Omv Ag

Welcome to the OMV Group's conference call. If you would like to ask a question after the presentation, you may register your request by pressing star 1 button on your telephone at any time during the actual presentation or during the question and answer session itself. You should have received the presentation by email. However, if you do not have a copy of the presentation, the slides and the speech can be downloaded at www.omv.com. Simultaneously to this conference call, a live audio webcast is available on OMV's website. At this time, I would like to refer you to the disclaimer which includes our position on forward-looking statements. These forward-looking statements are based on beliefs, estimates, and assumptions currently held by and information currently available to OMV. By their nature, forward-looking statements are subject to risks and uncertainties that will, may, or occur in the future and are outside control of OMV. Therefore, recipients are cautioned not to place a new reliance on these forward-looking statements. OMV disclaims any obligation and does not intend to update these forward-looking statements to reflect actual results, revise assumptions and expectations in future developments and events. This presentation does not contain any recommendation or invitation to buy or sell securities in OMV. I would now like to hand the conference over to Mr. Florian Greger, Head of Investor Relations. Please go ahead, Mr. Greger.

This gentleman will be a labeler.

Please go ahead.

I think we have a technical challenge at the moment. Okay, I'll try it one more time. It now seems to work. Yeah, as I just said, after Alfred's presentation, both gentlemen will be available for questions, and with that, I'll hand it over to Alfred. I just want to double-check before with the speech whether we can be heard.

Yes, please go ahead.

Okay, thank you. Alfred, over to you.

