Q3 2014 OMV AG Earnings Call

OMV.VA - OMV AG
Q3 2014 OMV AG Earnings Call
Nov 06, 2014 / 10:30AM GMT 

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Corporate Participants
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   *  David Davies
      OMV AG - Deputy Chairman of the Executive
   *  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
   *  Hamish Clegg
      Merrill Lynch - Analyst
   *  Nitin Sharma
      JP Morgan - Analyst
   *  Mehdi Ennebati
      Societe Generale - Analyst
   *  Matt Lofting
      Nomura - Analyst
   *  Henri Patricot
      UBS - Analyst
   *  Joshua Stone
      Barclays - Analyst
   *  Mark Corpulos
      Jeffries - Analyst
   *  Alastair Syme
      Citi - Analyst
   *  Mark Bloomfield
      Deutsche Bank - 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 Q3 2014 results. There will be a presentation of the results followed by a question-answer session. (Operator Instructions)

 You should have received the presentation by e-mail. 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.

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 David Davies,  OMV AG - Deputy Chairman of the Executive   [2]
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 Thank you very much and good morning, ladies and gentlemen. I'm here today with Jaap Huijskes, Head of E&P, to give you an update on the third quarter for OVM.

 If you turn to the first page of the results presentation, you see our results highlighted as usual. We produced in the first -- sorry, in the third quarter EUR656 million as a clean CCS EBIT, which compares to EUR619 million last year. So we are up by 6%.

 What has driven that has been the oil price being down. And you can see that in particular in the E&P results. The oil price was down by 8% to $102 from $110 last time. Production at 311,000 barrels a day was up 13%.

 And here compared to last year, although we are happy to have reported that Libya did come back on stream in the third quarter this year, of course it was producing even more in the third quarter last year and the reason for the growth is predominantly our Norwegian investments, which of course were not yet reflected last year, the deal with Statoil having been closed during quarter four.

 Depreciation and production costs were also higher in E&P. And of course what you are seeing here is the production from the Norwegian acquisition in particular. Depreciation in total in E&P was higher by EUR120 million. So that obviously impacts the overall operating profit.

 What also hits the operating profit is that our exploration expenses at EUR138 million for the quarter was 75% higher than a year ago, which mainly includes the write-off of unsuccessful wells in New Zealand, in the Faroe Islands and in Norway.

 The gas and power results improved versus previous year slightly. Last year we had a loss of EUR15 million; that's improved to a profit of EUR14 million this year. What was very notable was the very strong performance in refining and marketing, where profits increased from EUR98 million up to EUR206 million, this of course being particularly helped by the very strong refining margins that we experienced this year.

 The gearing ratio increased slightly to 35%, but remains broadly in line with our target in the long term of 30%.

 The next slide shows the economic environment. One or two complications in these charts to which you are not fully accustomed; then I will take some time to explain them to you. The oil price in euro/US dollar rather speak for themselves. The oil price in -- sorry, the exchange rate in average terms is broadly the same as last year in average at the period we close.

 However, instead of the 1.33 as an average, we actually had something just under 1.26. So we have actually seen some weakening of the euro, which had partly compensated the decline in the oil price, which you can see on average has declined to 102 during quarter three and of course during quarter four has declined still further.

 The middle chart shows the position in the gas markets in which we operate. This has become rather more complicated over the last few quarters, but allow me to explain it in more detail. The brown line at the bottom, which has been increasing up to a level now of EUR20 per megawatt hour, represents the gas price to industrial users in Romania.

 You can see that there was a substantial gap between that and the yellow line, which in quarter three last year was at EUR27 per megawatt hour, almost twice the price of the Romanian gas. And what we see here -- what we saw here was the very heavily subsidized effectively-price for natural gas for industrial users in Romania because of the impact of the regulation.

 And as this regulation has been relaxed and the gas price has been rising, of course the two lines have been getting closer. But of course what has also contributed to them getting a lot closer to each other is that the yellow line has come down substantially.

 Particularly during the second quarter of 2014, we saw a substantial reduction in the Central European gas hub -- premarket gas price to a level now in fact where the Romanian price and the European market price are broadly in line, so much so that the European regulator -- sorry, the Romanian regulators announced that as from quarter four effectively in the industrial market in Romania will have an open market.

 Of course the market isn't completely open because there are no substantial export opportunities for the domestic producers, but certainly the process of regulation now is subsidy -- price schedule, price increases is now behind us and a market now effectively exists for the Romanian industrial market, which is about 70% of total consumption.

 Another challenge has been the orange line, which is on the top. This represents an index of what is being paid for imported gas from Gazprom. And you can see the challenge of course keeping the yellow line and the orange line in line has been that if you are buying gas from Gazprom and trying to sell it in the European market, this has been quite a challenge for many importers.

 And that situation a year ago would have probably resolved. You can see that they were brought in line. But of course with the collapse of the market price during the current year, this gap has reopened and of course there are now hurried renegotiations with Gazprom ongoing to try to address this latest challenge.

 Moving to the right hand side, you see the indicator refining margin, which has also become a little complex. And the reason it has become complex is that in the first quarter of this year -- sorry, for the beginning of this quarter we have decided to recalibrate our indicator refining margins, now reflecting the fact that the Petrobrazi re-modernization is effectively completed. The product slate and the inefficiencies in terms of energy consumption are now largely addressed, and as a consequence, the refining margins that one can expect under normal circumstances are substantially higher.

 Of course the benefits of this had been getting fed into our profit and loss account over the years as the various plants and investments were actually executed, but we never reflected this in our indicator refining margin, otherwise this thing would simply become unstable.

 We have decided to do it in one fell swoop. And that's the reason if you look at the grey line that our reported refining margin seems to have increased quite dramatically. In fact of this increase, a big part is due to the re-modernization of Petrobrazi, something approximating $1 per barrel.

 The green line on here represents the refining margins we would have been reporting had we been reporting the now new product yield within the refining margins. The grey line is what we actually reported and the blue line here, which shows 3.7 in quarter three 2014 is the refining margins that we would have reported had the product slate not been adapted to reflect the Petrobrazi improvement.

 So under any environment, you have seen a market-driven shift, which would have taken us up to 3.7 during quarter three and over and above that. We are reporting now 4.9, which reflects, as I say, the changes in Petrobrazi. But under any scenario clearly given the step-up in refining margins in quarter three it has been a good quarter for downstream.

 On to the next chart, the top line EBIT EUR670 against the EUR570 million -- sorry, EUR570 million against EUR576 million; somewhat different from the clean CCS EBIT, which was up by 6%. Our reported EBIT is down by 1%. The next chart will show you why. It's predominantly due to the current cost of supply and losses during the quarter given the decline in the oil price.

 The financial result improved from minus EUR66 million down to minus EUR31 million, a difference of EUR35 million of which approximately EUR20 million was due to an improved position in Borealis. Not only was the European market relatively robust, but more particularly the contribution from Borouge continues to improve and that of course reflected itself in Borealis results given their 40% stake in the company.

 Taxes, higher in absolute terms given the profit, but also the tax rate was higher at 36% against 26%. Part of this is due to Petrom's contribution being lower. And of course Petrom's tax rate is particularly favorable at only 16% corporation tax.

 Also, we had something of an anomaly during the quarter in that during the quarter the Tunisian currency against the US dollar declined quite substantially. Our Tunisian book values for tax purposes are held in local currency.

