OMV Group Report January – September and Q3 2016

• Q3/16: Clean CCS EBIT at EUR 415 mn; clean CCS net income attributable to stockholders at EUR 447 mn
• Positive free cash flow after dividends at EUR 239 mn in Q3/16
• Upstream production of 301 kboe/d
• Robust clean CCS EBIT contribution from Downstream Oil and Downstream Gas
• Sale agreement for 49% stake in Gas Connect Austria signed
• OMV divests its wholly owned Upstream subsidiary in the UK for up to USD 1 bn

Rainer Seele, CEO of OMV: “OMV continues to deliver on its strategic targets. We further optimized our portfolio by selling a 49% stake in Gas Connect Austria, the gas transportation business. This will bring us sales proceeds of EUR 601 mn at closing in Q4/16. We also continued to optimize our North Sea portfolio. OMV signed an agreement for the sale of 100% of the shares in its wholly owned Upstream subsidiary, OMV UK, to Siccar Point Energy Limited for up to USD 1 bn. In the third quarter, OMV also continued to stringently implement its cost reduction program. OMV will achieve cost reductions of EUR 100 mn in 2016 and EUR 150 mn in 2017. In Upstream, we continue to focus our investments on projects delivering profitable barrels. This enabled OMV to reduce its CAPEX program from the initially targeted EUR 2.4 bn to EUR 2.0 bn in 2016. In 2017, we now plan to invest EUR 2.2 bn, a decrease of EUR 200 mn. All our efforts are reflected in OMV’s resilient earnings development despite the continuously challenging market environment. OMV delivered a robust clean CCS EBIT of EUR 415 mn in Q3/16. Moreover, OMV generated a positive cash flow, with an operating cash flow of EUR 652 mn and a free cash flow of EUR 239 mn.”

Group performance

Third quarter 2016 (Q3/16) vs. second quarter 2016 (Q2/16)

Consolidated sales increased by 14% vs. Q2/16, mainly due to higher Downstream Oil sales reflecting seasonally higher volumes as well as prices. Clean CCS EBIT increased from EUR 214 mn in Q2/16 to EUR 415 mn, driven by a higher Upstream and Downstream Oil result. The Upstream result benefited from a higher realized oil price and lower costs. Downstream Oil delivered a substantially increased result which was driven by the strong contribution from the retail and commercial businesses. OMV Petrom Group’s clean CCS EBIT amounted to EUR 137 mn, above Q2/16 (EUR 49 mn), mainly due to higher Downstream Oil results and a positive effect in the consolidation line. Net special items of EUR (350) mn were recorded in Q3/16 (EUR (608) mn in Q2/16). As OMV agreed to sell its wholly owned Upstream subsidiary in the UK to Siccar Point Energy, a pre-tax impairment of the disposal group in the amount of EUR 458 mn has been recognized in Q3/16. This impairment was partly offset by a write-up in the amount of EUR 116 mn, related to the ongoing divestment process of an Upstream asset in the Middle East and Africa region. Negative CCS effects of EUR (3) mn were recognized in Q3/16 (EUR 94 mn in Q2/16). The Group’s reported EBIT equaled EUR 63 mn, higher than Q2/16 (EUR (300) mn). OMV Petrom’s contribution to the Group’s reported EBIT was EUR 131 mn, higher than in Q2/16 (EUR 46 mn). The net financial result amounting to EUR 75 mn in Q3/16 improved by EUR 3 mn compared to last quarter. The result from Borealis remained strong and interest expenses decreased following the repayment of a bond at the end of Q2/16. Taxes on Group income amounted to EUR (8) mn in Q3/16. The effective tax rate in Q3/16 was 6% (Q2/16: 49%) Net income attributable to stockholders was EUR 48 mn vs. EUR (168) mn in Q2/16. Clean CCS net income attributable to stockholders was EUR 447 mn (Q2/16: EUR 222 mn). EPS for the quarter was at EUR 0.15 and clean CCS EPS was at EUR 1.37 (Q2/16: EUR (0.51) and EUR 0.68, respectively). Cash flow from operating activities amounted to EUR 652 mn and was below the Q2/16 level (EUR 1,036 mn), mainly due to negative working capital effects which were primarily related in Q3/16 to seasonal increase of accounts receivable in Downstream Oil as well as inventories in Downstream Gas. Free cash flow after dividends amounted to EUR 239 mn (Q2/16: EUR 172 mn).

