OMV AG

Magdalena Moll - Head of IR Rainer Seele - Chairman of the Executive Board & CEO Reinhard Florey - CFO

Mehdi Ennebati - Societe Generale Henri Patricot - UBS Hamish Clegg - Bank of America Merrill Lynch Marc Kofler - Jefferies Josh Stone - Barclays Tamas Pletser - Erste Bank

Thank you very much, Andrea, and good morning, ladies and gentlemen. And welcome to OMV's Q3 2016 Conference Call.

In the third quarter, OMV continued to deliver on its strategic targets, and turned in a good performance. OMV, again.

generated a positive cash flow after dividends of €239 million. In addition, and I’m sure you’ve seen this, we made an announcement that OMV agreed to sell 100% of the shares in its wholly owned upstream subsidiary, OMV U.K, to Siccar Point Energy Limited.

With me on the call today to explain the results are Rainer Seele, our Chairman of the Executive Board and Chief Executive Officer; and Reinhard Florey, our Chief Financial Officer. Rainer will highlight OMV's performance in the third quarter, as well as discuss important portfolio development.

Afterwards, Reinhard will review key aspects of the financial statement, and talk about the segment results in more detail. Rainer then will conclude with the outlook for the full-year 2016, and both gentlemen will then be happy to take your questions.

So, with this, I'd like to hand the presentation over to Rainer.

Ladies and gentlemen, good morning, and thank you for joining us. I’m happy to review our third quarter financial performance together with my Board colleague, Reinhard Florey.

Let me start with the key messages. OMV's performance in the third quarter '16 revealed that the Company is back on a successful path.

OMV again delivered a positive free cash flow after dividends of €239 million, demonstrating the stringent focus on cash generation. In this context, OMV continues with its rigorous CapEx discipline and will further reduce CapEx to €2 billion in 2016.

For next year, CapEx of €2.2 billion is planned. This is below our previous guidance.

At €360 million, the 2016 exploration appraisal expenditure will also come in lower than budget. For 2017, we reconfirm our initial E&A target at €300 million.

In addition, we made progress optimizing the portfolio by executing our strategic M&A projects. On September 22, this year, OMV signed the agreement for the sale of a 49% stake in Gas Connect Austria to a consortium composed of Allianz, which is Europe's largest insurer, and Snam, Italy's gas infrastructure operator.

We are aiming to close the deal until year-end. Total cash consideration will equal €601 million.

We also continued to further optimize our North Sea portfolio. OMV agreed to sell 100% of the shares in its wholly owned Upstream subsidiary, OMV U.K, to Siccar Point Energy Limited.

Let me give you some more details on this transaction. The transaction has been signed by the parties and has an economic effective date of January 1, 2016.

The transaction value amounts up to $1 billion. The transaction value consists of a firm payment of $750 million and a contingent payment related to the Rosebank Final Investment Decision in the amount of up to $125 million.

On top, the parties agreed on a purchase price adjustment with respect to CapEx to the effective date. This results in a further consideration in the amount of approximately $125 million.

Now, let me review OMV's upstream position in the U.K. We are partner in 22 licenses in the U.K Continental Shelf.

Just a few examples: production comes from the Jade gas-condensate field in the Central North Sea. The Schiehallion re-development project, in which OMV has an 11.8% stake, is scheduled to restart production in 2017.

Additionally, OMV holds stakes in several appraisal and development projects, including 20% of Rosebank; 47.5% of the Cambo oil and gas discoveries; and 26% on Jackdaw, a high-pressure, high-temperature discovery in the central area of the North Sea. This transaction is subject to conditions, including regulatory approval, and is anticipated to close in the first quarter of '17.

As a consequence, we had to impair the book value of the assets by €458 million in the third quarter '16. At closing, we will realize foreign exchange gains, currently estimated at approximately €100 million, related to the currency translation of the U.S dollar subsidiary, OMV U.K.

At the same time, OMV's related future investment requirements will decrease. This transaction is a major step towards the further optimization of our portfolio.

OMV plans to use the proceeds for strategic investments in low cost development regions and for strengthening the balance sheet. One key message is always important, ladies and gentlemen, our HSSE performance.

