Bank raises OMV rating on Romanian gas deregulation expectations

10 June 2013 12:57  [Source: ICIS news]

LONDON (ICIS)--Erste Group Bank has raised its recommendation on the stock of Austrian oil, gas and petrochemicals group OMV to 'buy' from 'accumulate', with Romania's scheduled gas price liberalisation expected to be a major catalyst for the company, the bank said on Monday.

The chances of Romania meeting its promise to deregulate its gas market have improved as the country now has a stable government relying on an EU/International Monetary Fund (IMF) deal, it added.

The deregulation would boost the value of OMV's Romanian subsidiary OMV Petrom, giving the government an opportunity to privatise its remaining 20.6% stake in the unit, Austria-based Erste Group Bank also noted.

“Romania has committed to the World Bank, IMF and European Commission to deregulate gas prices [to the import price level] for industrial users by end-2014, and for household consumers by end-2018,” said Tamas Pletser, an Erste analyst.

“After failing to meet a first deadline [of 1 December 2012], it seems that the current government is getting more serious about achieving the targets,” Pletser added.

The bank forecast 24%, 47% and 23% average domestic natural gas sales tariff increases for OMV Petrom in Romania in 2013, 2014 and 2015, respectively.

Another plus for the current valuation of OMV has come from high-cost gas exploration in the Black Sea, where the company has discovered an estimated 42-84 billion cubic metres of recoverable gas after drilling its first well, Pletser said.

“The country and the press were highly enthusiastic about the discovery, as this could offer independence to the country from imported natural gas,” he added.

Currently, roughly 23% of Romanian gas consumption is from gas exclusively imported from Russia, Pletser said.

By: Will Conroy
+44 20 8652 3214

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