(Bloomberg) -- Costs keep mounting for the wrong turn central Europe's biggest oil and gas producer took into the North Sea.
Austria's OMV AG wrote down another 530 million euros ($593 million) on Wednesday, the latest in a string of impairments that have erased about 3.5 billion euros from its books. The asset revaluation was triggered by a deal announced late Tuesday to sell part of its stake in a North Sea oil field to Suncor Energy Inc.
“Many of these assets are high-cost producers and hence bad at generating cash,” Bloomberg Intelligence analyst Philipp Chladek said. “OMV has to go back to low-cost assets.”
While oil prices were rising, OMV went on an investment binge, building stakes in far-flung assets from the North Sea to New Zealand. The company paid $2.65 billion for shares in Statoil ASA assets in 2013, its biggest-ever deal. Now with crude prices mired in a slump, the Vienna-based company is struggling to recover the expenses needed to get high-cost crude out of the ground and into market.
“We've stabilized the companies finances,” Chief Executive Officer Rainer Seele, who joined the company a year ago from BASF SE's Wintershall unit, told journalists in Vienna Wednesday. “We're reducing exposure to the North Sea and looking for more low-cost production in places like Abu Dhabi.”
Asset Swap
OMV told investors today that a planned asset swap with Gazprom should be signed in the second half. That deal is expected to give Austria access to Siberian gas fields and turn Russia into a “core region” by 2020 as the company pivots away from the North Sea.
Chief Financial Officer Reinhard Florey said that more write downs “can't be excluded” should markets deteriorate. OMV is also trying to sell stakes in its Austria Gas Connect pipeline network and Turkish gasoline retailer Petrol Ofisi.
OMV paid more than $2.5 billion for Petrol Ofisi, which operates 1,785 petrol stations in Turkey and owns the country's largest fuel storage and logistics business. A sale may raise as little as $1.3 billion, according to Bloomberg Intelligence calculations.
“Naturally, the political atmosphere in Turkey doesn't make it any easier,” OMV board member Manfred Leitner told journalists.
To contact the reporter on this story: Jonathan Tirone in Vienna at jtirone@bloomberg.net. To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net, Alex Devine, James Herron
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