 And this difference in the dollar and the local currency given that we actually report or rather manage the company on a US dollar basis led to a substantial swing in the deferred tax position, which we had to reflect in the tax line and that alone added something like 6% to our overall tax charge in the quarter.

 So hopefully a one-off anomaly which is not cash affecting. The more cash affecting one is the fact that Petrom's contribution to the overall Group profitability was lower.

 You see that on the next line minorities, down from EUR147 million to EUR112 million. Clearly the single biggest position here is the profit share of the 49% stake in Petrom, which we have to deduct here and clearly it's lower because Petrom (inaudible).

 I think the rest of that chart by and large speaks for itself. I'll move on if I may to the next chart, which is also rather self-explanatory. Very few special items during the quarter, only EUR22 million relating to certain restructurings being scheduled in Romania. The biggest position here is the CCS losses of EUR62 million, which I mentioned a second ago.

 Coming to the next page, you see the cash flow. Our cash flow -- after dividends free cash flow was minus EUR871 million for the first nine months of the year. So about half of that came about in the second quarter -- sorry, the third quarter. And the major reason for this was the change in net working capital you can see, which for the last few years we have been reporting relatively strong positive positions here as we have been managing our working capital down.

 This changed during quarter three, in part due to the unwinding of certain positions following the sale of Bayernoil in the previous quarter to this. And we expect this position to reverse further in quarter four such that we expect an improvement in the overall gearing and free cash flow during quarter four as a consequence predominantly of an improved net working capital position of course subject to what actually might happen on the oil price at the moment.

 Our overall investments at EUR2.9 billion are consistent with our long-term -- sorry, rather our committed -- our stated goals for the next two or three years of the EUR3.9 billion. And in fact we will be spending something like EUR3.9 billion during the current year given that we have already spent just under EUR3 billion so far.

 We did announce, however, in our press release today that we would -- are currently reviewing quite intensively the level of CapEx and in particular the pace of our capital expenditure in order that during this more tightened oil price period we can make sure that we can still deliver as near as possible a zero free cash flow after the dividend. And that will be the target for the next two or three years despite the difficult oil price environment.

 The next part -- the next page compares our CapEx to our EBITDA. Clearly where the majority of our CapEx goes as long announced -- long ago announced is in E&P, EUR2.160 billion, stands against an EBITDA from the division of EUR2.6 billion.

 Where we have been investing within E&P has been in drilling, workovers and field redevelopments in Romania, which has taken about EUR700 million of our CapEx in the first nine months of the year.

 Norway, here we have the projects of Gullfaks, Aasta Hansteen, Edvard Grieg and Gudrun, which have taken similar amounts, EUR600 million. Schiehallion field redevelopment continues in the UK, taking EUR200 million of this overall invested capital. And the Maari Growth project in New Zealand is about EUR100 million of this. And that explains a large part of the overall CapEx that we have spent so far this year.

 Within refining and marketing, the CapEx of EUR409 million relates to the Butadiene projects in Schwechat and Burghausen as well as the final steps of the Petrobrazi turnaround.

 And in gas and power, the EUR173 million investment is predominantly due to the capitalization of the lease rental commitments in the gas storage facility in Northern Germany and again is cash affecting to the extent that these rent cavern leases are paid over the years, but not cash affecting in one swoop as it were.

 Coming now to the business divisions, starting with exploration and production, here you see a reconciliation of the third quarter's results versus the previous quarter of this year on the left hand side. Whilst on the right hand side is a reconciliation of the third quarter's results this year with the third quarter last year.

 Clearly in both reconciliations you see realizations are lower. The oil price was lower versus the second quarter this year by 7%. Over and above that, the euro/US dollar sort of compensated that -- sorry, weakened further actually from 133 to 137. So also minus 3%. Whereas quarter three this year versus quarter three last year we see oil price was down by 8%, 102 versus 110. Whereas the euro/US dollar actually strengthened a little bit, plus 1%, and that compensated that.

 Volume worked positively in both cases, benefited the comparison with the second quarter by EUR135 million, and that's almost entirely due to Libya coming back on stream during the third quarter. Whereas compared with last year's third quarter, where in fact Libya was actually producing more than during the third quarter this year, the reason for the big volume increase is once again the inclusion now of the acquisitions in Norway.

 Of note also here, I have mentioned the high depreciation of EUR120 million vis-a-vis the third quarter last year, that again is predominantly due to Norway. Of significance also is the exploration expenses, which at EUR60 million are a substantial increase versus where we were a year ago.

 The next page shows you what has been happening with production. You can see in quarter three this year the substantial increase versus the previous quarter and indeed the same quarter last year, 311,000 barrels a day against 275,000 barrels a day.

 Clearly Libya coming back on stream has helped this. And I can actually report that recently -- very recently we have actually had production as high as 335,000 barrels per day overall, with still some shortage in Libyan production by about 8,000 barrels a day. So I think you can see why we still feel confident that we can move our production up even during this difficult phase.

 I must say, however, unfortunately that -- as we have always said, that Libya produces, but somewhere they may stop producing. Our major production in (inaudible) field actually was interrupted yesterday and as far as we understand remains out of production. So it may well be that our current performance in Libya is no longer going to be continued during the near future. We will see.

 OpEx has improved as we said it would in the previous quarter. Quarter two of 2014 was burdened to some extent by one-off costs in terms of wage settlements in Romania. They were wound now and you can see quiet a substantial improvement at the OMV level in the Group total from $17.96 a barrel down to $15.51 a barrel. And if you turn the page further, you can see that's similarly replicated in Petrom where we have gone down from $18.70 a barrel to $16.37 a barrel.

 Our production is remaining broadly stable, slightly down versus both last year and the previous quarter, but nothing overly significant.

 Coming now to gas and power, you can see although the numbers are relatively small, an improvement in all three business divisions -- in all business segments rather, improving the overall loss of minus EUR15 million to a profit of plus EUR14 million.

 Supply, marketing and trading reflects the better gas supply situation as the oil price related supply contracts are not as damaging as they were last year. Gas logistics has also improved as the availability of short-term profitable contracts has been something we have been able to take advantage of this year in terms of capacity booking on our pipelines.

 Power was also better than the same quarter last year and particularly driven by the Samsun plant in Turkey, which had a relatively good quarter, whereas the Romanian plant still suffers from relatively depressed spark spreads.

 On the next page just a few KPIs, what has been happening. The increase in the net electrical output during the third quarter is due to the successful operation of the power plant in Turkey.

 Trading volumes in total are higher in terms of paper trading. Gas sales volumes on the other hand are actually lower by 22%, and this is particularly driven by a very constrained demand given the low spark spreads from power plants and also from wholesale customers. As we said repeatedly, the market environment remains challenging.

 Then we come to refining and marketing, where the picture is somewhat different. Our third quarter profit of EUR206 million was helped enormously by a much stronger refining margin position shown here in the fuels line. And not only that, but we had an improved position in petrochemicals, which was also very helpful towards the overall profit contribution. So the improved refining margin has been the biggest driver.

 Marketing was broadly the same as last year, and this is despite the challenges in Turkey at the moment. Turkey was down on last year, slightly helped by a stronger import differential in Turkey which compensated the impact of the margin cap on the retail stations, which otherwise would have been quite damaging to the results.

 So marketing remains challenging particularly in Turkey, but we have benefited very strongly from the improved refining margin position.

 You see the refining utilization has also increased quite significantly following the turnaround of Petrobrazi, which drove the utilization down to 59%. We are actually producing during quarter three at a higher level than nominal nameplate capacity, 103%, and in the West quite high as well at 95%. So very pleased with the level of utilization particularly given the high refining margins that we have at the moment.