The sustainable management of Health, Safety, Security and Environment is top priority for OMV and critical to the responsible delivery of our products and services. Unfortunately, in the course of 2016, the lost-time injury rate trended upward.

We are deeply concerned that there were serious incidents, particularly in our Upstream activities. We are undertaking a third-party audit to investigate and analyze these incidents.

In addition, we rolled out the second phase of our Safety Culture Program across the entire Group. This program focuses on observing behavior, intervention and recognition.

Now, I'd like to briefly talk about OMV's market environment. The average oil price has stabilized at a level of $46 per barrel in third quarter '16 versus second quarter '16.

Of course, the OPEC agreement end of September, to cap production had a supportive effect on the price level. Saudi Arabia and its Gulf allies have preliminarily agreed to cut production by 4%, while Russia said it was prepared to freeze at current production levels.

The OPEC Gulf members are said to be unwilling to give Iraq an exemption from any agreement. Given current developments, OMV arrived at a new oil price assumption of $44 per barrel for 2016 and sticks to the $55 per barrel for next year.

Also, Central European gas prices remained stable in the third quarter 2016. OMV's realized gas price in upstream was €13 per megawatt hour, due to long-term, locked-in gas agreements, and pricing in countries not linked to the Central European Gas Hub price.

OMV sees a seasonally upward trend in gas prices for the rest of the year. A short remark on the refining market.

The OMV indicator refining margin declined by $1 per barrel to $3.7 per barrel in the third quarter of '16, compared to second quarter '16, mainly driven by lower gasoline and naphtha cracks. Seasonally stronger demand during the summer driving season could not compensate for the oversupply.

However, the middle distillates recovered slightly, supported by supply disruptions and a modest increase in demand. For the fourth quarter '16, we expect OMV's indicator refining margins to go up, along with an increase in the middle distillates spreads.

Finally, petrochemical margins improved compared to second quarter 2016, supported by higher demand. In the fourth quarter '16, petrochemical margins are expected to remain on a similar level supported by strong demand.

With the next slide, I'll highlight the key figures of the third quarter, and Reinhard will comment on them in greater detail later. Clean CCS EBIT increased from €214 million in second quarter '16, to €415 million in third quarter '16, due to higher Upstream and Downstream results.

Clean CCS net income, attributable to stockholders, came in at €447 million. This was higher than clean CCS EBIT, because of the strong results from Borealis and lower taxes.

Clean CCS earnings per share increased to €1.37 versus €0.68. As mentioned before, free cash flow after dividends was again positive at €239 million.

OMV generated an EBIT of €63 million, significantly up from the €300 million loss in the second quarter 2016. In third quarter '16, special items amounted to €350 million.

They included the €458 million impairment related to the OMV upstream assets in the U.K. EBIT in the second quarter '16 was also significantly impacted by €530 million of impairment charges related to the Rosebank field.

Net income attributable to stockholders came in at €48 million. Moving on to our financial performance in the first nine months of 2016, OMV realized solid operating results, despite the decrease in both the oil price and the refining margins.

OMV reported a clean CCS EBIT of €796 million, 34% lower than in the previous year. Both Upstream and Downstream turned in lower results.

Clean CCS net income attributable to stockholders decreased by 13% to €842 million. Free cash flow before dividend showed a significant improvement to €645 million.

In the same period of the previous year, the free cash flow was only €103 million. Free cash flow after dividend came in at €266 million.

On the next slide, we have summarized our key portfolio developments. On September 22, this year, OMV signed the sale agreement for a 49% minority stake in Gas Connect Austria to a consortium of Allianz and Snam.

This transaction supports the financial stability and cash flow for the OMV Group, while keeping a majority stake in Gas Connect Austria. In addition, it advances OMV's strategy to restructure the downstream gas assets and to reduce its exposure to the regulated gas business.

The total cash consideration will equal €601 million. The enterprise value is €1.4 billion, corresponding to an enterprise value per EBITDA multiple of 8 times.

The closing of the transaction is expected by year-end and is conditional upon merger control clearance by German and Austrian authorities. On October 6, 2016, OMV closed the sale of the 30% interest in the U.K offshore oil and gas project, Rosebank, to Canadian Suncor Energy.

Upon closing, Suncor made an initial payment of $50 million. Following the co-venturers approval of the Rosebank project final investment decision, OMV will receive an additional consideration of up to $165 million.

