OMV Petrom Annual Report 2020 Consolidated Financial Statements
Annual Report
2020
Contents
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OMV Petrom Annual Report 2020 Contents
Contents
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Who we are
The energy for a better life
An integrated energy company
Our business model
Why invest in OMV Petrom
Resilient results in a year with twofold crisis
Partner for Romania
Company
Statement of the Chief Executive Officer
OMV Petrom on the capital markets
OMV Petrom Strategy
Business enviroment
Business segments’ operational performance
Upstream
Downstream Oil
Downstream Gas
Report of the governing bodies
Report of the Supervisory Board
Directors`report
Corporate governance report
Corporate governance statement
Declaration of the management
Abbreviations and definitions
Consolidated financial statements and notes
Independent auditor’s report
Consolidated statement of financial position
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Consolidated report on payments to governments
Contact and Disclaimer
Note: In this report, “the company”, “OMV Petrom”, “OMV Petrom Group” and “the Group” are sometimes used for
convenience where references are made to OMV Petrom S.A. and its subsidiaries in general. The financials presented in the
report are audited and represent OMV Petrom Group’s consolidated results prepared according to IFRS; all the figures refer
to OMV Petrom Group unless otherwise stated. Figures may not add up due to rounding differences.
As per the legal requirements with reference to the disclosure of non-financial information, the company prepares and
publishes a separate sustainability report, which includes the information required for the non-financial declaration,
describing our sustainability initiatives. OMV Petrom’s Sustainability Report for 2020 will be published by May 31, 2021.
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Contents
The energy for a better life
OMV Petrom Annual Report 2020 Who we are
Every single day, OMV Petrom makes people's lives better.
Every single day, OMV Petrom produces and supplies the
energy for millions of people - for their comfort, their need
for mobility, or their passion to travel.
Energy is part of our lives: fuels are the basis for mobility,
gas is used for heating homes, and electricity powers the
appliances that make our lives easier. Behind all this stands
the energy of OMV Petrom.
OMV Petrom leverages on the industry’s expertise in
Romania, one of the first oil producing countries in the
world. At the same time, the company successfully applies
innovation and technical know-how to contribute to
improving the quality of life.
We produce energy in all its forms: fuels, gas and electricity.
Safely. Securely. Responsibly.
Today and tomorrow.
The energy for a better life
3
OMV Petrom Annual Report 2020 Who we are
An integrated energy company
OMV Petrom is the largest energy company in Southeastern
Europe. The company is active along the entire energy
value chain: from exploration and production of oil and gas,
to refining and fuels distribution, and further on to power
generation and marketing of gas and power.
The company is organized into three operationally
integrated business segments – Upstream, Downstream Oil,
Downstream Gas. OMV Petrom’s integrated business model
provides financial resilience due to synergies and natural
hedging against oil price volatility.
In Upstream, OMV Petrom is present in Romania,
Kazakhstan, Bulgaria and won the tender for an exploration
block in Georgia. Our expertise varies from deep onshore
and offshore exploration to mature fields and shallow
offshore production. In 2020, our portfolio consisted of
473 mn boe proved (1P) reserves and around 53 mn boe
hydrocarbon production (thereof 3.5 mn tons of crude oil
and natural gas liquids and 4.2 bn cubic meters of natural
gas).
In Downstream Oil, we operate the Petrobrazi refinery,
which has a capacity of 4.5 mn tons per year and can
process OMV Petrom’s entire Romanian equity crude oil.
We are present on the oil products retail market through a
network of 793 filling stations located in Romania, Moldova,
Bulgaria and Serbia. These filling stations are operated
under two brands: Petrom and OMV. In 2020, the
Downstream Oil segment recorded 5.0 mn tons of refined
product sales, of which 2.6 mn tons were retail sales.
In Downstream Gas, we are engaged in electricity
production, as well as gas and power sales. We operate the
Brazi gas fired power plant, which has a capacity of 860
MW. In 2020, the Downstream Gas segment recorded gas
sales volumes of 57.0 TWh (thereof 47.7 TWh to third
parties), the equivalent of 5.3 bcm, and generated 4.2 TWh
of electricity.
Every day, millions of people and thousands of businesses
in Romania and in the region use our energy. OMV
Petrom’s fuels and energy products enable mobility, provide
heat for living and working, and form the basis for a variety
of plastics and high-end petrochemical products used daily.
OMV Petrom has a long tradition of sustainable and
responsible behavior in delivering energy with the purpose
of improving people’s lives. Sustainability for OMV Petrom
means creating long-term value for our customers and
shareholders, while being an innovative company and an
employer of choice. We conduct our business in a
responsible way, respecting the environment and adding
value to the communities in which we operate.
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An integrated energy company
Our business model
OMV Petrom Annual Report 2020 Who we are
Our business model
5
OMV Petrom Annual Report 2020 Who we are
Why invest in OMV Petrom
OMV Petrom is the largest energy company in Southeastern
Europe and the largest Romanian company listed on the
Bucharest Stock Exchange, with a market capitalization of
EUR 4.2 bn at the end of 2020.
During this period, OMV Petrom has provided a stable base
for Romania’s economy as a reliable energy supplier, a
major employer, and a significant contributor to the state
budget.
21.35% of OMV Petrom’s capital is free float traded as
shares on the Bucharest Stock Exchange and as GDRs on
the London Stock Exchange.
The company has a leading position in the fuels and natural
gas markets in Romania and an important contribution to
the country’s security of electricity supply.
OMV Petrom’s success is based on its integrated business
model, operational excellence and financial discipline, which
are key in generating sustainable growth and attractive
returns for our shareholders.
OMV Petrom also benefits from the expertise and
international exposure of OMV, the majority shareholder
with 51.01% of shares, one of Austria’s largest listed
industrial companies.
Since its privatization 16 years ago, OMV Petrom’s story
has been about transformation, restructuring and
modernization. There has been an enormous amount of
change to get the best out of our assets, align ourselves
with best practice and industry trends and be leaders in the
way we develop our people.
Creating value for its customers by enhancing their
satisfaction and experience has been one of the company’s
prime objectives. Also, OMV Petrom considers its
responsibilities to its employees and the environment to be
a priority. To this end, the company has worked hard to
lower the lost time injury rate and to consistently reduce its
greenhouse gas emissions and water intensity.
The company confers great importance upon the principles
of good corporate governance considering corporate
governance a key element underpinning the sustainable
growth of the business and also the enhancement of long-
term value for shareholders. To remain competitive in a
changing world, OMV Petrom constantly develops and
updates its corporate governance practices, so that it can
meet new demands and future opportunities.
After years of hard work that paid off, OMV Petrom has
consolidated its position in the oil and gas market and has
turned into an efficient business. We have come a long way
during these years and our ambition is to go much further.
We are proud of the strong and sound foundation we have
built, which allows us to further create sustainable value for
our stakeholders.
OMV Petrom is committed to deliver a competitive
shareholder return throughout the business cycle, including
paying a progressive dividend. We aim to increase our
dividend each year or at least maintain it at the previous
year’s level, in line with the financial performance and
investment needs, considering the long-term financial health
of the company.
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Why invest in OMV Petrom
Resilient results in a year with twofold crisis
OMV Petrom Annual Report 2020 Who we are
All values refer to 2020, unless otherwise stated
1 Adjusted for exceptional, non-recurring items; Clean CCS (current cost of supply) figures exclude special items and inventory holding effects (CCS effects) resulting from Downstream
Oil; special items include temporary hedging effects (in order to mitigate Income Statement volatility);
2 After deducting net result attributable to non-controlling interests;
3 Excludes additional special income related to field divestments reflected in the financial result;
4 Dividend subject to GMS approval on April 27, 2021;
5 Calculated with the share prices at the end of the previous year;
6 Calculated with previous year dividend per share.
Resilient results in a year with twofold crisis
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OMV Petrom Annual Report 2020 Who we are
Partner for Romania
We are the largest private investor in Romania, the largest energy company, the biggest taxpayer and a major employer in
the country. We are aware of the important role we play in the economy and responsible behaviour is deeply embedded in
our company's culture.
1 Fuels refer only to retail diesel and gasoline; OMV Petrom estimates based on National Institute of Statistics and the Romanian Petroleum Association data.
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Partner for Romania
OMV Petrom Annual Report 2020 Who we are
Partner for Romania
9
OMV Petrom Annual Report 2020 Company
Statement of the Chief Executive Officer
Dear Shareholders,
We had a very challenging and eventful year 2020, in the
context of a twofold crisis generated by the COVID-19
pandemic and the decrease of commodity prices. Yet, we
proved our agility, ensured business continuity and security
of energy supply, we maintained our commitment towards
our stakeholders and had a good operational and financial
performance. I am very grateful to all my colleagues from
the Executive Board and the entire OMV Petrom team for
their great commitment and achievements during a year that
tested our limits as humans and organizations.
During the COVID-19 pandemic, the climate change
debate has intensified. As an energy company, we aim to be
part of the solution in the transition to cleaner energy, and
our business model, as well as the steps made so far,
endorse our commitment to contribute to the energy
transition of Romania. In this context, we see an increasing
role of gas projects such as Neptun Deep in the transition to
a lower-carbon economy, besides the benefits for the
country’s economic growth and security of supply.
In 2020, we further pursued our initiatives to reduce carbon
emissions of our operations, which decreased by 7.5% yoy
and by 26% versus 2010, advancing towards our target of
27% reduction until 2025 versus 20101. Lost Time Injury
Rate was at record low of 0.15, our strongest annual
performance since privatization in 2004, also better than the
international benchmark. Moreover, we continued our
initiatives within the ”Romania Eficienta” (Efficient Romania)
program and we supported Romania’s health care system.
In 2020, we made further progress in executing our
strategy. In Upstream, we advanced with the regional
expansion in our Black Sea focus area by entering Bulgaria
and by winning a tender in Georgia. In Downstream Oil, we
signed the contract to extend the partnership with Auchan,
planning to open up to 100 proximity stores per year, around
400 in total by 2025. We also increased the blending
capacity of bio-content in fuels, by year-end we had
photovoltaic panels installed in 82 filling stations in Romania
and we entered partnerships with Enel X and Eldrive in the
e-mobility field. In Downstream Gas, steps were taken to
expand our gas and power operations in the neighboring
markets, supporting the ambition to shift from a domestic
supplier to a regional energy player.
Despite the difficult context, our 2020 financial
performance was resilient. Our operating cash flow
reached RON 5.6 bn, decreasing to a much lower extent
than Operating Result mainly due to the strict working
capital management. Our CAPEX was down by 24% yoy, as
we rephased and optimized long-term delivery projects and
postponed non-committed investments. We also reduced
operational costs and exploration and appraisal
expenditures. These contributed to our financial strength,
which allowed us to distribute dividends of RON 1.8 bn for
the financial year 2019, an increase of 15% compared to the
previous year.
Looking at each business segment, in Upstream, we are
proud of containing the production decline below the 5%
guidance and of our ability to maintain the opex stable while
achieving a positive Clean Operating Result, in the context
of an over 25% yoy decrease in oil and gas prices.
In Downstream Oil, the 92% utilization level of our refinery
was excellent, significantly above the European average of
around 72%2. We capitalized on the flexibility of our supply
chain, selling more equity products in all our markets, while
reducing third-party supply. Solid sales margins
complemented the good operational performance of our
sales channels. As a result, our Clean CCS Operating
Result only slightly declined, despite the significant slump in
the refining margin.
In Downstream Gas, we had the best year on record from
three perspectives: gas sales volumes (mostly regulatory
1 Details will be available in OMV Petrom’s Sustainability Report for 2020.
2 Aggregated from monthly European refinery utilization rates in Monthly Oil Market Reports published by OPEC
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Statement of the Chief Executive Officer
OMV Petrom Annual Report 2020 Company
driven, leading to enhanced trading activity), net electrical
output, and segment Clean Operating Result.
OMV Petrom’s share price, while 19% down yoy,
outperformed peers’ average. The liquidity went up by 8%
yoy, helped by higher free float and the Issuer Market
Making program implemented starting September.
Based on our 2020 cash position and results, the
Executive Board proposed a gross dividend of RON
0.031/share for the 2020 financial year, flat yoy and
representing a 136% payout ratio. The proposal was
approved by the Supervisory Board and is subject to
further approval by the GMS on April 27, 2021.
Looking ahead, we aim to maintain the annual production
decline in Romania at around 5% yoy, excluding portfolio
optimization, between 2021-2023. Given the expected
recovery in demand, we foresee higher refined product
sales volumes and net electrical output, while for gas sales
we expect volumes to be lower in 2021 versus 2020. In
terms of CAPEX excluding acquisitions, we estimate
RON 2.9 bn for 2021 and an annual average for 2022-2023
of RON 3.8 bn (excluding also development of major
strategic projects), most of which to be allocated to
Upstream. We remain committed to achieving a positive free
cash flow after dividends and excluding major development
capex, maintaining a strong balance sheet, and continuing
to offer an attractive progressive dividend to our
shareholders going forward.
2021 is a crucial year for the Black Sea gas projects such as
Neptun Deep as we expect the Offshore Law to be
amended, according to public statements.
In order to contribute to a cleaner environment, in addition to
our efforts for lowering the CO2 emissions, we are assessing
various sustainable energy projects, including solar,
photovoltaics and bio-fuels. In the second half of this year,
we will provide a strategy update, including our approach
regarding energy transition. We also aim to improve
disclosure on climate change risks and opportunities, using
the TCFD framework, to which we adhere since July 2020.
Let me take this opportunity to thank all of our
shareholders, other stakeholders and employees for your
trust and continuing support over the very challenging past
year and ensure you that we will continue our greatest
efforts to enhance both OMV Petrom’s value and the overall
economic and social contribution to the countries in which
we operate.
Christina Verchere
Statement of the Chief Executive Officer
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OMV Petrom Annual Report 2020 Company
OMV Petrom on the capital markets
Shareholder structure
At the end of 2020, OMV Petrom S.A. had the following
shareholding structure: 51.0% – OMV Aktiengesellschaft,
20.6% – Romanian State, and 7.0% – Fondul Proprietatea
S.A (FP). The remaining 21.4% represents the free float,
traded as shares within the Premium category of the
Bucharest Stock Exchange (BSE) and as GDRs within the
Standard category on the main market of the London Stock
Exchange (LSE). The free float increased by three
percentage points following the sale by Fondul Proprietatea
via an Accelerated Book Building (ABB) in September 2020.
At the end of 2020, 477 legal entities from Romania and
abroad held 90.5% of the free float shares or 19.3% of OMV
Petrom share capital, with the remainder (9.5% of the free
float or 2.0% of capital) being held by around 456,000
private individuals.
An analysis of our shareholder structure, as at the end of
2020, shows that 67.5% of the free float was held by
Romanian institutional shareholders (2019: 60.6%), 9.5% by
retail investors (2019: 9.9%), 3.4% were Hungarian
institutional investors (2019: 3.7%), 1.7% were from the UK
and Ireland (2019: 2.0%), 2.5% were from the USA (GDR
component included in this category) (2019: 5.6%), 11.7%
were from other European countries (2019: 14.1%), and
3.8% were from rest of the world (2019: 4.1%).
Shares
The evolution of OMV Petrom share price in 2020 was
significantly influenced by the development of the COVID-19
pandemic which also caused stock market crashes, both
locally and internationally, most notably between February
and April 2020.
The year started on a positive note, hence the highest
share price of the year, RON 0.4500, was quickly reached
on January 7 and 9. However, by the end of January 2020,
markets had already started to decline, as the World Health
Organization declared the rapidly spreading COVID-19
outbreak a Public Health Emergency of International
Concern.
The capital market correction deepened in March, catalyzed
by turbulence in the oil market. During this time, the oil and
gas sector suffered twin shocks of demand destruction due
to the pandemic and of supply surge following tensions at
OPEC+ level. The tensions culminated with Saudi Arabia
increasing crude oil production and selling it at a discount,
thus sending oil prices and international markets into free
fall. On March 9 and March 12, international stock markets
recorded some of the biggest daily losses in years, as the
COVID-19 disease was declared a pandemic (March 11)
and lockdowns were widely being imposed around the
world. In this context, on March 9, OMV Petrom share
recorded also its highest daily decline in 2020 of 13.9%.
Taking cue from international markets, OMV Petrom’s share
also declined, reaching the lowest share price for trades
on the Regular market, RON 0.2735, on March 18, 2020.
From April 2020 onwards, global capital markets returned to
bullish sentiments, on hopes of COVID-19 vaccines and
quick economic recovery. However, volatility remained high
throughout the year, as diverse information – conflicting
data regarding economic outlook, governments’ measures
to mitigate the impact of the pandemic, political and civil
unrest in major economies such as the US – swayed
investors in different directions. In mid-April, OPEC+
reached an agreement on production cuts for the period
May 2020 through April 2022, which helped the oil markets
and consequently, OMV Petrom share price and industry
specific indices to recover.
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OMV Petrom on the capital markets
OMV Petrom Annual Report 2020 Company
On the ex-dividend date May 13, the SNP share price
corrected by 7.7% (RON 0.028), less than the equivalent of
2019 dividend per share of RON 0.031. The share price
ended the month 5.8% below the share price on May 12, but
up 7.5% mom, while the BET index appreciated by 9.1%
mom.
Another sizeable daily decrease of the OMV Petrom share
price (-5.9%) was recorded after the pricing of FP’s ABB
was announced (September 16). On the next day, FP sold
1.7 bn shares or 3% of OMV Petrom’s capital at RON 0.33,
a discount of 11% to the share price before the deal
announcement.
The 2020 average OMV Petrom share price for trades on
the Regular market was RON 0.3473, 11% lower than the
2019 figure of RON 0.3886, while the average dated Brent
oil price decrease was of 35% yoy. The highest daily
traded volume on the Regular market of 59.6 mn shares
was registered on August 17. The average daily traded
volume, including Deal trades, was 9.9 mn shares (2019:
9.2 mn), up 8% yoy, helped by the conclusion of an Issuer
market making (IMM) program on September 3, 2020. The
average daily traded value was RON 3.39 mn, down 5%
yoy in RON terms. The 2020 average daily traded value in
EUR terms was EUR 0.70 mn.
From the floors reached in March, domestic indices followed
an upward trend for the rest of 2020, most of them not fully
recovering, however, to the levels reached in the previous
year. The BET index closed the year 2% below the value of
at the end of 2019. The BET-NG index (comprising stocks
in the energy and utilities sectors) in which OMV Petrom has
a weight of around 30%, decreased by 12% yoy. The BET-
BK index (designed as a benchmark for asset managers
and institutional investors) also decreased by 1% yoy. The
BET-TR (total return BET) appreciated by 3% yoy in 2020.
As of September 21, 2020, FTSE’s reclassification for
Romania to Secondary Emerging Market became effective.
Underperforming the BET index by 17.0 percentage points,
OMV Petrom share ended the last trading session of the
year on December 30 at the share price of RON 0.3635,
19% lower yoy. The total shareholder return (including the
dividend of RON 0.031/share for the 2019 financial year)
was (12)%.
OMV Petrom on the capital markets
13
OMV Petrom Annual Report 2020 Company
OMV Petrom S.A. market capitalization at the end of 2020
was RON 20.6 bn or EUR 4.2 bn, accounting for around
13% of the total market capitalization of the companies
listed on the BSE and for around 23% of the capitalization of
the BET index (representing the 17 most liquid blue-chip
stocks listed on the BSE).
OMV Petrom S.A. share symbols
ISIN
Bucharest Stock Exchange
Bloomberg
Reuters
At a glance
Number of shares (mn)
Market capitalization (RON mn)1
Market capitalization (EUR mn)1
Year’s high (RON)
Year’s low (RON)
Year end (RON)
EPS (RON)
Dividend per share (RON)
Dividend yield (%)1
Payout ratio (%)3
ROSNPPACNOR9
SNP
SNP RO
ROSNP.BX
2020
2019
∆ (%)
56,644.1
56,644.1
20,590
4,229
0.4500
0.2735
0.3635
0.0228
0.0312
8.5
136
25,320
5,298
0.4470
0.2820
0.4470
0.0642
0.031
7.0
48
0
(19)
(20)
1
(3)
(19)
(64)
0
21
183
1 Calculated based on the closing share prices and RON/EUR exchange rates as of the last trading day of the respective year;
2 Dividend subject to GMS approval on April 27, 2021;
3 Computed based on the Group’s net profit attributable to stockholders of the parent.
Global Depositary Receipts (GDR)
The GDR price on the last trading day in 2020 was
USD 13.0, translating into a 13.3% yoy decrease. In 2020,
the GDR price ranged between a USD 15.7 high (on
January 2) and a USD 11.3 low (first reached on July 7).
outstanding at the end of each month ranged between
181,353 (in January) and 181,611 (in December). The latter
figure represents 7.3% of the GDRs issued in the October
2016 Secondary Public Offering and 0.23% of the free float
as of end-2020.
In total, 4,454 GDRs were traded in 2020 (2019: 64,492),
while the daily average number of GDRs was 17 (2019:
254).
The highest monthly trading volume and value were
reached in July (1,163 GDRs, worth of USD 13,142), while
the lowest in February - May (no trades). The total value
of GDRs traded in 2020 was USD 0.06 mn (2019:
USD 0.95 mn).
258 GDRs were issued in July and 1,427 GDRs were
cancelled in January 2020. The number of GDRs
In 2020, indices on the European and US exchanges had
mixed evolutions. Some reached record levels towards the
end of the year, as markets grew increasingly optimistic that
the widespread vaccinations against COVID-19 would lead
to a return to normal life and thus boost the economic
recovery. Oil and gas - specific indices had a more subdued
evolution, as the outlook for oil demand recovery remained
uncertain. The DAX increased by 3.5% yoy, FTSE 100
decreased by 14.3% yoy, STOXX Europe 600 decreased
by 4.0% yoy, STOXX Europe 600/Oil & Gas closed 25.8%
lower yoy, while Dow Jones Industrial average increased
by 7.2% yoy.
14
OMV Petrom on the capital markets
OMV Petrom Annual Report 2020 Company
OMV Petrom S.A. GDR symbols
London Stock Exchange Regulation S
ISIN Regulation S GDR
London Stock Exchange Rule 144A
ISIN Rule 144A GDR
PETB
US67102R3049
PETR
US67102R2058
Own shares
At the end of 2020, OMV Petrom S.A. held a total number of
204,776 own shares, representing 0.0004% of issued share
capital. In 2020, OMV Petrom did not buy back or cancel any
Treasury shares.
In the interest of transparency and timeliness, all company
reports, releases, and important information for
shareholders, analysts, and investors are promptly
disseminated on the BSE and LSE websites and also posted
in the Investors section on the company’s website.
Investor Relations activities
During 2020, the company’s top management and the
Investor Relations (IR) team had an active presence on the
local and foreign capital markets, by attending conferences
and organizing calls for analysts and investors. In the
context of the pandemic, the interactions took place mostly
online, including for the Annual General Meeting of
Shareholders, as there were no shareholders attending in
person the meeting. In 2020, we attended 12 conferences
and we virtually met around 90 investment funds from all
over the world. Such interactions provided the opportunity to
regularly update investors and analysts on the company’s
response to the COVID-19 crisis and oil price volatility, as
well as on the quarterly operational, financial performance
and strategy execution. During 2020, the number of
interactions with focus on ESG (Environmental, Social and
Governance) topics increased. More specifically, we
received questions around the impact of the European
Green Deal on our sustainability strategy and capital
expenditure plans.
The main tool via which we update capital markets is the
quarterly reporting package, which provides a
comprehensive resource for analysts and investors. The
package includes, among others, Trading Update of Key
Performance Indicators (KPIs) to provide early guidance
on OMV Petrom’s key trends for the quarter. OMV Petrom
continued publishing a Factsheet as well as the Questions
and Answers document of the quarterly conference calls on
its corporate website: www.omvpetrom.com.
Analyst coverage of OMV Petrom shares
At the end of 2020, OMV Petrom stock was covered by
nine analysts (2019: nine), of whom eight (or 89%) had
“Buy” or equivalent ratings (end of 2019: 55%) and one (or
11%) had a “Hold” or equivalent rating (end-2019: 33%). No
analyst had a Sell rating (2019: 11%). The average target
price (TP) according to analyst consensus estimates was
RON 0.403 (translating into a 11.0% upside potential
compared to the share price of RON 0.3635 on the last day
of trading in the year). This compares to an average TP of
RON 0.462 as at end-2019.
Dividends
The Supervisory Board has approved the Executive Board’s
proposal to the Ordinary GMS to distribute a gross dividend
per share of RON 0.031 for the year 2020, which is in line
with the current dividend policy. This translates into a total
cash outflow of RON 1,756 mn, a payout ratio of 136% of
the Group’s 2020 net profit attributable to stockholders of the
parent (2019: 48%), or 73% of the Group’s 2020 free cash
flow (2019: 54%). The 2020 dividend proposal is subject to
the approval of the forthcoming Ordinary GMS on April 27,
2021.
Dividend policy
OMV Petrom is committed to deliver a competitive
shareholder return throughout the business cycle, including
paying a progressive dividend. We aim to increase our
dividend each year or at least maintain it at the previous
year’s level, in line with the financial performance and
investment needs, considering the long-term financial health
of the Company.
OMV Petrom on the capital markets
15
OMV Petrom Annual Report 2020 Company
OMV Petrom Strategy
In 2020, the Romanian economic environment was marked
by a high level of uncertainty, largely related to the COVID-
19 pandemic. Despite the high market volatility and weak
demand, OMV Petrom’s achievements at the end of 2020
are remarkable, proving once more the value of our
integrated business model, the flexibility in adjusting the
plans and our results’ resilience.
To ensure business sustainability, the company has to
continue the programs started and, at the same time, adjust
to the challenges and uncertainties of the current market
environment, while playing an important part in the energy
transition. To address these, our strategy update is in
preparation and we will present it, including our approach
regarding the energy transition, in the second half of this
year.
The projects and programs envisaged under the three
strategic pillars – improving the competitiveness of our
existing portfolio, developing new opportunities for
growth, and expanding our regional footprint – ensure
the maximization of the integrated value of our company, the
sustainability of our core assets, the competitiveness of our
portfolio, and the growth in Romania and regionally. People
and Organizational Culture, Technology and Innovation, and
Sustainability are the strategic enablers supporting the
implementation of the strategy.
Divisional contribution to Strategy 2021+
The plans defined to improve the competitiveness of our
existing portfolio, the first pillar of the strategy, have
continued in all business divisions. In Upstream, two main
strategic directions are pursued to successfully extract the
highest value from our core assets: improving
competitiveness with a continued commitment to operational
excellence and exploiting the full potential of opportunities in
Romania. A stabilized production cost at around 11
USD/boe was maintained as a result of the strict cost
discipline, increased Mean Time Between Failures (MTBF),
optimized operations and processes. The MTBF reached
810 days, thus exceeding the 2021 target of 800 days one
year earlier, and therefore, the ambition for 2021 was
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OMV Petrom Annual Report 2020 Company
revised to approximately 840 days. We remain committed to
the 2025 target of reaching a MTBF of more than 900 days
by focusing mainly on root cause analysis, predictive
maintenance and implementation of new technologies.
By the end of 2020, approximately 75% of our active wells
portfolio and 70% of our production facilities had been
automated and modernized. Our target is to reach an
automation level of 95% for wells and 90% for facilities by
2025, leading to automated production systems enabling
remote control, business digital transformation enabled
trough OT & IT (Operations Technology and Information
Technology) systems digitalization, integration and digitally
skilled workforce.
The divestment of non-strategic fields and the outsourcing of
non-core activities have continued. The transfer of 40
marginal fields to Dacian Petroleum S.R.L., as part of the
portfolio optimization program that aims to streamline
operations and focuses on the core and most profitable
fields, is expected to be finalized in the first half of 2021. In
addition, the outsourcing of non-core activities (e.g. latest
main outsourcing project referring to general surface
services estimated to be finalized at the end of the first
quarter of 2021) ensures an Upstream organization able to
react in a more flexible, efficient and timely manner to both
external and internal factors, by reducing the level of
complexity and increasing efficiency and performance.
Maximizing the economic recovery through the
implementation of selected Improved / Enhanced Oil
Recovery programs, workovers and drilling programs will
help achieve our targets for ultimate recovery factors of 28%
for oil and 55% for gas. Viscous salt water flooding is the
recovery technique applied for the pilot we are running in
Independența field, the second largest onshore oil field in
our domestic portfolio. Given the long production history,
pressure depletion and the nature of the heavy oil being
produced, the field had been declining at a high rate.
Applying this technology targets to increase the total
recovery by up to 15% of the original oil in place. The pilot
started in 2019, and based on the good results of the first
injection well, a second injection well was put in production
in July 2020. Encouraging results have been registered and
by the end of 2020 we have added more than 35,000 barrels
of cumulative production since the beginning of the project.
The use of this technology has the potential to increase
production and unlock reserves in multiple fields across the
Upstream portfolio. Our next candidate is Vața field, and
further candidates are under evaluation.
Furthermore, one of our priorities remains to mature class 4
reserves. By targeting underexplored Near Field
Opportunities (NFO) in the proximity of existing
infrastructure, selected Field Redevelopment programs and
infill drilling, we expect significant reserves to be added. The
NFOs target formations deeper than 3,000 meters with the
aim to put the volumes fast into production, using an
infrastructure-led appraisal approach, while leveraging the
available capacity.
We are constantly focusing our efforts on protecting the
environment, ensuring energy efficiency, and reducing
carbon emissions, thus contributing to the achievement of
the company’s goal to reduce the carbon intensity of
operations by 27% until 2025, compared to 2010. With a
proactive and sustainable approach, we have continued the
investments and implementation of projects designed to
reduce the emissions, optimize the production flows,
modernize facilities and reduce energy consumption.
Moreover, we have initiated pilot-projects to use renewable
energy and increase energy efficiency (e.g. Solar to Power)
and works for additional 9 MW capacity of Gas to Power /
Combined Heat and Power plants to prevent routine flaring.
In Downstream Oil, even in such difficult times, our refining
business has proven its competitiveness in the region and
we are proud of our operational results at the end of 2020:
~92% utilization rate, well above European average, and a
Fuel and Loss ratio below 8%.
Reducing carbon footprint is also one of our main targets in
Downstream Oil, therefore environmentally friendly initiatives
continued in 2020. Following investments of approximately
EUR 21 million starting 2018, Petrobrazi refinery has
increased the blending capacity of bio-content in fuels from
200 kilotons to around 350 kilotons of bio-fuels per year. As
per the European regulations, transposed into the local
ones, the renewable energy content in transportation fuels
must increase from 10% in 2020 to 14% in 2030, in order to
support the reduction targets of greenhouse gas emissions
arising from transportation. Bio-quota targets are set as
energetic substitution targets, whereby each fuel has a
different energy content defined. OMV Petrom supplies fuels
with a volumetric bio-content of 6.5% in diesel and 8% in
gasoline. In addition, we performed the field test for 1,000
tons of rapeseed oil as part of the bio-oil process and
implemented initiatives for better detection and reduction of
emissions.
In retail, by the end of 2020 we have installed photovoltaic
panels in 82 filling stations in Romania, so that they can be
supplied with green energy and reduce the consumption of
conventional energy. By installing photovoltaic panels, more
than 10% of the electricity needs of the filling stations is
supplied from solar energy. The photovoltaic panels produce
OMV Petrom Strategy
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OMV Petrom Annual Report 2020 Company
more than 30,000 kWh of green energy per year in each
filling station.
promise to prolong the engine life, perfectly complemented
by VIVA offer as market differentiator, fulfilling “the energy
for a better life” promise.
