Omv Ag

Welcome to the OMV Conference Call Results, January to June Q2, 2023. If you'd like to ask a question after the presentation, you may register your question by pressing the star one button on your telephone keypad 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. To maintain this conference, a live audio webcast is available on the 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 or may occur in future and outside the control of OMV. Therefore, recipients are cautioned not to place undue reliance on these forward-looking statements. OMV disclaims any obligation and does not intend to update these forward-looking statements to reflect the actual results, revised assumptions and expectations, and future developments and events. This presentation does not contain any recommendation or invitation to buy or sell securities in OMV. I'd like to turn the call over to Mr. Florian Gregor, Padron Investor Relations. Please go ahead, Mr. Gregor.

Yeah, thank you. Good morning, ladies and gentlemen, and welcome to OMV's earnings call for the second quarter 2023. With me on the call are our CEO, Alfred Stern, and Reinhard Florey, OMV's Chief Financial Officer. As always, Alfred will walk you through the highlights of the quarter and discuss OMV's financial performance. Following his presentation, both gentlemen will be available to answer your questions. And with that, I'll hand it over to Alfred.

Thank you, Florian. Ladies and gentlemen, good morning and thank you for joining us. The second quarter of 2023 was characterized by increasing concerns about the global economic situation and tightening monetary policies across major economies. As a consequence, we have seen prices and margins decreasing. Compared to the previous quarter, Brent crude oil prices declined slightly to $78 per barrel on average for the quarter, and European gas prices dropped by 31% on the back of high storage levels and seasonality. Refining margins almost halved. compared with the exceptional level of the first quarter to $7.6 per barrel, driven by a sharp drop in NAFTA prices and lower middle distillate cracks. The flexibility of Chinese refiners to process Russian and Iranian crude at discounted prices has pushed NAFTA prices down compared to the previous quarter. In chemicals, End-market demand remained under pressure with slower-than-expected recovery in China and weak industrial activity in Europe, while supply increased with new capacity additions in Asia. Olefin margins in Europe increased supported by lower NAFTA prices, while polyolefin margins continued to decline. Weaker consumer activity, a squeeze on affordability, and continued destocking, combined with pressure from imports, have kept order levels depressed. The clean CCS operating results declined from the exceptional high level of the prior year quarter to around 1.2 billion euros. Our cash flow from operating activities in the quarter fell to €226 million, impacted by decreasing commodity prices combined with high tax payments in Norway related to 2022 earnings. Looking at operations, polyolefin sales volumes were lower by 7% year-on-year, while fuel sales volumes rose by 5%. The utilization rate of our refineries and European crackers was lower than the typical level of 90% plus due to planned turnarounds in Petrobras and at the chemical-related facilities in Schmechat. Oil and gas production was slightly higher year on year, primarily due to the commissioning of new wells in New Zealand and the force majeure in Libya in the prior year quarter. We continued to execute our strategy and further advanced with the transformation of our company. In June, our longstanding collective efforts at multiple levels came to fruition, and we announced the final investment decision for the natural gas project Neptune Deep, a key milestone in our strategy 2030. The project is expected to provide a reliable and secure source of energy while strengthening our group's position in the Black Sea region and in southeastern Europe. OMV Petrom will be the operator of the project. Together with Romgas, the largest producer and main supplier of natural gas in Romania, we will jointly invest up to €4 billion in the development phase of the project. With around 100 billion cubic meters of recoverable resources, Neptune Deep is one of the largest natural gas projects in the European Union. First production is estimated for 2027, and production at the plateau will be approximately 140,000 PoE per day for around 10 years. In our low-carbon business, we acquired a minority stake in the Canadian company Ever Technologies, the world's leading closed-loop geothermal energy solutions provider. As this technology is truly scalable and applicable in various types of geological structures, it will complement our existing portfolio, enabling us to offer solutions for district heating networks outside of the normal hydrothermal areas. Our initial focus in deploying this technology will be Austria, Romania, and Germany. In chemicals, we signed an agreement to acquire Rialti, one of the European market leaders specialized in the production of sustainable polypropylene compounds with a focus on mechanically recycled feedstock from waste. With over 30 years of experience, Realty is making compounds with applications in different industries, including automotive, appliances, and construction. The addition of Realty to our portfolio will increase our annual sustainable polyolefin production capacity by around 50,000 tons to around 200,000 tons, strengthening our ability to support our customers in meeting their sustainability ambitions. Moreover, we have been actively driving forward the diversification of our gas supply sources and supply routes. We worked on the diversification of our gas transport routes, which for historical reasons have been primarily focused on the supply route from the east via the Baumgarten hub. OMV was awarded capacity of around 40 terawatt hours per annum until 2026 and around 20 terawatt hours per annum for additional two years for transportation routes via Germany and Italy. And we signed a long-term agreement to purchase 1 million tons per year of LNG from BP starting from 2026 for 10 years. In addition, we announced this morning a new gas discovery in Austria with a preliminary evaluation of potential recoverable resources of around 28 million barrels of oil equivalent. We also made significant progress in our active portfolio management and closed the divestment of our Slovenian business to the Moor Group in June 2020. and the divestment of the nitro business to Agrofiat in July. Both divestments