On October 10, 2016, OMV Petrol Ofisi agreed to sell the Aliaga Terminal in Turkey to SOCAR. This divestment is fully in line with OMV's Petrol Ofisi's strategy to continuously improve the efficiency of its terminal network and supply chain.

OMV Petrol Ofisi will continue to use the fuel and LPG terminal in Aliaga, based on a long-term storage and throughput agreement. Closing of the transaction is expected by year-end 2016, subject to the approval by competition authorities.

As presented before, OMV divests its wholly owned Upstream subsidiary in the U.K for up to $1 billion to Siccar Point Energy Limited. During the course of 2016, OMV continued to reduce its CapEx spending.

While we projected CapEx to come in at €2.4 billion at the beginning of the year, we now estimate that we will only spend €2 billion. Investments for Nord Stream 2 will not materialize in 2016, and certain Upstream projects were phased.

This does not impact our production forecast. In the first nine months of 2016, we have spent €1.4 billion with Upstream projects accounting to €1 billion.

Therefore, the North Sea region accounted for €427 million, with the majority of CapEx allocated to the development of the Gullfaks, Schiehallion and Aasta Hansteen fields. OMV Petrom spent almost €330 million on field redevelopment projects, as well as on workovers and drillings.

In Tunisia, we proceeded with the development of the Nawara gas field. For 2017, we are planning a CapEx of €2.2 billion.

This is below our earlier 2017 guidance, because so far we have no CapEx planned for Nord Stream 2. In 2016, we will reduce exploration appraisal expenditures by 41% to €360 million.

This forecast reflects a €90 million reduction from the €450 million in exploration appraisal expenditures communicated in August 2016. The main reasons are lower drilling costs and reduced exploration activities, especially in Romania.

In the first nine months of 2016, we spent €233 million, mainly related to the Wisting well in Norway, as well as exploration and appraisal activities in Romania and Bulgaria. We continued with our evaluation of the Neptun Deep field in the Black Sea.

The drilling progress at the Polshkov well in Bulgaria has been finished with the exploration resulting in an oil discovery in the Black Sea. With respect to our Sub-Sahara Africa position, we additionally ceased activities in Namibia.

OMV's strategic target in 2017 will be to reduce exploration and appraisal expenditure to €300 million. We also continue to make good progress with the implementation of our cost reduction and efficiency program.

We will achieve cost savings of €100 million by the end of 2016 and commit to more than €150 million by 2017. And now I’d would like to hand over to my colleague, Reinhard, for the discussion of the financials.

Thank you very much, Rainer. Good morning, ladies and gentlemen, also from my side.

On Slide 14 you can see the summary of the Q3 income statement. My remarks will focus on the comparison mainly between Q3 versus Q2, 2016 figures.

The reported EBIT amounted to €63 million, compared to minus €300 million in second quarter 2016. The net financial results slightly increased to €75 million versus Q2 2016, due to a strong contribution from our Borealis with €110 million and lower net interest expense.

OMV recorded a tax expense of €8 million, so the tax effective rate was at 6%. If you were to compare, the clean tax rate was minus 10%.

Non-controlling interests were up, driven by higher contribution from OMV Petrom. This brought us on a reported basis to a net income attributable to our stockholders of €48 million, which is equivalent to €0.14 -- €0.15 per share.

Adjusted for special items, which includes €458 million impairment booked for OMV's Upstream assets in the U.K, clean CCS net income attributable to stockholders amounted to €447 million. This was more than double the clean CCS net income generated in Q2, 2016, and even more than the corresponding quarter last year.

The clean CCS earnings per share amounted to €1.37 in Q3 2016. Let me now turn to our cash flow, which was again strong in Q3 2016.

Cash flow from operating activities came in at €652 million. Depreciation, amortization and impairment, including write-ups, amounted to €899 million.

Cash outflow from net working capital was €154 million, primarily related to the seasonal increase of accounts receivables in downstream oil, as well as inventories in downstream gas. We used €469 million in cash for investment, particularly in Upstream.

This encompassed projects in the North Sea, workovers and field redevelopment at OMV Petrom, and development of the Nawara project in Tunisia. Free cash flow before and after dividend came in at €239 million positive.