For Downstream Gas, 2020 was a year of important
milestones. We achieved the record-high gas sales volumes
of 57 TWh, the highest ever Brazi net electrical output of 4.1
TWh, and the best power business performance so far. Our
2020 result more than ever emphasises the strengths of our
integrated gas and power business model.
With the target to diversify origination and trading activities,
we have further diversified our gas supply sources,
purchasing additional gas volumes to complement our
declining equity production. We continued to work towards
our strategic long-term goal of consolidating our leading
position in the Romanian gas market, by preserving and
further expanding our customer portfolio. More than before,
we proved to be a key player on the Romanian electricity
market, Brazi power plant having had an important
contribution on the balancing and ancillary services market,
enabled by its technical capabilities.
As part of the second strategic pillar – developing growth
options – maturing Neptun resources remains one of the
most important strategic objectives for the years to come. All
prerequisites – including the regulatory framework, fiscal
stability, competitive terms, liberalized gas market, and key
infrastructure – have to be in place to enable the
development of any gas investment of Neptun Deep scale.
In Downstream Oil, maximizing Petrobrazi profitability and
building a sustainable refining business remain our priorities.
We are continuing the evaluation of opportunities for
petrochemicals and high-value products, capitalizing on the
refinery’s flexibility to adapt to the new environment and to
use hydrocarbons in a sustainable manner, contributing to
the decrease of our carbon footprint.
In retail, we achieved nearly 5 million liters throughput per
filling station in Romania, even in the context of weaker
demand due to the pandemic circumstances, as people
preferred the safety of their personal cars instead of
choosing public transportation solutions. To maintain
leadership position remains the long-term ambition by
differentiating from the competitors with our dual brand
strategy. Strategic partnerships, programs to increase
customer loyalty, refreshed filling stations design, and
dedicated communication and campaigns to attract younger
families are our plans to maintain the national Petrom brand
– “value for money” – as undisputed leader in fuels in
Romania. The “top quality leader” value proposition for OMV
brand will be maintained by constantly offering high-
performance fuels and reinforcing OMV Maxx Motion’s
Following the pilot phase (first opening in May 2017), the
partnership with Auchan Retail Romania was extended in
August 2020 when the contract was signed. Extending the
partnership is an important step, but also a milestone in our
strategy to improve our customers’ experience. With only
one stop, our customers will be able to shop for their
groceries while fueling their cars, thus saving time. This is a
unique and innovative approach on the Romanian market
and meets the expectations of the modern consumers and of
the young generation, whose daily schedules are dynamic
and alert. We continue in this way the successful story and
we consolidate our position for the best quality-price ratio in
the Romanian fuel retail. The plan is to open up to 100
proximity stores per year, around 400 in total by 2025. OMV
Petrom and Auchan Retail Romania will invest more than
EUR 50 million in total to refurbish the 400 Petrom branded
filling stations. MyAuchan proximity stores will replace the
existing commercial spaces in the Petrom-branded filling
stations, offering to customers over 2,500 products.
Following the energy market trends and the increased
pressure to reduce CO2 footprint in all segments of activities,
including transport, our retail strategy is complemented by a
stronger focus on clean technologies and alternative means
of transport. And when we talk about passenger cars, the
obvious alternative is the electro-mobility. We believe that
the answer to our customers’ mobility needs is a mix of fuels
and alternative solutions. The partnerships with Enel X and
Eldrive for eMobility paves a new layer on the road to
sustainable mobility. Through these partnerships, we
contribute to the development of the charging infrastructure
to enable the transit of electric cars in the region and we
secure our presence in the electro-mobility field, extending
our portfolio of services for all our customers, regardless of
the type of vehicles they drive. We estimate that, by the end
of 2021, over 40 charging stations for electric cars will be
installed in our regional network. We focus on having in our
network EV charging points of minimum 50 kW, to secure a
fast recharging of 80% of the batteries of the electrical
vehicles within approximately 25 minutes - considering the
need for our customers to recharge their cars on the road,
when they are usually in a hurry.
We have redefined our Upstream priorities under the third
strategic pillar – regional expansion – focusing now on the
Black Sea region and continuing to build a strong position in
the area. Following our growth strategy, we have already
made important steps for expanding our offshore presence
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OMV Petrom Annual Report 2020 Company
in the Black Sea region, by entering Bulgaria and by winning
an international tender in Georgia.
In August 2020, OMV Petrom completed the acquisition of
OMV Offshore Bulgaria GmbH, thus entering the Han
Asparuh deepwater offshore exploration license (OMV
Petrom 42.86%, Total 57.14% Operator). The Han Asparuh
block is located in the western part of the Black Sea, in
Bulgaria. The first exploration well, Polshkov-1, was drilled in
2016. This was followed by the drilling of two further
exploration wells in 2017 (Rubin-1) and 2018 (Melnik-1). An
extensive 3D seismic campaign was finalized in May 2020
covering 5,614 km². The seismic data are currently being
processed, towards maturing future drilling candidates.
In June 2020, OMV Petrom was selected as the winner of
the international tender held for Offshore Block II, an
exploration block with total area of 5,282 km², located on the
shelf and within the economic zone of the Black Sea, in
Georgia. The Production Sharing Contract was signed in
March 2021. As an operator, OMV Petrom will establish an
operating company in Georgia, proceed with geoscientific
and environmental studies in 2021 and prepare for a large
offshore 3D seismic campaign in 2022, which will allow for a
detailed evaluation of this block’s potential.
In December 2020, we signed the transaction for the sale of
100% shareholding in Kom-Munai LLP (KOM) and Tasbulat
Oil Corporation LLP (TOC) in Kazakhstan to Magnetic Oil
Limited. KOM and TOC hold the production licenses for four
onshore fields. Closing of the transaction is subject to certain
conditions precedent including approval by the Kazakh
Ministry of Energy and is expected in the first half of 2021.
Furthermore, in February 2021, OMV Petrom signed a
memorandum of understanding with Naftogaz Group,
Ukraine’s national oil and gas company and one of the major
players in the CEE gas market, for the cooperation in
establishing joint gas exploration and production projects in
Ukraine. Taking into account our strategy of expanding the
activities in the Black Sea region, Ukraine is a natural step
for understanding opportunities in the area.
In Downstream Gas, steps were taken to develop gas and
power operations in the neighboring markets, supporting the
ambition to shift from domestic supplier to regional energy
player, leveraging market opportunities and existing
business footprint. This will enrich our sales and supply
portfolio in the region, offset the impact on our portfolio of
the declining equity gas volumes, while mitigating the
Romanian market concentration risk.
The progress of our strategy implementation is reflected in
our financial performance. Although 2020 was impacted by
the weak economic environment and all the challenges
driven by pandemics, we recorded positive free cash flow
after dividends.
Digital Journey at OMV Petrom – smart opportunities
across the value chain
In 2020, OMV Petrom demonstrated not only the ability to
respond swiftly and effectively to the challenges of the year,
but also took advantage of the opportunities unlocked by
digitalization and new ways of working. The company
introduced work from home and flexible working hours
wherever possible to minimize health risks during the
pandemic. Beyond that, the pace of change accelerated
across the organization to upgrade the agility of the
business. In this sense, we made important steps on the
path of simplifying and digitalizing as many processes as
possible. A great such example was the roll-out of the
qualified digital signature across the company.
OMV Petrom has continued to leverage digital technologies
to drive business performance and value generation across
business divisions. As part of the DigitUp program in
Upstream, through the GeoWorkspace technical
environment, more than 170 OMV Petrom users involved in
exploration, development and production activities accessed
securely all critical applications while working remotely.
Innovative tools such as a visual inspection application that
uses image recognition to collect process parameters for
wells and facilities, or drone inspections of oil storage tanks
were used to reduce HSSE risks, perform faster data
analysis and decrease costs. By implementing advanced
process controls in two oil and gas treatment facilities plants
in Romania, energy and resource efficiency are maximized
and the lifespan of equipment increases.
In Downstream, the initiatives under the Digital Motion
umbrella program range from advanced analytics and
remote operator training at Petrobrazi refinery, to customer-
centric innovations in the retail and commercial sales
activities. For instance, the implementation of a fast lane
concept in five pilot Petrom-branded filling stations having
outdoor payment terminals was a premiere in the Romanian
market, meant to cater to the expectation of the modern
customers whose daily schedules are dynamic and alert.
Other examples include electronic labelling, online invoicing
and modern customer relationship management systems.
We also pursue logistics excellence through various
innovative projects, such as a pioneering end-to-end
monitoring system that avoids fuel cross-contamination,
ensures product safety and fuel tracking during the whole
logistic chain that was implemented in Romania.
OMV Petrom Strategy
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OMV Petrom Annual Report 2020 Company
Sustainability Strategyiii
OMV Petrom aims to provide a secure supply of affordable
energy for the sustainable development of society. OMV
Petrom has a long tradition of sustainable and responsible
behavior in delivering energy with the purpose of improving
people’s lives. In 2020, we conducted our business in a
careful and responsible manner, ensuring the supply of
products and services based on special measures and in
critical situations in response to the COVID-19 pandemic,
without interruption of operational activities and without
incidents.
Our approach to sustainability
Sustainability for OMV Petrom means focus on conducting
business responsibly, efficiently and in an innovative way.
We are committed to creating long-term value for the
company and our stakeholders, while respecting the
environment, supporting the communities in which we
operate, and striving to support the United Nations (UN)
sustainable development goals. Every day, we do everything
we can to make sure our employees return home safely. As
a responsible business, we support our local communities to
grow and develop. We constantly invest in improving the
carbon efficiency of our operations and product portfolio with
the aid of new technologies.
As the demand for energy is increasing worldwide, so are
concerns about climate change. Moreover, this challenge
comes with increasing expectations that companies such as
ours deliver energy in a cleaner and sustainable manner.
We believe the key to this challenge lies in finding the
balance between climate protection efforts, affordable
energy and reliable supply. We built our Sustainability
Strategy 2025 on this foundation. It sets out our top
priorities and is already part of our company’s DNA. It drives
all our actions, as a solid business that acts responsibly
towards all its stakeholders.
Measurable targets have been set in the five focus areas:
“Health, Safety, Security and Environment (HSSE)”, “Carbon
Efficiency”, “Innovation”, “Employees”, “Business Principles
and Social Responsibility”.
Health, safety, security and environment
Health, safety, security and protection of the environment
have the highest priority in all our activities. Proactive risk
management is essential to achieving HSSE vision of
“ZERO harm – NO losses”.
2025 targets and 2020 achievements
Achieve zero work-related fatalities (2020: zero fatalities)
Stabilize Lost-Time Injury Rate (LTIR) at below 0.30 per
one million hours worked (2020: 0.15)
Keep leading position for Process Safety Event Rateiv
(2020: leading position maintained).
Carbon efficiency
OMV Petrom is committed to acting on climate change
mitigation and responsible resource management and
focuses on improving the carbon efficiency of its operations
and product portfolio. OMV Petrom supports the goals set
forth by the Paris Climate Change Agreement and EU
climate targets.
2025 targets and 2020 achievements
Reduce carbon intensity of operationsv by 27% until 2025
vs. 2010 (2020: 26% reduction vs. 2010);
No new projects with routine flaring and venting practice
and phase out existing routine flaring and venting latest
until 2030 (2020: we continued to implement projects to
phase out routine flaring and venting).
Innovation
OMV Petrom focuses on investments and partnerships in
innovation, research and development. Our innovation
efforts focus on optimizing production, developing innovative
energy solutions and embracing digital technologies.
2025 targets and 2020 achievements
Co-process around 90,000 tons of biogenic feedstock
per year in the Petrobrazi refinery by 2025 (2020:
process studies finalized; start process design work);
Implement Improved Oil Recovery (IOR) pilots in
Upstream to increase the recovery factor of our oil fields
(2020: successful pilot in Independența field, results of
iii All information on 2020 achievements refers to preliminary data or estimates; final data will be available in the 2020 Sustainability Report to be published by 31 May 2021;
iv The Process Safety Event Rate is defined as T1+T2/ workhours business units (employees and contractors). This definition excludes workhours from the gorporate functions General
management and finance in OMV Petrom);
v CO2 equivalent emissions produced to generate a certain business output using the following business specific metric (Upstream: t CO2 equivalent / toe produced, Refineries: t CO2
equivalent / t throughput, Power: t CO2 equivalent / MWh produced) consolidated to an OMV Group Carbon Intensity Operations Index based on weighted average of business segments
carbon intensity.
20
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OMV Petrom Annual Report 2020 Company
project extension are pending; started execution for a
similar project in Vața field).
Employees
OMV Petrom sees its employees as the key to its success.
Diversity is a high priority, which is why targeted measures
are also planned in this area. In particular, OMV Petrom is
striving to increase the proportion of women at management
levels through leadership and mentoring programs.
2025 targets and 2020 achievements
Increase share of women at management level to 30%
(2020: 25.56%);
Increase the next generation of talents through fresh
graduate employees (2020: 20 fresh graduates hired);
Measure and increase the engagement level of our
employees (2020: dedicated programs continued).
Business principles and social responsibility
At OMV Petrom, we have a long tradition of responsible
behavior towards employees, environment and society. We
follow the guidelines of the UN Global Compact, the UN
Guiding Principles on Business and Human Rights, and the
UN Sustainable Development Goals.
2025 targets and 2020 achievements
Raise business ethics awareness for all employees
through trainings and compliance communication
programs (2020: 337 employees were trained in
business ethics);
20 supplier audits covering sustainability topics by 2025
(2020: 12 supplier audits conducted);
Human rights training for all employees exposed to
human rights risks by 2025 (2020: 1,307 employees
trained on human rights);
Assess Community Grievance Mechanism of all
business divisions against UN Effectiveness Criteriavi
(2020: 737 registered grievances and 575 solved, in
addition to 101 from the previous year);
Maintain social license to operate through yearly
community relations and community development
strategies, plans and budgets, based on social impact
needs and risks assessment in our operations (2020:
over 60 projects implemented covering more than 65
local communities from all our sites; more than EUR 6
mn spent for social and environmental projects).
For additional information please access the “Sustainability”
section on our website www.omvpetrom.com.
vi Legitimate, Accessible, Predictable, Equitable, Transparent, Rights-compatible, A source of continuous learning, Based on engagement and dialogue
Sustainability Strategy
21
OMV Petrom Annual Report 2020 Company
People Strategy
OMV Petrom’s People Strategy is set on five principles –
Team Spirit, Accountability, Passion, Pioneering Spirit,
and Performance – that guide us for obtaining sustainable
business growth. It is managed by the Human Resources
Department, whose scope is to support the implementation
of four priorities through planned initiatives that target:
Strengthening leadership capability;
Focusing on culture and performance;
Increasing organizational agility;
Remaining a great place to work.
Specific Programs fulfilled in 2020
Implementation of Get to Know and Grow – a
development initiative focusing on Core TOP Talents
employees led by OMV Petrom Executive Board
Members. It consisted in development talks between
Executive Board Members and Core Top Talents in a
cross-divisional set up;
Launch of Career round table – a program that aimed
to enhance cross-divisional talent visibility and mobility,
same time tapping more into internal source capabilities
of the company in search for talents for various projects
and roles;
Organization of Employer Branding Webinars –
online events for students and young graduates
(approximately 100 participants) to strengthen employer
branding and increase engagement with the next
generation of professionals;
Launch of Crowdsourcing – The initiative involved 20
young graduates and students, 8 internal mentors and
facilitators that worked in teams on the topic: Unboxing
employee experience. What are the hopes and job
expectations of the new generation?
Training programs
In total, in 2020, we delivered 135,285 hours of training to
our employees, of which 22,187 hours of online training
session.
Diversity and Inclusion initiatives
In 2020, at OMV Petrom level, we started the Diversity and
Inclusion programs by organizing a face-to-face workshop
on how to combat gender bias at work, for a group of
women. Once the pandemic started, programs continued in
the virtual environment.
Moreover, in 2020, we started the planning for additional
initiatives that will be rolled-out in 2021, such as Diversity
Talks, a series of events based on diversity success stories
that aims to:
Raise awareness on main diversity topics of interest for
OMV Petrom Group;
Identify relevant diversity topics or immediate needs of
the companies / groups across the world;
Collect and present best practices existing across the
Group, as well as promote to business as usual the most
relevant experiences;
Build a Community of Diversity Experts and
Ambassadors that will be able to address and
constructively deal with main diversity indicators.
Additional information will be available in the 2020
Sustainability Report that will be published by May 31, 2021.
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People Strategy
Business environment
OMV Petrom Annual Report 2020 Company
Global macroeconomic and sector trends
In 2020, the global economy struggled with both health and
economic effects of a profound and rare crisis, triggered by
the COVID-19 pandemic. As a result of the exceptional
measures imposed by governments across the world to
contain the pandemic, global economy contracted sharply,
by 3.5%, experiencing its worst recession since the Great
Depression. World trade volume collapsed by 9.6% as
economic activity slowed down markedly in the first half of
the year. Policymakers and central banks were swift in
deploying an array of unprecedented support schemes to
households, businesses and financial markets.
Cumulatively, global actions amounted to USD 14 trillion in
fiscal support for the economy, around 16% of world GDP,
and USD 9 trillion in monetary support through interest rate
cuts and other measures by central banks. Due to the
imposition of lockdowns some economic sectors were hit
harder than others, with tourism, travel, hospitality and
entertainment being among the most severely affected.
However, despite the pandemic inflicting significant
economic costs, the downturn was not as deep as initially
feared and the subsequent recovery, which started in the
second half of the year, was stronger than expected. Retail
sales and new house building recovered partially, supported
by the increase in households‘ saving ratio during the
lockdown. The US economy contracted by only 4.9%,
helped by the Federal Reserve’s large scale debt purchases,
direct cash payments to targeted households and an
economic environment with virtually zero interest rates.
Although Japan did not impose a compulsory lockdown, its
economy shrank by 5.1% as government’s call for voluntary
business closures at the onset of the crisis was widely
respected. The Chinese economy was a rare exception, with
domestic demand remaining in positive territory, managing
to grow by 2.3%, thus reaping the benefits of stringent
measures taken to bring the pandemic under control.
The European Union (EU) was one of the regions on the
globe hardest hit by the pandemic. The EU economy
declined by 6.4% as services, which account for a large
share of it, were severely impacted by mobility restrictions.
Output contraction reached post-war records across most of
the EU economies, recording 5% in Germany, 8.3% in
France, 8.8% in Italy and 11% in Spain. Stronger exports,
notably driven by the increase in Chinese demand, and a
partial recovery in investment during the second half of the
year, mitigated the sharp decline in private consumption.
Manufacturing activity continued to advance despite the
virus resurgence in autumn, partly supported by increased
foreign demand. The EU labor markets, which were under
severe strain in the first half of the year, benefited from
short-time work schemes and other government support
policies, thus limiting the expansion in unemployment and
preventing large household income losses. In response to
the extraordinary economic circumstances, the European
Council agreed to set up a massive EUR 750 bn recovery
fund, financed – for the first time ever – by European
sovereign bonds in order to support reforms and
investments in member countries.
Consumer prices in advanced economies grew at an
annual rate of only 0.7% as the drop in demand weighed
down on prices. EU annual inflation rate decelerated to 0.2%
from 1.6% a year before, partially impacted by substantial
declines in travel-related services inflation, lower oil prices
and a temporary reduction in German VAT rates during the
second half of the year. Financial markets were volatile and,
after an initial sizable fall in early 2020, they recovered,
aided by the extremely large monetary expansion measures
by the world’s largest central banks. The main stock market
indices in the US, Japan and China posted gains in 2020,
while most of those in Western Europe, except Germany
and the Netherlands, ended the year lower.
Total global oil demand plummeted by a record 8.8 mn
bbl/d to 91.2 mn bbl/d in 2020 with lockdowns-induced travel
restrictions impinging heavily on demand. Both OECD and
non-OECD countries incurred a substantial drop in oil
consumption, by 11.8% and 6.1% respectively, as reduced
economic activity related to the pandemic triggered changes
in demand patterns for oil as well as other fuel liquids. The
demand for jet fuel, in particular, plunged the most, being
reduced by more than 3 mn bbl/d in 2020. Domestic and
international travel restrictions impacted heavily the aviation
sector, bringing air passenger traffic down by 60%. Global
oil supply responded to the unprecedented weakness in
demand dropping by 6.6 mn bbl/d. In April, at an early stage
of the pandemic, OPEC and Russia stroke a deal which
yielded the biggest oil production cuts in history. The
agreement, supported by the US and G20, removed 9.7 mn
bbl/d off the world oil market, the equivalent of almost 10%
of global supply. Although oil production cuts were gradually
unwound throughout the year, as the economies recovered
and global oil stocks were being drawn down, the latter
remaining above the pre-crisis level. The deep cuts in oil
production, especially by Saudi Arabia, left the OPEC
surplus crude oil capacity at 6.1 mn bbl/d in 2020, well
above the last decade’s average of 2.4 mn bbl/d.
Oil prices gyrated strongly in response to the strong market
uncertainty. During the first four months of the year alone,
Brent prices dropped by 70% in response to oversupply
concerns and weakened demand triggered by the pandemic.
The decline in oil prices was made worse by the brief oil
price war between Saudi Arabia and Russia who initially
disagreed over their collective oil production cut strategies.
Business environment
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OMV Petrom Annual Report 2020 Company
Saudi Arabia’s decision to flood global oil markets deepened
the fall in oil prices in the early months of the year. The
collapse in demand coupled with the immediate shortage of
oil storage even pushed US oil prices for May delivery briefly
into negative territory, for the first time in history, to -40
USD/bbl. From May onwards oil prices followed an upward
trend, supported by the gradual economic recovery, the oil
production cut agreement between OPEC and Russia and,
towards the end of the year, by hope for a relatively speedy
vaccine rollout. The average Brent oil price fell in 2020 by
34.8% year-on-year to USD 41.8/bbl, while the average
Urals price was USD 41.6/bbl, 35.2% lower compared to
2019. The average spread between Brent and Urals oil
prices widened to USD 0.26/bbl from USD 0.02/bbl in 2019.
Romania – macroeconomic and sector trends
The COVID-19 pandemic put a break in Romania’s solid
economic performance recorded over the last years.
Preliminary data show that Romania’s economy contracted
by 3.9% in 2020. Although the gross domestic product
(GDP) decline was significant, it turned out to be less severe
than the EU average. The economic impact of the two-
month period of lockdown restrictions enforced from mid-
March to mid-May, was asymmetric across various sectors.
The shutting down of businesses and limits of mobility
initially affected disproportionately the manufacturing sector,
hotels and restaurants, entertainment, and retail trade.
These impacts were more muted in the second half of the
year, when a resurgence in infections was tackled by the
authorities with targeted lockdowns and the imposition of an
alert state. Despite a partial recovery recorded during the
second half of the year, industrial production fell by 9.3% in
2020, the largest drop in recent history. Construction, which
represents around 7% of GDP, performed above
expectations advancing by 15.9% annually, with construction
sites being kept open and work there proceeding at almost
full speed even during the lockdown. Demand for IT
products and services rose as parts of economic activities
moved online, helping the sector to grow by 10.4%.
Domestic consumption, which was the main engine of
growth over the last decade, fell by 3.4%. Retail sales were
resilient and, following the dip during the lockdown period,
posted a 2.2% growth for the full year.
The government’s response to the pandemic followed the
paths adopted by other EU countries. Measures focused
primarily on easing the burden of the income loss brought
about by the imposed lockdown and on supporting the
health care system. The immediate fiscal impulses consisted
of additional government spending on medical resources,
technical unemployment – which paid 75% of gross wages
for furloughed employees – and grants to small and medium
enterprises. This made the labor market respond to the crisis
better than initially expected. The unemployment rate initially
jumped to 5.5% in July from 2.8% in January, but
subsequently fell to 4.9% at the end of the year. Households’
purchasing power was also maintained, on average, creating
premises for a speedier recovery. Another set of policies
focused on deferrals, including payments of taxes to the
budget or loans reimbursement moratorium for affected
debtors. Other measures aimed at providing liquidity and
guarantees to the private sector, via credit lines through
domestic banks. The authorities’ fiscal space was limited,
being constrained by the already existing large budget
deficit. Overall, the government’s fiscal support to the
economy came up to the equivalent of around 4% of GDP,
with almost half of it in government guarantees. This was
sizably lower than the fiscal backing received by other
economies in the region, where it amounted, on average,
between two to three times higher.
Macroeconomic imbalances deteriorated further in 2020.
Although the current account deficit remained virtually stable
as a share in GDP, the additional government spending for
pandemic-related measures, the 14% increase in public
pensions and the fall in current revenues, together, led to a
deepening in the budget deficit to 9.8% of GDP, more than
double compared to a year ago. The required additional
government borrowing pushed up strongly the public debt to
GDP ratio by over 12 percentage points, to 47.7%. Despite
this, the perceived country risk diminished gradually
throughout the course of the year. Domestic government
bond yields fell across all maturities, supported in part by
increased global liquidity. Romania’s country rating was left
at the lowest level of the investment grade following a
downward revision in outlook by two of the three main
international rating agencies.
Consumer price inflation ended the year at 2.1%,
influenced by weakened demand and lower commodity
prices. The RON/EUR exchange rate was verystable in
2020, given the large uncertainties faced by various
economic sectors. After increasing slightly during the first
part of the year, the volatility of RON against the EUR
dropped off subsequently. The overall level of RON-EUR
volatility remained low, compared to other exchange rates in
the region. Against the USD, the RON was more volatile,
driven largely by the EUR-USD behaviour. On average, in
2020 the RON fell against both the EUR and the USD by
1.9% and 0.1% respectively.
Romania’s total energy supply responded to the lower
demand, decreasing by 10.8% in 2020 to 31.4 mn toe. Both
domestic production and imports of coal, oil and natural gas
fell substantially. Oil supply went down by 14.9% to 10.2 mn
toe, as mobility restrictions triggered by the imposition of
24
Business environment
OMV Petrom Annual Report 2020 Company
lockdown limited demand for fuel products. Retail fuels
turnover sank by 8.0% compared to a year ago. Domestic
natural gas supply decreased by 9.7% to 7.3 mn toe, with
gas imports also falling by 20.8% to 1.7 mn toe.
Business environment
25
OMV Petrom Annual Report 2020 Company
Business segments’ operational performance
Upstream
At a glance 1
Segment sales (RON mn)2
Operating Result (RON mn)3
Special items (RON mn)
Clean Operating Result (RON mn)
Operating Result before depreciation and amortization,
impairments and write-ups (RON mn)
Capital expenditures (RON mn)4
Exploration expenditures (RON mn)
Total Group production (mn boe)
thereof in Romania (mn boe)
Sales volumes (mn boe)
Production costs (OPEX in USD/boe)
Proved reserves as of December 31 (mn boe)
thereof in Romania (mn boe)
2020
6,162
(985)
(992)
7
2,305
2,382
195
52.98
50.51
50.33
10.88
473
451
2019
9,541
2,589
(255)
2,845
5,342
3,269
427
55.35
52.97
52.09
10.90
504
477
∆ (%)
(35)
n.m.
(289)
(100)
(57)
(27)
(54)
(4)
(5)
(3)
(0)
(6)
(5)
1 For information about the financial performance of the segment, please refer to the relevant section in the Directors’ report on pages 40-52;
2 Including inter-segment sales;
3 Excluding intersegmental profit elimination;
4 Including capitalized exploration and appraisal and acquisitions.
HSSE is our first priority
The Lost Time Injury Rate (LTIR) (employees and
contractors combined) improved to 0.20, compared with
0.40 in 2019. No work related fatalities occurred in our
operations in 2020.
In Upstream, the rollout of Safety Culture Program
continued in 2020, adapted to the COVID-19 context. We
conducted assessments of safety culture maturity and
subsequently defined corresponding action plans. Moreover,
OMV Petrom’s safety principles were promoted through
numerous workshops organized in different business units.
We continued to focus on improving the carbon efficiency of
our operations, achieving a 24.3% decrease of the carbonvii
intensity in 2020 vs. 2019. Our improvement measures
included modernization, replacement and/or optimization of
gas processing and transportation infrastructure. We
continue to act on climate change mitigation by developing
projects that contribute to reaching our zero routine flaring
and venting objective by latest 2030.
Upstream operations in Romania
Exploration
In July 2019, NAMR announced a new license round for
Romania, comprising 28 oil and gas exploration blocks (22
onshore and six offshore). The official start of the tender
process for onshore acreage is awaited in 2021. We have
evaluated the offered acreage during 2020 and selected
several blocks of interest.
In February, OMV Petrom finalized a large 3D seismic
survey of more than 1,500 km2 in exploration block VIII-
Urziceni East together with Hunt Oil Company of Romania
S.R.L. as operator. Processing was ongoing during the rest
of 2020.
In March, the deep well 4700 Bărbătești was tested in
several reservoir zones, but none of the tests including
further pressure monitoring resulted in a sustainable
commercial flowrate under the revised long-term price
assumptions. The 6600 Băicoi well drilled in 2018 was
tested in Q4/20; despite initially encouraging flowrates, the
proven volumes were too small to be commercial.
vii Details will be available in OMV Petrom’s Sustainability Report for 2020.
26
Upstream
OMV Petrom Annual Report 2020 Company
In September, a new exploration well was drilled together
with Hunt Oil as operator near the Padina Field in the VIII -
Urziceni East block, but it did not find commercial
hydrocarbons. OMV Petrom’s own exploration wells, which
were planned for 2020, have been postponed to 2021/2022
due to the COVID-19 and the oil price crises.
Production
At the end of 2020, OMV Petrom operated 193 commercial
oil and gas fields in Romania (end-2019: 193).
In Romania, OMV Petrom’s hydrocarbons production
declined by 4.7% compared to 2019 level, to 50.51 mn boe
(or 138.0 kboe/d). Crude oil and NGL production declined
by 2.8% to 23.38 mn bbl (or 3.25 mn t), while natural gas
production declined by 6.2% to 27.13 mn boe (or 4.15 bcm).
Offshore production accounted for 16.4% from OMV
Petrom’s total hydrocarbons production in Romania (5.4% of
the crude oil and NGL production and 25.8% of natural gas
production).
Crude oil production based on enhanced oil recovery
techniques accounted for 25% of total domestic oil
production of OMV Petrom. Heavy oil, representing crude oil
with density greater than 900 kg/m3, accounted for 36% of
total production of crude oil and NGL.
The internal gas consumption for Upstream domestic
operations accounted for 9.5% of total gas production
(2019: 10.1%).
Natural decline and maintenance activities were the main
factors that impacted production in Romania in 2020.
Excluding the effect of divestments, production decline
stood at 4.5% yoy.
Overall production was supported by the well 4461 Totea
South, brought onstream in Q4/19 and by the contribution
from new wells and workover activities.
increase of the Reserves Replacement Rate, we managed
to drill a total of 63 new wells and sidetracks in 2020.
OMV Petrom further invested in keeping operation of the
facilities in line with HSSE standards and legal requirements
as well as in simplifying operations and improving cost
efficiency. All these led to safeguarding oil and gas
production and deliveries.
The following projects represent some highlights of our
main onshore projects:
FRD Independenţa / Independenţa Tank Farm
Independenţa is a mature oil field in production since 1959.
The purpose of FRD Independenţa is to increase production
by drilling in previously undeveloped areas with high
potential of oil accumulations. Out of the entire FRD scope,
Independenţa Tank Farm is the last project remaining to be
completed. In 2020, the project entered the detailed
engineering phase.
FRD Suplac Phase 2 and Suplac Key Infrastructure
projects
Main activities for FRD Suplac Phase 2 as well as for one
project from the key infrastructure “Drinking Water
Treatment Plant” were completed in 2020, while two other
projects, “Revamp Tank Farm Suplac” and “Regenerative
Thermal Oxidizer”, are awaiting commissioning.