 Marketing sales, the sales volumes fell from 4.2 million tonnes down to 4.143 million tonnes. And of course this reflects in part the sale of Bayernoil, which of course has led to our commercial business in particular selling less.

 The number of gas stations has fallen from 4,200 to 4,143, reflecting our continued efforts to rationalize the portfolio.

 And finally to the key financial indicators. You can see our gearing has been maintained broadly the same, 30%, 29%, 33%, and now slightly higher to 35%. We expect it to come down slightly in the fourth quarter subject of course to what may happen with the oil price. And we remain therefore broadly in line with our long-term gearing ratio target.

 The payout ratio remains a target of 30%, and a dividend of EUR1.25 last year was a target -- was a payout of 35% or slightly higher.

 Clean CCS ROACE fell to 9%. We now got a full-year consolidated of -- or almost a full-year consolidated of -- the Statoil deal within this and clearly our proportion of non-productive capital has been increasing quite considerably during the year, which has the expected effect on our ROACE in the short-to-medium term and we expect subject to what happens on the oil market of course that we will start to see our ROACE improve as those assets come on production.

 Finally now to the outlook for the current year. Our expectation is that the oil price will average around $100 roughly, much more or less mathematically baked in. The challenge of course more specifically is what will happen now in the medium and the longer term and we are clearly running scenarios on that as we speak. Hence, the announcement that we made with the press release in terms of being more cautious on the pace of our investments during this difficult period.

 We expect gas and power markets to remain challenging. You will be aware that an announcement was made recently as regards the intention to consolidate gas and power refining and marketing into one division called downstream, and the restructuring of that business will now start to move forward at a pace.

 Refining margins remain under some pressure. We are very happy with margins as they have been in quarter three, but really do not see the structural challenges in the European market as yet having been adequately addressed. So there is no reason for us to expect these margins to continue at the high levels of quarter three and expect to see them soften somewhat during quarter four.

 Marketing volumes remain under pressure, and as I mentioned already, the Turkish situation remains a challenge.

 Our production for the year as an average we would expect broadly around about 310,000 barrels a day. And the CapEx number at EUR3.9 billion, the vast majority of it going into E&P is also something I confirmed earlier on during the presentation.

 Our exploration total expenditure, as we have already said several times again, around about EUR700 million for the current year.

 At that point I will take the opportunity to hand over to Jaap, who can give you more insight into what has been happening in E&P. Thanks.

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 Jaap Huijskes,  OMV AG - Executive Board Member, Exploration & Production   [3]
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 Thanks, David. I will start with a few project highlights -- not that many in the quarter. Gudrun continued to ramp up. I will show you a bit more detail around our Norwegian production in a couple of slides. And Habban Phase 2 is the third highlight there; we are commissioning some of the production facilities. Again, I will come back to Yemen production in a bit more detail.

 I want to come back to Rosebank for maybe a few more words around that. We are continuing to make very good progress on Rosebank, a lot of the engineering related to trying to find major project savings has in essence been completed and is going through assurance processes. What that leads to is basically a joint venture that's united around progressing this project further towards an FID late 2015 or early 2016.

 What that means for the program in 2015 is further engineering, but in particular also work to validate all the cost savings that we worked on during the course of this year and to also work on the supply chain; with other words, our execution strategy to make sure that our execution strategy can capture both savings that we have engineered plus any savings that may come about as a result of the market clearly cooling as a result of the oil price diving.

 If you look at our complete project funnel, we show the same billion barrels as before. In fact not many changes in this slide this quarter. Two changes; instead of in the green column talking about West of Shetland, we now talk about the Cambo Hub, our deal with Hess, where we have taken over Hess' operatorship in Cambo is now closed. OMV is now the operator of Cambo. And with that, we are starting very early engineering work to see whether we can get a hub development in Cambo, including things like Suilven and Tornado off the ground.

 The other change in this slide is in the small print. You will see a footnote 4 added to the slide, which really relates around the timing of achieving the production attainment that we have always listed for 2016 with the review that David has already highlighted and the speed of our investments over the next couple of years, seeing that our overwhelming -- overriding target is to make sure we stay at a neutral to positive cash flow for the next couple of years, will have most likely an impact on the rate at which we grow for the next couple of years, and therefore that production attainment whilst it won't change in content, may change in the timing by which it's delivered.

 I got the usual project update slides here; won't dwell on them too long, just highlight the changes that we got on these as we have committed to do on a quarterly basis. Two changes on the projects under development. Maari Growth, we are going to spend a little bit more money. That's basically because of some drilling setbacks that we have had in Maari. You also see that in the timing of the production growth -- we are currently drilling into the reservoir with one of the first sidetracks, which is really the second well that we are on. The first one we suspended waiting for some equipment, where we will go back as soon as this well is complete.

 So it's progressing. We still expect the first of those production wells to be coming on stream towards the end of this year, but we have had a few drilling setbacks that should really have happened a little bit earlier.

 The other one is the Zidane project. You will have seen in the news that the joint venture has agreed to recycle that project in (inaudible). It means that we go back and re-access how we can turn this project into something that's more commercial than what it was.

 So no submission of plan of development and the entire joint venture aligned in the fact that currently the plan of development was not economic. We need to go back to the drawing board both from an engineering perspective and also from a commercial perspective.

 Zidane is a tieback to a host platform and a lot of the economics of something like Zidane depends on the commercial terms you get offered by that host platform and clearly that needed more work.

 So the project is not gone, but right now we are having another look and therefore it's pretty late to be determined.

 Projects under appraisal, not much of substance. I have already mentioned the Cambo Hub. You see in particular changes in this slide other than the name of the Cambo Hub.

 With dates, where we used to say under the decade, we are now really saying that one or two of these projects are going to come on stream in the next decade. And that's fine. These are long-term projects, part of our long-term portfolio. Other than that, no complex changes in the individual projects.

 Exploration update; and this is the list still for the 15 and 16 -- sorry, 14 and 15 wells. Clearly in Q4 we will update this. We will take the drilled wells out and basically show you the 15, 16 wells.

 Already, last quarter indicated that we have drilled a few dry wells and the successful wells so far this year have been Hanssen, the operator of the appraisal well in the Barents Sea, which proved additional volumes subsequent to the Wisting discovery that we made in 2013.

 But other than that, it has been -- it's not been a brilliant year for exploration in that you see us I think following the industry to a large degree. Currently, we are drilling in the Black Sea. I will show you a bit more on the final slide from my presentation. And we are drilling a deep big exploration well here in Austria.

 And then that's by and large our major well program finished for 2014. But you see the [outlook] for wells in 2015, again with timing of those wells subject to the same review that David has already mentioned. Clearly that review addresses CapEx, but will also address the amount of exploration money that we project to spend next year.

 Production in our two trouble countries; again David already mentioned that Libya was doing okay in the third quarter. Unfortunately yesterday we had a security incident in the field and we are yet to really get to grips what exactly happened there. And for the moment production is shut in, very unclear whether that will be a short- or a long-term problem. Clearly we hope for a short-term and we will do everything to try and make it a short-term problem.

 Year-to-date average, we have seen Libya production at about 30% of capacity. So it roughly translates to about 10,000 barrels a day instead of about 32,000 barrels a day that it could do. October materially better than that and we will see where November goes -- previous setback, which is very fresh with very sketchy details that happened yesterday.

