The Romanian economic and financial weekly Capital reveals on Wednesday, June 21, that the market value of the largest oil and gas company in Romania was underevaluated by the consortium of consultants who prepared the company for privatisation back in 2004.
Capital concludes that the faulty prognosis conducted by the consultants led
to Petrom being sold to the Austrian group OMV at half the price it was
According to the consortium of consultants formed by Crédit Suisse First
Boston, ING and Jacobs Consultancy the market value of Petrom was at
only USD 22 per barrel, a ridiculous value as compared to the international
market, reads the article in Capital.
The Austrian group OMV took over Petrom at a market value of EUR 2.23
billion or USD 2.76 billion, a value based on the calculations of the
The documentation, but also the privatisation contract drafted by the
consultants bring a shocking prediction: “Our indicative value for the
exploration and production division varies between USD 1.7 billion and USD
2.1 billion”. A value which, at the current quotation of the Brent
crude oil of around USD 70 per barrel, would translate into the growth of
Petrom by at least USD 5 billion.
A variant admitted by the consultant who in the same documents stresses:
“The value of the Exploration and Production Division is highly sensitive to
the global price of crude oil: a variation of two dollars in the Brent price
of oil conducts to a change of USD 600 million in the value of the company”,
In 2003, a year in which Venezuela had run wild on the oil market, and the
Americans announced Iraq’s invasion, Petrom’s consultants pointed to the
same value of the crude reserves: maximum USD 22 and minimum USD 18 from
2003 until 2012. ”A ridiculous prediction, if we bear in mind the fact
that in the same year the barrel exceeded USD 30, and has never dropped
below USD 25 since then”, reads the article in Capital .
The undervaluation is found in the case of the ton of domestic crude, which,
although it was sold with USD 169 in 2003, it is quite unexplainably
evaluated at USD 155 from 2004 until 2012. The undervaluation occurs again
in the case of the natural gas, one thousand cu.m. of such product being
evaluated at maximum USD 75 in 2006 and 2007. Currently Petrom-OMV sells the
natural gas for over USD 130 one thousand cu.m.
The underevaluation of the exploration and production division, the basic
activity of the company, has conducted to the major reduction of the market
value of Petrom, and also to the subsequent evolutions of the company.
”The consultants might say that they could not predict the skidding of oil
starting in 2004” reads the article.
Officially, OMV announced that Petrom holds reserves of oil and natural gas
estimated at around one billion barrel equivalent oil.
In 2004, the level of production rose to 5.5 million tons of oil and six
billion cubic meters of natural gas.
“In the market survey made for Petrom privatisation, in May 2003, the
technical consultant Jacobs Consultancy announced the Ministry of Industry
that it has identified reserves of 128 million tons equivalent oil. Plus 16
million tons of oil in Kazakhstan. Not any of them had been exploited.
Jacobs also announced that according to the International Accounting
Standards, the reserves amounted to 70 million tons of oil and 70 bln cubic
meters of natural gas by the end of 2001”, Capital further reveals.
While the sale of the oil company had been made based on the evaluation of
the oil reserves at maximum USD 22 the barrel, the figures presented by OMV
indicated for 2004 an average level of USD 31.97 the barrel, and for 2005 a
growth of 55 per cent, to USD 49.43 the barrel. A value equivalent to a
gross profit (EBITDA) of almost EUR 1 billion.
In December 14, 2004, OMV closed the acquisition of a 51 per cent stake in
the largest Romanian company, SNP Petrom SA. For the acquisition of 33.34
per cent of Petrom’s shares, OMV paid EUR 669 million. Within the framework
of an increase in share capital of EUR 830 million, OMV’s stake was
subsequently raised to 51 per cent.
Currently the shareholders structure is: OMV – 51 per cent, the Romanian
Government 40.74 per cent and EBRD 2.03 per cent, with a free float of 6.23
With the closing of its acquisition of a majority stake in Petrom, OMV has
become the largest oil and gas group in Central Europe, with oil and gas
reserves of around 1.4 billion barrels-oil-equivalent (boe), daily
production of approximately 340,000 boe and an annual refining capacity of
26.4 million metric tons.
OMV now has 2,382 filling stations in 13 countries. The group’s market share
in the Refining & Marketing business segment in the Danube region is up
to around 18 per cent. The Exploration & Production portfolio acquired
from Petrom encompasses approximately 1 billion boe of oil and gas reserves
and daily production of around 220,000 boe from around 300 oil and gas
fields, including around 15,000 onshore Romanian production wells as well as
offshore assets in the Black Sea and exploration and production concessions
22 Jun 2006, 09:21
Category: Energy Sector,
Category: Energy Sector,