November 10 (SeeNews) - Romania's largest oil group OMV Petrom, majority-owned by Austria's OMV, on Tuesday reported a 33% annual drop in its nine-month net profit to 1.539 billion lei ($537.1 million/358.1 million euro).
Petrom's net profit fell by 2.0% on the year to 615 million lei in the third quarter alone.
"Despite challenging economic conditions, we recorded good overall performance in the first nine months and the third quarter 2009, as results were supported by the effects of our timely response to the deteriorating environment: crude oil hedges for 2009, adjustment of our cost base and operations and the financing secured for our key projects,” OMV Petrom’s CEO Mariana Gheorghe said in a statement.
However, the company's cumulative results for the first nine months were affected by lower crude price, difficult economic conditions and deteriorating margins, marked by the downturn in the commercial and industrial sectors, she added.
“We have started production at the recently drilled offshore wells Delta 6 and Lebada Vest 4, which has helped reverse the downward trend in production. We also reduced the production costs and further strengthened our position in the retail fuels market,” Gheorghe said.
In the near-term, the company expects the oil and energy sector and the Romanian macroeconomic environment to be marked by volatility.
"We maintain our assumption of a weaker leu/euro exchange rate compared to the 2008 average. In the short term, the Romanian leu is likely to depreciate against both euro and US dollar," OMV Petrom said.
For the rest of 2009, the refinery fuels margins are anticipated to remain weak, thus putting heavy pressure on refining profitability. Overall fuels market in Romania is expected to be lower compared to the previous year, with considerable decrease of the commercial sales while retail market is expected to have a slight downward trend.
"In response to the current challenging environment, we will stay focused on our strategic directions and continuous investments, while further reviewing our restructuring options and assessing our business opportunities," Gheorghe said.
OMV Petrom's investments decreased by an annual 42% to 2.713 billion lei in the first nine months.
"All in all, the better-than-expected performance driven by the hedging gains will lead to a short-term positive market reaction in our view," Raiffeisen Capital & Investment (RCI) said in a note to investors.
"However, the fundamental operational conditions do not look very favourable for Petrom. We do not expect an improvement of the situation soon as the profitability perspective for the refineries could move further into the future should OMV decide to stall or postpone the modernization and expansion projects. Additionally, new profits coming from the power generation and a possible move towards renewables will also take considerable time to materialize," RCI added.
"We expect further details on the future of Petrom, especially regarding the refinery modernization, in the coming weeks. Until the new corporate strategy is announced by the majority shareholder OMV, we remain cautious about Petrom and thus confirm recommendation and target price."
In September Austria's Raiffeisen Centrobank (RCB) downgraded to ‘Reduce’ from 'Hold' its recommendation on the shares of Petrom and cut its target price to 0.24 lei per share from 0.30 lei.
The Petrom group has said it expects its 2009 net profit to rise by 8.8% to 1.11 billion lei after falling 43% last year.
Petrom is among the 10 most liquid stocks on the Bucharest Stock Exchange, BVB, and is included in its 10-share blue-chip BET index. Its shares were trading 1.60% up at 0.254 lei by 0923 GMT on Tuesday.
(1 euro=4.2971 Romanian lei)