together generated a cash inflow of more than 1 billion euros, with the lion's share only booked in the third quarter. The sale process of our E&P assets in Malaysia and New Zealand is progressing as planned. The marketing phase started in the second quarter, and we are seeing active interest from many potential buyers for both assets. Two weeks ago, we announced that we will pursue negotiations with Adnok on a potential combination of Borealis and Borouge. The transaction would create a global polyolefin company with a material presence in key markets and potential for growth. We are aiming for equal terms under a jointly controlled listed platform. Please understand that we cannot give any further details at this point in time. Let's now turn to our financial performance in the second quarter of 2023. Our clean CCS operating result came in at around 1.2 billion euros, substantially lower quarter-on-quarter and year-on-year, driven by significant price drops across all commodities from the exceptionally high levels seen in the prior year quarter. The Clean CCS tax rate increased from 36% to 46% due to a higher contribution from countries with high tax regimes in the total group profits compared with the same quarter of the previous year. As a result, the Clean CCS net income attributable to stockholders declined to 472 million euros. Clean CCS earnings per share amounted to €1.44. Let's now discuss the performance of our business segments. Compared to the second quarter of 2022, the clean operating result of chemicals and materials dropped sharply to €7 million. The nitro business turned negative to minus 35 million euros, and the performance of the polyolefin business declined as well, impacted by the slowdown of the chemical sector. The result was burdened by substantial negative inventory valuation effects, weaker margins and volumes, and a materially lower result from Borealis JVs. The contribution from the nitro business fell by around 150 million euros from the exceptional high level of the prior year quarter as a result of lower margins and negative inventory effects following the gas price development. The ethylene indicator margin declined by 14%, and the propylene indicator margin went down by 32%. The polyolefin indicator margins decreased by around 30% from the extraordinary levels of the second quarter of 2022. As a consequence, in our European olefins and polyolefins business, we recorded a negative market impact of around 200 million euros compared to the second quarter of 2022. and negative inventory valuation effects of around 200 million euros. The operational performance of our olefins business improved, supported by a higher utilization rate of the Stenungsund Cracker, which was in turnaround in the prior year quarter, and a higher light feedstock advantage. The polyolefin business of Porealis, excluding JVs, suffering from sluggish demand. Polyethylene sales volumes decreased by 9%, while polypropylene sales volumes declined by 4%, reflecting depressed demand in consumer products and a decline in energy infrastructure and healthcare applications. Mobility volumes increased, returning to pre-COVID levels due to the need to catch up on long-placed vehicle orders and better supply of semiconductors. Our specialty business continued to provide resilient earnings contributions, as you can see in the appendix of the presentation. We were able to maintain margins, but sales volumes declined due to subdued demand. The performance of the JVs dropped to 29 million euros due to a lower contribution from Boruche and a negative contribution from Baystar. The Boruche result declined, driven by oversupply and subdued demand in Asia, as well as a lower share of OMV in the JV following the listing of the company in June 2022. Sales volumes decreased due to slow demand, partially offset by the new BP5 plant, which was ramping up in the prior year quarter. At Baystar, the ethane cracker recorded a low utilization rate due to 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 decreased to 283 million euros, primarily due to a substantially lower contribution from refining, partially offset by a significantly higher retail and commercial result. The refining margins pulled back from the extraordinarily strong level of the prior year quarter when refining earnings had surged in the wake of the Russia-Ukraine war. Cracks for jet fuel, diesel, and gasoline dropped significantly, while NAFTA remained very weak. OMV's refining indicator margin in Europe fell from $20.5 to $7.6 per barrel, but remained above historical levels. The refinery utilization rate increased from 58% to 73% despite the Petrobras turnaround as the prior year quarter was affected by the Schwechat refinery turnaround and incident. As a result, in total, the performance was impacted negatively year on year by around 300 million euros. Total sales volume rose by 5% compared to the second quarter of 2022. Despite the divestment of the German retail network last year, we have seen a very good development in the retail business, driven by higher fuel unit margins and a better non-fuel business, partially offset by the missing contribution from Germany. The commercial business improved as well, driven by stronger margins and increased sales volumes following stronger demand and an upswing in the aviation sector. Following the global trend, the refining margins in the Middle East fell as well from the record levels of last year. However, the contribution from ad hoc refining and trading remained strong and was only slightly lower compared to the second quarter of 2022, supported by a partial reduction of the decommissioning provisions. The clean operating result of energy halved to 895 million euros compared with the second quarter of 2022, primarily due to lower commodity prices, partially offset by better performance of gas marketing and power. While in the prior year quarter, the print price averaged $114 per barrel and the European Gas Hub price 102 euros per megawatt hour, in the second quarter of 2023, the print price came down to $78 per barrel and the Gas Hub price to around 38 euros per megawatt hour. OMVs realized oil price decreased in line with Brent, while the realized gas price declined less than the hub prices by 50%. Around 30% of our gas portfolio, namely the volumes in Norway and Austria, is exposed directly to the European hub prices. The other countries follow more local pricing. As a result, we recorded a negative market effect of €866 million versus the prior year quarter. Compared with the second quarter of 2022, production volumes increased