This shows that we’re well on track to deliver on our promise to be free cash flow positive already, 2016. So this is really free cash flow positive after dividend.

We also substantially increased the result, despite ongoing difficult market environment. Clean CCS EBIT rose from €214 million in Q2 to €415 million in Q3.

In Upstream, sales volumes increased by 4%, since part of the Q2 2016 production volumes were sold in Q3 2016. Production decreased by 5% to 301,000 barrels of oil equivalent per day due to planned turnarounds in the Norwegian fields Gullfaks and Gudrun.

Absolute production costs further decreased, mainly as a result of ongoing cost saving initiatives. Upstream earnings increased from break even to €38 million positive, benefiting from a positive hedging result in the amount of roughly €26 million.

In Downstream, the utilization rate of the refineries was back at 97% in Q3 2016, following the turnaround activities in Q2 2016. Higher refined product sales more than offset the lower OMV indicator refining margin.

The retail and commercial businesses experienced seasonally increased sales volumes. Retail and commercial margins were higher backed by strong customer demands for OMV's products.

OMV Petrol Ofisi's performance was also seasonally strong. The performance of the petrochemical business strongly increased due to the higher sales volumes and improved product spread.

Downstream oil earnings increased substantially to €312 million. Downstream gas again performed well and generated a clean EBIT of €65 million, this included one-time gain of €22 million, mainly related to the clearance of a contract.

Now, let's look at the reconciliation from clean CCS EBIT to EBIT. Our deducting special items and inventory effect from clean CCS EBIT, EBIT came in at €63 million.

Special items in the amount of minus €350 million were mainly related to the impairment of OMV's upstream U.K net assets as mentioned, €458 million. On the other hand, the ongoing divestment process for an upstream asset in the Middle East of Africa region triggered a pre-tax write-up of €116 million.

On the next slide, you can see the Upstream clean EBIT development in Q3 2016 versus Q3 2015. Clean EBIT declined from €52 million to €38 million, as a result of significantly lower oil and gas prices.

The realized crude oil and gas prices dropped by 14% and 20%, respectively. Hedging had a positive impact of some €26 million in Q3 2016, this hedging result however was €36 million lower than in Q3 2015.

Higher sales volumes, as well as reduced costs and lower depreciation almost offset the negative impact of the decline in oil and gas prices. Production in upstream rose by 3% to 301,000 barrels of oil equivalent per day, sales volumes increased by 8% due to additional listings in Norway and contributed €39 million to clean EBIT.

Lower clean exploration expenses, as a result of reduced exploration activities, had a positive impact of €36 million. And production costs drove the improvement in clean EBIT on the other category in the amount of €20 million.

The OpEx in U.S dollar per barrel oil equivalent decreased by 13% now to $11.4 in Q3 2016, reflecting our strict cost management coupled with higher production. Finally, lower deprecation as a result of the lower asset base following impairments in Q4 2015 contributed €38 million.

Let me now turn to the Downstream performance. Downstream clean CCS EBIT decreased from €402 million to €377 million.

This was attributable to the lower OMV indicator refining margin, which decreased from $7.8 per barrel in Q3 2015 to $3.7 per barrel in Q3 2016. On the other hand, the refineries utilization rate increased from 93% to 97%.

At 8.4 million tons, total refined product sales were slightly up. The petrochemical business experienced good demand, but margins, while on a good level, were lower than in Q3 2015.

In the same period last year, the petrochemical industry was affected by planned and unplanned shutdowns, which drove up prices and margins. In the retail and commercial business, higher customer demand in Q3 2016 resulted in better margins.

Downstream gas, clean EBIT was up by €93 million, largely driven by our restructuring efforts. In addition, the result was supported by a higher valuation of forward contracts, as well as a one-off effect in the amount of €22 million related to the clearance of a contract.

Now, let's turn to OMV Petrom Group results. Clean CCS EBIT increased from €49 million in Q2 2016 to €137 million.

This was driven by improved results mainly in Downstream. The Upstream segment of OMV Petrom reported clean CCS EBIT of €45 million.

The production decreased to 174,000 barrels of oil equivalent a day due to natural decline. OMV Petrom successfully decreased unit production costs from $12.1 to $11.3 per barrel, due to lower personnel material and services cost.

