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OMV expects rough waters ahead

Austrian company a partner in a Russian gas pipeline feeding the European market.

By Daniel J. Graeber
OMV expects rough waters ahead
Austrian energy company OMV said it expects the natural market to be particularly challenging in 2016. Logo courtesy of OMV.

VIENNA, May 11 (UPI) -- Austrian energy company OMV said it expects the natural gas market in particular to be challenging this year, focusing its sentiment on European strategies.

Rainer Seele, the chief executive officer at OMV, said in a statement a 37 percent decline in year-on-year crude oil prices and "exceptionally low gas prices" meant the company had to consider its 2016 strategy carefully.

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"In this environment, we are focusing primarily on cash and costs," he said Wednesday.

OMV outlined a new corporate strategy in March that it said put profitability ahead of quantitative growth. The company is among those facing pressure from a weak energy market. A mid-quarter corporate filing highlighted an operating loss of around $2.1 billion last year, against profits of around $1 billion for 2014.

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The company said Wednesday it expects to keep its production levels relatively stable to 300,000 barrels of oil equivalent per day. For the first quarter, OMV reported a net profit of $190 million, about 50 percent lower than last year as low oil and natural prices take their toll.

The energy market has stabilized during the latter half of the quarter. OMV said it expects Brent crude oil to average around $40 per barrel for the year, against the $45 range in recent sessions.

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"The gas market environment is expected to remain challenging in 2016," the company said.

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OMV and Russian gas company Gazprom signed agreements in April aimed at strengthening the strategic cooperation between both companies. Included in the terms of the deal are assets swaps and the delivery of oil products from Gazprom's portfolio.

OMV is a partner in Nord Stream, the Russian company's twin natural gas pipeline system running through the Baltic Sea to Europe. The Austrian company said a final investment decision on an expansion to that system is expected later this year.

European leaders, wary of Russia's role in the regional energy sector, have expressed concern, saying the second phase of Nord Stream goes beyond immediate regulatory matters. By limiting opportunities for new sources and suppliers, the pipeline would only strengthen Russia's grip on the European gas market, they said.

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