slightly to 353,000 POE per day, primarily due to new wealth in New Zealand running production in Libya without interruption, partially offset by natural decline and planned maintenance in Norway and Romania. Production cost rose by 20% to $9.9 per barrel as a consequence of general price inflation and a positive one-off effect related to a tax audit in Romania in the prior year quarter. Sales volumes increased in line with production. The gas marketing in power result rose by 83 million euros, driven by a better performance of GasWest. The prior year quarter result was negatively impacted by hedging losses due to the volatility of the natural gas supply from Russia. In addition, the LNG business is now included in our clean operating result and contributed positively. In Romania, the gas and power business contribution declined in the context of significantly lower market prices, extended regulatory and fiscal interventions, and the planned turnaround of the Pras power plant for the entire quarter. The result was supported by the reversal of a provision related to taxation in Romania. Turning to cash flow, in the second quarter we had very high cash outflows due on the one hand to the annual payment of dividends and on the other hand to unusually high tax payments. We paid record regular and special dividends to OMV shareholders related to the full fiscal year 2022, amounting to €1.65 billion. In addition, we paid our remaining 2022 tax liabilities in Norway of around €1.2 billion. as well as taxes related to the solidarity contribution for 2022 in Romania and Austria, amounting to €380 million. Combined with a declining macro environment, our second quarter operating cash flow, excluding net working capital effects, turned negative, to minus 375 million euros. This includes dividends received from ad hoc refining and trading in the amount of 274 million euros. Networking capital effects generated a positive cash inflow of 600 million euros in the quarter triggered by a lower price environment. As a result, cash flow from operating activities for the second quarter was 226 million euros. Looking at the half-year picture, cash flow from operating activities, excluding networking capital effects, amounted to 1.6 billion euros. While in the first half of 2022, the networking capital effects generated a cash outflow of around 2.6 billion euros, in the first half of this year, these effects were partially reversed. generating a positive cash inflow of around 1.3 billion euros. As a result, cash flow from operating activities for the first half of 2023 was 2.9 billion euros, 7% lower than in the first half of 2022. The organic cash flow from investing activities generated an outflow of around 1.7 billion euros in the first half year. This included the re-oiled demo plant, the PDH plant in Belgium, maintenance of refineries, and EMP projects in Romania and Norway. As a result, the organic free cash flow before dividends for the first half year amounted to 1.2 billion euros. After the payment of the annual dividends to shareholders, minorities and bondholders, the organic free cash flow turned negative to minus 649 million euros in the first six months of 2023. The inorganic cash flow from investing activities generated an outflow of around 100 million euros. The cash inflow of 272 million euros related to the divestment of the business in Slovenia was more than offset by investments in debt instruments, additional loans granted to Porouge and Baystar, and the acquisition of a stake in Ever. Moving on to the balance sheet. Our leverage ratio at the end of June temporarily increased to 11% following a heavy cash outflow quarter when we had to pay the record annual dividends and the outstanding taxes in Norway. However, if we consider the cash inflow of around 850 million euros coming from the divestment of the NYPRO business, which we closed in July, our leverage ratio would be around 8%, well below our threshold of 30%. At the end of June 2023, OMV had a cash position of 6.5 billion euros and unchanged 5.2 billion euros in undrawn committed credit facilities. Let me conclude with an updated outlook for this year. Based on the developments we have seen so far, our estimate for the Brent oil price for the full year is now between $75 to $80 per barrel. Looking at the situation in gas, the storages are filling up fast in Europe, having already passed the 80% threshold, which is earlier than expected. Therefore, we now estimate the THE price for the full year to be around 40 euros per megawatt hour. As a consequence, we are adjusting our average realized gas price forecast for the full year to around 30 euros per megawatt hour. In chemicals and materials, supported by reduced NAFTA prices, we continue to expect the ethylene indicator margin to be around 530 euros per ton. However, the propylene indicator margin is now expected to be lower at around 400 euros per ton due to high supply availability. In polyolefins, the demand remains weak as the ongoing cost of living crisis is impacting consumer spending and industrial activity. We now forecast the polyethylene indicator margin for the full year to be around 300 euros per ton and the polypropylene indicator margin around 350 euros per ton. The guidance for polyolefin sales volumes is unchanged at around 3.8 million tons. The utilization rate of our European steam crackers is estimated to be around 85%. We have a planned six-week turnaround at the Porvo Cracker starting mid-August. At Baystar, the new Boar Star polyethylene plant with a capacity of 625,000 tons per year is mechanically completed and is expected to start up in the next weeks. In fuels and feedstock, we are now expecting the refining indicator margin for the full year to be in the range of $8 to $10 per barrel. The utilization rate of the refineries is expected to be around 90%. The guidance for fuel sales volumes and margins is unchanged. In energy, the guidance for the average production of around 360,000 barrels per day for the full year is unchanged. Total production in the third quarter is expected to be only slightly higher than in the second quarter, as there will again be planned maintenance works in various countries, such as Romania, New Zealand, and Norway. With regards to cash inflows, we expect to receive dividends from Boruch of $468 million for the fiscal year 2023 in two tranches, half to be paid in the third quarter of 2023 and the remainder in 2024. The clean tax rate for the full year is expected to be in the mid-40s. Thank you for your attention. Reinhard and I will now be happy to take your questions.