The last project from key infrastructure, “Revamp Gas Plant
Abrămuţ” is under assessment for further investments in the
area.
Totea Deep Compressors Project
Totea Deep Compressors Project was initiated in 2017,
having the scope to maximize the recovery factor, by
decreasing the abandonment pressure of the field, trough
the installation of three new electrically driven compressors
and their integration in the systems of Park 4540 Totea in
Asset Oltenia.
2020 was an active year in terms of routine activities in
Upstream, with an average of 97 crews available performing
830 workover jobs and around 4,600 well interventions. All
of these led to an MTBF of 810 days, an improvement from
737 days in 2019.
Execute phase began in March 2020, followed by the start
of construction activities at the end of July. By the end of the
year, main civil works were finalized and major items of
equipment were delivered on site.
Key projects
In 2020, drilling activities reached a peak with 10 active rigs
in February in the OMV Petrom operated licenses, before
being impacted by the COVID-19 pandemic. Despite the
pandemic impact and in line with our strategy to support the
Offshore Portfolio
Petromar Debottlenecking Production Optimization
This new growth project within the offshore program intends
to fight the decline by installing additional compression
capacity and lowering the wellhead pressure of several
existing wells. After conducting a feasibility study, the
project was officially kicked off in December 2020.
Upstream
27
OMV Petrom Annual Report 2020 Company
Rejuvenation Program
Despite the harsh conditions in 2020, this program aimed at
improving key process safety and integrity areas progressed
with a series of projects, as follows: one project aimed at
implementing a redundancy to the control system on the
central and another four platforms, three shutdown projects,
a new crane replacement project, as well as the
replacement of two gas turbines to secure the power supply.
Three new projects started in 2020: the online monitoring
project aiming to detect ruptures in piles or main beams, a
project to reinforce the subsea steel structure of the
Pescăruș platform, and a project to extend the life time
certificate for all platforms for another five years.
With around EUR 120 mn invested so far, this program
shows our full commitment to the operations in the Black
Sea region.
FRD Petromar
The main objective of FRD Petromar is to increase offshore
production by developing additional reserves in the Sinoe
field and minimizing the development cost by side-tracking
existing non-producing wells and upgrading the related
facilities. The detail design could be finalized in line with
approved strategy. Considering the harsh 2020 economic
context, the project team reconsidered the execution
strategy and developed an alternative option for the
production facility platform number 8. Engineering was
kicked off at the end of 2020 and preparation for the FID is
ongoing.
Partnerships
Since July 2010, in order to optimize the portfolio of existing
assets, OMV Petrom has entered into partnerships with
international companies for production enhancement.
The partnerships with PetroSantander, Expert Petroleum
Solution and Expert Petroleum are governed by production
enhancement contracts (PECs) referred to as PEC Timiş,
PEC Turnu, and PEC Țicleni, covering 22 mature fields in
total.
The PECs stipulate that the contractors take over and
finance the operations and together with OMV Petrom
commit to the future developments of the respective fields,
in order to maximize production while improving efficiency.
OMV Petrom remains the sole titleholder of the concession
contracts and the owner of the hydrocarbon production and
of the existing assets, as well as of the rights and
obligations under the relevant petroleum concession as
defined by the Petroleum Act.
In total, 37 workover jobs were performed by the contractors
within the PECs in 2020. The total production of the PECs
in 2020 amounted to 6.5 kboe/d (2019: 7.3 kboe/d), of which
PEC Țicleni 3.8 kboe/d, PEC Turnu 1.0 kboe/d, and PEC
Timiş 1.7 kboe/d.
In Q4/20, Expert Petroleum notified OMV Petrom about the
early termination of the PEC Timiş. This termination will
become effective on January 1, 2023.
In the Joint Operations Agreement with Hunt Oil (50%
OMV Petrom, 50% Hunt Oil operator), we recorded a
production of 1.5 kboe/d (OMV Petrom share) in 2020. The
well 2 Padina Nord was put into production in December
2020.
The total production recorded by PECs and Joint
Operations Agreements in 2020 was 8.0 kboe/d (2019: 8.7
kboe/d), representing 5.8% of the OMV Petrom’s total
domestic production.
International Upstream operations
In Kazakhstan, OMV Petrom holds development and
production licenses for the TOC fields (Tasbulat, Aktas,
Turkmenoi) and for the Komsomolskoe field. In 2020, the
average oil and gas production in Kazakhstan increased
by 4.2% versus 2019, to 2.47 mn boe (6.8 kboe/d), as a
result of the increased well intervention and workover
activities with a total of 11 workover jobs and 49 well
interventions carried out.
In December 2020, OMV Petrom signed the transaction for
the sale of its 100% shareholding in Kom-Munai LLP (KOM)
and Tasbulat Oil Corporation LLP (TOC) to Magnetic Oil
Limited, with closing expected in H1/21.
In August 2020, OMV Petrom completed the transaction for
the acquisition of OMV Offshore Bulgaria GmbH and
entered the Han-Asparuh exploration block. Han-Asparuh is
located in the western Black Sea in Bulgaria, south of the
Neptun Deep Block in Romania, and has an area of 13,819
km² with maximum water depths of over 2,000 m. OMV
Petrom holds a 42.86% share in the license, alongside Total
(57.14%) who is the operator. Processing of the 5,614 km2
of 3D seismic data acquired in H1/20 is ongoing towards
maturing future drilling candidates.
In June 2020, OMV Petrom was selected as the winner of
the open international tender held by the Ministry of
Economy and Sustainable Development of Georgia for the
Offshore Block II. The exploration block covers a total area
of 5,282 km² and is located on the shelf and within the
28
Upstream
OMV Petrom Annual Report 2020 Company
economic zone of the Georgian offshore Black Sea. The
Production Sharing Contract was signed in March 2021.
Production in 2020
Romania
Kazakhstan
OMV Petrom Group
Oil and NGL
Natural gas
Total
mn t
3.25
0.27
3.52
mn bbl
23.38
2.13
25.51
bcm
4.15
0.06
4.21
mn boe
mn boe
27.13
0.34
27.47
50.51
2.47
52.98
Proved reserves as of December 31, 2020
Romania
Kazakhstan
OMV Petrom Group
Oil and NGL
Natural gas
Total
mn t
38.8
2.5
41.3
mn bbl
bcf
mn boe
mn boe
279.0
19.8
298.8
928.7
12.0
940.7
172.0
2.0
174.0
451.0
21.8
472.8
Reserve Replacement Rate (RRR)viii
As of December 31, 2020, the total proved oil and gas
reserves in the OMV Petrom Group’s portfolio amounted to
473 mn boe (of which 451 mn boe in Romania), while the
proved and probable oil and gas reserves amounted to
761 mn boe (of which 720 mn boe in Romania).
For the single year 2020, the Group’s RRR decreased to
41% (2019: 49%), while in Romania it increased to 48%
(2019: 39.5%). The Group’s three-year average RRR
increased to 44% in 2020 (2019: 42%), and in Romania it
increased to 43% (2019: 38%). OMV Petrom was able to
increase RRR mainly due to favourable drilling and
workover results and new projects.
viii Including the effect of the divestments of nine marginal fields in 2019.
Upstream
29
OMV Petrom Annual Report 2020 Company
Downstream
Downstream Oil
At a glance 1
Segment sales (RON mn)2
Operating Result (RON mn)3
Special items (RON mn)
CCS effects (RON mn)
Clean CCS Operating Result (RON mn)4
Operating Result before depreciation and amortization,
impairments and write-ups (RON mn)
Capital expenditure (RON mn)
Refinery utilization rate (%)
Refining input (kt)
Crude oil processed (kt)5
Total refined product sales (kt)
thereof:
Gasoline (kt)
Diesel (kt)
Kerosene/Jet fuel (kt)
Fuel Oils & Bitumen (kt)
thereof:
Retail sales volumes (kt)6
2020
13,657
1,060
49
(442)
1,454
1,810
793
92
4,499
4,097
4,993
1,291
2,518
126
329
2,619
2019
18,346
1,475
(204)
178
1,501
2,223
818
97
4,727
4,306
5,462
1,310
2,702
289
342
2,847
∆ (%)
(26)
(28)
n.m.
n.m.
(3)
(19)
(3)
(5)
(5)
(5)
(9)
(1)
(7)
(56)
(4)
(8)
1 For information about the financial performance of the segment, please refer to the relevant section in the Directors’ report on pages 40- 52;
2 Including inter-segment sales;
3 Excluding intersegmental profit elimination;
4 Adjusted for exceptional, non-recurring items; clean CCS figures exclude special items and inventory holding effects (current cost of supply – CCS – effects) resulting from Downstream
Oil;
5 Including NGL;
6 Retail sales volumes refer to sales via Group’s filling stations in Romania, Bulgaria, Serbia and Moldova.
HSSE is our first priority
In Downstream Oil, we continued to focus on improving the
HSSE performance, by rolling out several programs
throughout the organization (campaigns such as: “Golden
Rules & Supplementary Life Saving Rules”, “Be Smart, Be
Safe”, as well as the “Leading Safety“ program).
The LTIR (employees and contractors combined) in
Downstream Oil was 0.10, better than the international
benchmark.
In 2020, due to the pandemic situation that triggered a lower
utilization rate of the refinery with less crude processed,
carbonix intensity at the refinery increased by 4.1% versus
2019.
Operational performance
The operational performance and energy efficiency of the
Petrobrazi refinery remained at competitive levels.In 2020,
the OMV Petrom indicator refining margin was
USD 2.89/bbl, lower by USD 1.79 /bbl than in 2019, as a
result of falling product spreads, mainly gasoline, jet and
diesel.
The refinery utilization rate was lower yoy, 92% in 2020
compared to 97% in 2019, reflecting the two weeks planned
shutdown in Q3/20 and lower demand following mobility
restrictions, but supported by placing more equity products
on all our markets while reducing third-party supply.
ix Details will be available in OMV Petrom’s Sustainability Report for 2020.
30
Downstream Oil
OMV Petrom Annual Report 2020 Company
The continued focus on operational and energy efficiency
allowed us to maintain the fuel and loss indicator below 8%,
similar to the previous year.
Production (kt)
Gasoline
Diesel
Kerosene/Jet fuel
Fuel Oils
LPG total
Petroleum coke
Other1
Total
2020
1,240
1,911
77
254
157
274
264
2019
1,302
1,958
117
281
196
274
260
4,177
4,388
∆ (%)
(5)
(2)
(34)
(10)
(20)
-
2
(5)
1 Comprises other products as: Propylene, Naphta, Hydrotreated Gasoline, Heavy Gasoline Fraction, Sulphur, etc.
OMV Petrom Group’s total refined product sales amounted
to 4,993 kt in 2020, representing a 9% decrease compared
to 2019, following weaker demand.
Group retail sales volumes were 8% lower than in 2019,
reaching 2,619 kt, as effect of reduced traffic during the
COVID-19 pandemic. In Romania, retail sales reached
2,248 kt in 2020, 6% lower than in 2019. Therefore, in 2020,
the average throughput per station in Romania decreased to
4.88 mn liters (2019: 5.27 mn liters), driving the overall
decrease of this indicator at the Group level to 4.03 mn liters
(2019: 4.43 mn liters).
Retail market sharex in the operating region stood at 32%,
flat versus the previous year, as our sales evolved in line
with the market, despite increased competition.
Within the OMV-branded filling stations, we continued to
provide our customers with best-in-class fuels and
convenience on the go with a diversified range services for
the drivers (e.g. money transfer, car insurance, utilities
payments, courier services).
In the Petrom-branded filling stations, we have consolidated
our “value for money” proposition on fuels, while continuing
our efforts to become more appealing to the younger
demographic, via specific consumer promotions and
capitalizing on the convenience of our offer. Regarding our
strategic partnerships, following the successful pilot phase of
the cooperation with Auchan, in August 2020 we announced
the extension of the partnership for opening approximately
400 MyAuchan proximity stores in the entire Petrom-
branded filling stations network. The partnership marks the
Petrom brand entrance into a new development stage, to be
reflected in the rebranding of the filling stations. The rollout
of MyAuchan convenience stores in updated Petrom filling
stations reached 25 units at the end of 2020, aiming to cover
up to 100 additional units per year. Furthermore, we
continued the partnership with Subway in Romania and with
KFC in Serbia.
In 2020, the total non-fuel margin at Group level decreased
by 14% compared to the previous year, being affected by
the mobility restrictions during the pandemic crisis.
In 2020, the non-retail business continued to be a strong
contributor to the overall OMV Petrom result, despite market
challenges posed by the COVID-19 pandemic and the
economic slowdown. The commercial bulk sales business
continued to perform well, capitalizing on market
opportunities for white products (diesel and gasoline).
Business development initiatives targeted the sale of marine
fuel oil with low sulfur content and of bitumen, while several
initiatives for digitalization and operational excellence were
developed, with a high focus on customers centricity. Jet fuel
sales to the aviation industry were the most affected by
lockdowns and mobility restrictions imposed widely across
Europe. In this context, our focus was to optimize processes
and costs. Overall, group non-retail sales decreased by 9%
compared to 2019, mainly due to weaker demand in the
context of the pandemic and the steep drop in the aviation
x OMV Petrom’s estimates based on preliminary data available; OMV Petrom retail market share is calculated by dividing retail sales (Gasoline + Diesel) by the total retail market
(Gasoline + Diesel);
Downstream Oil
31
OMV Petrom Annual Report 2020 Company
business. In Romania, non-retail sales were 906 kt, 21%
below the previous year’s level.
reflection in product prices would make the market unstable,
OMV Petrom fuel prices only reflect the trend, not the highs
or lows.
OMV Petrom fuel prices have a dynamic evolution based on
international fuel quotations, namely Platts Mediterranean,
as well as on market competition. In addition, prices are
influenced by the fiscal policy and exchange rate. As the
volatility of quotations is extremely high and an immediate
Number of filling stations per country at the end of period
The filling stations network operated within the OMV
Petrom Group at the end of 2020 comprised a total of 793
filling stations, same as at the end of 2019.
Romania
Moldova
Bulgaria
Serbia
Total
2020
560
77
93
63
793
2019
556
81
94
62
793
∆
4
(4)
(1)
1
-
32
Downstream Oil
OMV Petrom Annual Report 2020 Company
Downstream Gas
At a glance 1
Segment sales (RON mn)2
Operating Result (RON mn)3
Special items (RON mn)
Clean Operating Result (RON mn)
Operating Result before depreciation and amortization,
impairments and write-ups (RON mn)
Capital expenditure (RON mn)
Gas sales volumes (TWh)
thereof to third parties (TWh)
thereof to the regulated market (TWh)
Net electrical output (TWh)
2020
6,069
1,257
539
718
849
9
57.0
47.7
7.0
4.2
2019
6,978
438
156
282
530
85
54.8
47.2
12.5
3.4
∆ (%)
(13)
187
246
155
60
(90)
4
1
(44)
23
1 For information about the financial performance of the segment, please refer to the relevant section in the Directors’ report on pages 40-52;
2 Including inter-segment sales;
3 Excluding intersegmental profit elimination.
HSSE is our first priority
Though there has been a very difficult year from a medical
perspective, in Downstream Gas HSSE is constantly at the
top of our minds and always the first priority in any activity
we undertake. We have adapted our processes and
procedures to keep our employees and contractors healthy
and safe and we are proud to once again record a year with
no work-related incidents or lost-time injuries.
In 2020, we recorded a lower carbonxi intensity level by 0.5%
as compared to the 2019 level, in the context of higher net
electrical output.
Operational performance
According to our estimates, national gas consumption
increased by around 5% in 2020 as compared to 2019,
mainly driven by higher offtake by gas fired power plants and
the fertilizer industry. Regarding the supply sources, the
national consumption was covered by a decreasing
Romanian production and a lower share of imports as
compared to last year, given the high volumes available in
underground storages at the beginning of the year.
Release Program (GRP) introducing for producers the
obligation to offer a fixed percentage of their production, in
different products (monthly, quarterly, seasonal, annual) with
starting prices determined by the market prices recorded in
past periods for similar products.
In 2020, on the Romanian centralized markets, the traded
gas volumes covering a variety of standard products totaled
50.2 TWh (with delivery until end-2021), at an average price
of RON 62/MWhxii.
In 2020, our gas sales performance was outstanding. OMV
Petrom’s total gas sales volumes increased by 4% yoy to
57.03 TWh, historically the largest sales volume since the
start of our operations. The uplift is based on 2019
transactions to comply with the regulatory obligations for the
regulated and the centralized markets and was supported
also by high acquisitions from third parties. The gas sales
volume increase is a great achievement, given the
challenging market environment in 2020, with prices and
margins under pressure due to the competitive and volatile
gas market.
2020 was a challenging year for our gas business from the
regulatory point of view. In June 2020, the obligation to trade
on the centralized markets was replaced with the Gas
Given the legislation in force, in 2020 OMV Petrom supplied
the gas regulated market, delivering 7.0 TWh to the
xi Details will be available in OMV Petrom’s Sustainability Report for 2020;
xii Data regarding Romanian centralized markets represent OMV Petrom’s estimates based on available public information. The gas price for such transactions refers to various products in
terms of storage costs, flexibility and timing.
Downstream Gas
33
OMV Petrom Annual Report 2020 Company
households and district heating for households suppliers, as
per the set allocation, at the fixed price of RON 68/MWh.
of spot power prices, but also in the context of Romania
being a net power importer for the year overall.
The OPCOM spot base load power prices decreased by
approximately 20% yoy, averaging RON 191/MWh in 2020
(2019: RON 239/MWh).
2020 was a golden year for our power business. Brazi power
plant had the largest contribution to the Downstream Gas
segment result since the start of commercial operations in
2012. The record high net electrical output of 4.1 TWh
covered a share of 7% (2019: 6%) in the national power
generation mix. With the annual planned shutdown
completed in October 2020, on time, on budget and with no
HSSE incidents, the power plant had a technical availability
of 95%.
The power plant’s optimization mechanism covers both
forward and spot sales and thus improves the role of the
power plant within our equity gas value chain, while forward
contracts are used as hedges to protect against price
volatility, both long- and short-term.
Capitalizing on the power plant technical capabilities and
flexibility, significant additional revenues were obtained also
from the balancing and ancillary services markets. Its
significant importance for the security and stability of the
national energy system was also proved in 2020, given the
challenging supply and consumption power profile impacted
by the pandemic crisis.
The Brazi power plant had a legal obligation to supply the
regulated power market in H2/20 with 0.18 TWh at the price
of RON 223/MWh.
2020 was a difficult year, mainly due to the health crisis, the
measures taken to contain it, but also due to regulatory
changes that brough volatility and unpredictability to the
energy markets in particular. Still, this unusual market
environment was professionally and promptly managed,
innovative ideas were launched to maintain operations in all
assets and customer interaction, despite the pandemic
constraints. As such, we have demonstrated to our
customers and partners our reliability, our unwavering
commitment to their success and confirmed our role as a
key player in the Romanian energy market, well-positioned
for long-term growth and value creation.
At the same time, we concluded significant sale transactions
on the centralized markets, with a total gas volume of 16
TWh contracted for deliveries until end-2021, at an average
price in line with market prices. Some of these transactions
were completed within the GRP framework. OMV Petrom
fully complied with its obligation.
The foundation for an upward trend in sales is a well-
diversified supply portfolio, blending equity gas with a
diversified mix of other sources. In addition to mid- and long-
term activities, short-term solutions were developed in 2020,
all creating a supply portfolio tailored to our needs. Faced
with declining equity production, we used acquisitions from
third parties to cover all our sales commitments and
sustainably preserve our end-user portfolio.
At the end of 2020, OMV Petrom had 2.0 TWh of gas in
storage, following successful management of the extraction
and injection cycles. Even if the mimimum stock obligation is
no longer in force, OMV Petrom is committed to ensure
security of supply for its entire customer portfolio, therefore
optimizing the stored gas volume will always remain one of
our objectives.
In 2020, we succesfully maintained a leading position on the
Romanian gas market, in line with on our strategy.
Benefiting from our full focus, the end-user portfolio was
successfully maintained, proving business robustness and
customers’ loyalty. This portfolio broadly ranges from leading
industrial players to medium-sized and small consumers, to
whom we deliver on our promise to ensure security of
supply, complemented by our business-friendly approach,
competitive terms and professionalism, thus contributing to
the resilience of the Romanian economy. Given the
challenges of 2020 and the shift in customers’ behavior
towards the online, we have taken considerable steps
towards digitalization, making the contractual relationship
easier, faster and simpler for our customers.
While we were fully compliant with all regulations in force,
our focus remains to increase our end user customer
portfolio.
On the power market, as per currently available data from
the grid operator, national electricity consumption decreased
to 58 TWh in 2020 (2019: 62 TWh). The national electricity
production dropped by 6%, to 55 TWh (2019: 59 TWh). In
terms of power generation mix in 2020, the significantly
lower power production from coal was not fully compensated
by the slightly higher production from natural gas. Market
coupling continued to play an important role in 2020 in terms
34
Downstream Gas
OMV Petrom Annual Report 2020 Report of the governing bodies
35
OMV Petrom Annual Report 2020 Report of the governing bodies
Report of the Supervisory Board
Transparency and accountability towards our shareholders
is a well-established and deeply entrenched practice that
has been implemented in the Company. During a year
impacted by the COVID-19 pandemic, the Supervisory
Board continued to devote close attention to the Company’s
strategic focus and business performance in all areas of
activity, with special focus on monitoring of the
developments of the pandemic and preventive measures
implemented to ensure smooth running of activities and to
protect the health of employees and customers.
The following report provides an overview of the Supervisory
Board’s main points of interest during the year under review.
In addition to this report, the shareholders, as well as other
stakeholders, may access relevant information about the
Company and the Supervisory Board by:
visiting the Company’s website, www.omvpetrom.com,
where various information about the Company and
relevant contact details are available;
reading the other sections of the Company’s Annual
Report;
contacting the Company directly – shareholders,
investors and equity analysts can address their requests
to the Investor Relations department;
asking questions at the GMS, concerning the items to be
debated during such meetings.
Composition of the Supervisory Board
The Supervisory Board consists of nine members who were
appointed by the Ordinary GMS, in accordance with the
provisions of Company Law and the Articles of Association.
The Supervisory Board’s current mandate started on April
28, 2017 and expires on April 28, 2021. The CVs of the
current Supervisory Board members are available on the
Company’s corporate website and short presentations are
included in the Corporate Governance Report.
At the beginning of 2020, the Supervisory Board consisted of
the following members: Rainer Seele (President), Reinhard
Florey (Deputy President), Thomas Gangl, Johann
Pleininger, Daniel Turnheim, Jochen Weise, Sevil Shhaideh,
Radu-Spiridon Cojocaru and Joseph Bernhard Mark Mobius.
On March 3, 2020, the Ordinary GMS, convened at the
request of the shareholder Romanian State (via the Ministry
of Economy, Energy and Business Environment), approved
the revocation of Sevil Shhaideh from her capacity as
member of the Supervisory Board and the appointment of
Niculae Havrileț as new member in the Supervisory Board
for the remaining period of the mandate granted to Sevil
Shhaideh. During the same meeting, the Ordinary GMS
approved the appointment of Thomas Gangl and Johann
Pleininger (previously interim Supervisory Board members)
as Supervisory Board members for the remaining period of
the mandates granted to Manfred Leitner and Christopher
Veit, respectively. Therefore, at the end of 2020, the
Supervisory Board had the following composition: Rainer
Seele (President), Reinhard Florey (Deputy President),
Thomas Gangl, Johann Pleininger, Daniel Turnheim, Jochen
Weise, Niculae Havrileț, Radu-Spiridon Cojocaru and
Joseph Bernhard Mark Mobius.
Independence
Upon appointing each Supervisory Board member, the
Company conducts an independence evaluation based on
the independence criteria provided by the Corporate
Governance Code of the Bucharest Stock Exchange (which
are substantially similar to those provided by the Company
Law). The independence evaluation consists of an individual
personal assessment carried out by the relevant Supervisory
Board member, and is then followed by an external
assessment.
Moreover, for the purpose of preparing this report, the
Company reconfirmed with all Supervisory Board members
their independent or non-independent status as of
December 31, 2020.
Following this evaluation, it resulted that the following
Supervisory Board members met during 2020, as well as at
the date of this report, all the independence criteria
stipulated by the Corporate Governance Code and therefore
have an independent status as per such criteria, namely:
Jochen Weise, Radu-Spiridon Cojocaru and Joseph
Bernhard Mark Mobius.
Information on the independency of the Supervisory Board
members is included also on the Company’s corporate
website.
Supervisory Board works
In 2020, the Supervisory Board thoroughly reviewed the
position and prospects of the Company and accomplished
its functions according to the relevant laws, the Articles of
Association, the applicable Corporate Governance Code and
the relevant internal regulations. The Supervisory Board
coordinated with the Executive Board on important
management matters, monitored the latter’s work and was
involved in the Company’s key decisions, always following a
comprehensive analysis.
During a year governed by the COVID-19 pandemic, the
Supervisory Board members did not meet in person, all five
meetings being held by audio and video conferences.
Moreover, for specific and particularly urgent matters and
36
Report of the Supervisory Board
OMV Petrom Annual Report 2020 Report of the governing bodies
projects arising between the scheduled meetings, the
Supervisory Board submitted its approval in writing by
circulation, without an actual meeting being held, on three
other occasions. All members of the Supervisory Board
attended, by telephone or video conference, the vast
majority of the meetings of the Supervisory Board in 2020.
The average participation rate was over 98%. Only in one
occasion, a Supervisory Board member was represented by
another Supervisory Board member in the meeting.
In line with the Collective Labor Agreement, invitations to
attend the Supervisory Board meetings were extended to
trade union representatives and the meeting agenda and
related documents were provided in a timely manner in that
respect.
During the meetings, the Executive Board duly provided
detailed information, both verbally and in writing, on issues
of fundamental importance for the Company, including its
financial position, business strategy, planned investments
and risk management. Moreover, the Executive Board
provided updates to the Supervisory Board on the COVID-19
impact on the Company’s performance, presenting an
overview on the measures taken both at company and
divisional levels and also on the status of the operations.
Based on the reports of the Executive Board, the
Supervisory Board discussed all significant matters for OMV
Petrom in the plenary meetings. The frequency of both
plenary and committee meetings has facilitated an intensive
dialogue between the Executive Board and Supervisory
Board.
Besides the usual items, proposals and materials that were
discussed and submitted for approval of the Ordinary GMS
in April 2020, Supervisory Board’s main focus during 2020
was, amongst others, the overall development of the
Company, the status of the Neptun Deep project and
COVID-19 impact on the running of the Company’s activities
and the measures implemented to ensure the protection of
the health of its employees and customers.
In addition to the COVID-19 updates, in the regular reports
to the Supervisory Board, the President of the Executive
Board focused on topics such as HSSE, energy sector
overview and macroeconomic prospects.
effectiveness of the Supervisory Board’s activities, as well as
to ensure that the Supervisory Board can fulfil its
responsibilities towards shareholders and other
stakeholders.
For the 2020 financial year, the Supervisory Board considers
its composition to be satisfactory in terms of experience,
expertise, qualification, diversity, number of members and
presence. Supervisory Board members also value the good
collaboration with the Executive Board, the organization and
conducting of the Supervisory Board meetings and the
quality of the documents provided for such meetings.
Audit Committee
The Audit Committee is a consultative committee consisting
of Supervisory Board members who assist the Supervisory
Board on topics such as financial reporting, external
auditing, internal auditing, internal controls and risk
management, as well as compliance, conduct and conflicts
of interest.
At the beginning of 2020, the Audit Committee was
composed of four members, namely Jochen Weise
(President - independent), Reinhard Florey (Deputy
President), Sevil Shhaideh (member - independent) and
Radu-Spiridon Cojocaru (member - independent). Following
Sevil Shhaideh’s revocation as of 3 March 2020 as member
of the Supervisory Board (and consequently the cease of the
position in the Audit Committee) and the appointment of
Niculae Havrileţ as member of the Supervisory Board as of 3
March 2020, Niculae Havrileţ was also appointed as
member of the Audit Commitee as of 13 March 2020 and
until the expiration of the mandate of the current Supervisory
Board, namely until 28 April, 2021.
Therefore, at the end of 2020, including at the date of this
report, the Audit Committee has the following composition:
Jochen Weise (President - independent), Reinhard Florey
(Deputy President), Niculae Havrileţ (member) and Radu-
Spiridon Cojocaru (member - independent).
The CVs of the current Audit Committee members are
available on the Company’s corporate website and short
presentations are also included in the Corporate
Governance Report.
Self-evaluation of the Supervisory Board
Under the leadership of the President of the Presidential and
Nomination Committee, and according to the Guideline in
place for this purpose, the Supervisory Board undergoes
annually a self-evaluation process aiming to assess and, if
necessary, to improve both the efficiency and the
In 2020, the Audit Committee members met three times, one
time in person, while the other two meetings were held by
audio and video conference. During the meetings, the Audit
Committee reviewed and recommended the adoption of the
annual financial statements, reviewed the reports on
payments to governments, endorsed the Executive Board’s
proposal regarding the allocation of profits as well as the
Report of the Supervisory Board
37
OMV Petrom Annual Report 2020 Report of the governing bodies
proposal regarding the distribution of dividends for the
financial year 2019 and recommended to the Supervisory
Board and to the Ordinary GMS the reappointment of Ernst
& Young Assurance Services SRL (EY) as independent
financial auditor for 2020 financial year.
Annual financial statements
OMV Petrom prepares Group consolidated financial
statements in accordance with International Financial
Reporting Standards (IFRS) as endorsed by the European
Union, presented within this Annual Report.
As EY is the independent financial auditor of OMV Petrom
Group since 2011, reaching in 2021 the ten years maximum
duration provided by the EU Regulation no. 537/2014, in
2019-2020 a public tendering process for the selection of the
independent financial auditor for the audit of 2021 individual
and consolidated financial statements of OMV Petrom was
performed, the selection process being steered by the Audit
Committee.
In addition, the Audit Committee supervised and evaluated
the efficiency of OMV Petrom’s internal control and risk
management system, the adequacy of risk management and
internal control reports, and the responsiveness and
effectiveness of management to deal with failings or
weaknesses identified during internal control activities.
Moreover, the Audit Committee focused on assessing the
effectiveness and scope of the internal audit function, on
monitoring the application of statutory and generally
accepted standards of internal audit as well as on evaluating
the reports of the internal audit activity, including the internal
audit plan for 2020.
In the same time, the Audit Committee examined and
reviewed, before their submission to the Supervisory Board
for approval, related party transactions that exceeded or
were expected to exceed 5% of the Company’s net assets in
the previous financial year.
Independent financial auditor
EY was OMV Petrom Group’s independent auditor in 2020.
Given that EY’s engagements as statutory financial auditor
of OMV Petrom Group reaches in 2021 the ten years
maximum duration provided by the EU Regulation no.
537/2014, a public tendering process for the selection of the
independent financial auditor for the audit of 2021 individual
and consolidated financial statements of OMV Petrom was
performed. Following the audit tender, the Audit Committee
submitted to the Supervisory Board its recommendation
consisting in two possible choices for the potential auditor
for 2021, with a duly justified preference for one of them.
The Supervisory Board proposal, based on the
recommendation and in accordance with the preference of
the Audit Committee, will be submitted for approval to the
next Ordinary GMS to be held on April 27, 2021.
Separate financial statements of the Company for the year
ended December 31, 2020 are also prepared in accordance
with IFRS, as the Ministry of Finance Order no. 2844/2016
stipulates that Romanian listed companies must prepare
separate financial statements in accordance with IFRS as
endorsed by the European Union, starting with the year
ended December 31, 2012.
