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Austria's OMV to book $73 million writedown over Nabucco pipeline project

Highlights

Austria's OMV said Wednesday it will book a Eur 55 million ($73 million) one-time loss during the second quarter of 2013 from the writedown of assets related to its share of the failed Nabucco West pipeline project.

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The producer also said its oil and gas output slipped 2.6% in the second quarter from year-ago levels due to floods in Austria, technical problems in Kazakhstan and security problems and strikes in Libya.

OMV, the lead partner in Nabucco West, lost out last month to a rival pipeline project to bring gas from BP's giant Shah Deniz field offshore Azerbaijan to Europe.

For years OMV had promoted the Nabucco pipeline to bring Azeri gas to countries represented by the project's other shareholders, namely Hungary's MOL, Romania's Transgaz, Bulgarian Energy Holding and Turkey's Botas.


The producer said it would book the writedown as a net special charge in its second-quarter results.

On production, OMV said its oil and gas output fell to 297,000 b/d of oil equivalent in the second quarter, down from 305,000 boe/d in the year-ago quarter.

"This decrease was partly offset by higher quantities in Romania and New Zealand," the company said in a statement.

In February, the company said it expected total output in 2013 to average around the same level as 2012 -- around 303,000 boe/d.

Late last year, OMV said it was on track to hit a new production target of 350,000 boe/d by 2016, despite its recent production problems in Libya and Yemen.

Sales volumes in the quarter were slightly above the previous quarter, however, reflecting higher liftings in Tunisia and higher gas sales in Austria, the company said.

OMV said its second-quarter earnings were also likely to suffer from weaker oil prices, despite the positive effect of a stronger US dollar versus the Euro.

Exploration expenses were below the previous quarter which was burdened by the write-off of an unsuccessful exploration well in Norway and due to lower seismic costs in Romania, OMV said.

REFINING MARGIN WEAKNESS

OMV said its reference refining margins in the quarter fell sharply over the same period of 2012 and over the previous quarters. The margin averaged $2.48/b in Q2, compared with $4.15/b a year before and $3.01/b in the first quarter this year.

"The OMV indicator refining margin decreased compared to Q1 influenced by weaker middle distillates and naphtha spreads as well as a tightened Urals differential," OMV said.

The company said, however, weaker margins were "almost fully compensated" by higher refinery utilization rates after the scheduled partial turnaround in Bayernoil in first quarter, as well as a seasonal increase in sales volumes and cost reductions.

Refinery utilization rates averaged 94% in the quarter, up from 87% in Q1 and 80% the year before.

OMV plans to publish its second-quarter results on August 13.

--Robert Perkins, robert.perkins@platts.com
--Edited by Jonathan Loades-Carter, jonathan.carter@platts.com