UPDATE 3-Oil group OMV cuts goals after Arab world turmoil

Wed May 11, 2011 11:53am BST

Quotes

   

* Q1 clean CCS net income 272 mln euros vs Rtrs poll 304 mln

* Q1 clean CCS EBIT 726 mln euros vs poll 708 mln

* Refinancing decision due by end of June

* Repeats commitment to Libya, Middle East

* Shares off lows, lag firmer sector

(Adds comments from call, market reaction)

By Michael Shields

VIENNA, May 11 (Reuters) - OMV (OMVV.VI) became the latest oil industry casualty of unrest in the Arab world as the turmoil led to a drop in underlying first-quarter profit and prompted the Austrian group to cut production goals.

But OMV, which said it did not expect to resume output in Yemen or Libya this year, reiterated its commitment to the energy-rich region.

"There are no plans at all to reduce our engagement in Libya, Tunisia or the Middle East. This is an area for growth," new Chief Executive Gerhard Roiss, who took over in April, told a conference call with reporters on Wednesday.

Roiss said it would take months to ramp up production in Libya once the political situation in the country -- which generated a tenth of its oil and gas output in 2010 -- allowed.

"It's difficult to predict because we are not there and we cannot say what amount of damage we are facing there. It depends (on) is it just a few pipelines that are destroyed or is there any further equipment that is destroyed?"

He said he had no idea when it may be safe enough to reopen an export pipeline in Yemen that was attacked on March 14.

On Tuesday, British gas and oil producer BG Group (BG.L) said unrest in Egypt and Tunisia had hit output and profit, and lowered its 2011 output growth forecast. [ID:nLDE74908Z]

"Everything depends on how Libya will develop," said Philipp Chladek, an analyst at Raiffeisen Research in Vienna.

"We think now that OMV will not be able to produce in Libya for (the rest of) this year... but we think that similar as in this quarter the oil price will be high enough for the company to earn very nice profits."

A 38 percent rise in Brent crude prices helped cushion the blow from output OMV lost to political turmoil in the quarter.

Net profit excluding one-offs and unrealised gains from valuing inventories fell 9 percent to 272 million euros ($380 million), lagging a forecast for 304 million in a Reuters poll.

OMV production fell 4 percent quarter on quarter to 304,000 barrels of oil equivalent per day. The company also suffered a large foreign exchange loss, while a weak performance in its refining and gas units also weighed on the result.

Shares fell as much as 1.4 percent but turned flat by 0945 GMT. The European oil and gas sector .SXEP rose 0.5 percent.

REFINANCING OPTIONS STILL OPEN

Libyan production was normal until Feb. 20 and then fell sharply as a revolt against Muammar Gaddafi's rule broke out.

That has forced OMV to turn to oil from other countries.

"We are... still running down some of the inventory of the old Libyan crude that we had at the start of the crisis, albeit increasingly mixing in crude from other sources," Chief Financial Officer David Davies told the call.

Less than 5 percent of the crude OMV is processing now in its major Burghausen refinery is Libyan-sourced, he added.

Davies reiterated OMV would decide by the end of June how to refinance after two major acquisitions. It will take into account its strong cash generation and rating agency Fitch's view due soon on how to assess hybrid bonds, Davies said.

Roiss declined to discuss how divestments might play a role ahead of a strategic review whose outcome is due in September.

OMV aims to get its debt-to-equity ratio under 30 percent in the next few years from 47 percent at the end of March.

OMV bought Turkish petrol retailer Petrol Ofisi in a 1 billion euros deal last year and strengthened North Africa operations this year with the purchase of Tunisian assets of Pioneer Natural Resources (PXD.N).

Concern about output disruptions and a potential share sale to refinance its balance sheet have weighed on OMV shares.

They trade at 6.5 times 12-month forward earnings, a discount to peers such as Repsol (REP.MC) on 10.5 times and Eni (ENI.MI) on a 7.5 multiple, according to Thomson Reuters StarMine, which weights estimates by analysts' track records.

"In the near future there is still pressure on the stock due to the Libya issue but long term we are still positive on the stock," said Erste Group analyst Thomas Unger, noting performance at non-upstream segments was poised to improve. (Additional reporting by Fredrik Dahl; Editing by Dan Lalor and Mike Nesbit) ($1=0.7158 euros)