OMV AG

David Davies - Deputy Chairman of the Executive Board Jaap Huijskes - Executive Board Member

Thank you and good morning ladies and gentlemen. I have here with me Jaap Huijskes, who at the end of my presentation will give you an update on what’s been happening in E&P.

In terms of the first slide of my presentation, just a summary of the results highlights of the first quarter 2015. Our clean CCS EBIT was down by 50% to EUR 333 million, the predominant reason for this being the oil price being also down by 50% from $108 million last year to $54 this year in quarter one.

Production was also slightly lower, 303,000 barrels a day, down by 3%, the two major factors here were Norway which was 10,000 barrels a day higher, unfortunately for reasons which you’re familiar in Libya, 13,000 barrels a day lower. In particular this quarter, we had lower oil sales volumes.

The difference between what we produced and what we sold is quite significant, particularly in Norway where we had no goof up slipping in quarter one this year compared to three in quarter one 2014. And that obviously had its impact on the absolute quantum of the result.

We also had obviously lower lifting in Libya. The downstream result was much stronger from EUR 85 million to EUR 260, due in particular to the very strong refining performance.

The refining margin we had in quarter one this year was $7.40, against $1.60 per barrel last year, so obviously a significant improvement there. Gearing ratio at 35% is actually slightly higher than our long term target; I’ll comment to say more about that when we come to talk about the cash flow.

The economic environment is shown on the next slide. The oil price is quite clear, a quite significant decline over the last 12 months by 50%.

And although we’ve seen some recovery in the second quarter so far, clearly we are a long way below the levels we were enjoying only a year ago. This is partly compensated by the very strong dollar against the euro, but this doesn’t cover up anything like the hit that we’re actually suffering from the reduced oil price.

In the mid you see a slightly chart to that which we’ve previously presented. The yellow line represents the European gas price; the price is the Central European Gas Hub.

This is where the vast majority of our domestic production outside of Romania is priced. Clearly the Russian contracts are priced here now; the domestic Austrian production is priced and of course the Norwegian gas production is priced at a European level which is very similar to the Central European Gas Hub price.

Remaining gas production of course is not priced at this hub; it’s still in a largely now deregulated markets. In the industrial sector we now have a market price which is slightly below the level of the Central European Gas Hub, but of course a third of our gas is still sold in to the regulated sector for private households.

You saw a decline in quarter one this year which in large part was due to the domestic heating companies in Romania now being classified as part of the private sector, in the non-regulated sector and of course it had a negative impact on the gas price that we realize in Romania and of course that’s set into the overall realized gas price up which is shown by the orange line. The indicator refining margin is shared on the right hand side.

Clearly, in quarter three this year; there was a very strong increase. This was due to our recasting the calculation of the refining margin following the completion of the remodernization of the Petrobrazi refinery in Romania, this added $1 to our overall refining margin.

But even ignoring that, quite frankly you can see a very significant increase over the last 12 months in refining margin which so far in quarter two has also continued. Going now to the summary of the results on the next slide, the EBIT on a reported level was down by 66%; financial result was only minus EUR 23 million compared to minus EUR 63 last year.

There is number of factors which come into play here. Borealis had a better result by about EUR 14 million; there was some interest that we paid on a tax provision which was about EUR 11 million last year which didn’t happen this year and a factor also which comes into play is that last year we still had a relatively expensive euro bond which matured at April last year and clearly we refinanced that at a much lower interest rate, and that also accounts for approximately 8 million of the improvement.

The taxes line is also rather unusual; instead of an expense we actually had a negative tax rate charge of a EUR 16 million income. There are a number of reasons behind this, and this is going to be challenge particularly reporting or calculating and guiding on what the expected tax charge would be this year.

Clearly the very low upstream profits have the big impact, because the tax rates on the upstream is much higher. Our downstream profits are taxed either in Romania or in Austria typically, where you have tax rates of respectively 16% and 25%.

So that’s clearly below our long-term average. And with the poor upstream performance that also plays a role.

The reason of negative however has a number of factors, the biggest of which of course is the in the UK where the ring-fenced expenditure supplements incentive and the tax rate change from 62% to 50% caused us to recalculate certain deferred tax positions in quarter one and that led to an amount of increment also of course the level of oil price that we had in quarter one, we had reported losses in Norway which similarly attract a high tax credit. So an unusual tax quarter, which we don’t expect to continue.