Yeah, thank you, Alfred. Let's now come to your questions. I'd like to ask you to limit your questions to only two at a time so that we can take as many questions as possible. You can, of course, always rejoin the queue for a follow-up question. The first questions come from Irene Himona from Societe General. Irene, please go ahead.

Thank you very much. Good morning. My first question is on the cash taxes paid in the quarter in Norway and also solidarity taxes in Romania and Austria. You said in your prepared remarks that these relate to 2022. I wonder if you can please remind us How much remains to be paid in the rest of the year in these countries? And then, is there any guidance you can provide for the 2024 normalized cash tax rate? And my second question, you referred in your speech to operational challenges at Baystar, at the cracker there, and the negative contribution. Can you say what has gone wrong with the equipment and Is there a timeline for repairing it, please? Thank you.

Yeah. Hi, Irene. This is Reinhard speaking. Regarding your question to the taxes, the tax regime in Norway that is relevant for these, I would say, unusually high taxes is is that there is a delay of taxes if the prognosis of the overall oil prices and gas prices come to a different development. So normally at the beginning of a year in the tax regime, there's an assumption of oil and gas prices, and therefore the tax payment levels are being determined. Now we have seen in 2022 significantly rising oil and gas prices, so therefore the predetermined payments for tax have been much lower than the actual tax liabilities that arise from the operative business. You could also observe this in our balance sheet where the tax liabilities actually rose by the end of 2022 to a level of 2.4 billion euros. Now, this has come down by the payments in Q1 and specifically in Q2 of the additional delta of these taxes come down again to an almost normal level of 0.8 billion in the tax liabilities. So, therefore, we can assume that for the rest of the year, tax payments will be significantly lower and on a normal level because as of quarter three, we are more or less paying taxes that refer to the year 2023 with the respective lower oil and gas prices here. Regarding the solidarity tax, again, The solidarity tax that we have paid in Q2, actually some 300 million for the year 2022 in Romania, as well as some 80 million for the year 2022 in Austria, is a one-time effect. that will only take then a much lower level for the year 2023, but that will be paid only in 2024. So you will not see any solidarity tax payments on top of what has been done in Q2 in the year 2023. Then you had asked for a guidance of the 2024 normalized tax rate I think this is a little bit too far away for us to anticipate. What we have heard also in Alfred's speech is that we see for the rest of the year the clean tax rate at mid-40s range, 40 percentage range, and this is as far as we can guide for the moment.