Downstream results of OMV Petrom increased from €30 million to €88 million, the Downstream oil performance was supported by the high refinery utilization rate of 97% as well, as seasonally increased sales across all channels. Despite challenging market conditions, Downstream gas reported a better result in both gas and power, while still negative.

Benefiting from the strong cash generation of the Group, OMV decreased both its net debt and its gearing ratio. Net debt declined from €4.04 billion, at the end of 2015, to €3.74 billion.

The gearing came down and it came in at 27% comfortably below our long-term target of maximum 30%.OMV's balance sheet is in a healthy state reflecting a strong liquidity position with €1.7 billion in cash and cash equivalent, and €3.6 billion in undrawn credit facilities. The equity ratio rose up to 45%.

Now, I'd like to turn the presentation back to Rainer, for the outlook.

Thanks, Reinhard. Ladies and gentlemen, I now would like to summarize OMV's outlook for you.

For the full-year 2016, we increase our oil price assumption to an average of $44 per barrel. 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 fourth quarter 2016. The OMV's indictor refining margins in the fourth quarter '16 is projected to be above the third quarter 2016, along with an increase in middle distillate spreads.

Capacity utilization in the fourth quarter is expected to be above 90%. Our production guidance for 2016 is slightly above 300,000 barrels per day.

We reduce our CapEx guidance from €2.4 billion to €2 billion in 2016 with Upstream accounting for 75%. We reduced the exploration and appraisal expenditure guidance to €360 million.

And we will achieve cost reductions of €100 million in 2016. Please note that the fourth quarter 2016 will see a seasonal decline in Downstream oil compared to third quarter 2016.

This previous quarter was supported by a high product demand during the driving season. In addition, we do not anticipate any one-off gains in clean EBIT of Downstream gas in the fourth quarter '16.

As a consequence, we expect fourth quarter 2016 results to be below the strong level of third quarter 2016. Thank you very much and we’re now happy to take your questions.

Yes, thank you, Rainer, and Reinhard. And now, ladies and gentlemen, I'd like to open the call for questions.

I would like to ask you to please limit your questions to two at a time, so that we can take as many questions as possible. Of course, you’re always welcome to rejoin the queue for a follow-up question.

We have already several analysts here in line. And the first question comes from Mehdi Ennebati from Societe Generale.

Good morning, Mehdi.

Hi. Good morning.

Good morning, all. So two questions.

First one regarding the asset swap deal with the Gazprom. So, two weeks ago, Gazprom chairman announced that the asset swap deal has been postponed from H2 '16 to 2017 and that Achimov production startup has been postponed to 2019.

I think initially it was 2018. So is there a link between the asset swap deal postponement and the delay in the production startup?

Is it more due to some constraints from Norwegian authorities regarding Gazprom taking a minority stake on wins in Norway? And don’t you think it will finally be easier for you to buy this 25% stake in Achimov in cash rather than doing an asset swap deal?

The second question on Petrol Ofisi disposal process. With Bloomberg related you received several initial bids.

Can you confirm this news please, and would you consider the appetite is strong on Petrol Ofisi or not? And when do you expect to receive the final bids on Petrol Ofisi?

Will it be more in H1 '17 or more by the end of 2017, maybe 2018 given the turmoil in Turkey? And Just one small final little question regarding the CapEx commitment.

So you said that you reduced your 2017 CapEx by €200 million due to Nord Stream 2. Shouldn't we expect an impact from Schiehallion, OMV U.K disposal?

And post 2018, after Nawara and Aasta Hansteen startup, can you just remind us your CapEx commitments because it looks like it will be extremely low, meaning that you will have a huge flexibility on CapEx. Thank you.

Mehdi, you really make me busy with all the questions, to be honest. But I answer in the same priority you have asked the questions.

Let me start with the asset swap. With the asset swap the timeline has not been postponed.

There's a little bit of confusion because there is no clear guidance how we and Gazprom are communicating the numbers. So, that's why I would like to give you the timeline.

We both have planned to come up and to sign a basic agreement determining the economics, which means what is the percentage Gazprom will get in OMV U.K. Then after that -- OMV Norway, sorry; today U.K is too much in my head here, so in OMV Norway.