However, our tax rate this year is certainly going to be a long way below what we would otherwise have guided with a more normalized oil price, could be somewhere in the 30% range probably towards the lower end of that. Minorities and hybrid capital owners, clearly much lower than last year, down to EUR 58 million compared to EUR 137 million, the vast majority of this is due to Petrom.

Our share of their -- or rather the minority share of Petrom’s profits going from a EUR 170 million last year to EUR 38 million this year. So, that’s the biggest reason for decline here and clearly Petrom also suffering from the low oil price environment.

This brings us then to net income attributable to stockholders of EUR 163 million, 46% down on last year. If you convert that to clean CCS, net income attributable to stockholders, when you remove the Petrom effect and so on, then you come down to a EUR 237 million against EUR 302 million, a decline of 22%, which is also reflected of course in the clean CCS earnings per share of $0.73 against $0.93 a year ago.

On the next page is, special items which is our future report. The only item of significance on this chart is the amount of the CCS losses we incurred as the oil prices been declining during the first quarter compared to last year in particular and that’s again a cost of EUR 109 million in quarter one.

The next page shows the cash flow. Our net income of EUR 221 million down by 49% compared to last year.

Depreciation and amortization are rather similar. Other items minus 67 against 35, is due mostly to the non-cash items such as the contribution from Borealis.

Sources of funds in total therefore down by 33% to EUR 680 million, against EUR 1 billion last year. Net working capital was an outflow of EUR 274 million; we have a number of positions here, tax liabilities at the end of the last year which we paid in the beginning of this year.

What we also know is that much lower our price environment, the benefits of some of the things that we did in terms of working capital reduction over the last two years, do not have a bigger benefits of the lower prices that previously had and this of course also contributed to the negative swing in working capital in quarter one. Cash outflow from investments was over EUR 900 million.

And clearly, this is the biggest reason that we have EUR 517 million net free cash flow after dividend which is of course why the gearing ratio increased to 35% at the end of quarter one. The EUR 935 million invested during quarter one is compared on the next page to the CapEx that was actually spent, EUR 707 million.

While we booked this CapEx, we spent more in cash because of liabilities which existed at the end of December which were paid during quarter one of the amount that invested of EUR 707 million of quarter one, with EUR 754 million with an EBITDA against that. So our operating performance by and large financed our capital investments, and the lion share as ever has gone into E&P EUR 609 million.

And you can see on the right hand side the activity that we were investing in quarter one reflects this level of investment. Norway was the biggest; the Gullfaks, Aasta Hansteen and Edvard Grieg developments, and our ongoing investment in Gullfaks and Gudrun as well, accounted for just over EUR 170 million of the total.

The next biggest area is in workovers and field redevelopments in Romania, which was about EUR 160 million. The next one after this is capitalized exploration which is approximately EUR 90 million in quarter one and then other developments in Tunisia, New Zealand and the UK making up the rest.

Downstream investments of EUR 91 million are compared against an EBITDA number of EUR 378 million, so a particularly strong quarter from the downstream. The next page shows the performance in upstream, two reconciliations here comparing the first quarter of this year with the first quarter last year, on the right hand side, and on the left hand side, the first quarter this year compared to the previous quarter i.e.

quarter four 2014. Prominent on both of them is the realizations, which is down due to the oil price, EUR 185 million against quarter four last year.

Of course quarter four last year already saw much slower oil price scenario in the year but compared to the same quarter last year the decline on realization is much higher, EUR 426 million and clearly it’s the lower oil price by 50% which played a role here. Compared to quarter four 2014, we saw volume also of minus EUR 146 million and in terms of quarter one 2014, the decline was EUR 124 million.

I mentioned already the issue with liftings, and Norway and Libya have clearly been the biggest part of this decline. The Norwegian the things in particular we expect to improve quite considerably in quarter two.

So we will see much of this come back. Low depreciation and production cost mainly in Norway and Romania have helped the reconciliation compared to quarter four whereas compared to quarter one last year, it’s by and large lower exploration expenses; we had number of fields which were absorbed in quarter one last year which is not being repeated in current year.

The next page, here are a couple of KPIs. On the upstream side, our production, as we’ve mentioned already, is down by 3% compared to quarter one last year, compared to quarter four is down by 5%.

The Norway production decreased due to the shut-in in Gudrun which has now come back on stream. Libya production shut-ins have also had a big impact up here whereas Romanian production was actually up slightly by 2,000 BOE per day.