Thank you, Florian. Ladies and gentlemen, good morning and thank you for joining us. The first quarter of 2023 was characterized by declining oil and gas prices, a weaker chemical market environment, and strong refining margins. Print crude oil prices fell to $81 per barrel on average for the quarter, and European gas prices dropped by 44% on the back of high storage levels and a warmer-than-expected winter in Europe and the U.S. Refining margins more than doubled compared with the level of the first quarter of 2022, but they declined from the exceptional level seen in the previous quarter. The olefin margins in Europe decreased compared to the previous quarter, driven by an increase in NAFTA prices as a result of more gasoline blending and lower imports following sanctions on Russian refined products. Compared to the prior year quarter, the ethylene indicator margin was higher, while the propylene margin decreased due to lower demand and import pressure. Polyolefin margins held up better. Compared to the previous quarter, the polypropylene indicator margin was flat, while the polyethylene margin declined slightly. However, margins were substantially below the strong prior year quarter when imports to the European market were constrained due to shipping bottlenecks. At around 2.1 billion euros, our clean CCS operating result was strong. at a similar level to the previous quarter, but declined compared with the exceptional prior year quarter. Our cash flow from operating activities rose by 87% to 2.7 billion euros compared to the previous quarter, supported by a significant release of working capital. Looking at operations, polyolefin sales volumes went down slightly year on year, while fuel sales volumes were marginally up. The utilization rate of the European crackers and refineries is back to a high level at above 90%. Oil and gas production was significantly lower year on year, primarily due to the exclusion of Russian volumes. We continued to execute our strategy and further advanced with the transformation of our company. In March, we formed a joint venture with Wien Energie, who operates Vienna's large district heating network, to develop and utilize deep geothermal energy in the greater Vienna area instead of fossil energy. We had already worked together to explore the geothermal potential of the eastern Vienna basin and have gathered comprehensive data. Based on further exploration and exploitation of the existing potential in the Vienna Basin, we aim to develop deep geothermal plants, with the first one starting up in 2026. In April, we partnered with ACCA-PP and were awarded a license for CO2 storage in the Norwegian North Sea. The license will be operated by AKPB and comes with a work program, which includes a 3D seismic acquisition and a drill or drop decision by 2025. The project could potentially provide storage of more than 5 million tons of CO2 per year, with the intention to inject CO2 captured from industrial companies in Northwest Europe, including Borealis. According to the latest news received from the Norwegian Petroleum Directorate, OMV was awarded a 50% share in this license. In line with our strategy 2030, we decided to initiate the sales process for our E&P assets in Malaysia and New Zealand. The region has attractive gas growth projects, but the assets are very remote and thus are minimally integrated into our core business. We are now working on preparing the necessary documents to be able to officially start the divestment process next month. Let's now turn to our financial performance in the first quarter of 2023. Our clean CCS operating result came in strong once again at 2.1 billion euros. Stable quarter on quarter, and 21% lower year on year. This was mainly driven by a drop of oil prices and chemical margins, partially offset by significantly stronger refining margins. The clean CCS tax rate decreased to 39%, which was 7 percentage points lower than in the same quarter of the previous year due to a lower contribution from countries with high tax regimes in the group profits. As a result, the clean CCS net income attributable to stockholders declined slightly by 4% to €1 billion. Clean CCS earnings per share amounted to €3.13. Let's now discuss the performance of our business segments. Compared to the first quarter of 2022, the clean operating result of chemicals and materials dropped sharply to 94 million euros. The result was impacted by materially lower performance from the nitro business, a slowdown of the chemical sector reflected in weaker margins, volumes, and substantial negative inventory valuation effects, as well as lower contribution from the joint ventures. The contribution from the nitro business fell sharply by around 130 million euros from the exceptional high level of the prior year quarter, as a result of substantial negative inventory effects following the gas price development, lower sales volumes, and margins. The ethylene indicator margin improved by 13%, and the propylene indicator margin went down by 14%. The polyolefin indicator margins came down from the extraordinary levels of the first quarter of 2022. The polyethylene indicator margin declined by 20%, while the polypropylene indicator margin decreased substantially by 39%. As a consequence, in our European olefins and polyolefins business, we recorded a negative market impact of around 90 million euros compared to the first quarter of 2022 and inventory valuation effects of around 115 million euros. The operational performance in our olefins and polyolefins business decreased as well, impacted by lower steam cracker utilization rate and reduced polyolefin sales volumes. As a result of increasing economic pressure in Europe, polypropylene sales volumes decreased by 7%, while polyethylene sales were flat. The decline in demand was seen mainly in the consumer products and infrastructure segments, while volumes in mobility and energy increased. The specialty business continued to perform strongly, while sales volumes decreased by the margins improved slightly. The performance of the JVs dropped to 1 million euros, driven by a negative contribution from Baystar and a lower contribution from Porouge. The Porouge result declined, driven by industry-wide pricing pressure, a lower share of OMV in the JV following the listing of the company in June 2022, and decreased sales volumes. The plant's turnaround at Porou Stou, which was completed in March, led to reduced sales volumes, which were only partially compensated for by the full ramp-up of the PP5 unit. Although we have seen polyolefin prices in Asia increasing compared to the previous quarter, the prices remained below the level of the first quarter of 2022 due to new production capacities and lower demand. At Baystar, the cracker recorded a low utilization rate due to the shutdown triggered by the hard freeze in December and operational challenges. The results continued to be burdened by depreciation and interest expenses amid a weak market environment. The clean CCS operating result in fuels and feedstock almost tripled to 581 million euros due to very strong refining indicator margins, improved margins in retail and commercial, and a substantial higher contribution from up-knock refining and trading. OMV's refining indicator margin soared to $14.8 per barrel, resulting in a positive market impact of around 250 million euros compared to the first quarter of 2022. Significantly higher cracks for jet fuels, diesel, and gasoline were only partly offset by lower heavy fuel oil and NAFTA cracks. Total sales volumes were slightly higher than in the first quarter of 2022, We have seen a very good development in the commercial business where the removal of market price regulations had a positive impact on sales volumes and margins. The performance of the retail business improved as well due to higher margins and the better non-fuel business partially offset by higher costs and the divestment of the German retail network. In addition, the prior year quarter benefited from customers stockpiling fuel volumes in anticipation of fast-rising pump prices. The contribution from APNOC refining and trading rose sharply from 20 to 108 million euros, driven by higher refining margins. The clean operating result of energy declined by 23% to 1.5 billion euros on the back of lower realized commodity prices. Decreased sales volumes primarily due to the exclusion of Russia and higher operational costs. The negative effects were partially compensated for by a stronger dollar and a considerable contribution from gas marketing and power, which was 76% higher than in the first quarter of 2022. Starting from the first quarter of this year, both gas businesses west and east are now included in the energy segment. Compared with the first quarter of 2022, OMV's realized oil price decreased by 14% and thus less than Brent. Supported by the change of the