Lower production setback for European oil firms
Madrid, May 9, 2009
Spanish oil company Repsol, Austrian rival OMV and Romania's Petrom reported big drops in profit yesterday due to lower oil prices and falling production but refining margins rose.
Repsol said adjusted or clean net profit, which strips out one-off items and unrealised losses related to drops in the value of fuel inventories, fell 48 per cent to 421 million euros ($564 million), beating an average forecast for 346 million.
Repsol's rivals including Europe's largest oil company by market value, Royal Dutch Shell, British BP, Italian Eni also outperformed profit forecasts as they coped better than expected to a halving in oil prices.
Some analysts said Repsol's result was flattered by lower than expected tax and forex charges.
"The underlying operating result implies a challenged performance and we suggest to sell on (share price) strength," our sister publication the Gulf daily News quoted Jason Kenney, oil analyst at ING, as saying.
OMV said clean net income fell 70 per cent in the first quarter to 126m euros, undershooting a forecast for 194m euros.
"We expect that the most important market factors, the oil price, refinery margins and the euro-dollar exchange rate, will continue to experience high volatility," the company said.
"A weak set of first numbers versus peers leaves OMV, the best performing stock in the space, up 37 per cent in dollar terms this year to date, vulnerable to profit taking," David Thomas, oil analyst at Citigroup, said in a research note.
Petrom, majority owned by OMV, posted a 48 per cent fall in first-quarter net profit, including unrealised inventory losses, to 506m lei ($164 million), beating a forecast for 416 million euros.
The result was helped by gains related to hedging contracts and foregin exchange movement, the company said.
All the companies saw big falls in profit from pumping crude and gas, not helped by a continuation of an industry-wide trend of falling output.
Repsol's oil and gas production continued to sag, dropping 5 per cent to 317,000 barrels of oil equivalent per day (boepd) as new field startups failed to match natural field decline.
OMV's output fell 4 per cent to 308,000 boepd, partly due to a 3 per cent drop at its Petrom unit.
Better margins for processing crude than in the same quarter last year helped mute the pain, but margins have weakened since the fourth quarter of 2008 and with new refining capacity coming onstream internationally, the outlook for margins is weak. – TradeArabia News Service