 Yemen, better; you see uptime at about three quarters of capacity. So materially better than Libya. In a lot of ways we have got -- we are more able to control the security situation around our operations. Sana'a is very unsecure, but our team doesn't actually reside in Sana'a. We got local staff staffing the office in Sana'a and the management team resides in Dubai.

 And what we have been doing in Yemen is we have been drilling in the field, but security has meant that the completion of a central process and facilities is proving difficult. It's not so much to work in the field but the issue is being able to ship the equipment in that has been a particular problem there and will probably continue to be a problem for some time.

 We are continuing to build the central process and facility, but what we have done to fill the gap in the interim is we have added two further early production facilities; one of which was hooked up in October and one of which I expect to be on stream -- run by this week in fact.

 And what that will do is it will more or less replicate the total processing capacity that we eventually expect to get from the central processing facility, which we will still complete. But processing-wise we will more or less have the full processing capacity of the Yemen expansion or the Yemen Habban S-2 project on stream in the next week or so. And that means we can continue drilling our development wells and put those to good use. So that is an important -- quite an important detail.

 Norway then, you see the production chart. I mean it's unusual that we show you our production detail in individual countries. But this is so material to what has been happening to our total production. I thought I would take you through this in a bit more detail.

 You see Gullfaks doing very well, in fact ramping up slightly during the course of the year. And you see Gudrun ramping up very rapidly in -- and we have added October, which is clearly not in Q3, is in Q4. The reason we have added that is because it shows quite a steep ramp-up in October relative to the Q3 average. That looks bigger than it is. In fact in Q3 we had a planned shutdown or series of planned shutdown in Norway both in Gullfaks and in Gudrun.

 In fact earlier David showed you the Romania slide indicating maybe a slight dropoff in production in Romania in Q3, but by and large that was also due to a planned shutdown that we saw in Q3. Underlying production there remains flat quarter on quarter.

 And so back to Norway, you see Q3 which could have been slightly higher were it not for planned shutdown and you see production ramping up steeply in October. We have got a fourth well in Gudrun, drilling at the moment, very close to completion and expect therefore ramp-up to continue or to go up further before the end of the year with that fourth well coming on stream.

 Looking further in then to 2015 and 2016, so looking slightly further ahead, Edvard Grieg is according to the operator scheduled to come on stream in 2015. We are slightly more conservative. We keep saying 2016. But realistically actually this project could come on stream in 2015. It's continuing to make very good progress. And then Aasta Hansteen significantly later, 2017, 2018.

 So we got a ramp-up, which will continue, and we got a project pipeline, which in 2015, 2016 and ahead will push production in Norway up even further, to the point where after Romania, Norway is now our biggest production contribution.

 One slide to wrap up, with some pretty pictures and pretty words, but really not that much to update you on to be completely honest. We have finished drilling the Domino-2 appraisal well and we are currently analyzing the result together with Exxon, the operator. And we have actually moved the rig, the Ocean Endeavor, on the picture there, to Pelican and we are currently drilling the Pelican South exploration well.

 And the plan is for that well to be completed early next year and the plan then is to continue with further exploration in the Neptun acreage with the Ocean Endeavor during the course of next year.

 So we are busy. I think that's the one thing you can take away from that activity and the first real update will be when we have finished looking at the data from Domino-2 in combination with results of Pelican South, and that will happen early 2015.

 So far my update. Thank you very much.

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 David Davies,  OMV AG - Deputy Chairman of the Executive   [4]
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 Thank you, Jaap. I think we are going to hand back to the moderator, who is going to kick off the (technical difficulty) I'll pass over. Thank you.

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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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 A couple of questions from my side if possible. Firstly, just -- I appreciate, David, you mentioned you would be providing more details on spending plans with the February update. But just in terms of just to help us sort of think about it, in terms of your flexibility with regards to spending plans how much in 2015 and 2016 of the CapEx that you had originally guided for you have flexibility to move that? Just to give us a sense on that, that will be very helpful.

 And particularly with regards to the fact that some of these projects obviously are non-operated, so to the extent that you can actually delay or re-phase some of these projects, that would also be helpful to understand the moving parts there.

 My second question relates to the reorganization of the gas and power in the downstream businesses, the R&M business. Just could you give us a sense of what that could mean in terms of the -- either potentially the further disposals, sale of assets there? Is that sort of what you are thinking when it comes to reorganization of these business lines into one? Can you look at sort of streamlining some of the gas and power assets as a result of that?

 And then just finally, very briefly just in terms of the CEO succession process. If you can provide an update on that and whether you will be providing a sort of short list of candidates to the market at some point before an appointment, or any kind of timelines we can think of? That will be helpful. Thank you.

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 David Davies,  OMV AG - Deputy Chairman of the Executive   [3]
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 Well, I have experienced a lot in R&M over the last 12 years of my life but -- I mean in the industry generally, but that anybody would provide a short list of candidates before they are even appointed would be a first for me. So I think we can confidently exclude that.

 As regards the succession process, that's in the hands of the Supervisory Board. Actually, I had a conversation with an investor a few weeks ago about the corporate governance structure within Austria, that the Executive Board or the Supervisory Board are two completely separate entities, none of whom are members of the other.

 The Executive Board is monitored by the Supervisory Board and its performance is judged by the Supervisory Board. So we are accountable to them to that extent. But once appointed, the Executive Board is independent from the Supervisory Board. Clearly, there are a number of transactions given the volume, which may require a Supervisory Board approval as one would expect. But in terms of managing the Company the responsibility lies exclusively with the Executive Board.

 So the appointment and otherwise of Executive Board members is a job for the Supervisory Board. And as I have said, if that's the case, then the succession process is one that they will manage. But I can say with complete confidence that a short list of candidates before anybody is finally appointed will certainly not be something that we are doing.

 Downstream, I think it's a little bit too early to get into the quantum of what might be the results of the necessary restructuring into the gas and power business. But you mentioned specifically whether this could include asset disposals, and I think it's too early to say quite concretely on that. But I would most definitely say that we wouldn't exclude that as we look at the portfolio.

 And then as regards the capital expenditure, there was quite a lot within our capital expenditure guideline going forward, less so of course in the nearer term, 2014 in particular, but going forward as we look at 2015 and 2016, which related to projects which were not yet committed into our production target number and were not yet sort of finally approved as it were.

 So that's the area where you have clearly got the greater degree of flexibility. We are certainly not suggesting for a second that any of the non-operated projects which are clearly full in stream now in terms of the development expenditure are going to be impacted in any way -- in any way significantly at least.

 But the target we will assess is over the next three years despite a more challenging oil price environment to get as close to a neutral free cash flow as we can. And more on that I would say in quarter four. It's a bit work-in-progress at this point in time. But I think as you saw in 2008 when of course the oil price collapsed even more rapidly, you would be surprised what's committed and what's flexible when you really need to react as it were. And then that's the environment we are currently in right now.

------------------------------
 Haythem Rashed,  Morgan Stanley - Analyst   [4]
------------------------------
 Okay, thank you. That's very helpful.

------------------------------
 David Davies,  OMV AG - Deputy Chairman of the Executive   [5]
------------------------------
 Thanks.

------------------------------
Operator   [6]
------------------------------
 Hamish Clegg, Merrill Lynch.

------------------------------
 Hamish Clegg,  Merrill Lynch - Analyst   [7]
------------------------------
 Thanks for taking my question and, yes, great news on your downstream margin uptick, which looks very good. A couple of questions again just focussing a little bit on CapEx. I was just wondering sort of just to expand on that, could you maybe give us some color on what proportion of your volumes are uneconomic at an oil price below $80 if that environment was to stay?