The OpEx decreased quite considerably, $13.95 per barrel now OpEx. FX has clearly played a big role here, the strong dollar given that a lot of our cost of dollar clearly would be in Austria and Romanian activities being the biggest part of this and clearly, we’ve also taken measures following the connecting of the oil prices but service and material costs are much lower due the lower level of activity generally.

On the next chart, you see the same KPI shown out, however, just for Petrom. Production more or less stayed same, in fact slightly higher as we’ve already mentioned.

The OpEx here has come down really quite considerably. And there’s a number of factors here.

Clearly the foreign exchange is also playing the role here and also the reduction of service and material costs generally, lower level of activity, much stronger focus on costs. Now what we also see is a benefit here is a reduction in the asset tax which was introduced two years ago in Romania which thankfully did now partly rescinded and that’s obviously helped our operating expenses here in Romania, so a very good performance on the OpEx side down in Petrom.

Then the next chart shows the same sort of analysis for the downstream. The downstream business as from January this year was consolidated together, so refining and marketing, and gas and power are now shown here added together.

Last year, we produced in the first quarter EUR 85 million of CCS EBIT of which EUR 49 million was in the refining and marketing side and EUR 36 million was in gas and power. Refining margins have clearly been much stronger.

As I said already, the refining margin up to $7.40 compared to $1.60 in the same quarter last year and that’s added about EUR 156 million. The margin contribution was broadly neutral.

However this masked a strong performance in all of our markets with the exception of Turkey, the strong performance being something in the order of 17 million higher than last year. And this unfortunately was lost in Turkey where their relative performance where impact was following the price ceilings introduced by the energy regulator during the first quarter this year.

Downstream gas had a slightly better quarter than last year. Supply, marketing and trading benefited from a better sales performance with both volume and in margin with logistics business was also better but unfortunately their performance was offset by a weaker power performance where margins in Turkey and Romania have adversely impacted the performance of the power plants there.

Key performance indicators, firstly on the next slide, the refining utilization at 92% was up 3% overall, although this masks some movement going on here in Petrom. And you see the blue block here is the utilization of the Romanian refinery, very high in quarter three and quarter four last year and this was really compensating a very low position quarter two as it went into the turnaround, so it clearly had a large volume of crude on inventory to actually process, hence the very high levels of utilization which is now declining now to a more normalized level of 86%, the improvement really compared to quarter four is therefore from the refineries in both Burghausen and Schwechat which averaged 94%.

Natural gas sales volumes as shown clearly Q4 and Q1 being the highest seasonally driven, and natural gas sales volumes overall are up by 9% compared to the same period last year. CapEx is something we’ve talked about repeatedly so far this year.

The guidance that we’re now giving is consistent with what we were saying a few months ago, so 2.5 to 2.8 was the guidance then but we’re now saying as we believe this year will be something of the order of EUR 2.7 billion, predominantly going into the upstream but overall, down by approximately 30% compared to the EUR 3.8 billion one that was invested in the same period last year. The exploration and appraisal budget has been similarly cut by EUR 200 million.

We’re looking at reducing our operating cost and overhead by approximately EUR 150 million. We have defined and agreed with our union representatives a headcount reduction program, again to reduce our cost during this lower price period.

And as we’ve also said, a number of our non-core assets are currently under review with regard to their potentially exiting [ph] the overall portfolio. So, we’ve responded to the reduced price clearly; we’ve had a particularly strong impact as we’ve seen already with the average around $54 [ph] in quarter one.

But as we look forward into the longer term, our financial priorities are showed on the next slide. What we aim to achieve is broadly neutral free cash flow that will not be the case this year.

But as we look forward to 2016 and ‘17, there’s a lot major projects starting to come on stream during that period. Capital expenditure of being equal coming into effect with those projects no longer being invested, and that will be enable us to continue to pay an attractive dividend and to achieve a broadly neutral free cash flow position over that medium term period or maybe some improvement also in the oil price expected as we’ve already started to see this year.

The dividend we will propose tomorrow to the annual general meeting is EUR 1.25 per share. This has already been announced earlier in our quarter four results announcement.

Our target here is to maintain the dividend policy with a long term payout ratio of 30% of net income, clearly EUR 1.25; we’re higher than that because we expect our earnings to improve following our E&P production increases as well as an improvement in the oil price over the medium-term; we will bring that dividend back into line with this 30% target. Our credit rating is something that which we also placed some weight upon, great weight upon.