EY audited the 2020 financial statements, read the annual
report and has not identified information which is not
consistent in all material respects with the information
presented in the financial statements, and issued an
unqualified audit opinion.
The financial statements and audit reports for the year
ended December 31, 2020, as well as the Executive Board
proposal to distribute dividends of RON 0.031 per share
(corresponding to a payout ratio of 136% based on the
Group’s 2020 net profit attributable to stockholders of the
parent) were presented to the Supervisory Board for
examination in a timely manner. EY attended the relevant
meeting of the Audit Committee convened to review the
financial statements. The Audit Committee discussed the
financial statements with the independent financial auditor
and examined them carefully. Moreover, the Audit
Committee reported to the Supervisory Board on its
examination and recommended the approval of the annual
separate and consolidated financial statements, including
the management reports for the year ended December 31,
2020 and the Executive Board proposal for allocation of the
profit, including distribution of dividends.
The separate and consolidated financial statements were
approved in the Supervisory Board meeting of March 17,
2021 in line with the Audit Committee’s recommendation and
will further be submitted for approval in the Ordinary GMS to
be held on April 27, 2021.
Furthermore, following the review by the Audit Committee,
the Supervisory Board has approved the reports on
payments to governments for the year 2020, prepared in
accordance with Chapter 8 of the Annex 1 Ministry of
Finance Order no. 2844/2016 for approval of Accounting
Regulations according to International Financial Reporting
Standards, transposing Chapter 10 of the Accounting
Directive (2013/34/EU) of the European Parliament and of
the Council.
38
Report of the Supervisory Board
OMV Petrom Annual Report 2020 Report of the governing bodies
Corporate Governance
The Supervisory Board also approved the 2020 Directors’
Report which includes the Corporate Governance Report.
We thank our shareholders for their confidence in OMV
Petrom. The Company continued its successful operational
path of development in 2020 despite the difficulties caused
by the effects of the volatile regulatory environment and of
the COVID-19 pandemic.
demanding year marked by the COVID-19 pandemic and
achieved excellent results. We would also like to show our
appreciation to the clients and business partners of OMV
Petrom. Thanks to the resilient operational performance and
sound financial position in the context of the pandemic, the
Supervisory Board is confident that the Company is well
positioned to surmount further challenges ahead, take
advantage of new opportunities and unlock its full potential
in the years to come.
To this end, the Supervisory Board members would like to
express their appreciation to the Executive Board,
managers, employees and trade union representatives for
their commitment and hard work during 2020. They
successfully met the challenges of an unpredictable and
March 17, 2021
Rainer Seele
President of the Supervisory Board
Report of the Supervisory Board
39
OMV Petrom Annual Report 2020 Report of the governing bodies
Directors’ report
From left to right: Christopher Veit (EB Member - Upstream); Alina Popa (Chief Financial Officer - EB Member); Christina Verchere (Chief Executive Officer - President of the EB); Radu
Căprău (EB Member - Downstream Oil); Franck Neel (EB Member - Downstream Gas).
OMV Petrom Group financials (RON mn)
Sales revenues
Operating Result
Net income
Net income attributable to stockholders
Cash flow from operating activities
Capital expenditures
Employees at the end of period
2020
19,717
1,467
1,291
1,291
5,556
3,206
2019
25,485
4,245
3,635
3,635
6,803
4,225
10,761
12,347
∆ (%)
(23)
(65)
(64)
(64)
(18)
(24)
(13)
In 2020, the Group consolidated sales of RON 19,717 mn
were 23% lower compared to 2019, following negative
evolution of the commodity prices and lower sales volumes
for petroleum products and electricity.
stated after eliminating net special charges of RON (425) mn
and inventory holding losses of RON (396) mn. The net
result was a profit of RON 1,291 mn in 2020 (2019:
RON 3,635 mn).
The Group’s Operating Result for the year 2020 decreased
by 65% to RON 1,467 mn (2019: RON 4,245 mn), driven
mainly by the unfavorable market environment, as the lower
prices and the COVID-19 crisis had a negative impact on
Group’s performance, and by the net impairments triggered
by the revision of price assumptions. Clean CCS Operating
Result, in amount of RON 2,287 mn, lower by 50% yoy, is
The return on average capital employed xiii (ROACE)
reached a value of 4.1% (2019: 12.9%), while Clean CCS
ROACE decreased to 6.4% at the end of 2020, from 13.8%
at the end of 2019.
Cash flow from operating activities amounted to
RON 5,556 mn, 18% below the 2019 level, mainly as a
xiii For definitions of these ratios please refer to pages 74-76, section “Abbreviations and definitions”.
40
Directors’ report
OMV Petrom Annual Report 2020 Report of the governing bodies
result of lower commodities prices in the current market
environment.
Capital expenditure amounted to RON 3,206 mn in 2020
and was 24% lower than in 2019.
Due to the significant cash balance at December 31, 2020,
OMV Petrom Group reported a net cash position including
leases of RON 6,486 mn at the end of 2020, up from
RON 5,982 mn at the end of 2019.
Operating Result
Operating Result (RON mn)
Upstream1
Downstream
thereof Downstream Oil
thereof Downstream Gas
Corporate and Other
Consolidation: elimination of intercompany profits
OMV Petrom Group Operating Result
1 Excluding intersegmental profit elimination shown in the line “Consolidation”
In Upstream, Operating Result declined to RON (985) mn
(2019: RON 2,589 mn), mainly due lower oil and gas prices.
Exploration expenses increased to RON 814 mn in 2020
(2019: RON 238 mn), mainly due to write-off of exploration
wells slightly counterbalanced by lower seismic acquisition
expenses. Group production costs (OPEX) in USD were
kept stable at USD 10.88/boe mainly due to ongoing cost
optimization, which compensated for the lower production
available for sale. In Romania, production costs in USD
improved by 1% to USD 10.92/boe, while in RON terms they
improved by 1% to RON 46.27/boe. Upstream Operating
Result in 2020 also reflected special charges of RON (992)
mn, mainly due to net impairments, restructuring charges
and reassessment of provisions.
In Downstream Oil, Operating Result decreased to
RON 1,060 mn in 2020 (2019: RON 1,475 mn), impacted by
weaker refining margins, lower volumes sold in the context
of the COVID-19 pandemic and the planned shutdown of the
refinery in July. The negative effects were offset to a large
extent by the positive impact from CO2 certificates sale,
middle distillate margin hedges, good operational
performance of our sales channels and strict costs
management. In 2020, the OMV Petrom indicator refining
margin decreased by USD 1.79/bbl to USD 2.89/bbl, as a
result of falling product spreads mainly for gasoline, jet and
diesel. The refinery utilization rate decreased to 92%
(2019: 97%) reflecting the two-week planned shutdown in
2020
(985)
2,317
1,060
1,257
(105)
240
1,467
2019
2,589
1,913
1,475
438
(156)
(102)
4,245
∆ (%)
n.m.
21
(28)
187
33
n.m.
(65)
July and lower demand following mobility restrictions, but
supported by placing more equity products on all our
markets while reducing third-party supply. Downstream Oil
Operating Result reflected also special items of RON 49
mn (2019: special charges of RON (204) mn), and CCS
inventory holding losses of RON (442) mn (2019: gains of
RON 178 mn).
In Downstream Gas, Operating Result significantly
improved to RON 1,257 mn (2019: RON 438 mn) reflecting
record-high contribution from the power business, built on
power forward contracts, complemented by balancing and
ancilary services markets revenues. The gas business
reflected a very good end-user portfolio resilience. The result
also reflects one off revenues booked in Q2/20 representing
the compensation for higher costs incurred in 2019 for the
power regulated sales. Downstream Gas Operating Result
included also net special items of RON 539 mn, mainly
from full reversal of impairments for Brazi gas-fired power
plant amounting to RON 519 mn before tax, following
revision of the long-term power and CO2 price assumptions
(2019: net special items of RON 156 mn).
Operating Result in the Corporate and Other (Co&O)
segment was RON (105) mn (2019: RON (156) mn), as
previous year was influenced by higher social sponsorship
activities.
Directors’ report
41
OMV Petrom Annual Report 2020 Report of the governing bodies
Special items and CCS effect
Special items and CCS effect (RON mn)
Clean CCS Operating Result
Special items
thereof personnel and restructuring
thereof unscheduled depreciation and write-ups
thereof other
CCS effect: Inventory holding gains/(losses)
OMV Petrom Group Operating Result Group
2020
2,287
(425)
(110)
(331)
16
(396)
1,467
2019
4,573
(370)
(53)
-
(317)
42
4,245
∆ (%)
(50)
(15)
(108)
n.a.
n.m.
n.m.
(65)
The disclosure of Special items is considered appropriate in
order to facilitate the analysis of the ordinary business
performance. To reflect comparable figures, certain items
affecting the result are added back or deducted. They are
being disclosed separately. These items can be divided into
three categories: personnel and restructuring, unscheduled
depreciation and write-ups and other.
Furthermore, to enable effective performance management
in an environment of volatile prices and comparability with
peers, the Current Cost of Supply (CCS) effect is
eliminated from the result. The CCS effect, also called
inventory holding gains or losses, represents the difference
between the cost of sales calculated using the current cost
of supply and the cost of sales calculated using the weighted
average method after adjusting for any changes in valuation
allowances, in case the net realizable value of the inventory
is lower than its cost. In volatile energy markets,
measurement of the costs of petroleum products sold based
on historical values (e.g. weighted average cost) can have a
distorting effect on the reported results. This performance
measurement enhances the transparency of the results and
is commonly used in the oil industry. OMV Petrom,
therefore, published this measurement in addition to the
Operating Result determined according to IFRS.
Notes to the income statement
Summarized consolidated income statement (RON mn)
Sales revenues
Other operating income
Net income from equity-accounted investments
Total revenues and other income
Purchases (net of inventory variation)
Production and operating expenses
Production and similar taxes
Depreciation, amortization and impairment charges
Selling, distribution and administrative expenses
Exploration expenses
Other operating expenses
Operating result
Net financial result
Taxes on income
Net income
Less net income attributable to non-controlling interests
Net income attributable to stockholders of the parent
42
Directors’ report
2020
19,717
429
4
20,150
(8,210)
(3,489)
(873)
(2,996)
(1,952)
(814)
(348)
1,467
12
(188)
1,291
0.05
1,291
2019
25,485
259
7
25,752
(10,681)
(3,470)
(1,187)
(3,507)
(2,140)
(238)
(284)
4,245
32
(642)
3,635
0.09
3,635
∆ (%)
(23)
66
(39)
(22)
23
(1)
26
15
9
(243)
(23)
(65)
(63)
71
(64)
(44)
(64)
OMV Petrom Annual Report 2020 Report of the governing bodies
OMV Petrom is an integrated oil and gas company. The
hydrocarbons produced by the Upstream segment are
processed and marketed mainly by the Downstream
segment. Compared to 2019, consolidated sales revenues
decreased by 23% to RON 19,717 mn, following negative
evolution of the commodity prices and lower sales volumes
for petroleum products and electricity. After the elimination of
intra-group transactions of RON 5,852 mn, the contribution
of the Upstream segment representing sales to third parties
was RON 310 mn or about 2% of the Group’s total sales
revenues (2019: RON 481 mn). Sales to external customers
in the Downstream Oil segment amounted to RON 13,565
mn or 69% of total consolidated sales (2019: RON 18,237
mn). After elimination of intra-group sales, the Downstream
Gas segment’s contribution was RON 5,812 mn or
approximately 29% of total sales (2019: RON 6,737 mn).
Sales to external customers are split by geographical areas
on the basis of where the risks and benefits are transferred
to the customer. Romania and Central and Eastern Europe
represent the Group’s most important geographical
markets. Sales in Romania were in an amount of RON
17,067 mn or 87% of the Group’s total sales (2019: RON
21,566 mn, 85% of total sales) and sales in the rest of
Central and Eastern Europe were RON 2,627 mn or 13% of
Group sales (2019: RON 3,849 mn).
Other operating income increased to RON 429 mn RON
(2019: RON 259 mn) mainly due to sale of CO2 certificates
in Downstream Oil.
Purchases (net of inventory variation) which include costs
of goods and materials employed amounted to
RON 8,210 mn and decreased by 23% yoy mainly as a
result of lower purchases of petroleum products from third
parties, as well as lower quantities of crude oil processed in
the Petrobrazi refinery, partially offshet by higher expenses
with natural gas.
Production and operating expenses were stable at
RON 3,489 mn (2019: RON 3,470 mn).
Exploration expenses increased to RON 814 mn (2019:
RON 238 mn), mainly due to write-off of exploration wells
slightly counterbalanced by lower seismic acquisition
expenses.
Other operating expenses increased by 23% to
RON 348 mn, compared to the 2019 value of RON 284 mn.
The net financial result slightly decreased to RON 12 mn in
2020 (2019: RON 32 mn).
Taxes on income were in the amount of RON (188) mn
(2019: RON (642) mn), mainly driven by the lower profit
generated during 2020.
Directors’ report
43
OMV Petrom Annual Report 2020 Report of the governing bodies
Capital expenditure (CAPEX)
OMV Petrom Group Capital expenditure (RON mn)
Upstream
Downstream
thereof Downstream Oil
thereof Downstream Gas
Corporate and Others
Total capital expenditure
+/- Other adjustments1
- Investments in financial assets
Additions according to statement of non-current assets (intangible and
tangible assets)
+/- Non-cash changes2
Cash outflow due to investments in intangible and tangible assets
+ Net inflow in relation to sale/investment in subsidiaries, non-current assets
and other financial assets
Net cash used for investing activities
2020
2,382
802
793
9
23
3,206
547
-
3,753
(308)
3,445
(282)
3,163
2019
3,269
903
818
85
53
4,225
589
(0)
4,814
(879)
3,935
(379)
3,556
∆ (%)
(27)
(11)
(3)
(90)
(56)
(24)
(7)
n.a.
(22)
65
(12)
26
(11)
1 Capital expenditure is adjusted for capitalized decommissioning costs, exploration wells that have not found proved reserves and other additions which by definition are not considered
as capital expenditures;
2 Additions are adjusted for items that did not affect cash flows during the period (including acquisitions through leasing, reassessment of decommissioning provisions) and changes of
liabilities for investments.
Capital expenditure decreased by 24% to RON 3,206 mn
(2019: RON 4,225 mn).
Investments in Upstream declined by 27% to
RON 2,382 mn and represented 74% of total Group CAPEX
for 2020. The decline was mainly due to lower development
drilling and exploration activities as a response to the curent
environment, and the recognition in 2019 of assets under
IFRS 16 “Leases” for a long-term contract.
Exploration expenditures decreased to RON 195 mn
(2019: RON 427 mn) due to less onshore drilling activities
and less seismic acquisition.
Downstream investments amounted to RON 802 mn (2019:
RON 903 mn), thereof RON 793 mn in Downstream Oil
(2019: RON 818 mn) and RON 9 mn in Downstream Gas
(2019: RON 85 mn). In Downstream Oil, investments were
performed mostly at Petrobrazi refinery – continuing the
investments to increase the bio-blending capacity, securing
long-term logistic access through railway lines,
modernization and automation projects in the tank farm area
and various works performed in the context of the refinery
planned shutdown. In 2019, most amounts were routed to
retail, to a new terminal in Serbia, as well as to the
completion of the closed blowdown system at the Coker unit
and for the upgrade of unloading and storage facilities for
bio-blending components at the Petrobrazi refinery.
44
Directors’ report
OMV Petrom Annual Report 2020 Report of the governing bodies
Statement of financial position
Summarized consolidated statement of financial position (RON mn)
2020
2019
Assets
Non-current assets
Intangible assets and property, plant and equipment
Investments in associated companies
Other non-current assets
Deferred tax assets
Current assets (incl.Assets held for sale)
Inventories
Trade receivables
Assets held for sale
Other current assets
Total assets
Equity and liabilities
Total equity
Non-current liabilities
Provisions for pensions and similar obligations
Interest-bearing debts
Provisions for decommissioning and restoration obligations
Provisions and other liabilities
Deferred tax liabilities
Current liabilities (incl. Liabilities associated with assets held for sale)
Trade payables
Interest-bearing debts
Liabilities associated with assets held for sale
Provisions and other liabilities
Total equity and liabilities
34,505
30,614
32
2,326
1,534
13,115
2,103
1,258
861
8,894
34,933
31,077
27
2,338
1,491
12,563
2,464
1,892
217
7,989
47,621
47,495
33,071
8,844
214
109
7,272
1,249
-
5,706
2,859
175
413
2,259
47,621
33,501
8,197
241
198
6,456
1,282
21
5,797
3,372
132
224
2,068
47,495
%
(1)
(1)
18
(1)
3
4
(15)
(33)
296
11
0
(1)
8
(11)
(45)
13
(3)
n.a.
(2)
(15)
32
84
9
0
Compared to December 31, 2019, total assets slightly
increased by RON 126 mn, to RON 47,621 mn. Additions to
intangible assets and property, plant and equipment
amounted to RON 3,753 mn (2019: RON 4,814 mn).
the expected sale of the two subsidiaries in Kazakhstan,
their assets and liabilities were reclassified in Q4/20 to
assets held for sale and liabilities associated with assets
held for sale, respectively.
Compared to December 31, 2019, non-current assets
slightly decreased by RON 427 mn, to RON 34,505 mn,
mainly due to decrease in intangible assets and property,
plant and equipment. The depreciation, the net impairments
triggered by revision of price assumptions, and the
reclassification of assets to held for sale, exceeded the
additions during the period and the increase in
decommissioning asset following reassessment. In
Upstream, the net impairments triggered by revision of price
assumptions, include both write-offs of exploration
intangibles and net impairments for tangible assets, while in
Downstream Gas, the previously recorded impairments for
Brazi gas-fired power plant were fully reversed. Following
The net increase in current assets (including assets held
for sale) was mainly due to reclassification of assets to held
for sale following the expected sale of subsidiaries in
Kazakhstan. In addition, higher financial assets in relation to
margin hedges in the refinery and the increase in cash and
cash equivalents were offset by lower trade receivables due
to lower sales and by lower inventories.
The decrease in total equity by RON 430 mn was mainly as
result of dividend distribution for the fiscal year 2019, partly
offset by the net profit generated in the current period. The
Group’s equity ratio was 69% as of December 31, 2020,
compared with 71% as of December 31, 2019.
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OMV Petrom Annual Report 2020 Report of the governing bodies
As at December 31, 2020, total liabilities increased by
RON 556 mn compared to the December 31, 2019 value,
mainly due to an increase in non-current liabilities by
RON 647 mn following the reassessment of provisions for
decommissioning and restoration obligations, partially
dimished by the decrease in current liabilities (including
liabilities associated with assets held for sale) by
RON 91 mn, largely from lower trade payables following
lower acquisitions, partialy compensated by higher financial
liabilities in relation to margin hedges in the refinery.
OMV Petrom Group reached a net cash position including
leases of RON 6,486 mn as at December 31, 2020 higher
than RON 5,982 mn as at December 31, 2019.
Cash flow
Summarized consolidated cash-flow statement (RON mn)
Sources of funds
Cash flow from operating activities
Cash flow from investing activities
Free cash flow
Cash flow from financing activities
Effect of exchange rates on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
Free cash flow after dividends
2020
4,592
5,556
(3,163)
2,393
(1,921)
(4)
468
7,014
7,451
652
2019
7,059
6,803
(3,556)
3,246
(1,844)
1
1,404
5,609
7,014
1,730
In 2020, the inflow of funds from profit before tax, adjusted
for non-cash items such as depreciation and impairments,
net change of provisions and other non-monetary
adjustments, as well as net interest received and income tax
paid was RON 4,592 mn (2019: RON 7,059 mn). Changes in
net working capital generated a cash inflow of
RON 964 mn (2019: outflow of RON 256 mn). Cash flow
from operating activities decreased by RON 1,247 mn
compared to 2019, reaching RON 5,556 mn, mainly as a
result of lower commodities prices in the current market
environment.
In 2020, the cash outflow from investing activities
resulted in an outflow of RON 3,163 mn (2019:
RON 3,556 mn) mainly related to payments for investments
in intangible assets and property, plant and equipment,
largely in the Upstream segment, counterbalanced to some
extent by the partial collection of a receivable in relation to
the government grant for Brazi power plant investment.
Cash flow from financing activities reflected an outflow of
funds amounting to RON 1,921 mn (2019: RON 1,844 mn),
mainly arising from the payment of dividends of
RON 1,740 mn for the fiscal year 2019.
Free cash flow (defined as cash flow from operating
activities less cash flow from investing activities) showed an
inflow of funds of RON 2,393 mn (2019: RON 3,246 mn).
Free cash flow less dividend payments resulted in a cash
inflow of RON 652 mn (2019: RON 1,730 mn).
46
Directors’ report
OMV Petrom Annual Report 2020 Report of the governing bodies
Risk management
The main purpose of the OMV Petrom’s Enterprise-Wide
Risk Management (EWRM) process is to deliver value
through risk-based management and decision-making. OMV
Petrom is constantly enhancing the EWRM process based
on internal and external requirements. The process is
facilitated by a Group-wide IT system supporting the
established individual process steps (risk identification, risk
analysis, risk evaluation, risk treatment, reporting, and risk
review through continuous monitoring of changes to the risk
profile), guided by the ISO 31000 risk management
framework.
Risk management governance
Risk prevention is deeply integrated into the decision-making
processes of everyday business activities at every level of
our organization. The Executive Board sets, communicates,
and implements our risk management approach and
objectives throughout the Group.
To ensure that management takes risk-informed decisions,
with adequate consideration of actual and prospective
information, the Executive Board has empowered a
dedicated Risk Management function with the objective to
centrally lead and coordinate the Group’s risk management-
related processes. This department ensures that well-
defined and consistent risk management processes, tools,
and techniques are applied across the entire organization.
Risk ownership is assigned to the managers who are best
suited to oversee and manage the respective risk. OMV
Petrom’s consolidated risk profile is reported twice a year to
the Executive Board and to Supervisory Board’s Audit
Committee.
Risk management process
As mentioned, the risk management system and its
effectiveness are monitored by the Audit Committee of the
Supervisory Board via regular reports.
The risk management process is based on a
precautionary, systematic approach, aimed at timely
identification and management of risks in order to avoid a
possible negative impact on our business or reputation. We
believe that creating a risk-aware culture throughout the
organization, where everyone is conscious of the risks
related to their jobs and implements risk management
practices on a daily basis, is the most effective way to avoid
a negative impact. To this end, our comprehensive EWRM
program is driven by senior management and cascades to
every employee of the Company. It ensures greater
awareness and focus on risks that might affect the
Company’s objectives.
OMV Petrom’s EWRM system complies with the ISO 31000
Risk Management International Standard and comprises a
dedicated risk organization working under a robust internal
regulation framework with a quantitative information
technology infrastructure. Additionally, the EWRM system
actively pursues the identification, analysis, evaluation, and
mitigation of main risks in order to manage their effects on
the Company’s cash flow up to an acceptable level agreed
as per the risk appetite.
The risk management process, implemented through OMV
Petrom’s EWRM framework, combines bottom-up and top-
down processes, each employee being responsible for
managing the risks within their responsibilities. Paying
attention to every risk makes risk management a holistic
process.
The risks identified in the bottom-up risk process by
operational staff during day-to-day business management
are assessed against a mid-term time horizon of three years.
Risks are identified in the bottom-up process during day-to-
day business. Department heads are responsible for
initiating the risk analysis, which includes selection of the
appropriate risk identification techniques. These include not
only interviews, workshops, surveys and analyses of
historical losses, but also information on risks documented in
risk registers or loss data bases. Heat maps or risk matrices
are used to support the assessment process and serve to
identify probability ranges and the related consequences if
risks were to materialize.
Senior management evaluates top-down risks to provide a
strategic perspective of risks across a longer time horizon.
Permanently scanning the horizon to identify emerging risks
and having regular risk meetings, the senior management
have the full perspective on strategic risks landscape. This
enables capturing new trends and developments of the
operating environment and industry best practice, and
thereby enables the Group to achieve its long term
objectives.
Risk taxonomy
The Group considers short-, medium-, and long-term risks
per the horizons noted below:
Short-term risks – risks that may impact near-term
financial results, including those that may materialize
within the current annual reporting cycle;
Medium-term risks – risks that may materially impact our
financial results due to longer-term manifestation,
including those that may materialize over a three-year
timeframe and might impact the Mid-Term Plan;
Directors’ report
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OMV Petrom Annual Report 2020 Report of the governing bodies
Long-term risks – risks that may fundamentally impact
the viability of our long-term strategy and business
model, including those that may materialize over a ten-
year timeframe.
In terms of tools and techniques, OMV Petrom follows the
international risk management practices and uses stochastic
quantitative models to measure the potential loss associated
with the Company’s risk portfolio under a 95% confidence
level and a mid-term three-year horizon. The identified risks
are analysed depending on their nature, taking into
consideration their causes, consequences, historical trends,
volatilities, and potential cash flow impact.
As regards mid-term liquidity, the objective of OMV
Petrom’s risk management system is to secure its capacity
to deliver positive economic value added by managing the
Company’s risks and their potential cash flow impact within
the limits of the risk appetite. High potential single event
risks as well as long-term strategic risks are also identified,
evaluated, analysed, and managed consistently. For mid-
term risks, to ensure that OMV Petrom always remains
solvent and retains the necessary financial flexibility, liquidity
reserves in the form of committed credit lines are
maintained.
To assess short-term liquidity risk, the budgeted operating
and financial cash inflows and outflows throughout OMV
Petrom are monitored and analysed on a monthly basis in
order to establish the expected net change in liquidity. This
analysis provides the basis for financing decisions and
capital commitments.
The risks within OMV Petrom’s EWRM system are
organized into the following categories: market and
financial, operational, and strategic.
Market and Financial Risks
Regarding the market price risk, OMV Petrom is naturally
exposed to the price-driven volatility of cash flows generated
by production, refining, and marketing activities associated
with crude oil, oil products, gas and electricity. Market risk
has core strategic importance within OMV Petrom Group’s
risk profile and liquidity. The market price risks of OMV
Petrom commodities are closely analysed, quantified, and
evaluated. Corresponding optimization and hedging
activities are undertaken to mitigate those risks.
In terms of foreign exchange risk management, OMV
Petrom is essentially exposed to the volatility of RON
against USD and EUR. The effect of foreign exchange risk
on cash flows is regularly monitored.
Derivative financial instruments may be used for the
purposes of managing exposure to commodity price and
foreign exchange currencies upon approval from OMV
Petrom’s Executive Board in line with the Company’s risk
appetite and/or risk assessments.
Counterparty credit risk management refers to the risk that
a counterparty will default on its contractual obligations
resulting in financial loss to OMV Petrom. The Group’s
counterparty credit risks are assessed, monitored and
managed at Company level using predetermined limits for
specific countries, banks, clients, and suppliers. Based on
creditworthiness and available rating information, all
counterparties are assigned maximum permitted exposures
in terms of credit limits (amounts and maturities), and the
creditworthiness assessments and granted limits are
reviewed on a regular basis.
OMV Petrom is inherently exposed to interest rate risk due
to its financing activities. The volatility of EURIBOR and
ROBOR may trigger less or additional cash flow resources
necessary to finance the interest payments associated with
OMV Petrom’s debt. However, the risk and the mentioned
volatility are low.
Operational Risks
From an operational risk perspective, OMV Petrom is an
integrated company with a wide asset base composed
mainly of hydrocarbon production and processing plants.
The low-probability, high-impact risks associated with the
operational activity (e.g. blowouts, explosions, earthquakes,
etc.) are identified and incident scenarios are developed and
assessed for each of them. A special focus is given to
process safety risks, where OMV Petrom Group’s policy is
“Zero harm, No losses”. Where required, mitigation plans are
developed for each specific location. Besides emergency,
crisis and disaster recovery plans, OMV Petrom’s policy
regarding insurable risks is to transfer the risks via insurance
instruments. These risks are closely analysed, quantified
and monitored by the risk organization and are managed via
detailed internal procedures.
OMV Petrom’s risk management system is part of the
corporate decision-making process. Risks associated with
new major projects or important business initiatives are
assessed and communicated to management prior to the
approval decision, as part of the project evaluation process.
48
Directors’ report
OMV Petrom Annual Report 2020 Report of the governing bodies
Strategic risks
Strategic risk
Details
Political & Regulatory
Reserve replacement
Cyber threats
Global oil & gas
demand
Human capital
Technology &
Innovation
Climate change
In relation to political and regulatory risk, the Company is engaging in dialogue with various
authorities on national and regional level on topics of relevance for the industry and monitors
regulatory developments. In 2020, we saw several fiscal and regulatory initiatives put in
discussion and/or implemented. This increases legislative volatility with influence on the overall
business environment.
The natural decline of our mature oil and gas fields corroborated with a declining demand
influence the Reserve Replacement Rate (RRR). The strategy of OMV Petrom Group
considers projects intended to improve the RRR.
The Group IT infrastructure may experience a massive disruption that can lead to the loss of
access or the destruction of critical information. Therefore, this critical risk is constantly
monitored and the internal IT landscape is upgraded regularly, both proactively and reactively.
Demand in the oil and gas markets is affected by global factors, which may lead to increased
volatility in terms of both prices and volumes. Gas prices may also be impacted by various
regional developments, and their volatility also varies.
The global trends determine us to consider and change human capital strategy in order to
adapt to the market.
The developments in innovation capabilities within the energy sector lead us to increase our
efforts in developing new technologies constantly.
The OMV Petrom climate change risk management approach is addressed from both
perspectives: how climate change affects the Company and how the Company impacts the
environment. This is in line with the TCFD recommendations corroborated with the EU Non-
Financial Reporting Directive.
Directors’ report
49
OMV Petrom Annual Report 2020 Report of the governing bodies
From a long-term sustainability perspective, a strategic risk
assessment process is in place, on the one hand, to capture
the executive management’s perspective of the risk
environment across a longer-term horizon and, on the other
hand, to develop risk mitigation plans and monitor
implementation of defined actions. The strategic risks refer
to both externally and internally driven risks (oil and gas
market demand volatility, climate change, political and
regulatory framework, reserve replacement rate, human
capital, technology and innovation). An annual strategic risk
assessment ensures a robust revalidation of identified risks.
It captures new developments or provides updated
information on the operating environment and industry
trends, and thereby has a positive impact on the Company’s
ability to achieve its objectives.
Climate Change Risk Management
OMV Petrom is the first Romanian company to support the
recommendations of the Task Force on Climate-related
Financial Disclosures (TCFD). OMV Petrom is gradually
implementing these recommendations to increase
disclosure.
OMV Petrom Executive Board members discuss quarterly
the current and upcoming environmental, climate, and
energy-related policies and regulations; related
developments in the fuels and gas market; the status of
innovation projects implementation; and progress on
achieving sustainability-related targets. OMV Petrom
focuses on evaluating the potential vulnerabilities of the
Group to climate change (e.g., water scarcity, droughts,
floods, and landslides), the impact of the Group’s activities
on the environment, and the mitigation actions that will
ensure the transition to a low-carbon environment (reduction
of carbon emissions, compliance with new regulatory
requirements).
Climate change related risks and opportunities are
integrated into OMV Petrom’s EWRM process aimed at
identifying, assessing, and managing business-related risks.