 And just sort of staying on the oil price theme, your gearing at 35% is pretty close to your target ceiling of 30%, but you have got a $100 reference. How flexible can you be for how long if we saw, say for example, $80 throughout 2015? Would there be a degree of having to see things cut back?

 And also, do you think you can comment on the Q4 refining environment, because some of your other competitors said that the positive moves in Q3 have definitely continued into Q4. Is that something you are seeing in your region?

------------------------------
 David Davies,  OMV AG - Deputy Chairman of the Executive   [8]
------------------------------
 The last question is the easiest part in that we can certainly confirm that, that refining margins have actually stayed relatively robust. We repeat that the sort of fundamental structural challenge we don't see -- they are being addressed to some degree and there's a lot of speculation about what may happen next as it were. But the reality of the situation is that there's still a long way to go. So we would not be surprised if at some point they started to soften, and I have been rather cautious in the guidance that we have given on that basis. But it remains a fact absolutely that so far in quarter four the refining margins have stayed relatively strong.

 What's an economic below $80, I think Jaap may have something to say on that as well. But I think it's a little bit too early to be panicking. I think clearly $80 is a lot less helpful than $100 was. And we said repeatedly that our long-term assumption had been $100, as you yourself just repeated, Hamish.

 So the environment is more challenging and we are assessing that as we speak. One of the key elements of that is, well, how long that we are going to have this $80 environment? Is this now the new world or in fact could it even go lower? Or is there going to be some point in time during this cycle some response from suppliers, which may actually lead to some hardening?

 We have no idea on that. We have seen obviously as you have the pundits producing some quite wide ranges. But we are assessing it very carefully. And as I say, I'd rather leave it to -- till quarter four, where we can give you a bit more flavor.

 I think that probably touches on your other question in terms of gearing. We do -- with the 35% gearing we are still in a relatively strong position. But clearly, if your free cash flow is going to be negative for some more years, then you are going to be deteriorating that position. And that's what we are very anxious to avoid; it doesn't happen so that we stay in a position where our investment grade is as strong as it is now and our gearing ratio doesn't materially deteriorate from -- alter from where we are right now.

 I remind you -- I mean there's a -- the projects, as I mentioned a second ago, and clearly Libya is something of a wildcard. But within our 400,000 barrels a day target, we always assumed Libya, Yemen, Tunisia and such like would be re-stabilized as it were. So that was always something of a challenge.

 But as I mentioned, the last couple of weeks we were -- our production was quite a bit higher. In Libya we are producing about 24,000 barrels a day and that contributed then to a Group total of 335,000 barrels a day. And over and above that, clearly you have got 8,000 barrels still missing from Libya. That gets you to 343,000 barrels a day. And you have got three major projects and that's Schiehallion redevelopment coming on stream. They have the redevelopments in Norway, as well as the operated developments in Tunisia of Nawara, which would also substantially add to that.

 So our production is going to increase. We have said that this review of our CapEx may actually cause the date of arrival at the 400,000 barrels a day being deferred. But the projects which were going to get us there are still going to be executed. And you can see from that then our cash flow would also start to improve as those activities move from the investment phase to the production phase. And that's clearly going to be something that's also happening over the next two or three years.

 So we are not slashing our wrist by any means, but I think it pays to be cautious during this environment.

------------------------------
 Jaap Huijskes,  OMV AG - Executive Board Member, Exploration & Production   [9]
------------------------------
 And again we will update you on what exactly we are shifting and what the impacts are and what the capital guidance is when we do the Q4 results in February. But of course you tackle it on multiple fronts and we will tackle in OpEx, we will tackle our exploration spend. But coming back to CapEx, clearly the first things we are looking at are early commitments for projects that are coming on stream much later than 2016. Some of those we will push back. We will be looking at annual programs, where we basically use the creaming curve to make sure that we drill the very best wells, and we drop one or two rigs. But clearly we are also challenging costs, where we are retendering rigs because the market is clearly changing.

 And ultimately, yes, there are one or two projects where we will slow down spend a little bit. So you should expect the 400,000 barrels a day to maybe turn up slightly later, but not overdramatize it, because, as David said, most of that is on its way and it's quite frankly irreversible.

------------------------------
 Hamish Clegg,  Merrill Lynch - Analyst   [10]
------------------------------
 Brilliant. Thanks for your answers, guys.

------------------------------
 David Davies,  OMV AG - Deputy Chairman of the Executive   [11]
------------------------------
 Thanks.

------------------------------
Operator   [12]
------------------------------
 Nitin Sharma, JP Morgan.

------------------------------
 Nitin Sharma,  JP Morgan - Analyst   [13]
------------------------------
 A couple of questions if I may; the first one on gas price liberalization in Romania. I think you mentioned that gas prices are -- gas price increases are behind us. So is it fair to conclude that the earnings upside from this source is now factored in?

 The second one on dividend, clearly the payout ratio will have to expand if you decide to maintain -- or if you decide to maintain the dividend with lower oil price assumptions, all other things being equal. Is dividend also a potential lever to source cash especially when you talk about cash breakeven being the key target for 2015-2016? Thank you.

------------------------------
 David Davies,  OMV AG - Deputy Chairman of the Executive   [14]
------------------------------
 The second question is the easiest to answer. The dividend is not something that we are looking at. You attended, Nitin, the E&P Day that we had in February this year where we talked about cash flow once we actually start to bring these barrels on stream. And I have mentioned the projects which are going to contribute to that. Clearly, they are going to be bringing less on stream if were in $80 rather than $100.

 But moving from investment phase to production phase is clearly always going to be cash generative and that should enable our position as you look two to three years out to actually improve correspondingly. And as a consequence, we wouldn't be looking at cutting the dividend in the interim unless something dramatic really happened, which is not on our radar screen at this point in time.

 The earnings upside from Romania has gone to the extent that the liberalizing price was going to get close to the market price, because as we have seen the market price has come down. If we expect the market price to improve -- and of course there are a wide range of expectations in terms of what could happen to the European gas price -- then that earnings upside is reinstated as it were, because the volumes which would then be subject to market pricing will now be a lot higher than they were previously because of course the Romanian volumes would not otherwise have moved with the market. Now they will.

 The question therefore is, what is the upside from the gas price if any? So it's not about upside from the regulation as it were if you mean that the market price remains stable and high. It's now that given that we do have a market regime in Romania for the industrial users, the question, what will happen to the European gas price? And that's the real question that's relevant now.

------------------------------
 Nitin Sharma,  JP Morgan - Analyst   [15]
------------------------------
 And, David, if you allow maybe a follow-up. What's the tax status on these increased earnings from the increased catch-up in gas price -- liberalized gas price versus where the market price is?

------------------------------
 David Davies,  OMV AG - Deputy Chairman of the Executive   [16]
------------------------------
 It remains as it was when the prices started to increase two years ago, and that is basically that approximately 55% is taken in all taxes -- and that includes royalties, that includes corporation tax from the extra profit that we make. So every element of taxes amounts to approximately 55% and the balance remains with Petrom.

 The law which permits that actually expires at the end of this year. As you are aware, there's the tax stability clause in terms of the Petrom privatization. So we clearly expect changes to both during the coming year.

 But as you may be aware, there's a presidential election which has had one round and is going to its second round in a week or two's time in Romania. Once that has concluded, that should provide a degree of political stability in Romania and then we will be in a position to talk more concretely.