transfer price in Romania from Euros to Brent in the second quarter of 2022. While the European gas hub prices dropped by 44% compared with the prior year quarter, our realized gas price declined only by 7%. The realized gas price in the first quarter of 2022 included hedged volumes at the lower price and around 70,000 POE per day of Russian gas, half of which sold at very low domestic prices. Today, around 30% of our gas portfolio, namely the volumes in Norway and Austria, is exposed directly to the European hub prices. In Romania, the realized gas price was lower year on year, as most of the equity volumes were regulated. Production volumes decreased by 80,000 to 376,000 POE per day, primarily due to the change in the consolidation method of Russian operations, as well as natural decline in Norway and Romania. Production increased in the United Arab Emirates after a revision of OPEC restrictions. Production cost rose by 25% to $9.3 per barrel, impacted by the exclusion of the low-cost Russian gas volumes and global cost pressures. Sales volumes declined by 91,000 BOE per day in line with production. The gas marketing and power business increased by 155 million euros to 358 million euros, driven by a strong increase in the gas waste business. The result was supported by a very strong seasonal storage performance due to higher captured summer-winter spreads and the contribution from our LNG business, which has been included in our results since the previous quarter. These were offset by some losses caused by the volatility of the natural gas supply from Russia during January. OMV Petrom also had a very good performance, similar to the previous year quarter result, supported by strong margins from gas storage and power transaction outside Romania. Turning to cash flow. Our first quarter operating cash flow, excluding net working capital effects, was 2 billion euros, 40% lower than in the first quarter of 2022. In the prior year quarter, besides the very supportive macro environment, we temporarily benefited from the tax payment schedule in Norway, and we still had Russia consolidated for two months in our cash flow. This year, we received dividends from Port Rouge in the amount of 224 million euros, similar to the prior year quarter, and in addition, the majority of the insurance compensation related to the Schwechat incident. While in the first quarter of 2022, the net working capital effects generated a tremendously high cash outflow of around 700 million euros, in the first quarter this year, these effects reversed, generating a positive cash inflow of a similar size, triggered by a lower price environment, gas storage withdrawals, and lower storage injections. As a result, cash flow from operating activities for the first quarter was around 2.7 billion euros, and thus at the level of the prior year quarter. The organic cash flow from investing activities generated an outflow of around 850 million euros. This included the re-oil demo plant, the BDH plant in Belgium, the co-processing unit in Schwechat, maintenance of European refineries, and EMP projects in Romania, New Zealand, and the UAE. As a result, the organic free cash flow before dividends for the first quarter came in at 1.8 billion euros. Moving on to the balance sheet, since the end of last year, we have been able to further reduce net debt by around 1.6 billion euros to 639 million euros. As a result, our leverage ratio decreased to 2%. At the end of March 2023, OMV had a cash position of 9.7 billion euros and 5.2 billion euros in undrawn committed credit facilities. Let me conclude with the outlook for this year, which remains largely unchanged. Based on the development we have seen so far, our estimate for Brent oil price for the full year remains above $80 per barrel. Looking at the gas situation, the storages in Europe exited March more than half full, well above the five-year average, and with double the volumes compared to March 2022. Our storages in Austria are currently around 70% full. If we look at the current gas indicators, the DHE price for the full year has a downside potential compared to our estimated range of 60 to 70 euros per megawatt hour. However, given the volatility of the market, we consider it is too early to change our guidance now. We maintain our average realized gas price forecast for the full year of around 35 euros per megawatt hour. In chemicals and materials, our guidance for margins and volumes is unchanged. We expect to see some improvement in the olefin margins in the next quarter as industrial activity in Europe is picking up after a weaker macro outlook and outages at French refineries in the first three months of this year. For the full year, we continue to expect the ethylene indicator margins to be around €530 per ton and the propylene indicator margins around €480. Our polyolefin margin guidance is also unchanged. We forecast the polyethylene indicator margin to be around €350 and the polypropylene indicator margin around €400 per ton. The utilization rate of our European steam crackers is unchanged at around 90%. We have a planned turnaround at the Schwechat Cracker starting end of May for six weeks. At Bay Star, the new Boar Star polyethylene plant with a capacity of 625,000 tons per year is mechanically completed and is expected to start up this quarter. In Belgium, we finalized the re-tendering of the construction works for the Carlo BDH project, following the termination of all contracts with IRM Group, previously the main contractor, as of August last year. It is now estimated that the plant will start up in the first half of 2025, and the updated project plan provides for a substantial increase in costs. Borealis is claiming compensation from the IRM companies to recover part of the additional costs incurred. In fuels and feedstock, the refining indicator margin compressed recently as diesel supply is plentiful due to the rerouting of Russian volumes. Additional refinery capacities and sluggish demand Hence, from today's point of view, we see the refining indicator margin more toward the lower end of the previously communicated range of $10 to $15 per barrel for this year. The guidance for sales volumes is unchanged. Petrobras Refinery started a planned six-week turnaround on April 21st with a total impact of around 40 million euros, including OPEX and estimated margin loss. In energy, the guidance for the average production of around 360,000 barrels per day is unchanged. Total production in the second quarter is expected to be below the level seen in the first quarter as there are planned maintenance works in Norway, Malaysia, and Romania. The plant turnaround for the power plant in Romania started at the beginning of March and has been extended until the end of June because some additional parts need to be replaced. The results from the OMV gas marketing and power business in the next quarters will reflect the extended downtime for the power plant in Romania and the usual seasonal gas injection periods. Let me give you an update on the Neptune Deep project. In March, we signed a contract for the delivery of natural gas from the Black Sea to the Romanian National Transport System with Transgas. Assuming all key prerequisites are in place, we estimate the FID for the Neptune project in mid-2023. The organic CAPEX for full year will rise slightly from 3.7 to 3.8 billion euros, due to an increase in CNM related to the Carlo project and the later than estimated closing of the nitro divestment. Looking at cash flow, I would like to mention that our remaining 2022 tax liabilities in Norway amount to around 1.3 billion euros, and I expect it to be paid in the second quarter. In addition, in June, we will pay our record high dividends to OMV shareholders and minority shareholders amounting to around 2 billion euros. With regards to cash inflows, we expect to receive dividends from Port Rouge of at least 468 million dollars for 2023 in two tranches, one to be paid in the third quarter of 2023 and the remainder in 2024. The divestment of the nitro business has reached a very important milestone. The European Commission approved the deal. We are now waiting for clearance from the French authorities, and we are confident that we will close the transaction until end of June. Regarding the divestment of the Slovenian marketing business, a further milestone has been reached. In March, the buyer signed an agreement to sell some existing filling stations as a prerequisite for obtaining the EU Commission's clearance, and closing is expected until end of the second quarter. We expect a cash inflow of more than 1 billion euros upon closing the two deals. The clean tax rate for the full year is now expected to be in the mid-40s due to a stronger fuels and feedstock contribution than anticipated. Thank you for your attention. Reinhard and I will now be happy to take your questions.