And then we need I think one to two years for closing the deal. So, the deputy chairman of Gazprom, Alexander Medvedev, when he said he sees it in 2017, I think he had a very positive outlook for closing the deal.

So we’re fully within the plan schedule, so I still think we’re signing a basic agreement until year-end. It's right that Achimov production start has been postponed.

That’s reevaluation of the development concept. We have put that delay of production start into our calculations, that might be one of the reasons why we have to negotiate a bit longer.

That’s why -- it has nothing to do with the Norwegian authorities, because there is a misunderstanding of the postponement, which isn't a postponement.

Okay.

I agree with you, I'd love to buy in -- into Achimov 4/5, but Gazprom wants no cash. We have agreed on a swap deal.

That’s the headline. And one swap component is not cash, but as we’re getting liquidity, of course, cash becomes king, also in our thinking.

But as we speak about the asset swap, the headline remains that we’re swapping assets. So it will be -- that will be only if a minor cash component involved.

Petrol Ofisi, yes, we’ve received initial bids. I wouldn’t say that the appetite is strong, but we do have a good competitive bidding round.

The timeline is that we more will have final bids first half next year than second half. CapEx for next year, yes, Nord Stream 2 is one major effect for the reduction.

But you’re right that the sale of OMV U.K has the potential to further reduce our CapEx budget, but this has been not anticipated so far. And you’re right, Mehdi, that our flexibility post 2018, as we speak about CapEx commitments, is increasing substantially.

Can you provide -- can you quantify it please, the CapEx commitment from -- in 2018 and 2019?

Not at all.

All right.

Well, I can, but I don’t want to, Mehdi.

Sure. Sure.

I fully understand. Thank you very much, Rainer.

Thanks.

So then we come to the next question from Henri Patricot from UBS.

Yes, hello, everyone. Thank you for the presentation.

I just wanted to follow-up on the CapEx. Could you provide us with an idea of the split in direction between the phasing and the cost deflation in Nord Stream 2?

And will it evolve over there, the following few years? And you also mentioned that you produced your activities in Romania, that’s another implication on the level of production that you expect over the next few years?

Thank you.

All right. Thanks, Henri.

For Nord Stream 2, we do have a total CapEx number, 100% of the €8.5 billion being published by the Company, without financing costs. So, I made reference, now, to the CapEx numbers, excluding any financial cost.

The CapEx will be spent over the next year, mainly until 2019. Peaking in 2018, when the construction of the pipeline is scheduled to start.

That’s the reason why in 2016 there was only small amount of CapEx spent. But the Company has not released any information on the phasing of the CapEx.

So, that’s all I can say about Nord Stream 2, about the CapEx being spent. The second question on Romania.

It's right, we’re focusing now our investment activities in Romania, especially on promising work-overs so that we can keep the production level, more or less, on budget, like we’ve seen in 2016. So we will have only a moderate impact in 2017, but on a mid to longer term, we’ve to accept a production decline, if we don’t increase our CapEx spending in the region.

Okay. Thank you.

Our next question comes from Hamish Clegg.

Hi, guys. Good morning.

Just one quick one for me. Fantastic cash flow today, but I just wanted to ask you about Norway.

I just noticed, as a country in your volume numbers, it came off quite a bit in the quarter, was that just a function of maintenance? And actually one other, your employee count is down 7% year-on-year.

Can we expect that trend to continue and is that one of the core drivers behind your OpEx?

Hamish, can you repeat the first question please?

The first question was on your Norwegian volumes in the quarter. They were down quarter-on-quarter, 60 kbd from 72.

Could you explain that?

It was maintenance shutdown.

Okay, fine.

It was planned maintenance shutdown in Norway; that was the reason. Well, the reduction of employees, of course, it will -- I'd guess that the reduction of employees will continue, but not on the high level we’ve seen, especially some five years ago, because in Romania we’ve reached a certain point where the big headcount cut were more or less the history.

But the 5% to 7%, I would say, is not a bad guess.

Thanks.

So the next question we have it from Marc Kofler from Jefferies. Good morning, Marc.

Hi there. Good morning, everyone.

I just had a couple of quick questions, please. Firstly, on the U.K North Sea divestments, could you say a few words around any tax implications on that sale?

