further changes in taxes or duties which could burden this, although clearly, that's not something we can control. And as we look forward, we would hope that our overall level of OpEx could settle at a slightly lower level than what we currently had in quarter 1. But Libya is a big swing factor in that, clearly, because the OpEx in Libya is clearly at the lower end of the overall spectrum within OMV's portfolio.

------------------------------
 Bertrand Hodee,  Raymond James - Analyst   [46]
------------------------------
 Or probably if we can -- I can fine-tune the way I put my question is have you put a range I would say of OpEx in E&P? I would say if Libya is out for the rest of the year, or if Libya comes back, have you done this kind of exercise?

------------------------------
 David Davies,  OMV AG - CFO   [47]
------------------------------
 Yes. If Libya comes back, it would be lower, and if it doesn't, it will be probably about the same.

------------------------------
 Bertrand Hodee,  Raymond James - Analyst   [48]
------------------------------
 Okay, but you are not able to quantify it a bit?

------------------------------
 David Davies,  OMV AG - CFO   [49]
------------------------------
 No, we haven't done. Clearly, we have internal targets, and our internal targets still expect something from Libya which isn't reflected in the guidance that we've given. Whether or not those internal targets will be realized, the future will tell. We've got no control over it. And clearly, in those internal targets, we would be expecting our OpEx on that basis to come down slightly.

------------------------------
 Bertrand Hodee,  Raymond James - Analyst   [50]
------------------------------
 Thanks a lot.

------------------------------
Operator   [51]
------------------------------
 John Meyer, Societe Generale.

------------------------------
 John Meyer,  Societe Generale - Analyst   [52]
------------------------------
 I just wondered if we could go back to your earlier comments on Romania and natural gas, and I guess the political process. Do you think the events of the past three months in the Ukraine and the discussion around Russian natural gas exports have made any impact on the political debate there in terms of how they tax or encourage local domestic natural gas production?

------------------------------
 David Davies,  OMV AG - CFO   [53]
------------------------------
 No, I don't think so. Romania, compared to most of the other smaller countries in Eastern Europe, is in quite a fortuitous position, of course, in that it can not only largely supply its own requirements from domestic resources today, but now in particular following the Black Sea discovery, also has very exciting potential going forward for the future, not only as far as we are concerned as an operator there, but also in terms of its own domestic security and energy supply.

 Clearly, it's on everybody's radar screens what's happening nearby, but that that should have actually led to any precise proposals or items being discussed as regards taxation, and such like. No, that's not something that's come onto our radar screen.

------------------------------
 John Meyer,  Societe Generale - Analyst   [54]
------------------------------
 Great. Thanks.

------------------------------
 David Davies,  OMV AG - CFO   [55]
------------------------------
 Thanks, John.

------------------------------
Operator   [56]
------------------------------
 Mehdi Ennebati, Societe Generale.

------------------------------
 Mehdi Ennebati,  Societe Generale - Analyst   [57]
------------------------------
 I just would like to know if you would be able to quantify the negative effect at the EBIT level from the margin [tailing] in Turkey, please.

------------------------------
 David Davies,  OMV AG - CFO   [58]
------------------------------
 From what? From the margin tap in Turkey?

------------------------------
 Mehdi Ennebati,  Societe Generale - Analyst   [59]
------------------------------
 Yes.

------------------------------
 David Davies,  OMV AG - CFO   [60]
------------------------------
 That's a bit -- clearly, it's not going to be positive. I'm not being facetious saying that, but it's rather difficult because it's being imposed in a relatively aggressive top-down way, and how it gets borne as the market will determine between the refineries, between the retail operators and between distributors such as Petrol Ofisi, is a process which we're actually going through.

 But we had a relatively good, I would say, first 10 weeks of quarter 1 despite a very difficult environment, clearly with the strong currency depreciation that we had then which went through a huge increase in the pump prices because obviously the price level is based on dollars.

 Margins remain there relatively high and this was an unpleasant surprise. And therefore, consequences of which -- not just -- it's not simply a mechanical point -- quantification, the market has to squeeze its way through, but it's clearly going to have an impact on our overall profits though.

------------------------------
 Mehdi Ennebati,  Societe Generale - Analyst   [61]
------------------------------
 Okay. Should we expect a material impact, meaning higher than EUR20 million versus last year? Or do you think it is --?

------------------------------
 David Davies,  OMV AG - CFO   [62]
------------------------------
 I think possibly the top end of the range, but it's going to be double digit, I would think.

------------------------------
 Mehdi Ennebati,  Societe Generale - Analyst   [63]
------------------------------
 All right. Thank you very much.

------------------------------
Operator   [64]
------------------------------
 (Operator Instructions). There are no further questions. I will now hand back to David Davies for closing remarks.

------------------------------
 David Davies,  OMV AG - CFO   [65]
------------------------------
 Thank you very much; and thank you, ladies and gentlemen for your attention, for the questions you asked. And as ever, if there are any follow-up questions, then please don't hesitate to contact our investor relations team here in Vienna.

 Thank you. Bye-bye.

------------------------------
Operator   [66]
------------------------------
 That concludes today's conference call. A replay of the call will be available for one week. The numbers are printed on the telephone conference invitation. Or alternatively, please contact OMV's investor relations department directly to obtain the replay numbers.

 Thank you for joining today's conference call. You may now replace your handsets.






------------------------------
Definitions
------------------------------
PRELIMINARY TRANSCRIPT: "Preliminary Transcript" indicates that the 
Transcript has been published in near real-time by an experienced 
professional transcriber.  While the Preliminary Transcript is highly 
accurate, it has not been edited to ensure the entire transcription 
represents a verbatim report of the call.

EDITED TRANSCRIPT: "Edited Transcript" indicates that a team of professional 
editors have listened to the event a second time to confirm that the 
content of the call has been transcribed accurately and in full.

------------------------------
Disclaimer
------------------------------
Thomson Reuters reserves the right to make changes to documents, content, or other 
information on this web site without obligation to notify any person of 
such changes.

In the conference calls upon which Event Transcripts are based, companies 
may make projections or other forward-looking statements regarding a variety 
of items. Such forward-looking statements are based upon current 
expectations and involve risks and uncertainties. Actual results may differ 
materially from those stated in any forward-looking statement based on a 
number of important factors and risks, which are more specifically 
identified in the companies' most recent SEC filings. Although the companies 
may indicate and believe that the assumptions underlying the forward-looking 
statements are reasonable, any of the assumptions could prove inaccurate or 
incorrect and, therefore, there can be no assurance that the results 
contemplated in the forward-looking statements will be realized.

THE INFORMATION CONTAINED IN EVENT TRANSCRIPTS IS A TEXTUAL REPRESENTATION
OF THE APPLICABLE COMPANY'S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO
PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS,
OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS.
IN NO WAY DOES THOMSON REUTERS OR THE APPLICABLE COMPANY ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER
DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN
ANY EVENT TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S
CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE
MAKING ANY INVESTMENT OR OTHER DECISIONS.
------------------------------
Copyright 2018 Thomson Reuters. All Rights Reserved.
------------------------------