 There has been little or no discussion really on the subject for the last six months to be perfectly honest as of course we got into the political process of electing a new president. But we expect next year, probably earlier to start that dialogue again.

------------------------------
 Nitin Sharma,  JP Morgan - Analyst   [17]
------------------------------
 Thank you.

------------------------------
 David Davies,  OMV AG - Deputy Chairman of the Executive   [18]
------------------------------
 Thanks.

------------------------------
Operator   [19]
------------------------------
 Mehdi Ennebati, Societe Generale.

------------------------------
 Mehdi Ennebati,  Societe Generale - Analyst   [20]
------------------------------
 I will ask two questions please; the first one regarding refining. So if we look at your refining and marketing split, we can see that the EBIT from refining was EUR70 million in Q3 with refining margins indicator of $4.9 per barrel. If I look at Q3 2012 with $5.3 per barrel refining margin indicator, you have had refining EBIT of EUR140 million, meaning twice the one that you had this quarter.

 I just would like to understand how do you explain this difference? Probably there is some Bayernoil contribution there, but is there something else there please? So this is the first question.

 The second question, regards with the gas and power, especially the tariff increase in Romania. Could you just tell us currently what is the industrial price for Romanian [industrials]. Is it RON119 per megawatt hour as it was scheduled previously, let's say?

 And I will add another question, please, regarding Borealis. All other things being equal which level of, let's say, contribution should we expect in 2015 per quarter post Borouge contribution increase, please? You have made something like EUR65 million or EUR60 million contribution this quarter. Should we consider it as a normal contribution per quarter for the near term? Thank you.

------------------------------
 David Davies,  OMV AG - Deputy Chairman of the Executive   [21]
------------------------------
 Okay. Mehdi, the refining question, you are absolutely right, clearly in 2012 we would have had a contribution from Bayernoil. But I'm afraid I don't have the precise answer at hand. What I will get is I will get Felix to ring you back and he can go through that with you and reconcile it for you.

 The gas and power tariff in Romanian leu, I'll just get that for you in a second -- is RON89, RON89.4 per megawatt hour. I don't know whether it was your question relating to per thousand cubic meters or is it per megawatt hour?

------------------------------
 Mehdi Ennebati,  Societe Generale - Analyst   [22]
------------------------------
 No, it was per megawatt hour, yes.

------------------------------
 David Davies,  OMV AG - Deputy Chairman of the Executive   [23]
------------------------------
 Yes. And the level scheduled from the 1st of April, 2014 was RON89.40. So you can see -- what the original plan was that it would rise to RON119. But that of course presupposed that the European gas market itself would stay stable. In fact what has happened is, as I showed you in that chart in my presentation, the Romanian -- so the European market price has come down and met the regulated price increases on the way up quite frankly.

 So the regulator said already during this year there will be no more changes to the price because if we push to the RON219 you wouldn't be able to sell it because it would be complicated because there's no import pipelines for commercial gas into Romania either. But certainly the RON119, you would have been higher than western competitors and that was never the intention of the regulator.

 So we stopped the increases and we are now effectively in a market, he said, that in quarter four now a market condition is now prevailing in Romania. It's not quite a perfect market of course because there is no infrastructure to get our gas out of the market or indeed to get commercial volumes in, in any great volume other than from Russia, and that's even more expensive.

 But it's at least one major step in the road towards full liberalization, albeit at the lower level than the original target price.

 Then the question with regard to Borealis, what is interesting, although the Borouge venture is quite profitable clearly with a relatively favored feedstock price, a relatively favorable tax regime, it is unfortunately highly sensitive to the oil price.

 Because whereas in petrochemicals margins you typically look at the naphtha cost and the polyethylene and polypropylene price against that, in Borouge it's somewhat different because it's not the margin, it's the absolute level of the price which is of relevance here. So with the sinking oil price, that will obviously adversely impact the contribution that Borouge is going to be generating.

 So I wouldn't like to give you any concrete guidance. We will try to give you a little bit more perhaps in quarter four. But I think we can say in confidence that as Borouge volumes start to increase now and the thing starts to mature to its full capacity under almost any scenarios, the contribution from Borealis should be quite noticeably higher next year.

------------------------------
 Mehdi Ennebati,  Societe Generale - Analyst   [24]
------------------------------
 Okay, thank you very much. Maybe I will just add an additional question please regarding the E&P. When you decided to purchase or to increase your stake on Rosebank, which kind of brent price assumption did you use, please?

 And now with crude oil price at around $83 per barrel, do you still consider that the internal return rate is above 10%, let's say, a two-digit number? And finally, with decrease --

------------------------------
 David Davies,  OMV AG - Deputy Chairman of the Executive   [25]
------------------------------
 These are now two supplementary questions, Mehdi. Let me just answer this last one for you on the oil price assumption for Rosebank and where we are going forward.

 As we have said, the underlying assumption for brent, when we made the acquisition from Statoil of which clearly the increased stake in Rosebank was a part, we used about $100, rising to $105 after three or four years and actually kept it flat at that point in time.

 Maybe Jaap can give a little update on where things are with Rosebank in terms of the discussions. But as you just pointed out to me, we are talking about production coming onstream towards the end of the decade in terms of Rosebank. So it's going to take some fairly clever thinking to look into the crystal ball in terms of where prices will be. But it's a long way from the current situation that's for sure.

------------------------------
 Jaap Huijskes,  OMV AG - Executive Board Member, Exploration & Production   [26]
------------------------------
 Correct. I really have nothing to add to that at this stage. I mean the current oil price has got very little to do with what you expect to have at the end of the decade. And that's more relevant for (inaudible) decision, which we are not facing today. We are facing about a year or so from now.

------------------------------
 Mehdi Ennebati,  Societe Generale - Analyst   [27]
------------------------------
 All right, thank you very much.

------------------------------
 David Davies,  OMV AG - Deputy Chairman of the Executive   [28]
------------------------------
 Thanks.

------------------------------
 Jaap Huijskes,  OMV AG - Executive Board Member, Exploration & Production   [29]
------------------------------
 And I think more relevant, Mehdi, is that we are currently looking at a cost picture that's similar to slightly reduced from what we envisaged when we acquired.

------------------------------
 Mehdi Ennebati,  Societe Generale - Analyst   [30]
------------------------------
 Okay. So you still have, let's say, thanks to the clear price decrease, some pricing power to negotiate the CapEx requirement for Rosebank?

------------------------------
 Jaap Huijskes,  OMV AG - Executive Board Member, Exploration & Production   [31]
------------------------------
 Well, I think it's the other way around. We think the market is changing and we are going to make sure that we can fully utilize that.

------------------------------
 Mehdi Ennebati,  Societe Generale - Analyst   [32]
------------------------------
 All right, thank you very much.

------------------------------
 David Davies,  OMV AG - Deputy Chairman of the Executive   [33]
------------------------------
 Thank you.

------------------------------
Operator   [34]
------------------------------
 Matt Lofting, Nomura.

------------------------------
 Matt Lofting,  Nomura - Analyst   [35]
------------------------------
 Just two quick questions left please, sort of more clarification as much as anything else. Firstly, when you talk about free cash flow or sort of cash flow neutrality through 2015 and 2016, if you could just confirm whether you are including any assumption around prospective disposals in that view or whether you are focusing on cash flow neutrality on an organic basis pre-disposals?