And then I noticed a commentary around the resumption of volumes from the Sirte Basin at Libya. I was hoping you could quantify that impact?

But then also perhaps give us an update on some of your assets elsewhere in country? Thanks.

Marc, to the first question on tax. Tax implication is that, in general, what we have as a positive tax position in our OMV U.K is about €150 million.

On the other hand, there is only a small part of that tax positive side that we can transfer in terms of Group. So, the other part will be part of the transaction.

All right. Let me give you a little bit more our view on Libya.

I just have met the CEO of NOC, Mustafa Sanalla a few day ago and he told me that Libya is now producing 600,000 barrels per day, so it's strong recovery. To my regret, OMV cannot participate on such a good development.

We are just between 900 to 1,000 barrels per day, so there is another huge upside we can go up to 30,000 barrels per day. And the reason is that the infrastructure from the El Sharara field, which is our main field, is blocked.

And that’s the reason why we cannot export the crude. We cannot transport the crude to the export terminals.

The good story in Libya is the export terminals are free, and you can really lift the cargoes. Impact on reserves.

I think we have to look a little bit how sustainable is the situation now in Libya. The NOC Chairman is pretty positive that he can further resume production in his country.

I think it's a question of how stable the situation is going to be in Libya. We think that we should be very cautiously go into 2017, so that we might go and plan the current production level with an upside, in case we're going to have the infrastructure available to bring our main asset on stream.

As far as we speak about reserves, I think the Libyan production will come back. That’s something we do have in our plans, and therefore there will be no impact on our reserves.

That’s great. Thanks very much.

We move on next question is from Josh Stone from Barclays.

Hi. Yes, Good afternoon.

I’ve got three questions please. Firstly, on UK disposal, can you talk a little bit about what the motivation was to sell now?

Just trying to look at the very strong free cash flow for the first nine months of the year and the impairment you’ve had to take. Could you talk a little bit about just the motivation of the timing of the transaction?

And then secondly, I think I heard you say that some of the cash will be used for strategic investments in low-cost development areas. Perhaps you can maybe just elaborate just a little bit on that?

Thanks.

Just about the motivation to sell now. First of all, it is very much our inclination to change the portfolio towards more value barrels.

And as we’ve seen, there is, of course, higher exploration, higher lifting costs that we generally have in the North Sea, in U.K, than in other parts or our portfolio. We’ve seen a good opportunity, in spite of the -- in general, a challenging situation for M&A deals these days.

And this unfolded a very good transaction. We are very pleased that we found, with Siccar Point, a very good partner, and immediately jumped on that opportunity, while this was still a competitive transaction.

So this was not just be one side transaction. And I think we’re very satisfied that we were able to close this or sign this transaction.

What is it that we will do with the money? Of course, we will strengthen our balance sheet.

This allows us to go down in our gearing ratio. This allows us to strengthen the ability of the Company to go forward with its strategic plan.

Well, I’ve one addition. We of course, also will use the cash to be reinvested to increase our reserve position.

And then, look, Josh, we have reduced our E&A budget from €700 million to €300 million. €300 million are not sufficient to fully replenish our production.

That's clear to me. So therefore we needs to use some liquidity for M&A activities, to fill up our reserve position.

And we have said -- clearly said that we'd like to go for reserves in low cost regions, which we have defined. So If we’re going to increase our reserve position, it will be in the defined core regions.

And I made also clear that I’m a fan of early cash flow and that's the reason why I prefer to acquire producing barrels instead of developing barrels. So that’s , more or less, what I want to say in the context of our strategy.

That’s very clear. Thank you.

So now we move on to Tamas Pletse from Erste Bank.

Yes, good morning to everyone. Two questions, I’ve got.

First of all, I think you mentioned in your report that you would like to -- or actually, you wrote up some assets in the Middle East and in other regions. And I presume that you’re preparing to divest some of your assets further.

Can you elaborate a little bit more, I mean, which assets, or which geographical location, we can expect from when the further divestments? And my second question would be on your retail performance.

Do you plan to put some more money into regional retail, like similar to some of your competitors in the region? It seems like from your report that your commercial activities were very profitable.

So would you like to expand into this direction?