Maintaining the strong investment grade credit rating has been the lynchpin of our financial strategy over these last 10 years. We have a strong balance sheet; our long-term gearing ratio target remains at or below 30%.

And in terms of liquidity position, we remain quite in strong position as we have been at the past time. And before I hand over to Jaap, the outlook for 2015.

We expect the oil price to move between $50 and $60 in terms of an average. The gas market will remain challenging; and as I said already, the portfolio that we have of gas assets is something that we’re currently reviewing.

The refining margins are expected to decline from the higher that we’ve experienced so far this year. Marketing volumes are expected to be supportive by lower overall oil price and we are certainly seeing that this year.

Our production guidance remains intact at roundabout 300,000 BOE per day with no contribution from Libya or Yemen assumed within that number. CapEx will be about EUR 2.7 million and our exploration and appraisal expenditure something of the order of EUR 500 million.

So at that point, let me hand over to Jaap before we speak -- make sure when we get to the Q&A. Thank you.

Thanks David. A couple of projects updates.

Let me start with Norway. Norway has come up a couple of times.

We’ve got both production and lifting issues in the first quarter in Norway. The production issue was related to leakage, a pipe that burst at Gudrun.

That’s since been repaired, but that’s resulted in an outage at Gudrun for a little bit more than four weeks, which has an impact in the quarter of somewhere between 8,000 and 10,000 barrels a day. In addition to that we had a lifting issue in Norway but in a lot of ways that’s worked out very well for us.

We accelerated the lifting out in the first quarter into November last year and thereby we avoided the low price in January and some other liftings have dropped out of the first quarter into the start of the second quarter, again, basically, on a better place in the oil price curve than they otherwise would have been -- that’s a bit of luck of course; you don’t plan those things. But that’s how the liftings have worked.

So, we’ve seen an exit production shortfall and the lifting shortfall will correct itself in Q2 and will work for us production -- oil price wise. Other updates, Edvard Grieg is basically ready, sitting on the barge and should be lifted on its jack at sometime in June, really waiting for the lifting margin to turn up now.

In Hyundai, the yard in Korea, both Aasta Hansteen and Schiehallion, making good progress, now that some of the projects have left the yard. And Schiehallion is looking good for sail away in November this year for installation in the fields in 2016.

Maari, we’ve now finally got a second big producer on stream. In fact, as we speak, a third producer is being put on stream today; it’s currently cleaning up.

And in Nawara in Tunisia, we’re busy with the gas project. You see a picture there on the right top-hand corner where we’re actually stringing pipe and starting to weld it.

So that’s now firmly ongoing. If you look at exploration, on the next slide, we’ve had a few successful wells and operations ongoing.

In Norway, we have a discovery in Snefrid Nord, which is really tieback potential to Aasta Hansteen. And in Romania onshore, we’ve had a success in a well called Discovery Deep [ph] and still being assessed.

We’re in fact getting the well ready for testing later on in this quarter but looking very promising. It’s not on the high impact wells because we didn’t start out the sort site but starting to look very, very nice subject prepared.

That’s the well that we share fifty-fifty with our partner Repsol. Other high impact drilling, you’ve seen the news around the Bjaaland well in the Barents Sea, which came up dry.

It was an outlier on the block, so a different size in signature from the wells that we drilled so far which we wanted to test; clearly that didn’t work. That’s help us define what’s in that block but clearly a slight reduction from what the results could have been.

In the Black Sea, meanwhile, we’re continuing to drill and we expect to be able to give you an update on the resource potential for the block towards the end of the year. On the next slide, we often talked about security situation in Libya.

Unfortunately now we also need to update you on the security situation in Yemen. The news won’t have escaped you that there is essentially a full blown war now going on in the country.

We still manage to produce in Yemen albeit less than planned in the first quarter but early April, we closed in production. We’ve had some damage to our office in Yemen in Sana but we’re managing to run an operational office from a guesthouse that we got in the field.

However, we see no damage up to this point in time. So, we are still able to produce and should situation improve, what we have found though is we’ve started demobilizing project related resources quite aggressively.

So, we are demobilizing rigs. We keep workover rig on standby; the drilling rigs are being demobilized; and also projects started being demobilized.

So, we’re preparing for a long downturn in activities in Yemen. Consistent with that, we declared force majeure for operations towards the end of April, a few weeks after we shut-in production.

And for now, the force majeure period will effectively last for half a year. And we expect to be updating you on the financial status of Yemen operations until that force majeure period runs out somewhere towards Q4.