Thank you, sir. As a reminder, to ask a question, please signal by pressing star 1 on your telephone keypad. If you find that your question has already been answered, you may remove yourself from the queue by pressing star 2. We'll take our first question from Joshua Stone from Barclays. Please go ahead.

Thanks. Good morning, everyone. Two questions, please. Firstly, just on the cash flow, there's a very good cash result in the quarter. You've highlighted a couple of things, like the Bruges dividend and the insurance payment, but can you maybe just reconcile where you think there's a very strong cash performance is coming from it? In particular, cash taxes look a little bit lower than I thought, so am I right there, and is there anything to say on that? And then secondly, just maybe a given where your balance sheet is, can you just talk about how you're feeling about acquisitions and the appetite in the current environment to do deals? Thank you.

Happy to answer your question, Josh. This is Ryan speaking. First of all, to reconcile a little bit the cash flow, indeed, there was a very good operating cash flow and also, as Alfred has mentioned, a positive cash flow from net working capital that we have in there. But within that, there are a couple of, of course, effects that you would not see directly in the net income, which are corrected. in our other line, which more or less show the non-cash allocations that are in the net income. And as you mentioned, for instance, we have a higher cash-in from Bruges than the result shows. This is around 140 million more. We have around 150 million insurance payment also in the cash flow. And we have hedging effect in there of roughly $800 million, which are non-cash in the net income negative. So, therefore, they add to the actual cash that came in from the operative business. Against that is a negative delta of cash paid versus cash booked of cash around $170 million. So, in total, we paid some $950 million of tax, whereas the tax line in the P&L that is the booked tax shows about $780 million. So, this delta, of course, is also an increase when you come just from the bridge net income versus operative cash flow. But indeed, all the three segments contributed with the operative business positively to the cash flow, and also the net working capital was positive in all three segments. I hope that clarified a little bit the situation around the cash flow. Regarding the balance sheet, yes, you're right, extremely strong performance. I think it is important that the strength on the balance sheet and, of course, also the cash held on the balance sheet is, on the one hand side, protection against uncertainties in the market and, on the other hand, enables us to, of course, go for all the capital allocation priorities that we have defined. So all the organic growth, all the progressive dividend, potential inorganic growth opportunities, deleveraging, and then the special dividend in the magnitude of 20% to 30% of our operating cash flow. Alfred, any further comments?

I think Reinhard covered the main elements. I think your specific question was also around inorganic activities that we may do. As you may remember, we said in our strategy, if we find possibilities to accelerate our growth and our transformation through inorganic acquisitions, We will consider those. However, we have shown over the last month very good discipline and we will continue to do so in order to make sure that we meet the three key criteria for such activities. Number one, it needs to be in line with our strategy. in terms of sustainability, but also in terms of growth. Number two, it needs to be value creating and cash contributing, and it needs to be additive to our ROCE of 12% target that we have. This we will continue to have as criteria, and as it comes to to size of such possible acquisitions. I would just look, if you look back, right, Borealis, 39% was our biggest acquisition so far. And for us, this gives a little bit of room where we felt comfortable up to now.

Got it. Thank you.

Thanks, Josh. We now come to Sasi Kancilukuru from Morgan Stanley. Sasi, please go ahead.

Hi. Thanks for taking my questions. I had three small ones, please. The first one, you highlighted that the updated plan for the CaloPDH project now provides for a substantial increase in cost. I was just wondering you could quantify what those additional costs are and particularly what that impact to capex would be 2024 2025 capex would be uh the second one uh just wanted to check whether there were any capital equity injections into the jbs in one queue uh especially into baruch as also any expectations of equity injections uh for the rest of the quarters for the year as well and uh finally uh you you've lowered your guidance for the refining indicator margin now towards the lower end of the $10 to $15 per barrel range. I was just wondering what levels are you seeing right now?

Thanks. I will answer the first and the third question, and I will ask Reinhard to answer the second question that you asked. On Carlo, like I said in my speech, we expect a significant cost increase of the project primarily due to the necessary re-tendering of the project work that followed the termination of the contract with this main contractor, IREM Group. And compared to our previous plan, we now expect about 50 to 7 million euros additional until the end of this year. but there will most likely also be higher capex for the next two years due to the delay of the project. Borealis is currently working quite intensively on mitigating the cost increases of the project and has also initiated a legal process against IRAM to recover part of the additional incurred cost. On your third question concerning the refining indicator margins, it's correct that for the first quarter, we have actually seen refining indicator margins that were more up on the higher level of the range that we have given. And due to the changes that we anticipate in the market, We have now we see that we will, for the full year, be more in an average towards the lower end of the range that we have given here. I think three things that I would like to offer for consideration here. Number one, the indicator margins, of course, do not include any kind of utility cost or electricity cost and so on. And we see a lower environment in this, that the impact on the realized margins should be buffered by that. And secondly, we see a strong development of retail and commercial margins where we have seen the elimination of price caps that have capped or reduced our retail and commercial margins in the last quarters. And for the second question, I would ask Reinhard if he can help out.