The short- and medium-term risks are analysed for their
impact on the Company’s three-year financial plan. The
effects of long-term risks are evaluated based on a
qualitative analysis, considering a wider range of
uncertainty. The most substantive climate-related changes in
the oil and gas industry are expected to arise on a longer
time scale. Therefore, management pays close attention to
climate change-related long-term risks and opportunities and
takes these into account in strategic decision-making. In the
bottom-up approach, climate-change related risks are
identified using the standardized methodology of the EWRM
process.
Internal control
The Group has implemented an internal control system
which includes activities aiming at preventing or detecting
undesirable events and risks, such as fraud, errors,
damages, non-compliance, unauthorized transactions, and
misstatements in the financial reporting.
OMV Petrom’s internal control system covers all areas of
Group operations with the following goals:
Compliance with laws and internal regulations;
Reliability of financial reporting (accuracy, completeness,
and correct disclosure);
Prevention and detection of fraud and error;
Effective and efficient business operations.
OMV Petrom’s internal control system framework consists of the following elements:
Element
Internal control
environment
Assessment of
process and
compliance risks
Description
The existence of a control environment forms the basis for an effective internal control system.
Group-wide values and principles (e.g. business ethics) and organizational measures (e.g.
clear assignment of responsibility and authority, signature rules, and segregation of duties) are
defined and adhered to within this system.
Generally, all business, management and support processes are completed within the scope of
the internal control system. They are assessed to identify risky and critical activities as well as
process and compliance risk.
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OMV Petrom Annual Report 2020 Report of the governing bodies
Risk mitigation via
control activities
Control activities and measures (e.g. segregation of duties, checks, approvals, IT access
rights) are defined, implemented and performed to mitigate significant process and compliance
risks.
Related duties include the documentation of main processes and procedures containing a
description of key control activities performed.
Documentation and
information
Monitoring and audit Management and the Internal Audit department evaluate the effective implementation of the
internal control system.
OMV Petrom's successful management and operations
mean creating value for all stakeholders and require
systematically and transparently managing the Company
while applying the best corporate governance principles. To
attain this objective, OMV Petrom has implemented a
rigorous Management System.
The Management System represents the set of policies,
processes and regulations whose purpose is to manage and
control the organization in order to achieve its objectives
through optimized utilization of resources.
The Management System provides a structured framework
of processes and regulations and describes what the
company does, how it is organized, how it manages its
business and who is responsible for what. It also ensures
the continuous improvement of OMV Petrom’s
competitiveness by providing appropriate methods and tools.
The Internal Audit department assesses the effectiveness
and efficiency of the organization’s policies, procedures, and
systems which are in place to ensure: proper identification
and management of risks, reliability and integrity of
information, compliance with laws and regulations,
safeguarding of assets, economical and efficient use of
resources, and the accomplishment of established
objectives and goals.
Internal Audit carries out regular audits of individual Group
companies and informs the Audit Committee about the
results of the audits performed.
The Group has an Accounting Manual that is implemented
consistently in all Group companies to ensure the application
of uniform accounting for the same business cases. The
Group Accounting Manual is updated regularly based on
changes in International Financial Reporting Standards.
Furthermore, the organization of the Accounting and
Financial Reporting departments is set up to achieve a high-
quality financial reporting process. Roles and responsibilities
are specifically defined and a revision process – the “four-
eye principle” – is applied to ensure the correctness and
accuracy of the financial reporting process. The
establishment of Group-wide standards for the preparation
of annual and interim financial statements by means of the
Group Accounting Manual is also regulated by an internal
corporate regulation.
In accordance with Chapter 8 of the Ministry of Public
Finance Order no. 2844/2016 for approval of Accounting
Regulations according to International Financial Reporting
Standards, transposing Chapter 10 of the Accounting
Directive (2013/34/EU) of the European Parliament and of
the Council, OMV Petrom management prepared a
consolidated report on payments to governments for the
year 2020. This report will be published together with the
consolidated financial statements of OMV Petrom for the
year ended December 31, 2020.
Subsequent events
Please refer to Note 38 in the Consolidated Financial
Statements.
Outlook 2021
All the below is based on the assumption of no significant
lockdowns by year end.
For the full year 2021, OMV Petrom expects the average
Brent oil price to range between USD 50/bbl and USD
55/bbl.
We expect the refining margins to be above USD 4/bblxiv.
Also the demand for oil products and power is expected
xiv The budget is based on the assumption of around 5 USD/bbl for refining margins for 2021
Directors’ report
51
OMV Petrom Annual Report 2020 Report of the governing bodies
to be above the 2020 level, while the demand for gas to be
broadly similar to 2020.
At OMV Petrom Group level, we expect to generate a
positive free cash flow after dividends. CAPEX (including
capitalized exploration and appraisal and excluding
acquisitions) is currently anticipated to be around RON 2.9
bn. With regards to our Neptun Deep strategic project, we
outline that we remain keen to see it developed and we
expect the Offshore Law to be amended in the first part of
2021, as recently stated by the Romanian authorities.
Within our partnership with Auchan, we plan to open up to
100 MyAuchan stores in the upgraded Petrom-branded
filling stations.
We are focused on energy efficiency and decreasing the
emissions of our operations, thus we target to reduce
carbon intensity by 27% vs. 2010 until 2025.
In Upstream, we aim to maintain production decline at
around 5% vs. 2020, excluding portfolio optimization. We will
continue to focus on the most profitable barrels. As such, we
expect to close the transfer of 40 marginal fields to Dacian
Petroleum and the divestment of Kazakhstan assets to
Magnetic Oil Limited in H1/21. We plan investments,
excluding acquisitions, of RON 1.8 bn for drilling up to 40
new wells and sidetracks and for performing more than 700
workovers. As to exploration expenditures, the estimated
amount for 2021 is around RON 0.2 bn. The planned
activities include the drilling of up to two exploration
commitment wells, a new large onshore 3D seismic
campaign, seismic data processing towards maturing future
drilling candidates in Bulgaria and preparations for an
offshore seismic data acquisition campaign in Georgia. As
part of our regional expansion endeavors, in addition to the
activities mentioned above in Bulgaria, we signed the
Production Sharing Contract for the Georgian Offshore
Exploration Block II in March 2021. As an operator, OMV
Petrom will establish an operating company in Georgia,
proceed with geoscientific and environmental studies in
2021 and prepare for a large offshore 3D seismic campaign
in 2022, which will allow for a detailed evaluation of this
block’s potential.
In Downstream Oil, the refinery utilization rate is expected
to be above 95%, while the total refined product sales are
forecasted to be higher compared to 2020.
In Downstream Gas, we expect lower gas sales volumes, in
part due to regulatory requirements in 2020, and the net
electrical output to be higher vs. 2020. Also, a planned
shutdown of the Brazi power plant is scheduled in Q2/21.
Non-financial declaration
As per the legal requirements with reference to the
disclosure of non-financial information, the Company
prepares and publishes a separate Sustainability Report,
which includes the information required for the non-financial
declaration, describing our sustainability initiatives. OMV
Petrom’s Sustainability Report for 2020 will be published by
May 31, 2021.
52
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OMV Petrom Annual Report 2020 Report of the governing bodies
Corporate governance report
The Company has always conferred great importance upon
the principles of good corporate governance considering
corporate governance a key element underpinning the
sustainable growth of the business and also the
enhancement of long-term value for shareholders.
To remain competitive in a changing world, OMV Petrom
constantly develops and updates its corporate governance
practices, so that it can meet new demands and future
opportunities.
Since 2007, the Company has been governed in a two-tier
system in which the Executive Board manages the daily
business and operations of the Company, whereas the
Supervisory Board monitors, supervises and controls the
activity of the Executive Board. The powers and duties of the
above-mentioned bodies are stated in the Company’s
Articles of Association, available on the website
(www.omvpetrom.com) and in the relevant internal
regulations and are briefly detailed herein.
The Company is managed in an atmosphere of openness
between the Executive Board and Supervisory Board, as
well as within each of these corporate bodies. A transparent
decision-making process, relying on clear and objective
rules, enhances shareholders’ confidence in the Company
and its management. It also contributes to the protection of
shareholders’ rights, improving the overall performance of
the Company and providing better access to capital and risk
mitigation.
The members of the Executive Board and Supervisory
Board have always paid due attention to their duty of care
and loyalty. Hence, the Executive Board and Supervisory
Board have passed their resolutions as required for the
welfare of the Company, primarily in consideration of the
interests of shareholders and employees.
Bucharest Stock Exchange Corporate Governance Code
The Company first adhered to the Corporate Governance
Code issued by the Bucharest Stock Exchange in 2010 and
has continued to apply its principles, ever since then.
OMV Petrom complies with almost all of the provisions set
forth in the Corporate Governance Code issued by the
Bucharest Stock Exchange that entered into force on
January 4, 2016. More details on the Company’s compliance
status with the principles and recommendations stipulated
under the Corporate Governance Code issued by the
Bucharest Stock Exchange are presented in the corporate
governance statement, which is a part of this Annual Report.
General Meeting of Shareholders (GMS)
GMS organization
The GMS is the highest deliberation and decision forum of a
company. The main rules and procedures of the GMS are
laid down in the Company’s Articles of Association and in
the Rules and Procedures of the GMS, both published on
the Company’s corporate website, as well as in the relevant
GMS convening notice.
The GMS is convened by the Executive Board whenever this
is necessary. In exceptional cases, when the Company’s
interest requires it, the Supervisory Board may also convene
the GMS. At least 30 days before the GMS, the convening
notice is published in the Official Gazette and in one widely-
distributed newspaper in Romania and disseminated to the
Financial Supervisory Authority and Bucharest and London
Stock Exchanges. At the same time, the convening notice
will be also made available on the Company’s website,
together with all explanatory and supporting documents
related to items included on the relevant GMS agenda.
The GMS is usually chaired by the President of the
Supervisory Board, who may designate another person to
chair the meeting. The chairman of the GMS designates two
or more technical secretaries to verify the fulfillment of the
formalities required by law for carrying out the GMS and for
drafting the minutes thereof.
At the first convening, the quorum requirements are met if
the shareholders representing more than half of the share
capital of the Company are present, with decisions being
validly passed with the affirmative vote of shareholders
representing the majority of share capital of the Company.
The same rules apply both to the Ordinary and Extraordinary
GMS. The Ordinary GMS held at the second convening may
validly decide on the issues included on the agenda of the
first scheduled meeting, irrespective of the number of
attending shareholders, by the majority of the votes
expressed in such a meeting. For the Extraordinary GMS
held at the second convening, the quorum and majority
requirements are the same as for the first convening. Where
the mandatory legal provisions set out otherwise, the
quorum and majority requirements shall be carried out in
accordance with such legal provisions.
In observance of capital market regulations, the resolutions
of the GMS are disseminated to the Bucharest and London
Stock Exchanges and the Financial Supervisory Authority
within 24 hours after the event. The resolutions will also be
published on the Company’s website.
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OMV Petrom Annual Report 2020 Report of the governing bodies
The Company actively promotes the participation of its
shareholders in the GMS. The shareholders duly registered
in the shareholders’ register at the reference date may
attend the GMS in person or by representation, based on a
general or special proxy. Shareholders may also vote by
correspondence, prior to the GMS. The Company makes
available at the headquarters and/ or on the Company’s
website templates of such proxies and voting bulletins for
votes by correspondence.
The shareholders of the Company, regardless of their
participation held in the share capital, may raise questions in
writing or verbally regarding the items on the agenda of the
GMS. To protect the interests of our shareholders, the
answers to the questions shall be provided by observing the
regulations applicable to special regime information (e.g.
classified information), as well as of disclosure of
commercially sensitive information that could result in losses
or a competitive disadvantage for the Company.
GMS main duties and powers
The main duties of the Ordinary GMS are:
to discuss, approve or modify the annual financial
statements;
to distribute the profit and establish the dividends;
to elect and revoke the members of the Supervisory
Board and the financial auditor;
to establish the remuneration of the members of the
Supervisory Board and of the financial auditor;
to assess the activity of the Executive Board members
and of the Supervisory Board members, to evaluate their
performance and to discharge them of their liability in
accordance with the provisions of law;
to approve the income and expenditure budget for the
next financial year.
The Extraordinary GMS is entitled to decide mainly upon:
changing the corporate form or the business object of the
Company;
increasing or reducing the share capital of the Company;
spin-offs or mergers with other companies;
early dissolution of the Company;
converting shares from one class into another;
amendments to the Articles of Association.
Shareholders’ rights
Rights of the Company’s minority shareholders are
adequately protected according to relevant legislation.
Shareholders have, among other rights provided under the
Company’s Articles of Association and the laws and
regulations currently in force, the right to obtain information
about the activities of the Company, regarding the exercise
of voting rights and the voting results in the GMS.
In addition, shareholders have the right to participate and
vote in the GMS, as well as to receive dividends. OMV
Petrom observes the one share, one vote, one dividend
principle. There are no shares with multiple voting rights,
preferential voting rights or maximum voting rights or other
voting right restrictions such as non-voting shares without
preference, priority shares, golden shares and other voting
rights ceilings
Moreover, shareholders have the right to challenge the
decisions of GMS or withdraw from the Company and
request the Company acquire their shares, in certain
conditions mentioned by the law. Likewise, as per the
applicable legislation, one or more shareholders holding,
individually or jointly, at least 5% of the share capital, may
request the calling of a GMS. Such shareholders also have
the right to add new items to the agenda of a GMS, provided
such proposals are accompanied by a justification or a draft
resolution proposed for approval and copies of the
identification documents of the shareholders who make the
proposals.
Rights of GDR holders
As endorsed on each GDR certificate, GDR holders have
the rights set out in the terms and conditions of the GDRs.
These include the right to:
withdraw the deposited shares;
receive payment in US dollars from the GDR depositary
of an amount equal to cash dividends or other cash
distributions received by the GDR depositary from the
Company in respect of the deposited shares, net of any
applicable fees, charges and expenses of the depositary
and any taxes withheld;
receive from the GDR depositary additional GDRs
representing additional shares received by the GDR
depositary from the Company by way of free distribution
(or if the issue of additional GDRs is deemed by the GDR
depositary not to be reasonably practicable or to be
unlawful, the net proceeds in US dollars of the sale of
such additional shares);
request the GDR depositary to exercise subscription or
similar rights made available by the Company to
shareholders (or if such process is deemed by the GDR
depositary not to be lawful and reasonably practicable,
the right to receive the net proceeds in US dollars of the
sale of the relevant rights or the sale of the assets
resulting from the exercise of such rights);
instruct the GDR depositary regarding the exercise of
any voting rights notified by the Company to the GDR
depositary subject to certain conditions;
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OMV Petrom Annual Report 2020 Report of the governing bodies
receive from the GDR depositary copies received by the
GDR depositary of notices provided by the Company to
shareholders or other material information.
Supervisory Board
Supervisory Board members
The Supervisory Board consists of nine members who were
appointed by the Ordinary GMS, in accordance with the
provisions of Company Law and the Articles of Association.
The Supervisory Board’s current mandate started in 2017
and will end on April 28, 2021.
Thomas Gangl (1971)
Thomas Gangl graduated in chemical engineering from
Vienna University of Technology and also in mechanical
engineering from the University of Salford (Manchester). He
started his career with OMV in 1998 as process engineer
within the Schwechat Refinery, where he held various
management positions over the years. Since 2016, Thomas
Gangl has been Senior Vice President Business Unit
Refining & Petrochemicals, being responsible for all three
OMV refineries. As of July 1, 2019, Thomas Gangl is
Member of the Executive Board of OMV Aktiengesellschaft,
responsible for Refining & Petrochemical Operations.
Herein below is the composition of the Supervisory Board at
the end of 2020:
Thomas Gangl was appointed as member of OMV Petrom
Supervisory Board as of July 1, 2019.
Rainer Seele (1960) – President
After completing his studies at the University of Göttingen,
where he obtained a doctorate in Chemistry, Rainer Seele
joined BASF Aktiengesellschaft, initially as a research
scientist. After working in several different functions between
1987 and 1996, he was appointed Head of Group Chemical
Research and Head of Planning and Controlling at the
research division of BASF Aktiengesellschaft. In 1996 he
became Head of Strategic Planning at Wintershall AG in
Kassel and in 2000 he became a member of the Executive
Board at WINGAS GmbH.In 2002, Rainer Seele was also
appointed Chairman of the Board of Executive Directors of
WINGAS GmbH, and in 2009, he became Chairman of the
Wintershall Board. Starting July 1, 2015, Rainer Seele has
been CEO and Chairman of the OMV Aktiengesellschaft
Executive Board.
Rainer Seele was appointed as member of OMV Petrom
Supervisory Board as of 7 July 2015.
Reinhard Florey (1965) – Deputy President
Reinhard Florey graduated with a degree in Mechanical
Engineering and Economics from Graz University of
Technology while also completing his music studies at the
Graz University of Fine Arts. He then started his career in
corporate and strategy consulting. Until 2002, he worked for
McKinsey & Company, Austria, and from 2002 to 2012 he
occupied different management positions worldwide for
Thyssen Krupp AG. In January 2013, Reinhard Florey joined
Outokumpu OYJ, Finland, first as Executive Vice President
Strategy and Integration, and, starting November 2013, as
CFO and Deputy CEO. Since July 1, 2016, Reinhard Florey
has been the CFO of OMV Aktiengesellschaft.
Reinhard Florey was appointed as member of OMV Petrom
Supervisory Board as of 1 August 2016.
Johann Pleininger (1962)
Johann Pleininger studied mechanical and economic
engineering and began his career at OMV in 1977. From
2007 to 2013 he was Executive Board member responsible
for Exploration & Production at OMV Petrom. Afterwards, he
has been the Senior Vice President responsible for the core
Upstream countries Romania, Austria, as well as the
development of the Black Sea Region. Since September 1,
2015 he has been a member of the OMV Executive Board
and is responsible for Upstream (Exploration & Production).
As of July 1, 2017 Mr. Pleininger was appointed also Deputy
Chairman of the OMV Executive Board.
Johann Pleininger was appointed as member of OMV
Petrom Supervisory Board as of August 10, 2019.
Daniel Turnheim (1975)
Daniel Turnheim studied Business Administration at the
Vienna University of Economics and Business
Administration. In 2002, he joined OMV Group where he
held several management positions. He was Executive
Board member and CFO of OMV Petrom between January
2011 and December 2012. From January 2013 to June
2016, he was Senior Vice President of Corporate Finance
within the OMV Aktiengesellschaft. Since July 2016 he has
held the position as Senior Vice-President of Corporate
Finance & Controlling within the OMV Aktiengesellschaft.
Daniel Turnheim was appointed as member of OMV Petrom
Supervisory Board as of 1 January 2017.
Niculae Havrileţ (1956)
Niculae Havrileț graduated the Technical University Cluj
Napoca, Faculty of Mechanical Engineering – Technologies.
Niculae Havrileț has 40 years of experience in electricity field
and natural gas, including over 25 years of experience in
various leading positions. Moreover, Niculae Havrileț holds
Corporate governance report
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OMV Petrom Annual Report 2020 Report of the governing bodies
large experience in central public administration. From June
2012 to October 2017, he has been the President of the
National Energy Regulatory Authority (ANRE), including
member of the Regulatory Authorities Council within the
Agency for the Cooperation of Energy Regulators (ACER)
and member of the General Meeting of the Council of
European Energy Regulators (CEER). From February 2018
to November 2019 he acted as a personal advisor to the
Minister of Energy for issuing the National Energy Strategy
for 2016-2030 up to 2050. As of December 2019, Niculae
Havrileț is state secretary within the Ministry of Economy. In
2000, he has received the “Order of the Star of Romania”
Knight.
Niculae Havrileţ was appointed as member of OMV Petrom
Supervisory Board starting March 3, 2020.
Radu-Spiridon Cojocaru (1947) – independent xv
Radu-Spiridon Cojocaru graduated from the Faculty of
Applied Electronics, at the Politehnic Institute of Bucharest.
He is a founding member of the National Association for
Securities Market Development, contributing from his
position as member of the Board of Directors to the
establishment of specific institutions such as the Natonal
Securities Commission (currently the Financial Supervisory
Authority), Bucharest Stock Exchange, Central Depositary,
RASDAQ (Romanian Association of Securities Dealers
Automated Quotation).
Starting 1990, he held various positions within the
management structures of some Romanian companies. He
also held the position of Member of the Chamber of
Deputies within the Romanian Parliament between 1996 and
2000, and was a member of the Commission for Economic
Policies, Reform and Privatization where he contributed to
the framing of the legislation in the field, including the
budget, and to the supervision of some public bodies under
the control of Parliament. He was a member of the
presidential commission for the Romania’s Country Program
between 2016 and 2018. Between 2018-2019, he was
member of the National Committee for Substantiation of the
National Euro Changeover Plan.
Institute of Technology. He has spent more than 40 years
working in emerging markets all over the world. He joined
Franklin Templeton in 1987 as president of Templeton
Emerging Markets Fund, Inc. In 1999, he was appointed
joint chairman of the Global Corporate Governance Forum
Investor Responsibility Taskforce of the World Bank and
Organization for Economic Cooperation and Development.
Mark Mobius was the Executive Chairman of Templeton
Emerging Markets Group, which directed the analysts of
Franklin Templeton's 18 emerging market offices and
managed the emerging markets’ portfolios. After his
departure from Franklin Templeton in January 2018, Mark
Mobius established a new firm Mobius Capital Partners LLP,
as a Co-Founder in March 2018.
Mark Mobius was appointed as member of OMV Petrom
Supervisory Board as of 29 April 2010.
Jochen Weise (1956) – independent xv
Jochen Weise graduated in Law from the University of from
Universities of Bochum and Bonn, Germany, where he also
received his PhD. He has held non-executive positions as a
Supervisory Board member of the Verbundnetzgas AG in
Leipzig, Germany since December 2014 and as Senior
Advisor Energy Infrastructure Investments to Allianz Capital
Partners in London since November 2010. Previously, he
was member of the Management Board, between April 2004
and August 2010, Executive Vice President Gas Supply &
Trading, between January 2003 to March 2004, at E.ON
Ruhrgas AG, and Director Commercial Sales at Deutsche
Shell GmbH, between April 1998 and December 2001.
Jochen Weise was appointed as member of OMV Petrom
Supervisory Board as of 1 November 2016.
Main duties and powers of the Supervisory Board
The Supervisory Board has the following main powers:
to exercise control over the management of the
Company by the Executive Board;
to appoint and revoke the members of the Executive
Board;
to submit to the GMS a report concerning the supervision
Radu-Spiridon Cojocaru was appointed as member of OMV
Petrom Supervisory Board as of 28 April 2017.
activity undertaken;
to verify the reports of the members of the Executive
Joseph Bernhard Mark Mobius (1936) – independent xv
Mark Mobius earned a bachelor's and master's degrees from
Boston University and a Doctor of Philosophy (Ph. D) in
Economics and Political Science from the Massachusetts
Board;
to verify the Company’s annual separate and
consolidated financial statements;
xv Independent member as per the criteria of the Bucharest Stock Exchange Corporate Governance Code, criteria which are substantially similar to those provided by Company Law.
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OMV Petrom Annual Report 2020 Report of the governing bodies
to propose to the GMS the appointment and the
revocation of the independent financial auditor, as well
as the minimum term of the audit contract.
Details on the Supervisory Board works and activities in
2020, as well as the results of the Supervisory Board self-
evaluation are included in the Supervisory Board Report.
Supervisory Board functioning
The responsibilities of the members of the Supervisory
Board, as well as the working procedures and the approach
to conflicts of interest are governed by relevant internal
regulations.
The Supervisory Board meets whenever necessary, but at
least once every three months. The Supervisory Board may
hold meetings in person or by telephone or video
conference. At least five of the Supervisory Board members
must be present for resolutions to be validly passed. The
decisions of the Supervisory Board shall be validly passed
by the affirmative vote of the majority of the members
present or represented at such Supervisory Board meeting.
In the event of parity of votes, the President of the
Supervisory Board or the person empowered by him/her to
chair the meeting shall have a casting vote. In urgent cases,
the Supervisory Board may take decisions by circulation,
without an actual meeting being held, by the majority of
votes. The President shall decide on whether issues are of
an urgent nature.
Special committees
The Supervisory Board may assign particular issues to
certain Supervisory Board members, acting individually or as
part of special committees, and may also refer to experts to
analyze certain issues. The task of the committees is to
issue recommendations for preparing resolutions to be
passed by the Supervisory Board itself, without preventing
the entire Supervisory Board from dealing with matters
assigned to the committees. The special committees
established at the level of the Supervisory Board are the
Audit Committee and the Presidential and Nomination
Committee.
Audit Committee
The Audit Committee is composed of four members
appointed by decision of the Supervisory Board from among
its members.
During 2020, there was only one change in the membership
of the Audit Committee. Following Sevil Shhaideh’s
revocation as of 3 March 2020 as a member of the
Supervisory Board (and consequently the cease of the
position in the Audit Committee) and the appointment of
Niculae Havrileţ as member of the Supervisory Board as of 3
March 2020, Niculae Havrileţ was also appointed as
member of the Audit Commitee as of 13 March 2020 and
until the expiration of the mandate of the current Supervisory
Board, namely until 28 April, 2021.
Therefore, at the end of 2020 as well as at the date of this
report, following this change in the Supervisory Board
membership, the Audit Commitee has the following
composition: Jochen Weise (President - independent),
Reinhard Florey (Deputy President), Niculae Havrileţ
(member) and Radu-Spiridon Cojocaru (member -
independent).
The Audit Committee’s members have adequate
qualifications relevant to the functions and responsibilities of
the Audit Committee. In addition, one member has also the
necessary financial, auditing and accounting expertise.
Main duties and powers of the Audit Committee
The main duties and powers of the Audit Committee
according to the Audit Committee’s Terms of Reference
focus on four main areas:
Financial reporting – to examine and review the annual
financial statements of the Company and the proposal for
the distribution of the profits before their submission to
the Supervisory Board and subsequently to the GMS for
approval; to oversee and approve the nature and level of
non-audit services provided by the independent financial
auditor to the Company, as well as the issuance of
regulations/guidelines with regard to such services;
External audit – to consider and make recommendations
to the Supervisory Board on the appointment, re-
appointment and removal of independent financial
auditors, subject to approval by the shareholders;
Internal audit, internal controls and risk management – to
undertake an annual assessment of the system of
internal control;
Compliance, conduct and conflicts of interest – to review
conflicts of interests in transactions of the Company and
its subsidiaries with related parties and examine and
review, before their submission to the Supervisory Board
for approval, related party transactions that exceed or
may be expected to exceed 5% of the Company’s net
assets with the observance of the legal provisions in
place.
Details on the Audit Committee works and activities in 2020
are included in the Supervisory Board Report.
Audit Committee functioning
The working procedures of the Audit Committee are stated
in the Audit Committee’s Terms of Reference.
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OMV Petrom Annual Report 2020 Report of the governing bodies
The Audit Committee meets on a regular basis, at least
three times per year, and on an extraordinary basis if
required. The Audit Committee’s meetings are chaired by
the President or, in his/her absence, by the Deputy or by
another member, by virtue of a mandate from the President.
The decisions of the Audit Committee shall be taken by
unanimous consensus of all members of the Audit
Committee. In case unanimous consensus cannot be
reached with respect to a specific item on the agenda, that
item will be resolved upon by the Supervisory Board without
the consultative opinion of the Audit Committee.
has the right to make recommendations concerning the
proposal of candidates for appointment in the
Supervisory Board;
deals and decides on matters concerning the
remuneration of the Executive Board members and the
content of mandate contracts with Executive Board
members;
carries out the Supervisory Board self-evaluation
and the assessment of independency of Supervisory Board
members, under the leadership of the President of the
Presidential and Nomination Committee.
In urgent cases, the Audit Committee may take decisions
also by circulation, without an actual meeting being held,
with the unanimous consensus of all members of the Audit
Committee. The President shall decide on whether issues
are of an urgent nature.
Presidential and Nomination Committee
The Presidential and Nomination Committee is composed of
four members appointed by the Supervisory Board among
its members.
During 2020, there was only one change in the membership
of the Presidential and Nomination Committee. Following
Sevil Shhaideh’s revocation as of 3 March 2020 as member
of the Supervisory Board (and consequently the cease of the
position in the Presidential and Nomination Committee) and
the appointment of Niculae Havrileţ as member of the
Supervisory Board as of 3 March 2020, Niculae Havrileţ was
also appointed as member of the Presidential and
Nomination Committee as of 13 March 2020 and until the
expiration of the mandate of the current Supervisory Board,
namely until 28 April, 2021.
Therefore, at the end of 2020 as well as at the date of this
report, following this change in the Supervisory Board
membership, the Presidential and Nomination Committee
has the following composition: Rainer Seele (President),
Johann Pleininger (Deputy President), Joseph Bernhard
Mark Mobius (member - independent) and Niculae Havrileț
(member).
Presidential and Nomination Committee functioning
The Presidential and Nomination Committee meets on a
regular basis, at least once per year, and on an
extraordinary basis if required. The Presidential and
Nomination Committee’s meetings are chaired by the
President or, in his/her absence, by the Deputy or by
another member, by virtue of a mandate from the President.
The decisions of the Presidential and Nomination
Committee shall be validly passed by the affirmative vote of
the majority of the members present or represented at the
meeting. In the event of parity of votes, the President or the
person empowered by him/her to chair the meeting shall
have a casting vote. However, the President shall endeavor
to achieve that, to the extent possible, resolutions are
passed with a consensus among its members.
In urgent cases, the Presidential and Nomination
Committee may take decisions also by circular resolution,
without an actual meeting being held, by the majority of
votes. The President shall decide on whether issues are of
an urgent nature.
Executive Board
Executive Board members
The Executive Board of the Company comprises five
members, appointed by the Supervisory Board for a
mandate of four years ending on April 17, 2023.
Main duties and powers of the Presidential and
Nomination Committee
The main role of the Presidential and Nomination Committee
is to be involved in the succession planning for the Executive
Board, having full responsibility on the selection process of
candidates for appointment in the Executive Board. In
addition, the Presidential and Nomination Committee:
At the beginning of 2020, the Executive Board was
composed of the following members: Christina Verchere
(CEO and President), Alina-Gabriela Popa (CFO and
member), Peter Rudolf Zeilinger (member in charge of
Upstream activity), Radu Sorin Cǎprǎu (member in charge of
Downstream Oil activity) and Franck Neel (member in
charge of Downstream Gas activity).
The Supervisory Board approved the appointment of
Christopher Veit as Executive Board member in charge of
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OMV Petrom Annual Report 2020 Report of the governing bodies
Upstream activity starting with October 1, 2020, following
Peter Zeilinger’s waiver of his mandate, which became
effective on September 30, 2020.
Therefore, at the end of 2020, as well as at the date of this
report, the Executive Board has the following composition:
Christina Verchere (1971)
Chief Executive Officer and President of the Executive
Board
Christina Verchere holds a Master degree in Economics
Science from the University of Aberdeen, Scotland. She
started her career in 1993 and has spent over 20 years with
an oil and gas supermajor, where she held numerous
leadership positions in the UK, the US, Canada and
Indonesia. From 2012 to 2014, she has been the Regional
President of BP Canada located in Calgary and from 2014 to
2018, she has been BP Regional President of the Asia
Pacific region, located in Jakarta, Indonesia. She was
appointed Chief Executive Officer and President of the
Executive Board of OMV Petrom as of May 1, 2018.
Alina Popa (1977)
Chief Financial Officer
Alina Popa graduated from Bucharest Academy of Economic
Studies, Faculty of Accounting and Information Systems and
is a member of Association of Chartered Certified
Accountants (ACCA) in the UK, Charter Certified
Accountants in Romania (CECCAR) and Chamber of
Financial Auditors in Romania (CAFR). She started her
career with Deloitte Audit Romania and joined OMV Petrom
in 2006 having held leadership positions in finance functions
and coordinating important cross-functional projects.