And I will take the second part of the question, Irene, around the Bay Star joint venture. We are talking there about two different pieces of equipment. One is a steam cracker for a million ton of ethylene production out of ethane, and the second one is a Boar Star polyethylene production with 625,000 ton polyethylene production. This integrates with an already existing 400,000 ton of polyethylene production lines to make a fully integrated 1 million ton production complex. And the cracker and the Boar Star polyethylene plant have been built over the last couple of years. The cracker has actually been mechanically completed for longer now, and we had some startup issues, teething issues, which are partially normal for bringing a big machine like this on production. However, here it has been taking a little bit longer due to some issues like external influences like the winter freeze that we had earlier in the year and so on. But the fact is that now we are continuously improving the production, but we are not yet at the full production rate. So the utilization rate is still lower than what we anticipate, but it's continuously ramping up. For the Boar Star polyethylene plant, the status is such that it's mechanically complete now, and we are now taking this into production. So also there we will see over the next couple of weeks and months some production that is not yet at the level, but continuously ramping up that complex to produce marketable products.

Thank you very much.

Thanks, Irene. We now come to Sasi Kant Chiluku from Morgan Stanley. Sasi.

Hi. Thanks for taking my questions. I have two, please. The first was on the potential sale of the NP assets in Malaysia and New Zealand. You highlighted active interest from potential buyers for both assets. I was just wondering if it was possible to provide a timeframe for this process, maybe potentially for binding offers or completion of sale. Also, any indication of the size of the divestment in terms of value would be helpful. The second one was dividends to minority partners. Is it possible to provide any color on the expected dividend payments to minorities in the second half this year? especially any dividend payments to Borealis minority shareholders given no payments so far this year, and also the dividend payments to the Petro minority shareholders, including the special dividend that's been announced, I suppose, yesterday.

Sasi, regarding the potential sale of our assets in Malaysia and New Zealand, Indeed, we can confirm that the sales process is going well. We are facing very strong interest for the assets. Regarding the timeline, you can read a little bit from the fact that we have not taken these assets yet as asset held for sale or non-operative business, that we think that the timeframe would still take around 12 months or a little more to close. Of course, we are expecting that binding bids come in earlier, and even we might have underwriting here earlier, But for a closure with all the administrative topics around the countries of Malaysia and New Zealand, we expect that this at least takes 12 months. Regarding dividends to minorities, there are dividends from Borealis. that we are expecting to come out in third quarter. This is some 300 to 400 million, out of which a quarter would go to the co-owner at NOC 25%, and therefore leave our balance sheet, respectively our cash here. Regarding Petrom's special dividend, Petrom has announced today that there would be a special dividend that will be payable. I think it's in the September timeframe that this payment will go out. And the announced volume of Petrom has been done today. So this is the major part because all the other areas of minorities have actually already happened. Thank you very much.

Thanks, Sassi. We now come to Alistair Syme from Citi.

Thanks. Alfred, can you talk a little bit about what you're seeing in the gas business on the demand side? I note that sales in your West business were about 17 terawatt hours this quarter. I mean, if you go back, to 2Q21, you're over 30 terawatt hour. So can you sort of bridge that? And I'm particularly interested in the color you might have on what's going on in the industrial sector, given that's an important customer. I mean, are you seeing any signs whatsoever that now that gas prices have settled down a bit, that industrial customers are willing to pick back up on consumption? Or are we still too early on that? Thank you.