Sure. Sasi, you have asked about potential capital injections or equity injections into JVs. If we look at BayStar, we are not expecting any kind of capital injections there as we are already entering the stage of startup, both on the cracker and hopefully soon also on the Bay3 polyethylene plant. In Boruch company as such, we are also not expecting any kind of equity injections. In the Boruch 4 project, we are currently expecting that the capex needed will be covered by external loans, so by leveraging the company, so we do not foresee major equity stress or anything like that. for OMB or for Borealis as such coming on there. Great. Thank you very much.

Thanks, Sasi. Next questions come from Ori Patricot, UBS.

Yes, hello everyone. Thank you for the presentation. I have two questions, please. The first one, on chemicals where you didn't change the margin guidance for the year, I was wondering if you can give us a sense of to what extent you've seen improvements already in the quarter or whether we need to see further improvements for margins to get to the level that you expect, especially for olefins in Europe? And then secondly, very good performance in the cars and marketing and power business this quarter. I understand the seasonality going into second, third quarter. But think about next winter. To what extent was this performance in the first quarter exceptional or is that something that we could expect to see in a standard first quarter going forward for this business? Thank you.

Okay, on the chemicals and materials, the first quarter, we have actually seen a bit of a mixed picture, if you want. On the ethylene indicator margins, we have actually seen through the quarter some improvements, both in ethylene but also in propylene. We have seen also that going into the second quarter, and we believe that this may be caused by some pickup of activities. And therefore, we have maintained our guidance of 534 ethylene and 480 euro per ton for propylene. On the polyolefin side, polyethylene and polypropylene, we have seen in the first quarter actually I guess I would call it a stabilization and basically performance right around the guidance that we gave for the year. So 350 for polyethylene and 400 for polypropylene. We then see in particular in Asia, we have seen for the first quarter an average price in polyethylene and polypropylene that was about $50 above the Q4 average, and we are Also seeing that Q2, we have started in a similar range of this. So hopefully these are some good indications of a movement that we see in those areas. We do believe that Q2 will still on olefins, we see a bit of a brighter picture on polyolefin. We still see some pressures and Hopefully then as we go through the year in the second half, we will see some light improvements. On your second question, gas and power, I think the improved results are coming there from different areas. Definitely one area that I would think should be sustainable is around our long-term capacity bookings that we have on our LNG terminal in Rotterdam. And we had a very bad situation over the last years And that changed dramatically last year. And I would anticipate that Europe will continue to depend on LNG imports so that we can now use those LNG capacities in a much more commercial way. And we are also putting quite some effort in order to do that. I think that should be possible. And, of course, we also anticipate that, again, for next winter, gas storage and filling gas storages will be an essential pressure in order to provide security of supply. So I would anticipate that also we can have some good business. Currently, at OMB, our storage is already about 70% full. We have started storing now in the last few weeks and we will continue to put this into storage.

Thanks a lot, Ori. We now come to Peter Lowe, Redburn.

Perhaps just ask the distribution question another way. committed to return 20% to 30% of cash flow to shareholders. Some of your peers have ended up moving above their guided ranges. And if you don't strike a deal this year, you would certainly be in a position to do so. Is the 30% ceiling kind of a hard ceiling, or could you move above that if the circumstances allowed? And then just secondly, on the rising OPEX in upstream, To what extent can you kind of spread out kind of the two effects there, so underlying cost pressure and then I guess the change in mix as Russia's dropped out? Thanks.

Peter, I think we feel very confident with the strength of our balance sheet and also the way how we are proceeding with our strategic plans. that we are also for next year in the position to stay within a range below 30% of leverage level, and therefore the range of 20% to 30% is absolutely within our comfort zone. So I would really encourage to have a very positive view on that, and we feel absolutely comfortable with that. You can imagine that from a financial point of view, the strength of the balance sheet in troubled times is always a good cushion, but we will not keep money storage and therefore are more than happy to also let our shareholders directly participate via the progressive dividend as well as the special dividend. Thank you. Regarding rising OPEX in upstream, I think we have to see that, of course, this goes up, this goes down. In some areas, we see some inflationary effects on the OPEX. We are fighting that with programs that are both cost savings programs as well as efficiency programs in terms of procurement, in terms of administration and all of that. So, the key effect actually is how efficient we can be in the portfolio management. We have announced that we will have some portfolio measures in Asia, and we are also looking into the portfolio management when it comes to all the investments into new capacities there, specifically when you look into a Neptune project in Romania. This certainly will also, from the OPEC's point of view, be a favorable one given the right boundary conditions that we are always looking for here. And with the decline in... The overall rate of production, we will certainly also make choices when wells are too small and also take them out so that the specific increase of the operating cost in upstream can be curbed there.

