Omv Petrom - Perfect Market Storm In Motion Dragging Earnings Down
OMV Petrom –Earnings Revision
Rating: Accumulate (unch.)
Target Price (12-m): RON 0.46 (prev. RON 0.58)
Current share price: RON 0.32
Against the backdrop of slumping oil prices we feel it appropriate to slash massively our assumption for Petrom’s realized oil price from USD 56/bbl to as much as USD 35/bbl for 2020. We also lowered our assumption from Petrom’s realized oil price for perpetuity from USD 55/bbl to USD 53/bbl. We trimmed our estimate for Petrom’s released average gas price from RON 73.6/MWh to RON 68.2/MWh amid an oversupplied European gas market environment, improved interconnection between Romania and adjacent markets, flat demand, and Romanian natural gas storage facilities full to the brim. We expect Petrom’s refinery margin to hover around USD 4.7/bbl in 2019 that is the same as last year.
Weak commodity prices and declining production (by 4-5% p.a.) are expected to have put a damper on Petrom’s earnings this year. We cut our clean CCS-based EBIT estimates for 2020 from RON 4.4 bn to RON 1.93 bn (-58% YoY). Our new clean operating earnings estimates includes the impact of the relief in government’s new gas pricing regulation, i.e. the reinstatement of free gas prices as of July 1, 2020.
We also reduced our estimates for 2020 clean net income estimates from RON 3.46 bn to RON 1.73 bn (-55% YoY).
Concorde Securities Ltd. is Hungary’s leading independent company engaged in investment banking activities. It provides its clients with integrated financial services, including securities trading, research, corporate financing advisory, capital market transactions, wealth management and investment advisory. The operational management of the company is the responsibility of the CEO, while the owners/managers (who control one-third of the company through their shares and options) are in charge of its strategic governance. Concorde Securities Ltd. is a member of the Budapest, Frankfurt, Warsaw and Bucharest stock exchanges, as well as of the Hungarian Association of Investment Service Providers.
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