Romanian oil company OMV Petrom has recorded EUR 400 one-off losses in the fourth quarter of 2015 due to the steep drop in international oil prices, according to a report published by Austrian group OMV on Friday. The company also had EUR 180 million charges in the third quarter, due to the same factors.

OMV Petrom may thus announce its first yearly losses in more than ten years. The last time it had losses was in 2004, the year it was privatized. Then, the company posted its first losses ever as the new owners wrote off the bad investments and other expenses made while the company had been owned by the state.

This time, however, the losses are due to the oil price evolution, which has affected all the companies in this sector. As the oil price dropped, some of the investments oil companies have made in recent years have become unprofitable and need to be recognized as losses.

Austrian group OMV, which owns 51% of OMV Petrom’s shares, has reduced its oil price assumptions for both the short term and longer term after international oil prices went down to USD 30 per barrel.

“Our assumptions for Brent crude price are now for 2016 at USD 40/bbl, for 2017 at USD 55/bbl, for 2018 at USD 65/bbl, for 2019 at USD 70/bbl and then USD 75/bbl from 2020 onwards,” reads OMV’s report.

“These revised assumptions have required impairments to asset valuations in Upstream, covering assets under production and development, as well as exploration assets, to be recognized during Q4 2015 in the amount of approx. EUR 1.5 bln, thereof approx. EUR 0.4 bln attributable to producing assets in OMV Petrom,” the report states.

OMV Petrom also recorded EUR 180 million impairments on upstream assets in the third quarter of 2015. Thus, the company posted EUR 10 million losses in Q3 and a EUR 220 million net profit for the first nine months of the year (down by 60% compared to the same period of 2015).

Most analysts estimate that the EUR 400 million one-off losses in the fourth quarter will take the company on a loss for the whole year, according to Ziarul Financiar. This would come only two years after the company posted a record profit of over EUR 1 billion, in 2013.

OMV Petrom’s shares have lost a third of their value in the past 12 months and are trading at more than five-year lows. The company’s market capitalization currently stands at EUR 3.1 billion.

OMV Petrom moves into the red in the third quarter due to the oil price drop

Andrei Chirileasa, andrei@romania-insider.com