Thank you. Thanks, Peter. The next questions will come from Raphael Dupois, Société Générale. Raphael, are you there? Good. If not, then we go to... Now we can hear you.

Sorry. Sorry about that. I was congratulating you for the strong set of results. And my first question is about the Baystar GV. It looks like it's already two quarters. You seem to be having some technical issues there. Would you mind reminding us what those issues are and maybe even quantify the opportunity cost in terms of lost EBIT for this first quarter of the year? That's my first question. And then gas, marketing and power. There are many moving parts, not least this LNG business that you started booking results for last quarter. Looking at the sequential improvements for Q2-1Q, would it be possible to have more granularity on what's coming from this LNG business and what is coming from the fact you receive more gas from Russia than what you were expecting? and also the gas that you are selling from storage. Thank you.

Thank you, Raphael. I will answer your first question, and I will ask Reinhard to answer the second question. On the BayStar joint venture, I just want to go back and remind you of what the project there is. First of all, it's a 50-50 joint venture between Borealis and Total Energies. And the joint venture currently operates about 400,000 tons of polyethylene production. And the projects that we have there that we executed over the last few years is, number one, a 1 million ton ethane cracker, and number two, a Boer Star polyethylene plant with 625,000 tons of production. So at the end of this, this should be a 1 million ton ethane-based, fully integrated ethane to ethylene to polyethylene complex with state-of-the-art poor start technology there. The cracker was mechanical complete somewhere in the middle in the second half of last year. We started it up. We had some good progress there. And then, unfortunately, in the fourth quarter, this Texas winter freeze created a situation where the cracker tripped. And we had some damages in this trip that needed to be repaired. So a few months ago, we started back up the cracker and still have some teasing issues in getting that fully to run. But we see that we are making some progress towards that. and would anticipate that we are coming to a resolution of those issues. Like I said, it's a $1 million cracker, not completely unusual that there is startup issues that have to be eliminated one by one, and we'll have to work through that. What I can also report is on the, because that's the important part, then, that we can actually start the integrated operation in that joint venture. And in the meantime, the polyethylene plant is mechanically complete, and we are now working towards starting up the polyethylene plant with this we would then be in the situation to have that integrated setup there. On the EBIT impact, we do not report that kind of detail, but what I could maybe say is that we have, with the startup, we have started the depreciation, of course, of the plant, and if the plant is not running, this is not favorable to the result, of course.

Rafael, to your second question about gas marketing and power contribution and the parts of it. In Q1, we actually had a combined result of some $360 million from Gas East and Gas West. And, of course, in Gas East and Gas West, you have different parts of profitability in there. Gas East is mainly the gas sales and trading as well as the power business in Romania. And please be aware that in the first quarter, we had one month of shutdown of the power plant for maintenance reasons in there. So in this quarter, the contribution may have been a little bit less But that was more than compensated by a very good sales and trading business in the country. In GasWest, we have three parts that are contributing. The one is the normal sales and trading business. The second is the LNG business. And the third, actually, is the storage business. And in this quarter, of course, the storage business had by far the biggest contribution because we had, first of all, very good storage loading from last year. And you have seen that we used quite some working capital to allow us for that. And with rolling some of the contracts from Q4 to Q1 as end of Q4, we had very low prices, and they had recovered in the beginning of Q1. We had good opportunities for margins. LNG business is now a stable business, a profitable business, and is taking a part that will not fluctuate so much. And the sales of trading business is, of course, one that is more in Q4 and Q1 strongly contributing. So this is a seasonal business. where we will see that the month where we will store in instead of taking gas from the storage will have lesser contributions clearly from that business, and that, of course, is also the case for the storage business. You mentioned also that we would get more gas from Russia than expected. No, that's not the case. we are getting what we expect in Austria. So from our two contracts that we have with Gazprom, the contract flowing to Austria is now, I would say, adequately delivered to, whereas the contract in Germany is still at zero, and we are not receiving any kind of gas from Gazprom in Germany. So I hope this clarifies a little bit the situation.

Thank you.

Thanks, Rafael. We now come to Karen Kostanian from Bank of America.

Yeah, gentlemen, thank you so much for your presentation. I have two questions. The first question about your six weeks maintenance on the refineries. Could you just remind me if this is the first time you are announcing it and whether that's going to also... have a material impact on your expected refining margins in the second quarter? And the second question is more of a theoretical question on potential acquisitions. The chemicals margins are at the low. The valuations are at the low. What is preventing you from pulling the trigger?