 And then secondly, on gearing, David, earlier in your comments I think you referred to an expectation that gearing potentially comes down into year end. I just wondered if you could clarify if that was the case, and secondly, if so, why, given sort of the lower oil price? Thanks.

------------------------------
 David Davies,  OMV AG - Deputy Chairman of the Executive   [36]
------------------------------
 Well, again the last question first perhaps. The gearing -- clearly I said actually this that depending on what happens to the oil price. Although clearly we are not expecting in our calculations it certainly leaps back up to $100. Rather it stays somewhere similar to where we are now, roundabout the $85 level.

 And the predominant reason we expect it to come down is that we had a particularly tough third quarter on working capital. And that should change during quarter four.

 Part of the reason that we had a tough quarter three has been that we have increased storage in the gas business. And that has been helped by the changed environment in gas given that the spot price has come down, so there's some winter spread has re-established itself.

 But also we had some effect unwinding from the disposal of Bayernoil, certain payables which was still on our books which we paid during quarter three, which clearly is not going to be repeated in quarter four. So that would expect us to be able to turn the position around somewhat.

 But it's not going to go from 35 to 25. It's just going to come down by 1 or 2 percentage points we expect. But we will see. If the oil price collapses, then the situation clearly will be different. But we are not planning on that basis at least at this point in time.

 And then as regards free cash flow after disposals, I don't really think at this point of time we will be planning on any massively material disposals within those numbers. There may be some. We have said repeatedly that we would look to dispose a part of our stake in Rosebank once we had a clearer path to FID, and we believe that clarity is starting to establish itself now. So there is no news there.

 But over and above that, there is no sort of earth-shattering event which is going to be reflected in that. And what we are really trying to do is establish a broadly neutral free cash flow after dividend of course, but on the basis really that's -- just really what I have just said to you.

------------------------------
 Matt Lofting,  Nomura - Analyst   [37]
------------------------------
 Great. Thanks very much.

------------------------------
 David Davies,  OMV AG - Deputy Chairman of the Executive   [38]
------------------------------
 Thanks.

------------------------------
Operator   [39]
------------------------------
 Henri Patricot, UBS.

------------------------------
 Henri Patricot,  UBS - Analyst   [40]
------------------------------
 Just a couple of quick questions from me. The first one is a follow-up on a previous question on Borealis. As you said, you expect the contribution to increase noticeably in 2015. I was wondering if it was the same from the dividend that you expect to receive from Borealis. Will it take a bit more time given the level of debt at Borealis?

 And the second one is just a clarification on the production guidance for 2014. So in the 210,000 now today that you mentioned, how much you include for Libya? Thank you.

------------------------------
 David Davies,  OMV AG - Deputy Chairman of the Executive   [41]
------------------------------
 The Borealis dividend -- and it will likely track, shall we say, following what may -- what the contribution from Borouge is. It's more dependent on the debt level in Borouge rather the debt level in Borealis, because Borouge has been funded -- or very largely has been highly leveraged with debt secured of course by ADNOC, which has lent money into the venture.

 And clearly part of the cash flow that's generated goes to already paying that debt down fairly quickly and part goes towards dividend. But it is such a strongly cash generative operation when it is fully on stream, and it has been investing billions per year for the last six or seven years and that's now clearly coming to an end.

 So the cash flow should start to improve and that will ultimately start to come in dividends. But you will see the profit next year before you see the dividends. But fairly soon thereafter given the overall strong cash flow of the venture, you should start to see the debt being showed up into dividends of Borealis and then of course out of Borealis into its two shareholders.

 Then the other question was?

------------------------------
 Jaap Huijskes,  OMV AG - Executive Board Member, Exploration & Production   [42]
------------------------------
 I'll take that first. So production guidance for the year, clearly David has already indicated we have had a very good October and net result of that is that, Libya being there or not, of course it's got a decreasing impact on the year average. So if I look at the rest of the portfolio, we can get to about the 310,000 barrels a day without Libya.

 Having said that, if Libya stays at the current level for the rest of the year, we are not going to be an awful lot above that because simply there is only two months left in the year.

------------------------------
 Henri Patricot,  UBS - Analyst   [43]
------------------------------
 Okay, thank you.

------------------------------
 David Davies,  OMV AG - Deputy Chairman of the Executive   [44]
------------------------------
 Thanks.

------------------------------
Operator   [45]
------------------------------
 Joshua Stone, Barclays.

------------------------------
 Joshua Stone,  Barclays - Analyst   [46]
------------------------------
 Two please; firstly, on your gas supply contract, are you able to clarify on how much is currently oil linked and whether the low oil price has any impact on your renegotiations with Gazprom?

 And then secondly, given your focus on free cash flow, do you still think having a long-term production target is the right way to run the business? Thank you.

------------------------------
 David Davies,  OMV AG - Deputy Chairman of the Executive   [47]
------------------------------
 The gas supply contract in actual percentage in terms of what is oil, we haven't disclosed. What we have said is that -- clearly the more typical byproduct of the negotiations with Gazprom is that the proportion of the volume which is linked to gas -- which is linked to oil as opposed to linked to the hubs goes down as you would logically expect, otherwise we would still be booking massive losses on those transactions.

 And what I can say at this point in time is the percentage that's linked to oil is clearly a lot lower than it was a couple of years ago. There is still some, but not all to the extent that there is some that will help us.

 But clearly the purpose of the negotiations that we are pushing with Gazprom is really to try to get all of our gas that we buy from them linked to the market that we are trying to sell it into because otherwise you have got a commodity price risk, which was never the role that the wholesaler should be taking on.

 I'm sorry, I lost your last question. Just hit me again with it briefly.

------------------------------
 Joshua Stone,  Barclays - Analyst   [48]
------------------------------
 Yes, sure. Given the focus on free cash flow, whether it's all right still to have a long-term production target?

------------------------------
 David Davies,  OMV AG - Deputy Chairman of the Executive   [49]
------------------------------
 We were never driven by the production target. I think that's something of a misnomer. The production target was a result of the developments that we had in our roster, which were under expected on stream dates and expected production levels, and that produced a number, which we communicated to the market.

 That should never have intended to been interpreted as something that we would kill for at all costs in terms of what it meant for value and such like. All we have done at this point in time is basically say that within that roster and given the oil price developments that we have now, clearly the cash that we are expecting to be able to generate from the core operations to fund those investments is not likely to be as strong as we would have liked it to have been. And then as a consequence, it's appropriate to review the level of CapEx which may have an impact on that production.

 But the production target was never the be-all and end-all. We simply laid out a schedule of when these projects were expected to come on stream. These were value-creating projects. We still believe that to be the case. But clearly the lower oil price has not been helpful to that. But if they deliver as they are expected to in terms of the timing and the volumes that are expected to come out of them, then that production will flow through and it may not be 2016 that we hit, but it will be fairly soon thereafter we hope.

------------------------------
 Joshua Stone,  Barclays - Analyst   [50]
------------------------------
 Okay, very clear. Thanks.

------------------------------
Operator   [51]
------------------------------
 [Mark Corpulos], Jeffries.

------------------------------
 Mark Corpulos,  Jeffries - Analyst   [52]
------------------------------
 I just had a quick question referring to your comment around Romania and then around the fiscal regime and hopefully some clarity there into next year. Bearing that in mind, when you come back to the market in February and give an update on the capital spending of the next few years, by that point is it your assumption that you will have clarity on Romania and the fiscal regime going forward?