Between 2015 and 2019, she has been the General
Manager and President of the Board of Directors of OMV
Petrom Global Solutions, the Shared Service Center of OMV
Group. She was appointed Chief Financial Officer and
member of the OMV Petrom Executive Board as of April 17,
2019.
Christopher Veit (1958)
Responsible for Upstream
Christopher Veit holds a degree in Mechanical Engineering
and a Masters degree of Petroleum Engineering of the
Mining University at Leoben. He joined OMV Group in 1986
as a Production Engineer. He held various technical and
management positions in Libya, Pakistan and Austria such
as the Senior Vice President and Managing Director of OMV
Austria Exploration & Production GmbH. As of January
2016, he took over the position as Senior Vice-president of
Exploration, Development & Production within OMV
Exploration & Production GmbH. He also represented OMV
in several supervisory boards of its subsidiaries. He is
member of the advisory board of the Department Petroleum
Engineering at Mining University Leoben. He was appointed
member of the OMV Petrom Executive Board starting
October 1, 2020.
Radu-Sorin Căprău (1974)
Responsible for Downstream Oil
After graduating the Faculty of Management from the
University of Economic Studies in Braşov, Radu Căprău
started his career in the sales area, before joining OMV in
2000 as Area Manager for OMV Romania. Since then, he
held various management positions within OMV Group in
Romania and Bulgaria, being responsible for Retail, Supply
& Sales and Petrom Aviation. In 2018, he was the Head of
Crude Supply & Trading within OMV Refining & Marketing
GmbH in Vienna. He was appointed member of the OMV
Petrom Executive Board as of October 1, 2018.
Franck Albert Neel (1970)
Responsible for Downstream Gas
Franck Neel studied Energy at the University of Rouen and
received an Engineer Degree and then followed a Master of
Mechanical Engineering at Cranfield University in United
Kingdom. Later on, he earned an Executive Degree from the
London Business School. Franck Neel spent 25 years
working for the Group Engie. Thus, he started his career at
Gaz de France in the engineering department, where he
spent seven years, and then moved to the Marketing and
Sales with different functions in different countries such as
France, Czech Republic, Hungary, Netherlands, Italy and
United Kingdom before joining OMV Petrom. He was
appointed member of the OMV Petrom Executive Board as
of July 1, 2018.
Main duties and powers of the Executive Board
The main powers of the Executive Board, performed under
the supervision and control of the Supervisory Board, are:
to establish the strategy and policies regarding the
development of the Company, including the
organizational structure of the Company and the
operational divisions;
to submit annually for the approval of the GMS, within
four months after the end of the financial year, the report
regarding the business activity of the Company, the
financial statements for the previous year, as well as the
business activity and budget projects of the Company for
the current year;
to conclude legal acts on behalf of and for the account of
the Company, with observance of matters reserved to
the GMS or to the Supervisory Board;
to hire and dismiss, and to establish the duties and
responsibilities of the Company’s personnel, in line with
the Company’s overall personnel policy;
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OMV Petrom Annual Report 2020 Report of the governing bodies
to undertake all the measures necessary and useful for
the management of the Company, implied by the daily
management of each division or delegated by the GMS
or by the Supervisory Board, with the exception of those
reserved to the GMS or to the Supervisory Board through
operation of law or of the Articles of Association;
to exercise any competence delegated by the
Extraordinary GMS.
The Executive Board reports to the Supervisory Board on a
regular basis on all relevant issues concerning the course of
business, strategy implementation, the risk profile and risk
management of the Company.
Moreover, the Executive Board ensures that the provisions
of the relevant capital markets legislation are complied with
and implemented by the Company. Likewise, the Executive
Board ensures the implementation and operation of
accounting, risk management and internal controlling
systems which meet the requirements of the Company.
The members of the Executive Board have the duty to
disclose immediately to the Supervisory Board any material
personal interests they may have in transactions of the
Company as well as all other conflicts of interest.
Furthermore, they have the duty to notify other Executive
Board colleagues of such interests forthwith.
All business transactions between the Company and the
members of the Executive Board as well as persons or
companies closely related to them must be in accordance
with normal business standards and applicable corporate
regulation. Such business transactions as well as their terms
and conditions require the prior approval of the Supervisory
Board.
Executive Board functioning
The responsibilities of the Executive Board members, as
well as the working procedures and the approach to conflicts
of interest are governed by the relevant internal regulations.
The Executive Board may hold meetings in person or by
telephone or video conference. The meetings of the
Executive Board are held regularly (at least once every two
weeks, but usually every week) and whenever necessary for
the operative management of the Company’s daily business.
The Executive Board shall have a quorum if all members
were invited and if at least three members are personally
present. The Executive Board shall pass its resolutions by
simple majority of the votes cast. In the event of a tie, the
President shall have a casting vote. However, the President
shall endeavor in her/his best efforts to achieve that, to the
extent possible, resolutions are passed unanimously.
Should the nature of the situation requires it, the Executive
Board can pass a resolution by circulation based on the
written unanimous agreement, without an actual meeting
being held. The President shall assess whether such a
procedure is called for. Such a procedure may not be used
for resolutions pertaining to the annual financial statements
of the Company or its registered share capital.
In 2020, the Executive Board met 50 times, either in person
or by video conference and passed resolutions by circulation
on 8 other occasions in order to approve all matters
requiring its approval in accordance with the Articles of
Association and the Company’s internal regulations, as well
as to allow the members of the Executive Board to discuss
all significant matters concerning the Company and to inform
each other about all relevant issues of their activity.
Women’s advancement
The Company supports gender diversity and promotion of
women in management positions although acknowledges
the gender gap in the oil and gas industry.
OMV Petrom strives for diverse teams and specifically, at
management level, aims to increase female representation
in Senior Leadership roles to 30% by 2025. The Company
supports this through a number of initiatives such as
mentoring, succession planning, and specific training
addressing topics like unconscious bias.
At the end of 2020 and at the date of this report, there were
two women in OMV Petrom’s management bodies: Christina
Verchere, the CEO and President of the Executive Board
and Alina Gabriela Popa, CFO and member of the Executive
Board. Moreover, at the end of 2020, 30% of the first line
directors reporting to the Executive Board were women,
whilst the percentage of women in senior leadership roles in
total (senior vice presidents, directors, head of departments
and senior advisors) was around 28%. The proportion of
women in the OMV Petrom Group as a whole was 24% at
year end.
OMV Petrom is committed to protecting the rights,
opportunities of all employees, by promoting parity and
eliminating gender bias, by offering learning opportunities in
diversity and by making available to all employees an
Ombudsman Department to which employees may raise
work related issues, including gender related, namely the
PetrOmbudsman.
60
Corporate governance report
OMV Petrom Annual Report 2020 Report of the governing bodies
Principles of Remuneration Policy
OMV Petrom targets to occupy a strong market position with
compensation levels designed to be competitive in the
respective labour markets, ideally in reference to the oil and
gas sector, in order to attract, motivate and retain the best
qualified talents.
remuneration of EUR 4,000 for each member of the Audit
Committee (for 2019: EUR 4,000 per meeting) and an
additional gross remuneration per meeting corresponding to
a net remuneration of EUR 2,000 for each member of the
Presidential and Nomination Committee (for 2019: EUR
2,000 per meeting).
To maintain long-term competitiveness, OMV Petrom uses a
variety of reward elements to strengthen its position as an
attractive employer in the oil and gas industry. The overall
remuneration structure is specifically set up to reflect the
reward principles of the Company, while paying special
attention on fairness and transparency towards employees
and other stakeholders within and outside organization.
OMV Petrom’s remuneration principles are targeting more
than just being compliant with the legislation. The Company
places people at the core of its business, being one of the
main pillars of the Company’s success.
In line with the recent requirements regarding directors’
remuneration as per Law no. 24/2017 on issuers of financial
instruments and market operations (as amended and
supplemented by Law 158/2020), OMV Petrom prepared a
Remuneration Policy for the Executive Board and
Supervisory Board of OMV Petrom, applicable starting 2021
financial year.The Remuneration Policy was drafted by the
Presidential and Nomination Committee, in close
cooperation with independent consultants. The
Remuneration Policy proposed by the Presidential and
Nomination Committee was then approved by the
Supervisory Board and afterwards will be put to a vote at the
Ordinary GMS on 27 April 2021. Once approved by the
Ordinary GMS, the Remuneration Policy will be available in
the Corporate Governance section of our corporate website
(www.omvpetrom.com).
The Remuneration Policy is aligned with OMV Petrom’s
long-term strategy, current market practice, as well as OMV
Petrom’s shareholders’ views and interests. It follows OMV
Petrom’s core principle of pay according to performance.
The implementation of the Policy and the performance
outcomes will be set out in the annual Remuneration Report
for OMV Petrom’s Executive Board and Supervisory Board,
which will be prepared starting by reference to financial year
2021.
Remuneration of the Supervisory Board members
For 2020, the Ordinary GMS approved an annual gross
remuneration corresponding to a net remuneration for each
member of the Supervisory Board amounting to EUR 20,000
per year (for 2019: EUR 20,000 per year), an additional
gross remuneration per meeting corresponding to a net
As at December 31, 2020 and December 31, 2019, there
were no loans or advances granted by any of the Group
companies to the members of the Supervisory Board. As at
December 31, 2020 and December 31, 2019, the Group
companies did not have any obligations regarding pension
payments to former members of the Supervisory Board.
Remuneration of the Executive Board members and of
the senior management
The aggregate amount of remuneration and other benefits,
including benefits in-kind, paid in 2020 to the members of
the Executive Board and the directors reporting to Executive
Board members, collectively as a group, for their activities
performed in all capacities, amounted to RON 69.40 mn (for
2019: RON 81.51 mn).
The remuneration paid to members of the Executive Board
and to the directors reporting to the Executive Board
members aims to be at competitive levels and consists of:
fixed remuneration based on contractual arrangements
performance-related remuneration assessed against
financial and non-financial metrics (including OMV
Petrom S.A. share price evolution, HSSE and
sustainability metrics) in line with company strategy, to
align the interests of management and shareholders,
including both short- and long- term plans consisting of:
▸ performance bonus program of 1 year
▸ long term incentive as multiyear performance
plan of 3 years.
Benefits in kind (non-cash benefits) as support to
properly carry out job related activities, including accident
and liability insurance.
Remuneration of other staff
The employees of OMV Petrom are employed under local
Romanian terms and conditions and the salaries are
therefore set in RON. The employment contracts are
concluded with OMV Petrom and governed by the Romanian
law. Reflecting additional responsibilities in other OMV
Petrom Group companies, there are employees with an
additional employment contract with other entities within
OMV Petrom Group.
Corporate governance report
61
OMV Petrom Annual Report 2020 Report of the governing bodies
The remuneration of OMV Petrom employees is at
competitive levels for the relevant oil and gas industry and
includes: (i) a fixed base remuneration, paid monthly as a
net salary determined by applying to the base gross salary
the income tax quotas and social contributions, (ii) other
fixed payments, such as fixed bonuses and special
allowances according to the Collective Labour Agreement,
(iii) other statutory and non-statutory benefits, such as
private insurance, holiday indemnity / special days off and,
depending on the assigned position, a company car or car
compensation fee and (iv) short-term (quarterly and / or
annual) performance-related components. The measures/
key performance indicators used are based on financial and
non-financial metrics.
62
Corporate governance report
OMV Petrom Annual Report 2020 Report of the governing bodies
Corporate governance statement xvi
Provisions of the Bucharest
Stock Exchange Corporate
Governance Code
Section A - Responsibilities
Complies
Does not
comply or
partially
complies
Comments
A.1. All companies should have
internal regulation of the Board
which includes the terms of
reference/ responsibilities for the
Board and key management
functions of the company,
applying, among others, the
General Principles of this Section.
A.2. Provisions for the
management of conflict of interest
should be included in Board
regulation. In any event, members
of the Board should notify the
Board of any conflicts of interest
which have arisen or may arise,
and should refrain from taking part
in the discussion (including by not
being present where this does not
render the meeting non-quorate)
and from voting on the adoption of
a resolution on the issue which
gives rise to such conflict of
interest.
A.3. The Supervisory Board
should have at least five
members.
A.4. The majority of the members
of the Board should be non-
executive. Not less than two non-
executive members of the Board
of Directors or Supervisory Board
should be independent, in the
case of Premium Tier Companies.
Each member of the Supervisory
Board should submit a declaration
that he/she is independent at the
√
√
√
√
Since April 2007, OMV Petrom has been managed in a
two-tier system by an Executive Board, which manages
the daily business of the Company under the
supervision of the Supervisory Board. The Company’s
corporate governance structure and principles, as well
as the competences and responsibilities of the GMS,
the Supervisory Board and the Executive Board are laid
down in the Articles of Association, the Rules and
Procedures of the GMS, the internal rules of the
Supervisory Board and of the Executive Board, and in
other relevant internal regulations. The main
resposabilities of the Executive Board and Supervisory
Board (including its committees), as well as of the GMS
are also mentioned in the Annual Report.
The members of the Executive Board and the members
of the Supervisory Board have, by law, a duty of care
and a duty of loyalty to the Company, stated not only in
the Company’s Articles of Association, but also in other
internal regulations.
Moreover, the Company has in place internal rules on
how to deal with conflicts of interest, when such
situations occur, providing for immediate disclosure and
refraining from debates/voting on that particular matter.
The Supervisory Board consists of nine members
appointed by the Ordinary GMS, in accordance with the
provisions of Company Law and the Company’s Articles
of Association.
OMV Petrom’s governance follows a two-tier system,
with the Executive Board ensuring the management of
the Company under the control and supervision of the
Supervisory Board. The Supervisory Board comprises
nine members who are all non-executives. Therefore,
the balance between executives and non-executives is
ensured.
Upon (re)appointing each Supervisory Board member,
the Company conducts an independence evaluation
based on the independence criteria provided by the
xvi The statement summarises the main highlights of the Bucharest Stock Exchange Corporate Governance Code’s provisions. For the full text of the Code please refer to Bucharest Stock
Exchange website www.bvb.ro
Corporate governance statement
63
OMV Petrom Annual Report 2020 Report of the governing bodies
Complies
Does not
comply or
partially
complies
Comments
Provisions of the Bucharest
Stock Exchange Corporate
Governance Code
moment of his/her nomination for
election or re-election as well as
when any change in his/her status
arises, by demonstrating the
ground on which he/she is
considered independent in
character and judgment.
A.5. A Board member’s other
relatively permanent professional
commitments and engagements,
including executive and non-
executive Board positions in
companies and not-for-profit
institutions, should be disclosed to
shareholders and to potential
investors before appointment and
during his/her mandate.
A.6. Any member of the Board
should submit to the Board
information on any relationship
with a shareholder who holds
either directly or indirectly, shares
representing more than 5% of all
voting rights.
A.7. The company should appoint
a Board secretary responsible for
supporting the work of the Board.
A.8. The corporate governance
statement should inform on
whether an evaluation of the
Board has taken place under the
leadership of the chairman or the
nomination committee and, if it
has, summarize key action points
and changes resulting from it. The
√
√
√
√
64
Corporate governance statement
Corporate Governance Code (which are substantially
similar to those provided by the Company law). The
independence evaluation consists of an individual
personal assessment carried out by the relevant
Supervisory Board member and is then followed by an
external assessment to confirm the independence
resulted following such individual personal assessment,
as the case may be.
Moreover, for the purpose of preparing the Corporate
Governance Report of the Annual Report, the Company
reconfirmed with all Supervisory Board members their
independent or non-independent status as of December
31, 2020.
Following this evaluation, it resulted that at the date of
this report, three Supervisory Board members meet all
the independence criteria provided by the Corporate
Governance Code. Information on the independence
status of the members of the Supervisory Board is
included on the Company’s corporate website, within
the About Us section, Supervisory Board sub-section,
and in the Supervisory Board Report.
Information on the Supervisory Board and Executive
Board members’ permanent professional commitments
and engagements, including executive and non-
executive positions in companies and not-for-profit
institutions is included in the Supervisory Board and
Executive Board members’ CVs, available on the
Company’s corporate website, within the About Us
section, Supervisory Board and Executive Board sub-
sections.
The members of the Executive Board and the members
of the Supervisory Board have, by law, a duty of care
and a duty of loyalty to the Company, stated not only in
the Company’s Articles of Association, but also in other
internal regulations.
The Company has put in place internal rules on how to
deal with conflicts of interest.
The Company has a General Secretary, who supports
the works of both the Executive Board and Supervisory
Board.
Based on a Supervisory Board Self-Evaluation
Guideline which provides the purpose, criteria, and
frequency of such an evaluation, the Supervisory Board
undergoes a self-evaluation process on a yearly basis.
The self-evaluation is conducted under the leadership
of the President of the Presidential and Nomination
Committee.
OMV Petrom Annual Report 2020 Report of the governing bodies
Complies
Does not
comply or
partially
complies
Comments
The outcome of the Supervisory Board’s self-evaluation
for 2020 is presented in the Supervisory Board Report.
Provisions of the Bucharest
Stock Exchange Corporate
Governance Code
company should have a
policy/guidance regarding the
evaluation of the Board containing
the purpose, criteria and
frequency of the evaluation
process.
A.9. The corporate governance
statement should contain
information on the number of
meetings of the Board and the
committees during the past year,
attendance by directors (in person
and in absentia) and a report of
the Board and committees on their
activities.
A.10. The corporate governance
statement should contain
information on the precise number
of the independent members of
the Board of Directors or of the
Supervisory Board.
√
√
A.11. The Board of Premium Tier
companies should set up a
nomination committee formed of
non-executives, which will lead
the process for Board
appointments and make
recommendations to the Board.
The majority of the members of
the nomination committee should
be independent.
√
The Company’s Executive Board meetings are held
regularly (at least once every two weeks, but usually
every week), while the Supervisory Board meets
whenever necessary, but at least once every three
months. Details on the number of meetings and
attendance at the meetings of the Executive Board and
the Supervisory Board, including the Audit Committee
and the Presidential and Nomination Committee, during
2020, are included in the Supervisory Board Report and
the Corporate Governance Report.
The reports of the Supervisory Board and Executive
Board for 2020 are included in the Annual Report and
submitted for Ordinary GMS’s approval.
Following the independence evaluation of the
Supervisory Board members, as per the independence
criteria provided by the Corporate Governance Code
(which are substantially similar with those provided by
the Company Law), it resulted that, at the date of this
report, three Supervisory Board members meet all the
independence criteria stipulated by the Corporate
Governance Code.
Information on the independence status of the
members of the Supervisory Board is included on the
Company’s corporate website, within the About Us
section, Supervisory Board sub-section, and in the
Supervisory Board Report.
As stipulated in the Company’s Articles of Association
and applicable law, the Supervisory Board members
are appointed by the Ordinary GMS, based on a
transparent procedure of appointment and on the
majority of votes of the shareholders. Prior to the
Ordinary GMS, their CVs are made available for the
consultation of the shareholders. The shareholders can
supplement the candidates list for the position of
member of the Supervisory Board.
In accordance with the Company’s Articles of
Association, the Executive Board members are
appointed by decision of the Supervisory Board based
on the majority of votes. OMV Petrom’s Supervisory
Board has set up a Presidential and Nomination
Committee.
Corporate governance statement
65
OMV Petrom Annual Report 2020 Report of the governing bodies
Provisions of the Bucharest
Stock Exchange Corporate
Governance Code
Complies
Does not
comply or
partially
complies
Comments
The main role of the Presidential and Nomination
Committee is to be involved in the succession planning
for the Executive Board, having full responsibility on the
selection process of candidates for appointment in the
Executive Board. In addition, the Presidential and
Nomination Committee has the right to make
recommendations concerning the proposal of
candidates for appointment in the Supervisory Board.
The Presidential and Nomination Committee is
composed of four members appointed from among its
members. As members of the Supervisory Board, all
members of the Presidential and Nomination
Committee are therefore non-executives.
At the date of this report, one member of the
Presidential and Nomination Committee is independent
and thus, the Company is only "partially compliant" with
this provision.
OMV Petrom’s Supervisory Board has set up an Audit
Committee from among its members. The members of
the Audit Committee are therefore all non-executives.
The Audit Committee is composed of four Supervisory
Board members, out of which only two are independent
at the date of this report, the Company being thus only
“partially compliant” with this provison.
The Audit Committee includes members who have
adequate qualifications relevant to the functions and
responsibilities of the Audit Committee. In addition, one
member has also the necessary financial, auditing and
accounting expertise.
As members of the Supervisory Board, all members of
the Audit Committee, including the president of the
Audit Committee, are non-executives.
Based on the independence evaluation, it resulted that
at all times during 2020 as well as at the date of this
report, the president of the Audit Committee meets all
independence criteria provided by the Corporate
Governance Code.
Section B - Risk management and internal control system
B.1. The Board should set up an
audit committee, and at least one
member should be an
independent non-executive. The
majority of members, including the
chairman, should have proven an
adequate qualification relevant to
the functions and responsibilities
of the committee. At least one
member of the audit committee
should have proven adequate
auditing or accounting experience.
In the case of Premium Tier
companies, the audit committee
should be composed of at least
three members and the majority of
the audit committee should be
independent.
√
B.2. The audit committee should
be chaired by an independent
non-executive member.
√
B.3. Among its responsibilities, the
audit committee should undertake
√
66
Corporate governance statement
OMV Petrom Annual Report 2020 Report of the governing bodies
Complies
Does not
comply or
partially
complies
Comments
√
√
√
√
√
The main roles and functions of the Audit Committee,
as detailed in the Terms of Reference for the Audit
Committee, consist of the following:
examining and reviewing the annual separate and
consolidated financial statements and the proposal
for profit distribution;
considering and making recommendations on the
appointment, re-appointment or removal of the
independent external financial auditor, which is to
be elected by the Ordinary GMS;
undertaking an annual assessment of the internal
control system considering the effectiveness and
scope of the internal audit function, the adequacy of
risk management and internal control reports to the
Audit Committee, the responsiveness and
effectiveness of management to deal with identified
internal control failings or weaknesses and their
submission of relevant reports to the Supervisory
Board;
reviewing conflicts of interests in transactions of the
Company and its subsidiaries with related parties;
evaluating the efficiency of the internal control
system and risk management system;
monitoring the application of statutory and generally
accepted standards of internal auditing;
regularly receiving a summary of the main findings
of the audit reports, as well as other information
regarding the activities of the Internal Audit
department and evaluating the reports of the
internal audit team;
examining and reviewing, before their submission to
the Supervisory Board for approval, related party
transactions that exceed or may be expected to
exceed 5% of the Company’s net assets, in
accordance with Related Party Transactions Policy,
and observing also the legal provisions in place;
overseeing and approving the nature and level of
non-audit services provided by the independent
financial auditor to the Company, including by
issuance of regulations/guidelines regarding such
services.
The Audit Committee submits periodic reports to the
Supervisory Board on the specific subjects assigned to
it.
Corporate governance statement
67
Provisions of the Bucharest
Stock Exchange Corporate
Governance Code
an annual assessment of the
system of internal control.
B.4. The assessment should
consider the effectiveness and
scope of the internal audit
function, the adequacy of risk
management and internal control
reports to the audit committee of
the Board, management’s
responsiveness and effectiveness
in dealing with identified internal
control failings or weaknesses and
their submission of relevant
reports to the Board.
B.5. The audit committee should
review conflicts of interests in
transactions of the company and
its subsidiaries with related
parties.
B.6. The audit committee should
evaluate the efficiency of the
internal control system and risk
management system.
B.7. The audit committee should
monitor the application of statutory
and generally accepted standards
of internal auditing. The audit
committee should receive and
evaluate the reports of the internal
audit team.
B.8. Whenever the Code mentions
reviews or analyses to be
exercised by the Audit Committee,
these should be followed by
cyclical (at least annual), or ad-
hoc reports to be submitted to the
Board afterwards.
OMV Petrom Annual Report 2020 Report of the governing bodies
Provisions of the Bucharest
Stock Exchange Corporate
Governance Code
B.9. No shareholder may be given
undue preference over other
shareholders with regard to
transactions and agreements
made by the company with
shareholders and their related
parties.
B.10. The Board should adopt a
policy ensuring that any
transaction of the company with
any of the companies with which it
has close relations, that is equal
to or more than 5% of the net
assets of the company (as stated
in the latest financial report),
should be approved by the Board
following an obligatory opinion of
the audit committee and fairly
disclosed to the shareholders and
potential investors, to the extent
that such transactions fall under
the category of events subject to
disclosure requirements.
B.11. The internal audits should
be carried out by a separate
structural division (internal audit
department) within the company
or by retaining an independent
third-party entity.
B.12. To ensure the fulfillment of
the core functions of the internal
audit department, it should report
functionally to the Board via the
audit committee. For
administrative purposes and in the
scope related to the obligations of
the management to monitor and
mitigate risks, it should report
directly to the chief executive
officer.
68
Corporate governance statement
Complies
Does not
comply or
partially
complies
Comments
√
√
√
The Company applies equal treatment to all its
shareholders. According to the internal Policy on
Related Party Transactions in place within the
Company, related party transactions are considered on
their merits in accordance with the normal industry
standards, applicable laws and corporate regulations.
The Company adopted an internal Policy on Related
Party Transactions providing for the main principles of
review, approval and disclosure of related party
transactions, according to the legal provisions in place
and the Company’s statutory documents, including the
fact that related party transactions that exceed or may
be expected to exceed, either individually or jointly, an
annual value of 5% of the Company’s net assets must
be approved by the Supervisory Board following the
approval of the Executive Board and based on the
review of the Audit Committee of the respective
transaction.
OMV Petrom submits reports on significant transactions
with its related parties to the Financial Supervisory
Authority and to the Bucharest Stock Exchange. Such
disclosure reports are reviewed by the independent
financial auditor according to the relevant laws in force.
Internal audits are carried out by a separate structural
department within the Company, namely the Internal
Audit department.
√
The Internal Audit department administratively reports
to the CEO. Still, the Internal Audit department
continues to maintain some functional reporting to the
Executive Board, meaning that the Company only
“partially complies” with this provision.
Nonetheless, the Audit Committee is regularly informed
about the main internal audit findings and other
activities of the Internal Audit department. Moreover,
the Audit Committee approves the audit charter (which
stands for the terms of reference of the Internal Audit
department and which describes its purpose, authority
and responsibility) and approves the annual internal
audit plan. Therefore, in our opinion, the independence
and objectivity of the internal audit function is not
OMV Petrom Annual Report 2020 Report of the governing bodies
Provisions of the Bucharest
Stock Exchange Corporate
Governance Code
Complies
Does not
comply or
partially
complies
Comments
Section C - Fair rewards and motivation
C.1. The company should publish
a remuneration policy on its
website and include in its annual
report a remuneration statement
on the implementation of this
policy during the annual period
under review.
Any essential change of the
remuneration policy should be
published on the corporate
website in a timely fashion.
√
Section D - Building value through investors’ relations
D.1. The company should have an
Investor Relations function -
indicated, by person(s)
responsible or an organizational
unit, to the general public. In
addition to information required by
legal provisions, the company
should include on its corporate
website a dedicated Investor
Relations section, both in
Romanian and English, with all
relevant information of interest for
investors, including:
D.1.1. Principal corporate
regulations: the articles of
association, general shareholders’
meeting procedures.
D.1.2. Professional CVs of the
√
impaired by this reporting structure. Likewise, the
Internal Audit Department did not encounter, in its past
experiences, cases that could be considered as
jeopardizing its independence or objectivity due to
these functional reporting lines.
The Company is assessing how to fully comply with this
provision in the future.
During 2020, as well as at the date this report was
prepared, OMV Petrom did not have a formal
remuneration policy in place. However, a Remuneration
Policy for the Executive Board and Supervisory Board
of OMV Petrom, applicable starting 2021 financial year
was drafted by the Presidential and Nomination
Committee, then approved by the Supervisory Board
and will be put to a vote at the Ordinary GMS on 27
April 2021. The Remuneration Policy is aligned with
OMV Petrom’s long-term strategy, current market
practice, as well as OMV Petrom’s shareholders’ views
and interests. It follows OMV Petrom’s core principle of
pay granted according to performance.
Once approved by the OGMS, the Remuneration Policy
will be available on the Corporate Governance section
of our website (www.omvpetrom.com).
The implementation of the Policy and the performance
outcomes will be set out in the annual Remuneration
Report for OMV Petrom’s Executive Board and
Supervisory Board, which will be prepared starting with
financial year 2021.
The Company has a special department dedicated to
investor relations that can be contacted via e-mail at
investor.relations.petrom@petrom.com.
Likewise, OMV Petrom has a special section of the
corporate website dedicated to Investor Relations,
where the following main information/documents are
available, both in English and Romanian:
Articles of Association – in the About us section,
Corporate Governance sub-section;
Rules and Procedures of the GMS – in the About us
section, General Meeting of Shareholdes sub-
section;
Detailed professional CVs for all members of the
Executive Board and Supervisory Board – in the
About us section, Supervisory Board and Executive
Board sub-sections;
Corporate governance statement
69
OMV Petrom Annual Report 2020 Report of the governing bodies
Provisions of the Bucharest
Stock Exchange Corporate
Governance Code
Complies
Does not
comply or
partially
complies
Comments
Current reports and periodic reports – in the
Investors section, Investor News and Publications
sub-sections;
Convening notices and supporting materials for the
GMS – in the About us section, General Meeting of
shareholdes sub-section;
Financial calendar and information on other
corporate events – in the Investors section,
Financial Calendar and Events sub-sections;
Name and contact information of a person able to
provide investors with relevant information on
request – in the Investors section, Contact Investor
Relations sub-section;
Investor Presentations, Annual and Interim Reports,
Annual and Interim Financial Statements, both
separate and consolidated, including also the
independent financial auditor reports, as the case –
in the Investors section, Investor News and
Publications sub-sections.
The Company’s Dividend Policy is published on its
corporate website in the Investors section, Shares and
GDRs / Dividends sub-section as well as in the About
us section, Corporate Governance sub-section.
The Company has a Forecast Policy which is published
on its corporate website in the About us section,
Corporate Governance sub-section.
members of its governing bodies,
Board members’ other
professional commitments,
including executive and non-
executive Board positions in
companies and not-for-profit
institutions;
D.1.3. Current reports and
periodic reports (quarterly, semi-
annual and annual reports);
D.1.4. Information related to
general meetings of shareholders;
D.1.5. Information on corporate
events;
D.1.6. The name and contact data
of a person who should be able to
provide relevant information on
request;
D.1.7. Corporate presentations
(e.g. IR presentations, quarterly
results presentations etc.),
financial statements (quarterly,
semi-annual, annual), auditor
reports and annual reports.
D.2. A company should have an
annual cash distribution or
dividend policy. The annual cash
distribution or dividend policy
principles should be published on
the corporate website.
D.3. A company should have
adopted a policy with respect to
forecasts, whether they are
distributed or not. Forecasts mean
the quantified conclusions of
studies aimed at determining the
total impact of a list of factors
related to a future period (so
called assumptions): by nature,
such a task is based upon a high
level of uncertainty, with results
sometimes significantly differing
from forecasts initially presented.
The policy should provide for the
frequency, period envisaged, and
content of forecasts. Forecasts, if
published, may only be part of
annual, semi-annual or quarterly
√
√
70
Corporate governance statement
OMV Petrom Annual Report 2020 Report of the governing bodies
Complies
Does not
comply or
partially
complies
Comments
√
√
√
√
√
√
The details regarding the organization of the GMS are
mentioned in the Company’s Articles of Association and
the Rules and Procedures of the GMS, as well as
briefly stated in the Corporate Governance Report.