Thank you. I will start with your second question and then answer your first question after and ask Reinhard for some help of potential impact. On the chemical and material acquisition, what we said is that we have a very good growth project, growth plan for our chemical and material business that is really based on organic growth projects. If you remember the three big growth projects that we had, BayStar project, which I just talked about before, the BDH project in Belgium, Carlo, and the Port Rouge Four project in Abu Dhabi. These three projects will all come online by 2025, and they will allow us to about a 30 percent growth of our chemicals and materials business. So this is the big focus. What we said in addition to this is that we will make the business more sustainable by increasing our circular business to about 2 million tons by 2030. Most of those businesses, this circular business, is There's no really big acquisitions that you can make at the moment in order to drive this forward. Borealis has made a smaller one in the last couple of months. They bought a minority share in a company called Renasci in Belgium, which does chemical recycling. or Smart Chain Recycling, it's called, so it's a mix of different recycling methods. And they have actually increased their share recently to a majority now. They now own slightly more than 50% of Renarski. So these are smaller acquisitions that can be made, but the big movements in this circular business is going to be organic, and we are currently building a re-oil plant in our Schlechert refinery, our own OMV technology. That re-oil plant should come on stream later this year with 16,000 tons of production capacity that we will then bring on stream where we make the steps. The third thing that we said in chemicals is inorganic acquisitions to diversify our portfolio. And you're absolutely right. Our balance sheet is strong enough that we can do that. But we did also make it very clear that we need to fulfill all three criteria. It needs to be moving with our strategy in terms of sustainability, in terms of growth perspectives. It needs to be value-enhancing. for us, and it needs to contribute to our ROCE of 12% target. And we are, of course, always open and looking around for those targets. But at the moment, I have nothing to announce here.

Yeah, and then maybe your question, your first question regarding the maintenance in Petrobras. in Romania. This is a six-week maintenance window. It has been previously announced. It is also a planned maintenance. And you may have followed that we did not have major shutdowns in Petrobras over the last year. So for the first time, this refinery has been running on a five-year period. And that also makes this maintenance period a little bit longer than to the normal four weeks now in six weeks. But this has been announced and has planned. And you had asked for the impact. We are estimating the total impact of that six-week period at around 40 million euros. This includes both OPEX as well as estimated margin loss. But the specific margin loss that you see, of course, you can quite easily calculate if you take the indicator margin and the missing volumes during that period, so with the indicator margins now going down, maybe it's not the worst moment for that kind of a shutdown.

Thank you very much.

Thanks, Karen. Next is Giacomo Romeo-Jeffries.

Yes, thank you. The first question is going back to your earlier comments around the chemical acquisitions requirement, you made a comment about referring back to the acquisition of Borealis in 2020 and saying that that gives an idea of the maximum size. Just wanted to get a little bit more of a comment here. Obviously, the acquisition price was $4.68 billion, but the net cash out was quite lower. So which one of the two should we see as sort of the maximum size for a potential M&A here? And then Related to that, would you be okay to let your leverage go above 30%, or would you see 30% as a cap in terms of the size you will be happy to use for M&A opportunities? The second question is more general, and it's around gas storage. You said you are at 70%, which is well ahead of the EU's intermediate target levels. Just trying to understand, how do you see your progress towards the end of summer, sorry, end of injection season target of 95%? Are you looking to sort of get there as soon as reasonably possible in order to de-risk? the growth to that level, or are you happy to sort of slow it down and just make it grow hand-in-hand with what are the EU's intermediate targets? Just trying to get a little bit better understanding of what you're thinking there. Thank you.

Thank you, Giacomo. I will start with question number two and ask Reinhard to help on question number one. The storage level that we are looking to achieve here, of course, we will again make sure that we reach a high storage level as we had in the last year, as you could see from Q1 of this year. It also creates a possibility to earn some money. We actually are going to look to commercially optimize our storage activities as we move towards the winter season again and make sure that we can use the storage opportunity also to lock in positive margins towards the winter season then when we heat. So this will be a key driver for us how we move up on the storage.

Yes, and Giacomo, regarding the size and the impact of potential acquisitions, First of all, we always point to the fact that these kind of acquisitions are opportunistic, and we are looking for best possible targets at the best possible time. And we concentrate, of course, pursuing our strategy with organic investments. But when it comes to the maximum size or what we are targeting at, I'm long enough in M&A business to say you never announce a number or you never announce a target up front. So, therefore, I think it's important to see what Alfred has said. We are in a size that is digestible for us with the clear intention not to surpass the 30% of our leverage. So just to make sure we are not looking into a $10 or $15 billion acquisition. This is very clear. We are looking at clearly smaller sizes, if at all, at the right time, and we will let you know about successful approaches when the time is the right one.

Thank you.

Thanks, Giacomo. We now come to Matt Lofting, J.P. Morgan.

Hi. Thanks for taking the questions. Two, please, if I could. One strategic and one nearer term. On the former, bearing in mind the E&P disposal process around Malaysia and New Zealand, how committed is OMV to preserving vertical portfolio integration through Strategy 2030? And are you concerned that upstream divestments risk making group cash flows incrementally more cyclical around downstream trends as shown in many ways by the chems and refining dynamics we've seen in recent months and then secondly from a cash flow perspective can you talk about where you see the trajectory or at current macro on second quarter operating cash flow factoring macro trends including lower refining and emp volumes that you highlighted bruges and swash at inflow phasing from Q1 and high Norwegian cash taxes. Thank you.

