Wood & Company: OMV Petrom is not well positioned to take advantage of market changes

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OMV Petrom is not well positioned so as to take advantage of the market changes, according to Wood & Company brokerage house report published on InvestingRomania.

“We like Petrom’s leadership, its diversified low-risk business model and long-term prospects. However, in our opinion, the company is not well positioned to take advantage of the changes in the market. Although Petrom has a price-performance ratio from the SPO (Secondary Public Offering), as of October 2016, the company has reduced the growth potential level, and, from our point of view, the company is still underestimated,” the report reads.

Wood & Company notes the price of natural gas has benefited from a recovery starting with October 2016 which should save the Romanian market and its investors from the asymmetric risk associated with an import-only market.

“In the period ahead, we will see a recovery in volumes and prices, a renewal of the tax and copyright system, infrastructure investments and new development projects from both companies (ed. note Romgaz and OMV Petrom), and namely the production and revenue volume. Of the two companies, we prefer Romgaz, a larger beneficiary of recovery, with the opportunity to capitalize more quickly on new markets when the infrastructure is completed,” the analysts brokerage house pointed out.

The quoted source says that Petrom has done a very good job by maintaining production, but has lagged behind with the replacement of reserves in recent years, only the Neptun project being able to solve this.

“We see Petrom as a disciplined low-cost producer with a balanced business model. It has a small, but profitable downstream business where risks can arise from,’ the report also reads. As regards Neptun Deep, the document says that this investment could change the company’s prospects, but the realization of this project will be carried out in the future.

Last year’s spring, the OMV CEO, Reiner Seele stated in Bucharest that Petrom and ExxonMobil will not start the gas production in the Neptun perimeter of the Black Sea sooner than 2020 as no final investment decision has been made so far. OMV Petrom and the Americans from ExxonMobil have invested overall EUR 1.5 billion from 2008 until now in the Neptun perimeter.

 

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