On CapEx, you’ve seen this slide before and the numbers were also highlighted again by David. We are projecting to decrease expense from this about EUR 3 billion in 2014 guidance to now 2015 guidance to EUR 2.4 billion.

In fact 2015 CapEx for the first year was at three year average period. We expect to end at around EUR 2 billion.

On revenue and production cost, FX helps us. Here of course the FX was against us where all our projects is dollar terms are staying the same and in euro terms becoming more expensive, in particular for example Tunisia, you see CapEx in euro terms well above planned.

And that is not because we’re not trying to save money, it’s because FX rate there worked against us. On balance FX rate helps but on CapEx, you see one or two locations where really does work against us.

So, that’s a first year and full year average consistent with that as well and the main cause we talked about before are drilling workover programs in Austria and Romania, deferral of activities in the key projects in particular Rosebank pushing that further out but also assuming the latest start of project activity elsewhere in the portfolio which we should see towards the end of that three-year period. Exploration spend, we are struggling to bring expenditure down.

I think you’ll see that in the rest of the industry as well. There are a lot of rig commitments that I have to work their way out.

So, we will see activity levels dropping further during the year, but difficult to realize the 20% cut in spend. What in particular we’re focusing on there is securing the long-term health acreage position.

So we are still shooting seismic and we are still pursuing further acreage, but in particular, key drilling commitments we’re trying to push further out in time. On OpEx, you saw the detail in data slide that has nine numbers that we’re looking for the year, at an OpEx level roughly the same as what you’ve seen in the first quarter.

That’s about a $3 drop in OpEx on dollar per barrel terms. And rough rule of thumb is that about two thirds of that comes from FX but a bit more than a third actually comes from real underlying cost savings related to personnel levels, service, amount of services that we buy and cost at which we buy those services in.

And clearly we’re working very hard to work closely and receiving that savings in long term. There’s some other shifts in OpEx as well.

In 2014, we still had Libya in for about 25%; Libya is in fury, it drops our total operating costs by about a $1 per barrel, and clearly 25% would be $0.25 and we’re missing that this year. If Libya were to come back in, you’d expect the OpEx to drop further than the $13.9 that you see there.

Of course our current expectation is that Libya will not return this year. Getting towards the end, Romania, great production performance in Q1.

In fact when you see Petrom performance going up in the financial slides that David went through earlier, you see the good Q1 performance in Petrom but also good performance production wise in Gazprom first quarter which of course is at the end of the day a Petrom operation, we see those numbers coming through there. when seeing these numbers there is only the Petrom production in the first quarter 174.3, which is great, very, very good.

We are expecting some downturn during the rest of this year though. First of all because of reduced activity levels and we say they’re up to 4% in mid-term decline year-on-year.

Clearly we’re working very hard to minimize the impact of the savings that we’ve pushed through. On the other hand, our drilling rig count is reducing significantly.

I think I’ve quoted those numbers for you in previous calls but we’re dropping from about 12 to at the end of the year about four rigs in Romania. And clearly an upturn on that is subject to the oil price recovering further.

The other thing you’re going to see during the rest of this year is that we have some shutdown activity plants, so not unscheduled plant shutdown activity in Romania for the rest of this year, both in Sofiya which is 2012 exploration -- new field exploration success which has currently contributed some 50,000 barrels a day to our total. We will have to do some major workovers in some of those production wells in the second half of the year.

We’ll find that such that we do those when gas demand in Romania’s at its lowest and we also have some shutdown activity again scheduled for related project work offshore which again will in particular affect gas deliverability again planned during summer when gas demand in Romania’s at its lowest. So those are the project high and lowlights.

Upstream priorities for 2015; they won’t surprise you. They’re consistent with what David went through.

First of all, we want to run an operationally attractive and safe operation around the world. Manage our cash; and production takes third place, instead of where it used to be at second place.

Really focusing the organization on cash flow and what that means in particular in the E&P is managing our cash out, our cash in is managed by production levels. But cash out is as we said, CapEx, exploration spend and OpEx and we’re focused on all three of those.

On production terms, we’ve got some shutdown activities planned in the second half of the year which we’ll manage as best as we can. Production performance in Q1 was affected by the Gudrun outage.

That is back now that second quarter is up and running but of course Yemen we’re still contributing some 7,000 barrels a day in first quarter. That unfortunately is now out with no outlook of that returning in the very short term, albeit our facilities there are completely intact.

That was it for the projects update.