Likewise, OMV Petrom publishes convening notices for
every GMS which describe in detail the procedure to be
followed for the respective meeting. In this manner, the
Company ensures that the GMSs are adequately
conducted and well organized, while the shareholders’
rights are duly observed.
The independent financial auditors attend the Ordinary
GMS whereby the annual separate and consolidated
financial statements are submitted for approval.
All matters submitted for GMS approval are subject to
the Supervisory Board’s approval according to
Company’s internal rules.
Moreover, the Annual Report submitted for GMS
approval contains a brief assessment of the internal
controls and significant risk management systems.
The Rules and Procedures of the GMS provide for the
possibility for any professional, consultant, expert,
financial analyst or accredited journalists to participate
in the GMS, upon prior invitation from the President of
the Supervisory Board.
The quarterly and semi-annual financial reports include
information in both Romanian and English regarding the
key drivers influencing the change in sales, operating
profit, net profit and other relevant financial indicators,
both on quarter-on-quarter and year-on-year terms.
OMV Petrom organizes one-to-one meetings and
conference calls with financial analysts, investors,
brokers and other market specialists to present the
Corporate governance statement
71
Provisions of the Bucharest
Stock Exchange Corporate
Governance Code
reports. The forecast policy should
be published on the corporate
website.
D.4. The rules of general
meetings of shareholders should
not restrict the participation of
shareholders in general meetings
and the exercising of their rights.
Amendments of the rules should
take effect, at the earliest, as of
the next general meeting of
shareholders.
D.5. The independent financial
auditors should attend the
shareholders’ meetings when their
reports are presented there.
D.6. The Board should present to
the annual general meeting of
shareholders a brief assessment
of the internal controls and
significant risk management
system, as well as opinions on
issues subject to resolution at the
general meeting.
D.7. Any professional, consultant,
expert or financial analyst may
participate in the shareholders’
meeting upon prior invitation from
the Chairman of the Board.
Accredited journalists may also
participate in the general meeting
of shareholders, unless the
Chairman of the Board decides
otherwise.
D.8. The quarterly and semi-
annual financial reports should
include information in both
Romanian and English regarding
the key drivers influencing the
change in sales, operating profit,
net profit and other relevant
financial indicators, both on
quarter-on-quarter and year-on-
year terms.
D.9. A company should organize
at least two meetings/conference
calls with analysts and investors
OMV Petrom Annual Report 2020 Report of the governing bodies
Complies
Does not
comply or
partially
complies
Comments
Provisions of the Bucharest
Stock Exchange Corporate
Governance Code
each year. The information
presented on these occasions
should be published in the
Investor Relations section of the
company website at the time of
the meetings/conference calls.
financial elements relevant for their investment
decision.
In 2020, OMV Petrom organized four conference calls
following the publication of the quarterly results. In
addition, the Company held one-on-one and group
meetings and attended analyst and investor
conferences, which in the context of the COVID-19
pandemic, were organized mostly online. For more
details, please also see the Annual Report’s section
relating to OMV Petrom on the capital markets.
The Investor Presentations were made available at the
time of the meetings / conferences on the corporate
website, in the Investors section.
OMV Petrom conducts various activities regarding
education, social and environmental responsibility, as
well as governance, supporting the local communities in
which the Company operates. OMV Petrom
concentrates its sustainability efforts on five focus
areas: health, safety, security and environment, carbon
efficiency, innovation, employees and business
principles and social responsibility.
More details in relation thereto may be found in the
Sustainability Report for 2020, which will be issued by
the Company, in accordance with the legal
requirements regarding the disclosure of non-financial
information.
D.10. If a company supports
various forms of artistic and
cultural expression, sport
activities, educational or scientific
activities, and considers the
resulting impact on the
innovativeness and
competitiveness of the company
part of its business mission and
development strategy, it should
publish the policy guiding its
activity in this area.
√
72
Corporate governance statement
OMV Petrom Annual Report 2020 Report of the governing bodies
Declaration of the management
We confirm to the best of our knowledge that the consolidated financial statements give a true and fair view of the financial
position of the Group as of December 31, 2020, its financial performance and cash flows for the year then ended, in
accordance with applicable accounting standards, and that the Directors‘ report gives a true and fair view of the
development and performance of the business and the position of the Group, together with a description of the principal risks
and uncertainties associated with the expected development of the Group.
Bucharest, March 17, 2021
The Executive Board
Christina Verchere
Chief Executive Officer
President of the EB
Alina Popa
Chief Financial Officer
Member of the EB
Christopher Veit
Member of the EB
Upstream
Franck Neel
Member of the EB
Downstream Gas
Radu Căprău
Member of the EB
Downstream Oil
Declaration of the management
73
OMV Petrom Annual Report 2020 Report of the governing bodies
Abbreviations and definitions
ABB
ANRE
bbl
bbl/d
bcf
bcm
bn
boe, kboe
boe/d, kboe/d
BET
BSE
CAPEX
Capital employed
CCS / CCS effects /
Inventory holding gains /
(losses)
CEO
CFO
Clean CCS Operating
Result
Clean CCS net income
attributable to stockholders
Clean CCS ROACE
CV
EB
EPS
EU, EUR
EURIBOR
FP
FRD
GDP
GDR
74
Abbreviations and definitions
Accelerated Book Building
Romanian Energy Regulatory Authority
barrel(s), i.e. 159 liters
bbl per day
billion cubic feet; 1 billion standard cubic meters = 35.3147 bcf for Romania or 34.7793 bcf for
Kazakhstan
billion cubic meters
billion
barrels of oil equivalent, thousand barrels of oil equivalent
boe per day, kboe per day
a free float market capitalization weighted index reflecting the performance of the most traded
17 companies on the BSE’s regulated market
Bucharest Stock Exchange
Capital Expenditure
Equity including minorities + net debt
Current cost of supply
Inventory holding gains and losses represent the difference between the cost of sales
calculated using the current cost of supply and the cost of sales calculated using the weighted
average method after adjusting for any changes in valuation allowances, in case the net
realizable value of the inventory is lower than its cost.
In volatile energy markets, measurement of the costs of petroleum products sold based on
historical values (e.g. weighted average cost) can have distorting effect on reported results
(Operating Result, Net income etc.).
The amount disclosed as CCS effects represents the difference between the charge to the
income statement for inventory on a weighted average basis (adjusted for the change in
valuation allowances related to realizable value) and the charge based on the current cost of
supply.
The current cost of supply is calculated monthly using data from our refinery’s supply and
production systems at Downstream Oil level.
Chief Executive Officer
Chief Financial Officer
Operating Result adjusted for special items and CCS effects. Group clean CCS Operating
Result is calculated by adding the clean CCS Operating Result of Downstream Oil, the clean
Operating Result of the other segments and the reported consolidation effect adjusted for
changes in valuation allowances, in case the net realizable value of the inventory is lower than
its cost.
Net income attributable to stockholders, adjusted for the after tax effect of special items and
CCS
Clean CCS Return On Average Capital Employed = NOPAT (as a sum of current and last three
quarters) adjusted for the after tax effect of special items and CCS, divided by average Capital
Employed (on a rolling basis, as an average of last four quarters) (%)
Curriculum Vitae
Executive Board
Earnings per share = Net income attributable to stockholders divided by weighted number of
shares
European Union, euro(s)
Euro Interbank Offer Rate – the reference rate for European banks in interbank loans
denominated in EUR
Fondul Proprietatea
Field redevelopment
Gross Domestic Product
Global Depositary Receipts
OMV Petrom Annual Report 2020 Report of the governing bodies
GMS
HSSE
HU
IE
IFRS
ISO
LPG
LSE
LTIR
m, km
mn
mom
MTBF
MW; MWh
n.a.
n.m.
NAMR
Net debt/(cash)
NGL
NOPAT
OECD
OGMS
OPCOM
OPEC
Operating Result
Operating Result before
depreciation
OPEX
Q
ROACE
ROBOR
RON
RRR
S.A.
Special items
t, kt
TCFD
TOC
TP
TWh
US(A)
General Meeting of Shareholders
Health, Safety, Security and Environment
Hungary
Ireland
International Financial Reporting Standards
International Organization for Standardization
Liquefied Petroleum Gas
London Stock Exchange
Lost-time injury rate (employees and contractors). The number of lost time injuries (fatalities and
lost workday injuries) per one million hours worked.
meter(s), kilometer(s)
million
month-on-month
mean time between failures
megawatt(s); megawatt hour(s)
not applicable/not available (as the case may be)
not meaningful; the deviation is above (±) 500% or the comparison is made between values of
opposite signs
National Agency for Mineral Resources
Interest bearing debts and financial lease liabilities less liquid funds (cash and cash equivalents)
Natural Gas Liquids – it refers to condensate only
Net Operating Profit After Tax. Profit on ordinary activities after taxes plus net interest on net
borrowings, +/- result from discontinued operations, +/- tax effect of adjustments
Organisation for Economic Co-operation and Development
Ordinary general meeting of shareholders
The administrator of the Romanian electricity market
Organization of Petroleum Exporting Countries
The “Operating result” includes the former indicator EBIT (“Earnings Before Interest and Taxes”)
and the net result from equity-accounted investments
Former EBITD = Operating Result Before Interest, Taxes, Depreciation and amortization,
impairments and write-ups of fixed assets, including reversals
Operating Expenses
quarter
Return On Average Capital Employed = NOPAT (as a sum of current and last three quarters)
divided by average Capital Employed (on a rolling basis, as an average of last four quarters)
(%)
Romanian Interbank Offer Rate – the reference rate for Romanian banks in interbank loans
denominated in RON
New Romanian leu
Reserve Replacement Rate
Romanian JSC - Joint stock company (Societate pe Acţiuni)
Special items are expenses and income reflected in the financial statements that are disclosed
separately, as they are not part of underlying ordinary business operations.
They are being disclosed separately in order to enable investors to better understand and
evaluate OMV Petrom Group’s reported financial performance.
metric tonne(s), thousand tonnes; 1t of crude oil = 7.193 bbl for Romania or 7.78 bbl for
Kazakhstan
Task Force on Climate-related Financial Disclosures
Tasbulat Oil Corporation
Target Price
terawatt hour(s)
United States (of America)
Abbreviations and definitions
75
OMV Petrom Annual Report 2020 Report of the governing bodies
UK
USD
VAT
yoy
United Kingdom
United States dollar(s)
Value added tax
year-on-year
76
Abbreviations and definitions
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Translation of the Company’s consolidated financial statements issued in the Romanian language
1
OMV Petrom Annual Report 2020 Consolidated Financial Statements
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of OMV Petrom S.A.
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of OMV Petrom S.A. (“the Company”) and its subsidiaries (together
referred to as “the Group”) with official head office in 22 Coralilor Street, Petrom City, District 1, Bucharest, Romania
identified by sole fiscal registration number RO1590082, which comprise the consolidated statement of financial position as
at December 31, 2020 and the consolidated income statement, consolidated statement of comprehensive income,
consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a
summary of significant accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial
position of the Group as at December 31, 2020, and of its consolidated financial performance and its consolidated cash
flows for the year then ended in accordance with the International Financial Reporting Standards as endorsed by the
European Union.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs), Regulation (EU) No. 537/2014 of the
European Parliament and of the Council of 16 April 2014 (“Regulation (EU) No. 537/2014“) and Law 162/2017 („Law
162/2017”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of
the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with
International Code of Ethics for Professional Accountants (including International Independence Standards) as issued by the
International Ethics Standards Board for Accountants (IESBA Code) together with the ethical requirements that are relevant
to the audit of the financial statements in Romania, including Regulation (EU) No. 537/2014 and Law 162/2017 and we have
fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated financial statements of the current period. These matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion
on these matters.
For each matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the “Auditor’s responsibilities for the audit of the consolidated financial
statements” section of our report, including in relation to these matters. Accordingly, our audit included the performance of
procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The
results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our
audit opinion on the accompanying consolidated financial statements.
78
Independent auditor’s report
The English version of the audit report represents a translation of the original audit report issued in Romanian language.
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Description of each key audit matter and our procedures performed to address the matter
Key audit matter
How our audit addressed the key audit matter
Recoverability of the carrying value of property, plant
and equipment (Upstream)
As at 31 December 2020, the carrying value of the
Upstream property, plant and equipment was RON 20,218
million, after a net impairment of RON 346 million recorded
in 2020. The impairment mainly relates to oil & gas assets.
Under the International Financial Reporting Standards, an
entity is required to assess, at least at each reporting date,
whether indicators for potential impairment, or reversal of
impairment previously recorded, exist and, if they exist, an
impairment test is required.
The assessment of the recoverability of the carrying
amount of property, plant and equipment requires
judgement in assessing whether there is an indication of
impairment or reversal of a previously recognized
impairment, in determining the level at which an asset or
cash generating unit should be tested for impairment and in
measuring the recoverable amount.
An impairment assessment also involves management
estimates, the most significant relating to estimates of
future cash flows and discount rates, which are used in the
evaluation of the recoverability of property, plant and
equipment. These future cash flows from oil & gas assets
are mainly sensitive to assumptions relating to future oil
and gas prices and production volumes.
The Group’s disclosures about property, plant and
equipment and impairment adjustments are included in
Note 2 (Judgements, Estimates and Assumptions), Note 7
(Property, Plant and Equipment), Note 23 (Cost
information) and Note 28 (Segment information) to the
financial statements.
We analysed the management’s process for assessing the
recoverability of the carrying amount of property, plant and
equipment and performed procedures to evaluate the
impairment test prepared by the management.
Specifically, our work included, but was not limited to, the
following procedures:
Performed a detailed understanding of the Group’s
internal process and related documentation flow and
key controls associated with the impairment testing
process;
Assessed the determination of cash generating units;
Compared the assumptions used in the future cash flow
estimates with approved budgets and business plans;
Compared production volumes to oil and gas reserves;
Compared the future short and long-term oil and gas
prices used in the Group’s budgets to consensus
analysts’ forecasts and those adopted by other
international oil companies;
Assess the consideration of Covid-19-pandemic impact
in the cash flow estimates;
Assessed the historical accuracy of management’s
budgets and forecasts (in terms of production volumes
and operating costs) by comparing them to actual
performance and to prior year;
Checked the mathematical accuracy of management’s
cash flow model for determining the value-in-use and its
conformity with the requirements of the International
Financial Reporting Standards;
Involved our valuation specialists to assist us in the
analysis of discount rates and inflation rates;
Evaluated the management’s sensitivity analysis over
key assumptions in the future cash flow model in order
to assess the potential impact of possible changes; and
Assessed the adequacy of the Group’s disclosures in
the financial statements.
The English version of the audit report represents a translation of the original audit report issued in Romanian language.
Independent auditor’s report
79
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Key audit matter
How our audit addressed the key audit matter
We analysed the management’s process for assessing
recoverability of the Brazi gas fired power plant cash
generating unit and performed procedures to evaluate the
impairment test prepared by management.
Specifically, our work included, but was not limited to the
following procedures:
Performed a detailed understanding of the Group’s
internal process and related documentation flow and
key controls associated with the impairment testing
process;
Compared the assumptions used within the future cash
flow estimates with approved budgets and business
plans;
Corroborated with supporting evidence the main
assumptions included in the determination of value in
use;
Checked the mathematical accuracy of management’s
cash flow model for determining the value-in-use and its
conformity with the requirements of the International
Financial Reporting Standards;
Involved our valuation specialists to assist us in the
analysis of discount rates and inflation rates;
Evaluated the management’s sensitivity analysis over
key assumptions in the future cash flow model in order
to assess the potential impact of a range of possible
changes; and
Assessed the adequacy of the Group’s disclosures in
the financial statements.
Recoverability of the carrying value of Brazi gas fired
power plant
The carrying value of Brazi gas fired power plant was RON
1,346 million as at 31 December 2020, after an impairment
reversal of RON 519 million recorded in 2020.
Under the International Financial Reporting Standards, an
entity is required to assess, at least at each reporting date,
whether indicators for potential impairment, or reversal of
impairment previously recorded, exist and, if they exist, an
impairment test is required.
The assessment of the recoverability of the carrying
amount of Brazi gas fired power plant requires judgement
in assessing whether there is an indication that an asset or
a cash generating unit should be impaired or an
impairment may be reversed and in measuring any such
impairment adjustment.
An impairment assessment also involves management
estimates, the most significant relating to estimates of
future cash flows and discount rates, which are used in the
evaluation of the recoverability of the carrying value of the
Brazi gas fired power plant. These future cash flows are
mainly sensitive to assumptions regarding spark spreads
(being the differences between the electricity prices and
the gas and CO2 certificates prices) and the power quantity
produced that are affected by expected future performance
and market conditions.
The Group’s disclosures about intangible assets, property,
plant and equipment and related impairment testing are
included in Note 2 (Judgements, Estimates and
Assumptions), Note 6 (Intangible assets), Note 7 (Property,
Plant and Equipment), Note 23 (Cost information) and Note
28 (Segment information) to the financial statements.
80
Independent auditor’s report
The English version of the audit report represents a translation of the original audit report issued in Romanian language.
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Key audit matter
How our audit addressed the key audit matter
Recoverability of intangible exploration and evaluation
(E&E) assets
We evaluated management’s assessment of the carrying
value of E&E assets performed with reference to the
criteria of IFRS 6 and the Group’s accounting policy.
The carrying value of intangible E&E assets was RON
2,685 million at 31 December 2020, after write offs
(impairment) of RON 599 million recorded in 2020.
Under IFRS 6, Exploration for and Evaluation of Mineral
Resources, exploration and evaluation assets shall be
assessed for impairment when facts and circumstances
suggest that the carrying value of an exploration and
evaluation asset may exceed its recoverable amount.
The assessment of the carrying value requires
management to apply significant judgements and estimates
in assessing whether any impairment has arisen at year
end, and in quantifying any such impairment.
The key estimates and assumptions relate to
management’s intention to proceed with a future work
program for a prospect or license, the likelihood of license
renewal, and the success of drilling and geological analysis
to date.
The Group’s disclosures about intangible E&E assets and
related impairment testing are included in Note 2
(Judgements, Estimates and Assumptions), Note 6
(Intangible Assets) and Note 23 (Cost information) to the
financial statements.
Specifically, our work included, but was not limited to, the
following procedures:
Inquired whether the management has the intention to
carry out exploration and evaluation activity for the main
E&E projects, which included discussions with senior
management as to the intentions and strategy of the
Group and reviewed the Executive Board minutes of
meetings where exploration plans and strategies were
discussed;
Read Executive Board minutes of meetings and
considered whether there were negative indicators that
certain projects might be unsuccessful;
Discussed with management about the status of the
largest exploration projects;
Assessed whether the Group has the ability to finance
any planned future exploration and evaluation activity,
which included review of the Executive Board minutes
of meetings for any indications about the lack of such
ability or intention and checking that the investment
budget for the next year includes funds for main
exploration and evaluation projects;
Assessed the existence of any fields where the Group’s
right to explore is either at, or close to, expiry and
reviewed management’s assessment whether there are
any risks related to renewal of the license;
Analysed the management’s assumptions where an
exploration and evaluation asset has been impaired;
and
Assessed the adequacy of the Group’s disclosures in
the financial statements.
The English version of the audit report represents a translation of the original audit report issued in Romanian language.
Independent auditor’s report
81
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Key audit matter
How our audit addressed the key audit matter
Estimation of oil and gas reserves
Oil and gas reserves are an indicator of the future potential
of the Group’s performance. Furthermore, they have an
impact on the financial statements as they are the basis
for:
production profiles used in future cash flow estimates;
depreciation, amortization and impairment charges for
the core assets in the Upstream segment.
The estimation of oil and gas reserves requires significant
judgement and assumptions made by management and
engineers due to the technical uncertainty in assessing
quantities.
The Group’s disclosures about estimation of oil and gas
reserves are included in Note 2 (Judgements, Estimates
and Assumptions) to the financial statements.
Our procedures have focused on management’s estimation
process in the determination of oil and gas reserves.
Specifically, our work included, but was not limited to, the
following procedures:
Performed a detailed understanding of the Group’s
internal process and related documentation flow and
key controls associated with the oil and gas reserves
estimation process;
Tested controls of the oil and gas reserves review
process;
Analysed the internal certification process for technical
and commercial specialists who are responsible for oil
and gas reserves estimation;
Assessed the competence of both management internal
and external specialists and the objectivity and
independence of external specialist, to consider
whether they were appropriately qualified to carry out
the estimation of oil and gas reserves;
Analysed the report of the management’s external
specialist, on their review of Group’s estimated oil and
gas reserves (latest report as at 1 July 2018 for the
reserves as of 31 December 2017);
Tested whether significant additions or reductions in oil
and gas reserves were made in the period in which the
new information became available and in compliance
with Group’s Reserves and Resources Guidelines;
Tested that the updated oil and gas reserve estimates
were included appropriately in the Group’s
consideration of impairment and in accounting for
depreciation and amortization; and
Assessed the adequacy of the Group’s disclosures in
the financial statements.
82
Independent auditor’s report
The English version of the audit report represents a translation of the original audit report issued in Romanian language.
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Key audit matter
How our audit addressed the key audit matter
Estimation of decommissioning and restoration
provisions and environmental provisions
We assessed management’s annual estimation of
provision for decommissioning and restoration obligation
and environmental obligation.
The total decommissioning and restoration provision and
the environmental provision was RON 7,540 million and
RON 410 million respectively at 31 December 2020.
Specifically, our work included, but was not limited to, the
following procedures:
The Group’s core activities regularly lead to obligations
related to dismantling and removal, asset retirement and
soil remediation activities.
The key estimates and assumptions relate to
management’s estimates of future costs, discount rates
and inflation rates which are used to project the
decommissioning, restoration and environmental
obligations.
The Group’s disclosures about decommissioning,
restoration and environmental obligations are included in
Note 2 (Judgements, Estimates and Assumptions) and
Note 14 (Provisions) to the financial statements.
Performed a detailed understanding of the Group’s
decommissioning and restoration obligations estimation
process and the related documentation flow and the
assessment of the design and implementation of the
controls within the process;
Compared the current estimates of decommissioning,
restoration and environmental costs with the actual
costs previously incurred. Where no previous data was
available, we have reconciled cost estimates to third
party evidence or the Group’s engineers’ estimates;
Discussed with the management the estimates of
allocation over time of works to be performed for
surface and subsurface decommissioning for wells;
Inspected supporting evidence for any material
revisions in cost estimates during the year;
Involved our valuation specialists to assist us in the
analysis of discount rates and inflation rates;
Tested the mathematical accuracy of decommissioning
and restoration provision and environmental provision
calculations; and
Assessed the adequacy of the Group’s disclosures in
the financial statements.
The English version of the audit report represents a translation of the original audit report issued in Romanian language.
Independent auditor’s report
83
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Key audit matter
How our audit addressed the key audit matter
Recoverability of receivable from the Romanian State
We assessed management’s estimate regarding
recoverability of the receivable from the Romanian State.
As part of the privatization agreement, the Company is
entitled to the reimbursement by the Romanian State of
part of wells abandonment (decommissioning) and
environmental costs incurred to restore and clean up areas
pertaining to activities prior to privatization in 2004.
Consequently, the Group has recorded as receivable from
the Romanian State the corresponding estimated
decommissioning obligations having a net present value of
RON 2,152 million as at December 31, 2020 and the
environmental obligations in Downstream Oil with a total
net present value of RON 250 million.
The measurement of the receivable from the Romanian
State, requires management to make significant
judgements and estimates to address the uncertainty
around the specific expenditure that is recoverable from
Romanian State. The assessment process considers inter
alia the history of amounts claimed, documentation process
related requirements and potential litigation or arbitration
proceedings.
The Group’s disclosures about environmental and
decommissioning state receivable are included in Note 2
(Judgements, Estimates and Assumptions) and in Note 9
(Trade Receivables and Other Financial Assets) to the
financial statements.
Specifically, our work included, but was not limited to, the
following procedures:
Read the stipulations of the Annex P of the privatization
agreement dated 23 July 2004, related to the
acquisition by OMV Aktiengesellschaft of shares in the
National Petroleum Company Petrom SA, as approved
by Law no. 555/2004. Annex P includes stipulations
related to the obligation of the seller (i.e. Ministry of
Economy and Commerce) to reimburse the Company
for historical environmental losses and abandonment
costs, provided certain conditions are met;
Analysed the management’s assessment of the
recoverability of the receivable from the Romanian
State, including the history of amounts claimed vs.
amounts accepted and reimbursed, and discussed with
management about the status of the notices of claims
submitted to the Romanian State and of the Arbitration
process;
Obtained and read the independent lawyers’
assessment of the status of the Arbitration, that was
considered by the Group for the measurement of the
State Receivable;
Traced the receivables for which notices of claim have
been submitted to the respective notices of claims;
Traced the receivables for which decommissioning was
performed but the notices of claim have not yet been
submitted to the respective decommissioning costs;
Traced the receivables for which decommissioning has
not yet been performed against the respective
decommissioning provisions;
Discussed with the management estimates of timing of
collection;
Involved our valuation specialists to assist us in the
analysis of discount rates and inflation rates
Tested the mathematical accuracy of the calculation of
the net present value of the receivables recorded; and
Assessed the adequacy of the Group’s disclosures in
the financial statements.
84
Independent auditor’s report
The English version of the audit report represents a translation of the original audit report issued in Romanian language.
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Other information
Other information consists of the information included in the Group’s 2020 Annual Report which includes the Report of the
Supervisory Board, the Directors’ Report and the consolidated Report on payments to governments and also the
Sustainability report, but does not include the consolidated financial statements and our auditor’s report thereon. We
obtained the Annual report (except for the Report of the Supervisory Board), prior to the issuance of our auditor’s report, and
we expect to obtain the Report of the Supervisory Board and the Sustainability report after the issuance of our auditor’s
report. Management is responsible for the other information.
Our opinion on the consolidated financial statements does not cover the other information and we do not and will not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or
our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have
performed on the other information obtained prior to the date of the auditor’s report, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance
with the International Financial Reporting Standards as endorsed by the European Union, and for such internal control as
management determines is necessary to enable the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative
but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these consolidated financial statements.
The English version of the audit report represents a translation of the original audit report issued in Romanian language.
Independent auditor’s report
85
OMV Petrom Annual Report 2020 Consolidated Financial Statements
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism
throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal
control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt
on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to
draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the
date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going
concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within
the Group to express an opinion on the consolidated financial statements. We are responsible for the direction,
supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought
to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
matters.
Report on Other Legal and Regulatory Requirements
Reporting on Information Other than the Consolidated Financial Statements and Our Auditors’ Report Thereon
In addition to our reporting responsibilities according to ISAs described in section “Other information”, with respect to the
Director’s Report, as included in the Annual Report, we have read the Directors’ Report and report that:
a) in the Directors’ Report we have not identified information which is not consistent, in all material respects, with the
information presented in the accompanying consolidated financial statements as at December 31, 2020;
b) the Directors’ Report identified above includes, in all material respects, the required information according to the
provisions of the Ministry of Public Finance Order no. 2844/2016 approving the accounting regulations compliant with
the International Financial Reporting Standards, with all subsequent modifications and clarifications, Annex 1 points 15
– 19;
86
Independent auditor’s report
The English version of the audit report represents a translation of the original audit report issued in Romanian language.
OMV Petrom Annual Report 2020 Consolidated Financial Statements
c) based on our knowledge and understanding concerning the Group and its environment gained during our audit of the
consolidated financial statements as at December 31, 2020, we have not identified information included in the Directors’
Report that contains a material misstatement of fact.
Other requirements on content of auditor’s report in compliance with Regulation (EU) No. 537/2014 of the European
Parliament and of the Council
Appointment and Approval of Auditor
We were appointed as auditors of the Group by the General Meeting of Shareholders on April 27, 2020 to audit the
consolidated financial statements for the financial year end December 31, 2020. Total uninterrupted engagement period,
including previous renewals (extension of the period for which we were originally appointed) and reappointments for the
statutory auditor, has lasted for 10 years covering the financial periods end December 31, 2011 till December 31, 2020.
Consistency with Additional Report to the Audit Committee
Our audit opinion on the consolidated financial statements expressed herein is consistent with the additional report to the
Audit Committee of the Company, which we issued on February 3, 2021.
Provision of Non-audit Services
No prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No. 537/2014 of the European Parliament and
of the Council were provided by us to the Group and we remain independent from the Group in conducting the audit.
In addition to statutory audit services and services disclosed in the notes to the consolidated financial statements, no other
services were provided by us to the Company, and its controlled undertakings.
On behalf of,
Ernst & Young Assurance Services SRL
15-17, Ion Mihalache Blvd., floor 21, Bucharest, Romania
Registered in the electronic Public Register under No. FA77
Name of the Auditor/ Partner: Andreas Hadjidamianou
Registered in the Electronic Public Register under No. AF3357
Bucharest, Romania
17 March 2021
The English version of the audit report represents a translation of the original audit report issued in Romanian language.
Independent auditor’s report
87
OMV Petrom Annual Report 2020 Consolidated Financial Statements
OMV PETROM S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS OF DECEMBER 31, 2020
(all amounts are expressed in million RON, unless otherwise specified)
ASSETS
Intangible assets
Property, plant and equipment
Investments in associated companies
Other financial assets
Other assets
Deferred tax assets
Non-current assets
Inventories
Trade receivables
Other financial assets
Other assets
Cash and cash equivalents
Current assets
Assets held for sale
Total assets
EQUITY AND LIABILITIES
Share capital
Reserves
Stockholders’ equity
Non-controlling interests
Total equity
Provisions for pensions and similar obligations
Interest-bearing debts
Lease liabilities
Provisions for decommissioning and restoration obligations
Other provisions
Other financial liabilities
Other liabilities
Deferred tax liabilities
Non-current liabilities
Notes December 31, 2020 December 31, 2019
6
7
8
9
10
18
11
9
9
10
12
13
14
15
7, 16
14
14
16
17
18
2,811.51
27,802.20
31.68
2,092.96
233.28
1,533.74
3,132.01
27,944.72
26.94
2,122.57
215.47
1,490.93
34,505.37
34,932.64
2,102.90
1,258.13
1,213.11
229.77
7,450.64
12,254.55
860.90
47,620.82
5,664.41
27,406.22
33,070.63
0.50
2,464.45
1,891.86
486.10
489.44
7,013.54
12,345.39
217.20
47,495.23
5,664.41
27,836.45
33,500.86
0.51
33,071.13
33,501.37
213.69
108.94
543.06
7,272.42
645.12
46.87
14.09
-
240.70
197.88
572.15
6,456.08
588.87
106.82
13.89
20.91
8,844.19
8,197.30
88
Consolidated statement of financial position as of December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Trade payables
Interest-bearing debts
Lease liabilities
Income tax liabilities
Other provisions and decommissioning
Other financial liabilities
Other liabilities
Current liabilities
Liabilities associated with assets held for sale
Total equity and liabilities
Notes December 31, 2020 December 31, 2019
16
15
7, 16
14
16
17
12
2,858.64
3,372.35
175.03
137.33
43.60
516.87
802.61
758.74
5,292.82
412.68
47,620.82
132.25
128.79
205.21
623.31
372.54
738.36
5,572.81
223.75
47,495.23
These consolidated financial statements were approved on March 17, 2021.