So on the gas market, we have seen in 2022 that across Europe there was a significant reduction of gas demand, gas use. I think three big drivers that were observed there, that one was increasing amounts of power generation with renewables. The second was fuel switching. partly because of security of supply, but partly also because of cost economics, some fuel switching. And the third one was in industrial sectors where there was where the gas has a significant share in the total cost of the production, we saw curtailment of production. I think some of these changes probably temporary. Others I think will have a lasting effect that we see here. Some of the industrial consumers were you specifically asked. I think you've probably seen some announcements around ammonia producers in Western Europe that are mothballing plants. other high-energy consumers, there was a number of announcements also around the production reduction. So I think one has to count on that some of these effects will be permanent. However, I can also tell you from own experience, we have done a lot in our refineries last year. Again, same thing, one, security of supply. Secondly, cost management. Last year we have switched away from gas. Our German plant, we were able to run completely without natural gas. And in our Austrian plant here, we reduced down to 30% of gas. Some of this has now gone back because of the more attractive prices, like you say. So some of this will swing back, but probably not all of it.

Can you say in your own plant, are you fully back to gas or are we still only part of it?

Yes, in our own plants we are going back to gas, right? I mean, it's economics. The second piece is also, of course, with gas having a more attractive CO2 footprint than some of the other alternatives.

And finally, even though prices have settled down a little bit and the MLC forwards are still high, do you think we're a long way from any of these high energy consuming industries coming back?

So our outlook for 2023 on the THC is now 40. If you remember, the average of last year was 121. So this is a big drop, like you say. However, it's still double. of what it used to be in the pre-Ukraine period, right? It was around 20 over the last decade, approximately. And with 40, I think we also need to be aware that it's not just double of what it used to be. It's also four to five times the value of a Henry Hub comparison. So this has made it more attractive, but it's still not a low-cost kind of location.

Okay, brilliant. Thank you very much for the cover.

Thanks, Alistair. Next questions come from Henri Patrickon, UBS.

Yes, hello everyone. Thank you for the presentation. Two questions, please. The first one, I want to come back to the discussions for potential combination between borage, probably some countries you can't give the details. But there was a thing that could give us a sense of why you see that potential combination with borage as the best way forward for MV to deepen the exposure in chemicals. And then secondly, I wanted to ask about this discovery in Austria, how quickly you can reach the plateau production level and whether there's some follow-on potential more exploration wells that you plan that could increase further your production in the country. Thank you.

Okay, I start with the potential combination of Borealis and Boruche, where we announced that we will pursue negotiations with ADNOC to explore if such a potential combination can be interesting. I'm sure you understand that it's somewhat limited what I can say here because we are still in the middle of negotiations. But I would like to make maybe a few points. So let me start with the industrial logic. And the industrial logic of this potential combination of Porouge and Porealis is that it has a compelling logic and the two businesses would provide us with interest in a market-leading global polyolefin powerhouse. And this is the underlying logic that makes it interesting, where we could also, through the partnering with a long-term partner, APNOC, this would allow us to share risks. in a very large market, and with this also go after larger scale businesses and build a world-class global leading business. And if you look at it, right, you can obviously see in Borealis and in Bois Rouge, we can look back at the 25-year partnership where we have done something like this successfully. And this is why we think this is worth exploring and see if there's potential in there. Our aim would be by being an equal partner under a jointly controlled listed platform would provide also potential for further growth acquisitions And doing that together with an established, successful partnership with ADNOC opens up opportunities, in my opinion, that by us alone we couldn't pursue in such a way. But also, I want to say here, right, we said we were going to pursue negotiations. The outcome of these negotiations is open, and we will keep you updated about any progress that we can make in it. On your second question on Wittau, what I would want to say is you detected correctly this exploration drilling was a result of one of Europe's largest or maybe largest seismic campaign that we did here in the Vienna Basin about five years ago. And through the evaluation of this seismic campaign, we identified potential resources. And Wittau was here, our first exploration campaign that we now drilled over the over the last five months approximately. And we were then very excited and happy that this was actually positive and that we could show that it is actually a gas find. We estimate the resources to be about converted into terawatt hours, about 48 terawatt hours, and that would increase our gas production in Austria about 50%. The OMV gas production in Austria about 50%. We produce about 8,000 barrels per day today.

Okay, thank you. I guess it's fair to assume that this 50% increase can be done fairly quickly.

Of course, in the situation that we have now, this is our aim. There's, of course, a few things that we need to make. The most notable is we need to make a connection to our gas treatment plant in a place close to the site. It's about 10 kilometers. And that is going to be the speed-determining step, but I think you're correct. We are trying to make this happen as quickly as possible. Okay, thank you.

