OMV Petrom's €1 Billion Pivot to Drilling Sets the Stage for a Conflicted Earnings Report

OMV faces mixed Q1: Petrom reallocates €1B from low-carbon to oil & gas, while parent struggles with €100M hedging loss, weak refining margins, and delayed Borouge IPO.

The Austrian energy group OMV is heading into its first-quarter earnings release on Thursday with a tale of two strategies. On one side, its Romanian subsidiary OMV Petrom has just unveiled a dramatic reallocation of capital — pulling a full €1 billion away from low-carbon investments and pouring it straight into oil and gas exploration. On the other, the parent company is grappling with a €100 million hedging loss tied to Middle East supply chain disruptions, weakening refinery margins, and a delayed Borouge IPO that will squeeze dividends for income-focused shareholders.

Analysts are bracing for a sharp earnings rebound despite the headwinds. Six analysts polled expect first-quarter earnings per share of €1.32 — triple the €0.44 posted in the same period last year. Revenue is forecast to climb roughly 25 percent to around €7.76 billion. But the operating picture is far messier than those headline numbers suggest.

OMV Petrom’s strategic overhaul, presented at its annual general meeting on Tuesday, is the most striking shift. The company confirmed its total investment budget through the end of the decade remains at roughly €11 billion, but the share allocated to low-carbon projects has been slashed from 35 percent to 25 percent. That freed-up €1 billion is now earmarked for conventional exploration and production. The move effectively weakens the subsidiary’s own climate targets: its planned reduction in carbon intensity has been cut from 20 percent to 10 percent. Management justified the step by arguing that new climate technologies are not yet market-ready.

The capital reallocation comes with higher production ambitions. OMV Petrom now targets daily output of around 170,000 barrels of oil equivalent by 2030, up from a previous goal of just over 160,000. Extended licenses for existing production sites make the higher target achievable.

The market has rewarded the sharper focus on the core business. OMV shares climbed to €59.70 on Wednesday, bringing the year-to-date gain to more than 23 percent. That still leaves the stock roughly 6 percent below its 52-week high of €63.20.

But the parent company’s quarterly report will reveal several drags on profitability. The refining margin has collapsed from €10.76 per barrel to €6.65. The fuels segment is carrying a roughly €150 million burden from lower retail margins and planned refinery outages. On top of that, the €100 million in one-time hedging losses from Middle East-related supply chain disruptions will weigh on the bottom line.

For income investors, the biggest disappointment is the delayed Borouge Group International listing on the Abu Dhabi Stock Exchange. OMV and ADNOC have agreed to push the IPO to 2027, opting instead to strengthen the joint venture’s balance sheet in the current market environment. The knock-on effect: OMV’s dividend income from the venture will be halved to $250 million in 2026. Analysts estimate that will reduce the total dividend per OMV share by €0.60 to €0.70.

The payout for the 2025 financial year remains robust. OMV has proposed a total dividend of €4.40 per share — split into a regular dividend of €3.15 and a special dividend of €1.25. The variable component is contingent on the leverage ratio staying below 30 percent, a condition the company met for 2025. The formal vote takes place at the annual general meeting on May 27 at the Vienna Congress Center.

Starting with the 2026 financial year, OMV will switch to a new dividend formula. The company will distribute 50 percent of attributable BGI dividends plus 20 to 30 percent of operating cash flow. The new mechanism is designed to structurally decouple payouts from the oil price cycle, but the transition year will come at a cost.

In the chemicals segment, headwinds persist. Global overcapacity is expected to keep margins depressed through the end of 2026. From the second quarter of 2026, management anticipates a stable quarterly contribution of around €140 million from the joint venture combining Borouge, Borealis, and NOVA Chemicals.

Investors listening to Thursday’s earnings call will be watching how the strong upstream performance offsets the weaker downstream results. OMV Petrom’s capital pivot provides a clear template for where the group’s priorities now lie. Attention will also focus on the Black Sea Neptun Deep project, where OMV Petrom is targeting gas production from 2027 — a venture that suddenly looks even more central to the group’s growth narrative.