------------------------------
 David Davies,  OMV AG - Deputy Chairman of the Executive   [53]
------------------------------
 It's hard to say to be perfectly honest and it's out of our hands. At the end of the days, it's a decision that the Romanian politics is ultimately going to have to take. If they have taken it by then or there's some clarity or some indication to what direction things are likely to go, then clearly we will communicate that. But unfortunately it's not something we can control.

 What will be the case by then is we will have clarity in terms of the political spectrums and who you are speaking to. And that will be important because you are going to have several years of stability at that point in time. And I think the message we have always communicated is that we will continue under every scenario frankly to invest very heavily in Petrom.

 The oil -- the Black Sea discovery is clearly a potential game changer (inaudible) as much for Petrom, but for the industry generally in Romania. And our strong belief is that a degree of predictability and stability within the fiscal regime is part and parcel of encouraging the necessary investments not just from Petrom, but for many other international players who are now active in that market.

 But in terms of this is now what the new regime will be, I would love to hope that we could say something to you quite specifically and directly in February, but we simply can't control that. It's not our decision.

------------------------------
 Mark Corpulos,  Jeffries - Analyst   [54]
------------------------------
 Sure. Thanks very much. So I just had one other question as well regarding the Habban development and some of Jaap's comments. Do you still feel that your guidance on the cost of that project, is that still appropriate given some of the changes you have been making around the early production systems?

------------------------------
 Jaap Huijskes,  OMV AG - Executive Board Member, Exploration & Production   [55]
------------------------------
 So we haven't guided the cost of this quarter. I don't think it's going to change materially because the amount of hardware you can put in the field is quite limited. The amount of people that you can put in the field is quite limited. So the actual scope for escalation isn't that big, and these EPFs, they don't cost an awful lot either.

 You also got to recognize that at the end of the day this is a PSC. So cost and production is a different relation in a PSC like the one that we got in Yemen than what you would see in a straightforward concession agreement.

------------------------------
 Mark Corpulos,  Jeffries - Analyst   [56]
------------------------------
 That's great. Thanks very much.

------------------------------
Operator   [57]
------------------------------
 Alastair Syme, Citi.

------------------------------
 Alastair Syme,  Citi - Analyst   [58]
------------------------------
 If I think back to end 2008, one thing you did was hedge a bit of your production. Can you talk about your thinking on that subject at this time? Secondly, can you just talk about how the economics of the FRDs in Romania and Austria stand up to this oil price? And then finally, could you just remind us your cash flow and earning sensitivity to the oil price? Thank you.

------------------------------
 David Davies,  OMV AG - Deputy Chairman of the Executive   [59]
------------------------------
 Let me take the first and the last, Alistair. Yes, hedging was something we leaped upon very quickly in 2008. I think the circumstances were a bit different of course. We had sort of a global collapse in 2008 and securing cash flow to simply survive was sort of fairly high on people's priorities.

 Also, what was happening with the oil price was fairly precipitous. The decline was from a very high number to a very low number fairly quickly. And we were able to get in quickly.

 I mean we clearly monitor the situation. We have internally a number of triggers actually which we learned from 2008 that we need to be more sophisticated in terms of when we sit down and discuss it. And we haven't yet reached that point, although clearly we are nearer to it than we would otherwise been at $100. But we haven't taken any decision at this point, nor that we hedged anything at this point in time.

 Just remind -- I'm getting so old -- Alastair, what was the third question that you asked me?

------------------------------
 Alastair Syme,  Citi - Analyst   [60]
------------------------------
 Oil price sensitivity

------------------------------
 David Davies,  OMV AG - Deputy Chairman of the Executive   [61]
------------------------------
 Yes, the oil price sensitivity. For every dollar on the oil price up or down, it's broadly above EUR40 million of operating profit, against which you need to set sort of the divisional tax rate, which is -- depending on which assets you are operating at that point given Libya's contribution. But 50% to 55% as an average.

------------------------------
 Alastair Syme,  Citi - Analyst   [62]
------------------------------
 Okay, thank you.

------------------------------
 Jaap Huijskes,  OMV AG - Executive Board Member, Exploration & Production   [63]
------------------------------
 And for this in Austria and Romania are by and large very robust against the oil price. The biggest sensitivity to oil price or the biggest dropouts from oil price don't come from the FRDs. They come from the wells that we drill in annual programs, which we drill on a creaming curve, where immediately when this happens of course you go to the end of the creaming curve, you start cutting some of the more marginal wells off. The FRDs by and large are very robust against the current oil price scenario.

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 Alastair Syme,  Citi - Analyst   [64]
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 Okay. So you mean marginal wells in Romania and Austria?

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 Jaap Huijskes,  OMV AG - Executive Board Member, Exploration & Production   [65]
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 Correct. So we drill wells from the two [headers]. We drill them as part of the fuel redevelopment projects; by and large those are very robust against the current oil price scenario.

 The rest you drill on an annual program. You optimize that annual program continuously based on a creaming curve and that creaming curve changes during the year of course based on what you find with the wells that you drill, including the new field exploration wells, which may lead to follow-up that's better than the tail end of the curve.

 So you continuously optimize that and that's where you cut the tail end off. That's also where you will see us make some of the CapEx savings over the next two years.

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 Alastair Syme,  Citi - Analyst   [66]
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 Brilliant. Thank you very much.

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Operator   [67]
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 Mark Bloomfield, Deutsche Bank.

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 Mark Bloomfield,  Deutsche Bank - Analyst   [68]
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 Just a couple of questions for Jaap please. First of all, it looks like you are going to have another fairly active year with the drilling next year. I'm just wondering if you need to sustain spend that's around EUR700 million to deliver that program.

 And as a follow-up, I just wondered if you could give us a little more detail on the appraisal program for Wisting next year.

 And the second question, Jaap, just wondered if you could give us a sense of progress at Bina Bawi just thinking around the path to any investment decision or perhaps early production. Thanks.

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 Jaap Huijskes,  OMV AG - Executive Board Member, Exploration & Production   [69]
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 So I will take them in order. Exploration spend in 2015, we are actually planning to take that slightly down again. Specific guidance we will give you in February, but we do foresee a small reduction there too -- or a reduction there too.

 In that reduced program, we currently still expect to drill a third appraisal well -- or a second appraisal wells, sorry, in Wisting next year. So that's still in the schedule.

 On Bina Bawi, I think I have said this before, early production of oil is out of the question. Simply there isn't enough oil left to make that worthwhile. Early production of gas of course is a completely different matter. That by and large does not exist. To produce gas you need to have the full facilities in place.

 And what we said previously is, with Bina Bawi turning from an oil into a gas discovery that's making the plan for development of Bina Bawi difficult from a technical point of view, different from a commercial point of view and difficult from a political point of view, because clearly the amount of gas that we think we found there isn't for domestic consumption or that could be exported.

 So clearly this has therefore becomes something that's very complex and therefore is going to take a significant amount of time and we are going to take that time.

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 Mark Bloomfield,  Deutsche Bank - Analyst   [70]
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 Thank you very much.

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Operator   [71]
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 That was the last question. I will now hand back to David Davies for his closing comments. Please go ahead.

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 David Davies,  OMV AG - Deputy Chairman of the Executive   [72]
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 Well, thank you as ever, ladies and gentlemen, for your attention, for your questions. If you do have any follow-up, particularly more detailed questions, then as ever please don't hestitate to contact Felix Rusch and the team in Investor Relations. Thank you very much.

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Operator   [73]
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 That concludes today's telephone conference call. A replay of the call will be available for 1 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. You may now replace your handsets.




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