Thanks, Ori. Next is Matt Lofting, J.P. Morgan.

Thanks, Jens, for taking the questions too, if I could please. First, chemicals, I think you referenced earlier, end market demands to under pressure, slower than expected recovery in China. Can you just share a sense of perhaps how the current baseline compares to where you thought it might be at the beginning of the year and what lead indicators OMV is looking to for early signs of recovery kicking in? And then secondly, on the upstream business, coming back to the transaction in Malaysia and New Zealand, given that you've indicated you've seen active industry interest for those assets. Should we expect to see the company making further portions of the international upstream business available for sale? Thank you.

Okay. Let me start with the chemicals outlook. I will We start here with the indicator margins for polyethylene and polypropylene in Europe. Both of these, so the total polyolefin indicator margins, we took down by 50 euro per tonne. And that is driven mainly by slower demand pickup than we anticipated and good availability in the markets, also some imports into Europe. But what I need to say here is, of course, these are indicator margins. which apply more to the commodity type of business. If you look at the end of our presentation, we put in the attachment an update of our business portfolio where 40% of the volumes are specialty sales, and these indicator margins don't apply to these specialty sales. These 40% specialty volume create about 60% of our sales margins. And as you can see in that chart there, the margins in the specialty sector have held up very well. We have seen some softening in some segments. on volume, but the total absolute margin still on the strong side, right? That's what you can see there. In particular automotive, we have seen that this is actually growing above last year, so looks like some catch-up demand in automotive. We also see in this energy sector, so wire and cable insulation and so on, that is related to the energy transition. So wind, photovoltaic, that this continues to have strong market performance. And in that energy segment, we are actually a global market leader. So it looks differentiated, right, so the overall market. I would want to go a little bit also to the Asian markets and developments there, because that is relevant for our Bois Rouge joint venture. What we have seen there is that There was actually in quarter one and coming out of quarter one, it looked like the business was going to pick up a little bit. But in the end, China in particular disappointed with weaker than expected demand so that we in the end saw more of a sideways down movement in the second quarter in the Asian market. The indicators that we can look there is that we that in those markets we see a weaker demand that's mainly in the construction market. Some of these materials go into the production of all types of pipes, water pipes, gas pipes, sewage pipes. And that goes into the construction market. And there, of course, we see that with increasing interest rates, some slowdown in those construction markets, and also a significant amount of this material, more the commodity type or the productivity part, goes into packaging applications. And there we also see that customers are more hand-to-mouth managing inventories very closely and some weaker indicators to extrapolate what we can see on the way forward.

Yeah, Matt, maybe taking your second question on the divestment of our upstream assets in Malaysia and New Zealand. you had asked whether there is any further sales steps planned. No, we do not have any further sales steps in that dimension planned. Of course, we are looking into portfolio optimization steps in that area. But if we look at our 2030 target that we have given, it is around 350,000 BOE. And if you take our production that we planned for this year, 360,000 POE, you can see with taking out some 70,000 POE of Malaysia and New Zealand, adding some 70,000 POE by Neptune, we are around this dimension. And what we have to manage is the natural decline that we have, of course, in some of the maturing fields there. and therefore some portfolio optimization will happen, but no further divestments of that dimension planned.

Thank you very much. Very clear.

Thanks, Matt. We now come to Henry Tarr at Barenbeck.

Hi, guys. Thanks for taking my questions. I have two questions. Just coming back on the gas supply business, I guess you're still buying a reasonable amount from Gazprom in Q2, I think 4.9 terawatt hours. Is there any view on the, has there been any change to the reliability or the risk to gas flows through the Ukraine? And then how much of this, if there was a disruption, do you think you could cover from the diversification efforts, the new LNG, etc.? ? And are you working on the other side to change the sort of supply contracts you have to take some of this potential variability into account? And then my second question is just to come back on the potential Borealis-Beruge consolidation or merger. You talk about sort of jointly controlled or aiming for being jointly controlled. Would that mean you'd still consolidate that business? Presumably not, but just to check. Thank you.