Third quarter 2016 (Q3/16) vs. Third quarter 2015 (Q3/15)

Consolidated sales decreased by 12% vs. Q3/15, mainly due to lower Downstream Oil sales reflecting lower product prices. Clean CCS EBIT decreased from EUR 495 mn in Q3/15 to EUR 415 mn. The improved results of the retail and commercial businesses as well as the higher Downstream Gas result, almost offset the sharp decline of the OMV indicator refining margin. OMV Petrom group’s clean CCS EBIT was at EUR 137 mn, below Q3/15 (EUR 239 mn), as Q3/16 was negatively impacted by lower oil and gas prices. Negative net special items of EUR (350) mn were recorded in Q3/16 (EUR (1,073) mn in Q3/15), mainly related to the EUR 458 mn impairment of OMV’s Upstream assets in the UK. This impairment was partly offset by a write-up in the amount of EUR 116 mn, related to the ongoing divestment process of an Upstream asset in the Middle East and Africa region. Negative CCS effects of EUR (3) mn were recognized in Q3/16 (EUR (149) mn in Q3/15). The Group’s reported EBIT amounted to EUR 63 mn, higher than Q3/15 (EUR (728) mn). OMV Petrom’s contribution to the Group’s reported EBIT was EUR 131 mn, higher than Q3/15 (EUR 8 mn). The net financial result of EUR 75 mn in Q3/16 increased significantly compared to EUR 9 mn in Q3/15. This development was sustained by a higher contribution from Borealis as well as an improved foreign exchange result. Taxes on Group income amounted to EUR (8) mn in Q3/16. The effective tax rate in Q3/16 was 6% (Q3/15: 36%). Net income attributable to stockholders was EUR 48 mn vs. EUR (456) mn in Q3/15. Clean CCS net income attributable to stockholders amounted to EUR 447 mn (Q3/15: EUR 367 mn). EPS for the quarter equaled EUR 0.15 and clean CCS EPS amounted to EUR 1.37 (Q3/15: EUR (1.40) and EUR 1.13, respectively). Cash flow from operating activities amounted to EUR 652 mn and was below Q3/15 (EUR 1,135 mn). This development was mainly due to cash outflows from net working capital. Free cash flow after dividends amounted to EUR 239 mn (Q3/15: EUR 524 mn). Capital expenditure decreased to EUR 1,359 mn in 9m/16 (9m/15: EUR 1,997 mn). Upstream invested EUR 997 mn in 9m/16 compared to EUR 1,702 mn in 9m/15. CAPEX in Downstream amounted to EUR 357 mn (9m/15: EUR 282 mn), of which EUR 328 mn was invested in Downstream Oil (9m/15: EUR 249 mn) and EUR 29 mn in Downstream Gas (9m/15: EUR 33 mn). CAPEX in the Corporate & Other amounted to EUR 5 mn (9m/15: EUR 13 mn). Compared to year-end 2015, total assets decreased by EUR 1,522 mn to EUR 31,142 mn mainly as a result of a lower derivatives position as well as a reduction of intangible assets and property, plant and equipment as of September 30, 2016. Equity decreased by 2% in comparison to December 31, 2015. The Group’s equity ratio increased to 45% as of September 30, 2016, compared to December 31, 2015 (44%). The cash position increased to EUR 1,748 mn (December 31, 2015: EUR 1,348 mn). Net debt decreased to EUR 3,743 mn compared to EUR 4,038 mn at the end of 2015. On September 30, 2016, the gearing ratio stood at 27% (December 31, 2015: 28%) In 9m/16, inflow of funds from net income, adjusted for non-cash items such as depreciation, net change in long-term provisions, non-cash income from investments and other positions was EUR 2,149 mn (9m/15: EUR 2,579 mn). Net working capital components in the cash flow statement generated a cash inflow of EUR 118 mn (9m/15: cash outflow of EUR 179 mn); the positive impact resulted primarily from lower inventories and higher trade payables. Cash flow from operating activities decreased by EUR 133 mn, compared to 9m/15, reaching EUR 2,267 mn. In 9m/16, net cash from investing activities resulted in an outflow of EUR 1,621 mn (9m/15: EUR 2,297 mn), mainly related to investments in Romania and Norway. This position also included cash outflows for the acquisition of FE-Trading GmbH and FE-Trading trgovina d.o.o. of EUR 57 mn, which reflects the cash consideration of EUR 26 mn paid to the seller and also trade and other financial liabilities amounting to EUR 31 mn. Cash outflow less cash acquired amounted to EUR 54 mn. Free cash flow (defined as net cash from operating activities less net cash used in investing activities) showed an inflow of funds of EUR 645 mn (9m/15: EUR 103 mn). Free cash flow after dividends resulted in a cash inflow of EUR 266 mn (9m/15: outflow of EUR 426 mn). Cash flow from financing activities reflected a net outflow of funds amounting to EUR 237 mn (9m/15: EUR 104 mn), following repayments of a bond and other long-term debt as well as payments of dividends and hybrid coupons during the period. These effects were partially compensated by drawings of new long- and short-term borrowings. This position also includes a cash inflow from contributions by former minority shareholders of EconGas GmbH in the amount of EUR 36 mn. The cash consideration paid for the remaining non-controlling interest in EconGas GmbH amounted to 3 Euro.