I will start with question number one. Reinhard will take your question on cash flow expectations. The strategy of OMV is a strategy where we are saying today we have three business segments with energy, fuels, and feedstock, and chemicals, and materials. And they have an integration value for us that is helping us to have a strong performance through the different cycles. I think the Q1 result that we just delivered does show the benefit of this. But more importantly, from a strategic perspective, we see that in our transformation to become a sustainable fuels, chemicals, and materials company, we do see integration value also on an operational level in order to make that transformation over time. So let me give you two or three examples of this. We just announced for the Q1 This Poseidon project together with in Norway for carbon capture and storage. One of the CO2 emitters that we are considering that could store into this is where we have activities in northwestern Europe. with access to exporting the CO2 potentially to this CCS activity. The second one that I want to mention is our re-oil process. We believe our re-oil process is one that can be scaled to a very big commercial level. We are now finishing up this year our 16,000 ton plant, but the full commercial scale would be 200,000 tons. And this operation can be integrated into the refinery for additional efficiency and additional value creation from the production of such re-oil plants. And the third example is that for our refineries, we will increase our chemicals integration. As road fuels reduce over time, we will increase our integration into chemicals more and go up to 24, 25 percent of chemical integration. And we believe those are good integration benefits. that help us both to manage cyclicality, but also bring us some operational synergies across the portfolio. As it comes to Malaysia and New Zealand, this is also a decision that was also driven to a degree that these are very remote assets that in our core portfolio have limited integration in that area. And this is for us, therefore, a driver to go into this. And last, what I want to say, if you look at the timeframe of 2019 to 2021, that is the time where we had Borealis already in after the acquisition, what you can see is we are really one of the few companies that has a very balanced mix of contribution from the different business segments. about 30% of coming from chemicals, 30% from refining, 40% from energy. And over time, we will be able to move this in a growth direction. I really think we are one of the few companies that have such a balanced portfolio that allows this transformation.

Yes, and then, Matt, regarding your question regarding cash flow expectation Q2. First of all, we are expecting, again, a good operative cash generation. So we have three strong segments there. However, we have to take into account, of course, that currently we have lower indicators for both gas prices as well as refining margins. We expect a slightly improved chems environment in second quarter. And then, of course, we have also to look into the networking capital because, as Alfred has stated, we are starting already with storing gas again. So this is something where certainly there will be a negative networking capital effect to be expected in Q2. On the positive side, we are expecting cash in from our divestments. Nitro and possibly also the Slovenian retail business. But then, of course, we see a stronger cash outflow on the tax side in Norway. There will be second quarter, the highest quarter in terms of tax payments. And, of course, I mean, a good message to our investors, we will have the cash outflow from dividends and special dividends in Q2 and also the dividends from Petrom. So this is a little bit the overall picture where you can see what influencing factors will deviate between Q1 and Q2 as special situation, but in general cash generation situation. should he can be strong from operative results.

Thank you. Thank you, Matt. There's another question from from .

Yes. Hello, everyone. Thank you for taking my question. Coming back on the Norwegian tax liabilities, you had $3 billion. of outstanding tax liabilities in Norway at the end of Q4. Now it has been reduced to 1.7 billion. But can you quantify the cash tax payment you expect in Norway in Q2? I wanted to understand how that compares with your cash tax payment in Norway in Q1, just to make sure we properly model that. cash tax lag in Norway. And my second question is, you refer in your gas marketing business this quarter to some hedging losses in January 2023 because of erratic natural gas supply from Gazprom. Can you quantify that hedging losses impact in January?

Thank you. I'll try my best regarding the tax guidance for Norway. So, as I said, tax payments overall in Q1 have been around $950 million. That, of course, is not only the Norwegian tax But let's say two-thirds go in that direction. We have from the Norwegian tax regime a situation where the tax relating to the past year is always three major tranches in the first half year, one in the first quarter, two in the second quarter. And as you can see from our balance sheet, tax liabilities are in the magnitude of slightly above 1.3 billion in there. So you can imagine that this is about the tax payments that we are expecting from Norway here as they are the liabilities that we carry from last year here. So I hope this gives you the guidance So that's why I said the highest burden on tax payments from Norway will be in the second quarter. When you were in your second question referring to the impact of hedging losses in January, we have given you last year an average number per month of around 50 million of the hedging losses is there is volatility. In January, volatility has been a little bit higher, but there is nothing specifically to quantify here. All the kind of losses that we made with these hedges have been more than compensated with our good gas management, with sales, with storage business. So I'm very happy to report that we are more than overcompensating this kind of negative impact, and this is really the good news about Q1.

Crystal clear right now. Crystal clear.

Thank you. Thanks, Bertrand. We now come to the end of our conference call and would like to thank you for joining us today. Should you have any further questions, please contact the investor relations team. With that, thanks again and have a good day.

Thank you very much. I wish you a good afternoon. Thank you.