Well, let me start with your last question, Tamas. Well, the regional retail business, if we look into -- when we talk about our regional retail business, we are talking about Europe and European market.

We have clearly said that we are expecting the refining margin will come under pressure. We should remember the normal days of refiners in Europe, and we do have that, since more than a decade, that we have overcapacities in the market.

So I'll will be very cautious to go for any retail and refining activities in the European market, especially when we’re taking into account that we do see a shift of refining capacities towards the wellhead, which is not predominant in Europe. So I’d be very much surprised whether OMV would go for investing into new refining capacities or acquiring refining capacities.

It would be also not in line, as speak about our divestment program we had, to clean up our refining portfolio. Tamas, what we’re going to do is, of course, we’re more investing along the value chain.

So what is in the main focus of OMV is that we’re going to support, especially our petchem activities and our participation in Borealis. The Borealis management is really top of the class when I see how they’ve developed the business, and you can see it since quite a while how profitable the company is being managed.

And if I look into the growth perspective and the growth history of the Company, we’re well advised that we should look a bit deeper into Borealis and should spend also some more money into that business. You might not see it in our EBIT numbers, but, at the end of the day, the money counts in your pocket, and the net income is then the right one to look at.

Okay.

The divestments, I think it's a process that we’re going to further optimize our portfolio. We’re looking into North African positions, where we'd like to optimize our portfolio there regionally, and especially Tunisia was in the focus of our activities.

There we are going to challenge a little bit our colleagues.

Okay. It's quite clear.

So I understood that no retail, no downstream, but rather petrochemicals and upstream, of course.

Great summary.

Okay, good. Thanks very much again.

Thank you.

So we started our Q&A session with many questions from Mehdi and we will end it with one question from Mehdi. Is that possible?

Go ahead.

Thank you. One question please, in three parts.

[Indiscernible].

The first part, just -- I just would like to come back to what has been announced by the management in February 2016? So David Davies, previous CFO, said that if the oil price goes back to $53 per barrel it is possible that the dividend, let's say, OMV will increase the dividend to €1.25.

Now that your organic free cash flow is very strong, now that you are deliberating, now that you might invest in, let's say, production which is cash generative, reserves which are cash generative, should we still consider that if the oil price goes back to $53 per barrel you'll increase your dividend? This is the first question.

Second question, just would like a small update regarding the talks with the Romanian Government on the hydrocarbon taxation change. Do you expect any change for 2017 or no?

And finally, as you were talking about Borealis, which is doing very well, earnings are improving year-on-year. Is it fair to consider that the dividend that you received from Borealis should go up again?

Okay. Well, David Davies is in pension, but the dividend is not in pension, Mehdi.

That's for sure. His commitment on the $53 per barrel, first of all, let's move into '17 and let's see what the price of oil we'll really get.

What makes us busy now in these days, Mehdi, is more what is the dividend we do have to approve for the year 2016. So, let us close the year 2016 and then let's discuss the dividend on 2017.

What I can indicate, right now, is that the Board of OMV is, right now, discussing our dividend policy. Reinhard is working hard on it.

And the next year we’re going, at latest we’re going to give you a new guidance on the dividend policy of OMV. We, first, have to discuss it, of course, with our Supervisory Board.

No changes in Romanian taxation for 2017, a short answer. And Borealis with the dividend, well, this is like in every family, Mehdi.

We’ve to fight for higher dividend as shareholders, and I try to make pressure. I don't know whether I'm going to be successful, but Borealis is of course performing on a higher level than 2015.

And if you're performing off a higher level and you’re [indiscernible] and you have a very high cash flow, then of course, the appetite of shareholders are growing up. It's like with you.

Thank you very much.

Good. So Ladies and gentlemen, this brings us to the end of our conference call.

I'd like to inform you that OMV will next report on its fourth quarter results on February 16, 2017. I'd like to thank both gentlemen, Rainer and Reinhard.

I certainly would like to thank you for joining us this morning and would like to encourage you if you’ve any further questions, please do not hesitate to call us at Investor Relations, we will be very happy to help you. So with this, I wish you all a very successful day.

It will be a very busy day today, considering the elections also in the U.S and -- but we all wish you a nice day and hope to see you soon. Thank you.

Bye, bye.

Thanks. Bye.

Thank you.