Let me start, Henry, with the gas supply question. I want to explain that we have two Gazprom supply contracts, one in Germany and one in Austria. The German supply contract with Gazprom has not received any gas supply for the last many months, right? So somewhere around half of last year, the gas supplies stopped, and we have not received any since then. The Austrian gas supply contract in the second half of last year was very volatile. We received anything between 20 and 70 percent of the contractually agreed quantities. which created at that time quite a lot of management effort and issues. Since the beginning of February, Gazprom has stuck to 100% of the contractually agreed quantities and is supplying this reliably. So we have not, since then, after January, we have not seen any of this volatility. Of course, the gas flows, so both from our experience with Gazprom last year, but also because the gas is supplied through the Ukrainian pipeline, we at OMV consider this to be an unreliable supply source. And because of that, since March last year, we are running a diversification strategy to make sure that we have non-Russian gas and the transport capacities so that we can distribute it to our customers. We are today in a position that we have sufficient non-Russian gas quantities, volumes. So that's from the LNG terminal in Rotterdam. That's from Norwegian production. And that's from third-party contracts in Norway and in Italy. So with those quantities, and the transport capacities that we have now, we can supply all of our customer obligations, even if Gazprom stops supplying. Concerning the contracts, I want to also mention here that we have and continue to spend quite a lot of time to develop a legal strategy how we address those things. We have quite some, we are quite clear what we want, but I do not want to communicate this publicly at this moment.

And, Henry, to your second question around Borealis-Porouge, of course, all the details are currently under negotiation, and we cannot go to final conclusions here. However, just to explain, as also Alfred did, the idea is to run this as a combined growth platform as equal partners. And that, on first glance, of course, implies two things. The first is that, ultimately, OMV will own less of Borealis but more of Boruche. And the second is if you have then a listed platform with two equal partners, that would not imply any kind of majority that would allow for any of the party a full consolidation.

Okay.

Thanks. Thanks, Henry. The next questions come from Tamás Pleca, Erste Bank.

Good morning. I got only one follow-up regarding your asset divestments in New Zealand and Malaysia. Do you consider to sell these assets separately, or do you plan to sell this as one entity? I just ask because I may see that you may have potentially more interest for the Malaysian assets Could you confirm that? Also, can you remind us what is the potential valuation for these assets? Thank you very much.

Thomas, happy to comment on that. The clear intention of what we are discussing at the moment is to have a package deal between both assets that we are selling. And you will understand that I'm not commenting on any target value that we are currently discussing. This is an open process, and therefore I cannot give you indication in that direction.

Okay. That's clear.

Thank you very much. Thank you, Tamás. Next is Bertrand Audet, Kepler-Chevreux.

Yes. Good morning, and thank you for taking my question. I have two left. The first one is on your first answer to Irene's question related to taxes. You mentioned that no further solidarity taxes payment, cash payment is due in 2023, but the remainder will be paid in 2024. Can you share with us what is the amount that remains to be paid in 2024? And the second question relates to the divestment process, again, on New Zealand and Malaysia.

Can you remind us what is the book value of those assets into OMV books, probably also adjusted to the fact that you own only 50% of SAFUA. Thank you.

Yeah, Bertrand. To your first question regarding the taxes, the 2024 payments for taxes would refer to 2023 applicable volumes. And therefore, we do not have value yet because we don't know how the full year looks like. And we have to pay it for a full year, not in tranches. So what I can say is that we have booked a prorata in Romania for the first half year of $100 million. not knowing exactly what will happen in the second half. Of course, as this in Romania is relating to Oil consumed in the refinery with the turnaround that we had in Petrobras, this was a little bit lower. But as we don't know how this actually will continue with the price levels, with the production levels in the second half, it would be premature to give you a number there. In Austria, it was only a very small number, and we have to look into how the situation, which is under a different regime than in Romania, is with these lower prices expected for the second half then developing. And your second question, book value of New Zealand and Malaysia, we have never disclosed single asset book values. So, therefore, I unfortunately cannot give you that information. Fair enough.

Thank you. Thanks, Bertrand. We now come to the end of our conference call. Thank you for joining us today. If you have further questions, please contact the investor relations team. We're happy to help. Have a good afternoon and a good weekend. Thank you. Bye. Thank you for joining. Bye-bye.

Thank you. Thank you very much. Ladies and gentlemen, that concludes today's teleconference call. A replay of the call will be available for one week. The number is printed on the telephone conference invitation. Or alternatively, please contact OMB's Investor Relations Department directly to obtain the replay numbers. Have a good day and goodbye.