Risk management

As an international oil and gas company with operations extending from hydrocarbon exploration and production through trading and marketing of mineral products and gas, OMV is exposed to a variety of risks including market and financial risks, operational and strategic risks. A detailed description of risks and risk management activities can be found in the Annual Report 2015 (pages 31-33). For 2016, the main uncertainties which can influence OMV Group’s performance remain the commodity price risk, FX risk, operational risks and also political as well as regulatory risks. The commodity price risk is being monitored constantly and appropriate protective measures for the cash flow are taken, if required. The inherent exposure to safety and environmental risks is monitored through HSSE (Health, Safety, Security and Environment) and risk management programs, which have the clear commitment to maintain OMV’s risks in line with industry standards. See also the Outlook section of the Director’s report below for more information on current risks.

Transactions with related parties

Please refer to the selected explanatory notes of the interim consolidated financial statements for disclosures on significant transactions with related parties.

Outlook for the full year 2016

Market environment

For the year 2016, OMV expects the average Brent oil price to be at USD 44/bbl. The Brent-Urals spread is anticipated to be wider than in recent years due to increased supply from Saudi Arabia and Iran. The gas market environment in Europe continues to be characterized by oversupply. However, gas prices on European spot markets are expected to show a seasonally upward trend in Q4/16 compared to Q3/16.

Group

• CAPEX (incl. capitalized E&A) is expected to be around EUR 2 bn, thereof 75% in Upstream
• Exploration and appraisal expenditure is expected to amount to EUR 360 mn
• The Group expects to reach its goal of reducing costs of EUR 100 mn ahead of schedule already in 2016 (compared with 2015 as the basis). OMV has set a new cost reduction target of more than EUR 150 mn for 2017

Upstream

• OMV expects total production to be slightly above 300 kboe/d
• The combined production of Romania and Austria is expected to average slightly above 190 kboe/d. In Q4/16, OMV is finalizing an upgrade of surface facilities, including shut-ins at key wells, in the Totea Deep field in Romania
• In Norway, average production is expected to increase to above 65 kboe/d due to additional volumes, resulting mainly from the ramp-up of Edvard Grieg and better performance from Gullfaks and Gudrun
• OMV recently restarted production in two fields in the Sirte basin in Libya. Consequently, OMV expects to generate minor production volumes in Libya in Q4/16. Production in Yemen is not expected to restart during the year since the security situation remains critical
• The sale of a 30% stake in the Rosebank field was closed on October 6, 2016, bringing OMV a cash inflow of USD 50 mn in Q4/16

Downstream

Oil

• Refining margins in Q4/16 are projected to be above the Q3/16 level, along with an increase in middle distillates spreads
• Capacity utilization in Q4/16 is expected to be above 90%. This is supported by the strong performance in all sales channels
• Petrochemical volumes are expected to come in lower in Q4/16 vs. Q3/16 while petrochemical margins are expected to remain on a similar level
• Demand from commercial and retail customers for mineral oil products will remain strong but decline seasonally in Q4/16
• The sale of the Aliaga Terminal in Turkey is expected to be closed in Q4/16
• The sale process of OMV’s wholly owned subsidiary OMV Petrol Ofisi is progressing according to plan

Gas

• Due to oversupply on the European gas market, natural gas sales margins are expected to remain at a similar level as in Q3/16
• Downstream Gas does not anticipate any one-off gains in clean EBIT in Q4/16
• The sale of OMV’s 49% stake in Gas Connect Austria is expected to be closed in Q4/16. OMV will realize sale proceeds of EUR 601 mn at closing
• The power business remains challenging in the core countries in Turkey and Romania

OMV expects Q4/16 clean CCS EBIT to be below the strong level in Q3/16. The main reasons are the seasonal decline in the Downstream Oil business compared to Q3/16. The previous quarter was supported by high product demand during the driving season. In addition, we do not anticipate any one-off gains in clean EBIT of Downstream Gas in Q4/16.

Source: www.omv.com, November 9th