_____________________
Christina Verchere,
Chief Executive Officer
President of the EB
_____________________
Alina Popa,
Chief Financial Officer
Member of the EB
_____________________
Christopher Veit,
Member of the EB
Upstream
_____________________
Franck Neel,
Member of the EB
Downstream Gas
_____________________
Radu Căprău,
Member of the EB
Downstream Oil
_____________________
Irina Dobre,
Vice President Finance Department
_____________________
Nicoleta Drumea,
Head of Financial Reporting
Consolidated statement of financial position as of December 31, 2020
89
OMV Petrom Annual Report 2020 Consolidated Financial Statements
OMV PETROM S.A. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2020
(all amounts are expressed in million RON, unless otherwise specified)
Sales revenues
Other operating income
Net income from investments in associates
Total revenues and other income
Purchases (net of inventory variation)
Production and operating expenses
Production and similar taxes
Depreciation, amortization, impairments and write-ups
Selling, distribution and administrative expenses
Exploration expenses
Other operating expenses
Operating result
Interest income
Interest expenses
Other financial income and expenses
Net financial result
Profit before tax
Taxes on income
Net income for the year
thereof attributable to stockholders of the parent
thereof attributable to non-controlling interests
Basic and diluted earnings per share (RON)
Notes
19, 28
20
21
23
22
28
24
24
25
26
27
2020
2019
19,716.98
25,485.47
428.95
4.47
20,150.40
(8,209.70)
(3,488.97)
(873.30)
(2,996.06)
(1,952.35)
(814.47)
(348.46)
1,467.09
337.33
(295.44)
(30.28)
11.61
1,478.70
(187.69)
1,291.01
1,290.96
0.05
0.0228
258.77
7.36
25,751.60
(10,680.68)
(3,469.59)
(1,187.33)
(3,506.70)
(2,140.17)
(237.66)
(284.41)
4,245.06
317.63
(276.98)
(8.91)
31.74
4,276.80
(642.12)
3,634.68
3,634.59
0.09
0.0642
These consolidated financial statements were approved on March 17, 2021.
_____________________
Christina Verchere,
Chief Executive Officer
President of the EB
_____________________
Alina Popa,
Chief Financial Officer
Member of the EB
_____________________
Christopher Veit,
Member of the EB
Upstream
_____________________
Franck Neel,
Member of the EB
Downstream Gas
_____________________
Radu Căprău,
Member of the EB
Downstream Oil
_____________________
Irina Dobre,
Vice President Finance Department
_____________________
Nicoleta Drumea,
Head of Financial Reporting
90
Consolidated income statement for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
OMV PETROM S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2020
(all amounts are expressed in million RON, unless otherwise specified)
Net income for the year
Exchange differences from translation of foreign operations
Gains/(losses) on hedges arising during the year
Reclassification of (gains)/losses on hedges to income statement
Total of items that may be reclassified ("recycled")
subsequently to the income statement
Remeasurement gains/(losses) on defined benefit plans
Gains/(losses) on hedges that are subsequently transferred to
the carrying amount of the hedged item
Total of items that will not be reclassified ("recycled")
subsequently to the income statement
Income tax relating to items that may be reclassified ("recycled")
subsequently to the income statement
Income tax relating to items that will not be reclassified ("recycled")
subsequently to the income statement
Total income tax relating to components of other
comprehensive income
Other comprehensive income/(loss) for the year, net of tax
Total comprehensive income for the year
thereof attributable to stockholders of the parent
thereof attributable to non-controlling interests
2020
1,291.01
(2.63)
467.80
(371.31)
93.86
(11.45)
(134.60)
2019
3,634.68
26.69
24.69
3.26
54.64
(25.61)
-
(146.05)
(25.61)
(15.07)
23.37
8.30
(43.89)
1,247.12
1,247.06
0.06
(5.10)
4.11
(0.99)
28.04
3,662.72
3,662.62
0.10
Consolidated statement of comprehensive income for the year ended December, 2020
91
OMV Petrom Annual Report 2020 Consolidated Financial Statements
OMV PETROM S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2020
(all amounts are expressed in million RON, unless otherwise specified)
Consolidated statement of changes in equity for the year ended December 31, 2020
Share
capital
Revenue
reserves
Cash flow
hedge
reserve
Foreign
currency
translation
reserve
Other
reserves
Treasury
shares
Stockholders'
equity
Non-
controlling
interests
Total
equity
5,664.41 27,736.81
27.70
(168.52)
240.48
(0.02)
33,500.86
0.51 33,501.37
-
1,290.96
-
-
-
-
(9.62)
(32.01)
(0.31)
(1.96)
-
1,281.34
(32.01)
(0.31)
(1.96)
- (1,755.96)
-
-
-
78.67
-
-
-
-
-
-
-
-
-
1,290.96
0.05
1,291.01
(43.90)
0.01
(43.89)
1,247.06
0.06
1,247.12
(1,755.96)
(0.07) (1,756.03)
78.67
-
78.67
5,664.41 27,262.19
74.36
(168.83)
238.52
(0.02)
33,070.63
0.50 33,071.13
Balance at
January 1, 2020
Net income
for the year
Other
comprehensive
income/(loss) for the
year
Total
comprehensive
income/(loss) for the
year
Dividends
distribution
Reclassification of
cash flow
hedges to balance
sheet
Balance at
December 31, 2020
Consolidated statement of changes in equity for the year ended December 31, 2019
Share
capital
Revenue
reserves
Cash flow
hedge
reserve
Foreign
currency
translation
reserve
Other
reserves
Treasury
shares
Stockholders'
equity
Non-
controlling
interests
Total
equity
Balance at
January 1, 2019
Net income
for the year
Other
comprehensive
income/(loss) for
the year
Total
comprehensive
income/(loss) for
the year
Dividends
distribution
Balance at
December 31,
2019
5,664.41 25,653.10
4.22
(191.26)
237.17
(0.02)
31,367.62
0.48
31,368.10
-
3,634.59
-
-
-
-
(21.50)
23.48
22.74
3.31
-
3,613.09
23.48
22.74
3.31
-
(1,529.38)
-
-
-
-
-
-
-
3,634.59
0.09
3,634.68
28.03
0.01
28.04
3,662.62
0.10
3,662.72
(1,529.38)
(0.07)
(1,529.45)
5,664.41 27,736.81
27.70
(168.52)
240.48
(0.02)
33,500.86
0.51
33,501.37
For details on equity components, see Note 13.
92
Consolidated statement of changes in equity for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
OMV PETROM S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2020
(all amounts are expressed in million RON, unless otherwise specified)
Profit before tax
Interest income
Interest expenses and other financial expenses
Net movement in provisions and allowances for:
- Inventories
- Receivables and other assets
- Pensions and similar liabilities
- Decommissioning and restoration obligations
- Other provisions for risk and charges
Income from associated companies
Gain on transfer of business
Net gains on the disposal of non-current assets
Depreciation, amortization and impairments including write-ups
Other non-monetary adjustments
Interest received
Interest and other financial costs paid
Tax on profit paid
Cash generated from operating activities before working
capital movements
(Increase)/decrease in inventories
(Increase)/decrease in receivables and other assets
Increase/(decrease) in liabilities
Cash flow from operating activities
Notes
24
24, 25
8
32
20, 22
32
2020
1,478.70
(265.14)
27.44
15.28
(38.82)
(38.79)
74.82
35.35
(4.47)
-
(41.25)
3,677.85
(94.60)
189.26
(22.54)
(401.24)
4,591.85
297.09
798.20
(131.41)
5,555.73
2019
4,276.80
(224.95)
29.07
1.27
(34.51)
4.11
6.78
230.40
(7.23)
(51.77)
(25.44)
3,637.67
(213.92)
171.69
(20.73)
(720.58)
7,058.66
(326.56)
(192.55)
262.97
6,802.52
Consolidated statement of cash flows for the year ended December 31, 2020
93
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Investments
Intangible assets and property, plant and equipment
Investments and other financial assets
Disposals
Proceeds in relation to non-current assets
Proceeds from transfer of business
Proceeds from sale of subsidiaries
Cash flow from investing activities
Net repayments of borrowings
Dividends paid
Cash flow from financing activities
Effect of foreign exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Thereof cash disclosed within assets held for sale
Cash and cash equivalents presented in the consolidated statement of
financial position
Notes
2020
2019
32
32
32
32
32
(3,445.27)
(3,935.26)
-
38.19
210.50
-
71.59
262.24
78.58
-
(3,163.18)
(3,556.25)
(180.56)
(327.65)
(1,740.38)
(1,515.89)
(1,920.94)
(1,843.54)
(3.93)
467.68
7,013.54
7,481.22
30.58
1.38
1,404.11
5,609.43
7,013.54
-
7,450.64
7,013.54
94
Consolidated statement of cash flows for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
OMV PETROM S.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2020
(all amounts are expressed in million RON, unless otherwise specified)
1. LEGAL PRINCIPLES AND BASIS OF PREPARATION
OMV Petrom S.A. (22 Coralilor Street, 013329 Bucharest, Romania), has activities in Upstream, Downstream Oil and
Downstream Gas business segments and it is listed on Bucharest Stock Exchange under “SNP” code and on London Stock
Exchange under “PETB” and “PETR” codes.
Stockholders’ structure as at December 31, 2020 and 2019
OMV Aktiengesellschaft
Romanian State
Fondul Proprietatea S.A.
Legal entities and private individuals
Total
Percent 2020
Percent 2019
51.011%
20.639%
6.997%
21.353%
51.011%
20.639%
9.998%
18.352%
100.000%
100.000%
As of December 31, 2020 the number of Global Depositary Receipts (GDRs) was 181,611, equivalent of 27,241,650
ordinary shares, representing 0.048% of the share capital.
As of December 31, 2019 the number of GDRs was 182,780, equivalent of 27,417,000 ordinary shares, representing
0.048% of the share capital.
Statement of compliance
These consolidated financial statements have been prepared in compliance with International Financial Reporting Standards
(IFRS) as endorsed by the European Union (EU).
Romanian listed Companies such as OMV Petrom S.A. are required by Ministry of Finance Order no. 1121/2006 to submit
the consolidated financial statements prepared in accordance with IFRS as endorsed by EU starting 2007.
The financial year corresponds to the calendar year.
Basis of preparation
The consolidated financial statements of OMV Petrom Group, hereinafter referred to also as “the Group”, are presented in
RON (“Romanian Leu”), using going concern principles. All values are presented in millions, rounded to the nearest two
decimals. The consolidated financial statements have been prepared on the historical cost basis, except for certain items
that have been measured at fair value as described in Note 4 Accounting and valuation principles. For financial assets and
liabilities where fair value differs from carrying amounts at the reporting date, fair values have been disclosed in Note 33.
Notes to the consolidated financial statements for the year ended December 31, 2020
95
OMV Petrom Annual Report 2020 Consolidated Financial Statements
2. JUDGMENTS, ESTIMATES AND ASSUMPTIONS
Preparation of the consolidated financial statements requires management to make judgments, estimates and assumptions
that affect the amounts reported for assets, liabilities, income and expenses, the accompanying disclosures and the
disclosure of contingent liabilities. Estimates and judgments are continuously evaluated and are based on management’s
experience and other factors, including expectation of future events that are believed to be reasonable under the
circumstances. However, uncertainty about these assumptions and estimates could result in actual outcomes that may differ
from these estimates and may require a material adjustment to the carrying amount of the assets or liabilities affected in
future periods.
Other disclosures relating to the Group’s exposure to risks and uncertainties in relation to capital management and financial
risk management and policies are included in Note 36.
Changes in estimates are accounted for prospectively.
Correction of material prior period errors is made retrospectively, through retained earnings, by restating the comparative
amounts for the prior period(s) presented in which the error occurred or if the error occurred before the earliest prior period
presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented. Errors which
are not material are corrected in the period when they are discovered, through the income statement.
Estimates and assumptions
The key assumptions concerning the future and other key sources of uncertainty at the reporting date that have a significant
risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are
described below. The Group based its assumptions and estimates on parameters available when the consolidated financial
statements were prepared. Existing circumstances and assumptions about future developments, however, may change due
to market change or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions
when they occur.
a) Oil and gas reserves
Mineral reserves (oil and gas reserves) are estimated by OMV Petrom Group’s own engineers in accordance with
international and industry agreed standards based on the availability of geological and engineering data, reservoir
performance data, drilling of new wells and commodity prices. The estimates are audited externally periodically (usually
every two years). The last external audit for oil and gas reserves was performed in 2018. Commercial reserves are
determined using estimates of hydrocarbons in place, recovery factors and future oil and gas prices.
The oil and gas assets are depreciated on a unit of production basis at a rate calculated by reference to either total proved
or proved developed reserves (please refer to Depreciation, amortization and depletion accounting policy below),
determined as presented above. The carrying amount of oil and gas assets at December 31, 2020 is shown in Notes 6 and
7.
The level of estimated commercial reserves is also a key determinant in assessing whether the carrying value of any of the
Group’s development and production assets should be impaired.
96
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
b) Decommissioning costs
The Group’s core activities regularly lead to obligations related to dismantling and removal, asset retirement and soil
remediation activities. These decommissioning and restoration obligations are principally of material importance in the
Upstream segment (oil and gas wells, surface and offshore facilities). At the time the obligation arises, it is provided for in full
by recognizing the present value of future decommissioning and restoration expenses as a liability. An equivalent amount is
capitalized as part of the carrying amount of long-lived assets.
Decommissioning costs will be incurred by the Group at the end of the operating life of some of the facilities and properties.
Estimates of future restoration costs are based on current contracts concluded with suppliers, reports prepared by OMV
Petrom Group engineers, as well as past experience. Downward changes in the expected future costs or postponement in
the future affect both the provision and the related asset, to the extent that there is sufficient carrying amount, otherwise the
provision is reversed to income statement.
Provisions for decommissioning and restoration costs require estimates of discount rates and inflation rates. These
estimates have a material effect on the amount of the provisions (see Note 14).
The ultimate decommissioning and restoration costs are uncertain and cost estimates can vary in response to many factors
including changes to relevant legal requirements, the emergence of new restoration techniques or experience at other
production sites. The expected timing and amount of expenditure can also change, for example, in response to changes in
reserves or changes in laws and regulations or their interpretation. As a result, there could be significant adjustments to the
provisions established which would affect future results.
c) Impairment of non-financial assets
The Group assesses each asset or cash generating unit (CGU) at each reporting period to determine whether any indication
of impairment exists. When an indicator exists, a formal estimate of the recoverable amount is made, which is considered to
be the higher of the fair value less costs to sell and value in use. Except for the assets whose carrying amount will be
recovered through a sale transaction rather than through continuing use, for all impairment tests performed, the recoverable
amount was based on value in use. The assessments require the use of different estimates and assumptions depending on
the business such as crude oil prices, discount rates, reserves, growth rates, gross margins and spark spreads. The key
estimates and assumptions used bear the risk of change due to the inherent volatile nature of various macro-economic
factors and the uncertainty in asset or CGU specific factors like reserve volumes and production profiles, which can impact
the recoverable amount of assets and/or CGUs.
Impairment testing in Upstream
The key valuation assumptions for the recoverable amounts of Upstream assets are the oil and natural gas prices,
production volumes and the discount rates. The production profiles were estimated based on past experience and represent
management’s best estimate of future production. The cash-flow projections for the first five years are based on the mid-
term plan and thereafter on the whole life term of the field (“life of field“) planning.
In 2020, OMV Petrom Group updated its mid-term plan and revised its long-term planning assumptions to reflect changes in
the market environment. In addition, the short-term oil price assumption were updated in order to reflect the significant
decrease in oil prices in 2020.
Notes to the consolidated financial statements for the year ended December 31, 2020
97
OMV Petrom Annual Report 2020 Consolidated Financial Statements
The nominal oil price assumptions and the RON/USD exchange rates are listed below:
Oil price assumptions in 2020
Brent oil price (USD/bbl)
RON/USD exchange rate
Brent oil price (RON/bbl)
Oil price assumptions in 2019
Brent oil price (USD/bbl)
RON/USD exchange rate
Brent oil price (RON/bbl)
2021
50
4.30
215
2020
60
4.22
253
2022
60
4.30
258
2021
70
4.22
295
2023
60
4.30
258
2022
70
4.22
295
2024
65
4.30
280
2023
75
4.22
316
2025
65
4.30
280
2024
75
4.22
316
For the years 2026 until 2029, OMV Petrom Group assumed a Brent oil price of USD 65/bbl which is expected to gradually
decline to USD 60/bbl until 2035. From 2035 onwards, OMV Petrom Group applied a Brent oil price of USD 60/bbl. All
before mentioned assumptions for the years after 2025 are based on 2025 real terms.
The assumptions used for oil prices for short and medium term are based on management’s best estimate and were
consistent with external sources. The long-term assumptions were consistent with data provided by external studies and
consider long-term views of global supply and demand.
The above revisions led to impairments (net of write-ups) in Romania of RON 346.37 million before tax and write-offs of
exploration intangibles of RON 599.09 million before tax. The recoverable amounts of impaired assets or for which a
reversal of impairment was booked amounted to RON 2,730.42 million. The after-tax discount rate used was 9.7%. The
recoverable amount was based on the value in use.
An increase of 1 percentage point in the after-tax discount rates would lead to an additional after-tax impairment of
approximately RON 150 million. Furthermore, a Brent oil price decrease of USD 10/bbl per year would lead to an additional
after-tax impairment of approximately RON 2.5 billion.
In 2019, based on management estimations regarding long term Brent oil price and production volumes, an analysis of the
triggering events was performed and it was concluded that there are no indicators for impairment or reversal of impairment,
consequently no impairment test was necessary.
Impairment testing in Downstream
In the Downstream Oil business, besides discount rates, the recoverable amounts are mainly impacted by the indicator
refinery margin and the utilization rate in the refinery and by the retail margin and sales volumes in retail.
In 2020 and 2019, based on management estimations it was concluded that there were no triggering indicators for
performing an impairment test in Downstream Oil.
In the Downstream Gas business, besides discount rates, the main valuation assumptions for the calculation of the
recoverable amounts are the spark spreads (being the differences between the electricity prices and the cost of gas and cost
of CO2 certificates) and net electrical output for the power plant. The assumptions used for prices are based on
management’s best estimate, considering specifics of local market as well as the correlation between the local and regional
markets.
In 2020, the long-term power and CO2 price assumptions were revised taking into account the improved power generation
market, favoring gas fired power plants as compared with coal fired power plants. This led to the full reversal of impairments
for Brazi gas fired power plant, in amount of RON 518.65 million before tax based on an after-tax discount rate of 4.26%.
98
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
An increase of 1 percentage point in the after-tax discount rates would not change the amount of the reversal, as the
recoverable amount would be still higher than the write-up cap. Also, a decrease of 25% in the spark-spread would not have
an impact on the reversal booked.
In 2019, based on management estimations it was concluded that there were no triggering indicators for performing an
impairment test in Downstream Gas.
d) Exploration and evaluation expenditure
The application of the Group’s accounting policy for exploration and evaluation expenditure requires judgment in determining
whether it is probable that future economic benefits are likely either from future operation or from sale or whether activities
have not reached a stage which permits a reasonable assessment of the existence of reserves. The determination of
reserves and resources is itself an estimation process that involves varying degrees of uncertainty depending on sub-
classification and these estimates directly impact the point of deferral of exploration and evaluation expenditure. The deferral
policy requires management to make certain estimates and assumptions as to future events and circumstances, in particular
whether an economically viable extraction operation can be established. Any such estimates and assumptions may change
as new information becomes available. If, after expenditure is capitalized, information becomes available suggesting that the
recovery of the expenditure is unlikely, the relevant capitalized amount is written off in the income statement in the period
when the new information becomes available. The exploration and evaluation expenditure capitalized is presented under
intangible assets in the statement of financial position.
e) Recoverability of Romanian State receivable
Management is periodically assessing the recoverability of the receivable related to expenditure recoverable from the
Romanian State related to obligations for decommissioning and environmental costs in OMV Petrom S.A., which was
recognized based on the privatization agreement. The assessment process is considering inter alia the history of amounts
claimed, documentation process related requirements, potential litigation or arbitration proceedings. For more details, see
Note 9 b).
Judgments
In the process of applying the Group’s accounting policies, the following judgments were made, particularly with respect to
the following:
f) Cash generating units
Management exercises judgment in determining the appropriate level of grouping Upstream assets into CGUs, in particular
with respect to the Upstream assets which share significant common infrastructure and are consequently grouped into the
same CGU.
Notes to the consolidated financial statements for the year ended December 31, 2020
99
OMV Petrom Annual Report 2020 Consolidated Financial Statements
g) Contingencies
By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The assessment of
contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events.
h) Lease term and incremental borrowing rate
OMV Petrom Group determines the lease term as the non-cancellable term of the lease, together with any periods covered
by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate
the lease, if it is reasonably certain not to be exercised. The Group has lease contracts which include prolongation and
termination options. When determining the lease term to be used for the measurement of the lease, the Group takes into
account all the relevant facts and circumstances that create an economic incentive for exercising either the extension or
termination option of the lease term, such as market factors, the extent of oil and gas reserves or other relevant facts. In
case of lease term in relation to land for filling stations and access roads, for periods covered by prolongation or termination
options, the assumption applied was that the lease term will not exceed 20 years. The maximum useful life of filling station
buildings is 20 years and beyond this period the exercise of any option becomes uncertain.
The Group cannot readily determine the interest rate implicit in its leases. Therefore, it uses the relevant incremental
borrowing rates to measure lease liabilities. These incremental borrowing rates were determined taking into consideration
factors such as the term of the lease, credit risk, currency in which the lease was denominated and economic environment.
3. CONSOLIDATION
a) Subsidiaries
The consolidated financial statements comprise the financial statements of OMV Petrom S.A. (“OMV Petrom” / “the
Company”) and its subsidiaries (“OMV Petrom Group” or ‘the Group”) as at December 31, 2020, prepared in accordance
with consistent accounting and valuation principles. The financial statements of the subsidiaries are prepared for the same
reporting date, December 31, 2020, as those of the parent company.
Control exists when OMV Petrom is exposed, or has rights, to variable returns from its involvement with the investee and
has the ability to affect those returns through its power over the investee.
Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when
OMV Petrom has less than a majority of the voting or similar rights of an investee, OMV Petrom considers all relevant facts
and circumstances in assessing whether it has power over an investee, including: the contractual arrangement with the other
vote holders of the investee; rights arising from other contractual arrangements as well as voting rights and potential voting
rights. OMV Petrom re-assesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the elements of control.
Consolidation of a subsidiary begins when OMV Petrom obtains control over the subsidiary and ceases when OMV Petrom
loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the
100
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
year are included in the consolidated financial statements from the date OMV Petrom gains control until the date OMV
Petrom ceases to control the subsidiary.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line
with those used by other members of OMV Petrom Group. All intra-group assets and liabilities, income and expenses
relating to transactions between members of the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.
If the Group loses control over a subsidiary, it derecognizes the related assets (including goodwill), liabilities, non-controlling
interest and other components of equity while any resultant gain or loss is recognized in consolidated income statement. Any
investment retained is recognized at fair value.
The number of consolidated entities is as follows:
As at January 1, 2020
Included for the first time
Deconsolidated during the year
As at December 31, 2020
Romanian companies
Foreign companies
Full consolidation
Equity method
11
1
(1)
11
5
6
1
-
-
1
1
-
Please refer to Note 31 for further details on Group structure.
The Company holds majority of the voting rights in all fully consolidated subsidiaries.
Non-controlling interests are not significant as of December 31, 2020 and December 31, 2019.
b) Associates
An associate is an entity over which the Group is in a position to exercise significant influence, through participation in the
financial and operating policy decisions of the investee, but has not control or joint control over these policies. This is
normally presumed to exist when OMV Petrom has 20% or more of the voting power of the entity. The results, assets and
liabilities of associates are incorporated in these financial statements using the equity method of accounting.
Investments in associated companies are accounted for using the equity method, under which the investment is initially
recognized at cost and subsequently adjusted for the Group’s share of the profit or loss less dividends received and the
Group’s share of other comprehensive income and other movements in equity. Goodwill relating to an associate is included
in the carrying amount of the investment and is not tested for impairment individually.
After application of the equity method, the Group determines whether it is necessary to recognize any impairment loss with
respect to Group’s investment in the associate. In case the net investment in the associate is reduced to zero, additional
losses are provided for, and a liability is recognized, only to the extent that the Group has incurred legal or constructive
obligations or made payments on behalf of the associate.
The consolidated income statement reflects the share of the net results of operations of the associate. The share of any
change in other comprehensive income (OCI) of the associate is presented as part of the Group’s OCI. In addition, where
there has been a change recognized directly in the equity of the associate, the Group recognizes its share of the changes
Notes to the consolidated financial statements for the year ended December 31, 2020
101
OMV Petrom Annual Report 2020 Consolidated Financial Statements
and discloses it in the consolidated statement of changes in equity. The Group recognizes the dividend from an associate
when the right to receive a dividend is established, and presents separately (Note 8) the share of the results of operations of
the associate corresponding to dividends received.
The aggregate of the Group’s share of net profit or loss of an associate is shown on the face of the consolidated income
statement under operating result.
The financial statements of the associates are prepared for the same reporting period as the Group.
When the Group has transactions with an associate of the Group, unrealized profits and losses are eliminated to the extent
of the Group’s interest in the relevant associate.
c) Interests in joint arrangements
IFRS defines joint control as the contractually agreed sharing of control of an arrangement, which exists only when decisions
about the relevant activities (i.e. activities that significantly affect the returns of the arrangement) require the unanimous
consent of the parties sharing the control.
Classifying the joint arrangement as joint venture or joint operation requires the Group to assess their rights and obligations
arising from the arrangement. Specifically, the Group considers:
the structure of the joint arrangement – whether it is structured through a separate vehicle;
when the arrangement is structured through a separate vehicle, the Group also considers the rights and obligations
arising from:
▸ the legal form of the separate vehicle;
▸ the terms of the contractual arrangement;
▸ other facts and circumstances, considered on a case by case basis.
Joint ventures are joint arrangements in which the parties that share control have rights to the net assets of the
arrangement. Joint operations are joint arrangements in which the parties that share joint control have rights to the assets,
and obligations for the liabilities, relating to the arrangement.
As of December 31, 2020 and 2019, the Group had joint arrangements classified as joint operations.
The Group recognizes its direct right to the assets, liabilities, revenues and expenses of joint operations and its share of any
jointly held or incurred assets, liabilities, revenues and expenses. The Group accounts for the assets, liabilities, revenues
and expenses relating to its interest in a joint operation, line by line, in its consolidated financial statements.
The material joint arrangements where OMV Petrom is partner, as well as commitments in relation to the joint arrangements,
are presented in Note 35.
102
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
4. ACCOUNTING AND VALUATION PRINCIPLES
4.1. Changes in accounting policies
The accounting policies adopted are consistent with those of the previous financial year, except for the changes as
described below.
First-time adoption of amended standards
The Group has adopted the following amended standards with a date of initial application of January 1, 2020:
Amendments to IFRS 3 Business Combinations: Definition of a Business
Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform
Amendments to IAS 1 and IAS 8: Definition of Material
Amendments to References to the Conceptual Framework in IFRS Standards
The amendments did not have any material impact on OMV Petrom Group’s financial statements.
Change in income statement presentation
Starting with 2020, reversals of impairments on tangible and intangible assets are reported within the line “Depreciation,
amortization, impairments and write-ups” in order to improve the international comparability of the income statement
presentation. The prior year figures have been adjusted accordingly. The voluntary change in accounting policy has no effect
on the operating result.
Adjustments to income statement items
In RON million
Other operating income
Total revenues and other income
Depreciation, amortization, impairments and write-ups
2019 (old) Reclassification
2019 (new)
263.95
25,756.78
(3,511.88)
(5.18)
(5.18)
5.18
258.77
25,751.60
(3,506.70)
4.2. New and revised standards not yet mandatory
OMV Petrom Group has not applied the following new or revised IFRSs that have been issued but are not yet effective. They
are not expected to have any material effects on the Group’s financial statements. EU endorsement is still pending in some
cases.
Notes to the consolidated financial statements for the year ended December 31, 2020
103
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Standards and amendments
Amendments to IFRS 16 Leases: Covid 19 Related Rent Concessions
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16: Interest Rate Benchmark Reform - Phase 2
Amendments to IFRS 3 Business Combinations: Reference to the Conceptual Framework
Amendments to IAS 16 Property, Plant and Equipment: Proceeds before intended use
Amendments to IAS 37: Onerous Contracts - Cost of Fulfilling a Contract
Annual Improvements to IFRS Standards 2018-2020
Amendments to IAS 1: Classification of Liabilities as Current and Non-Current
IASB effective date
June 1, 2020
January 1, 2021
January 1, 2022
January 1, 2022
January 1, 2022
January 1, 2022
January 1, 2023
Amendment to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint
Ventures: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
postponed indefinitely
4.3. Summary of accounting and valuation principles
a) Business combinations
Business combinations are accounted for using the acquisition method. Assets and liabilities of subsidiaries acquired are
included at their fair values at the time of the acquisition. For each business combination, the Group elects whether it
measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s
identifiable net assets.
Goodwill is calculated as the excess of the aggregate of the consideration transferred, the amount recognized for non-
controlling interests and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the
fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group reassesses whether it
has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to
measure the amounts to be recognized at the acquisition date. If the reassessment still results in an excess of the fair value
of net assets acquired over the aggregate consideration transferred, then the gain is recognised in income statement.
Goodwill is recognized as an asset and reviewed for impairment at least annually. All impairments are immediately charged
against income statement, and there are no subsequent reversals of goodwill impairment.
Non-controlling interests entitle their holders to a proportionate share of the entity's net assets in the event of liquidation.
Non-controlling interests are presented separately in the consolidated statement of comprehensive income and within equity
in the consolidated statement of financial position, separately from parent’s shareholders’ equity. Losses within a subsidiary
are attributed to the non-controlling interest even if that results in a deficit balance.
b) Pre-licence costs
Pre-licence costs are expensed in the period in which they are incurred. Pre-license prospecting is performed in the very
preliminary stage of evaluation when trying to identify areas that may potentially contain oil and gas reserves without having
physical access to the area. Related costs may include seismic studies, magnetic measurements, satellite and aerial
photographs, gravity-meter tests etc.
104
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
c) Licence acquisition costs
Exploration licence acquisition costs are capitalized in intangible assets.
Licence acquisition costs are reviewed at each reporting date to confirm that there is no indication that the carrying amount
exceeds the recoverable amount. This review includes confirming that exploration drilling is still under way or firmly planned,
or that it has been determined, or work is under way to determine that the discovery is economically viable based on a range
of technical and commercial considerations and sufficient progress is being made on establishing development plans and
timing.
If no future activity is planned or the licence has been relinquished or has expired, the carrying value of the licence
acquisition costs is written off through income statement.
Upon recognition of proved reserves and internal approval for development, the relevant expenditure is transferred to oil and
gas assets within tangible assets.
d) Exploration and evaluation costs
Exploration and evaluation costs are accounted for using the successful efforts method of accounting. Costs related to
geological and geophysical activity are expensed as and when incurred. The costs associated to exploration and evaluation
drilling are initially capitalized as oil and gas assets with unproved reserves pending determination of the commercial viability
of the relevant properties. If prospects are subsequently deemed to be unsuccessful on completion of evaluation, the
associated costs are included in the income statement for the year. If the prospects are deemed commercially viable, such
costs are transferred to tangible oil and gas assets upon recognition of proved reserves and internal approval for
development. The status of such prospects and related costs are reviewed regularly by technical, commercial and executive
management including review for impairment at least once a year to confirm the continued intent to develop or otherwise
extract value from the discovery. When this is no longer the case, the costs are written off.
e) Development and production costs
Development costs including costs incurred to gain access to proved reserves and to prepare development wells locations
for drilling, to drill and equip development wells and to construct and install production facilities, are capitalized as oil and
gas assets.
Production costs, including those costs incurred to operate and maintain wells and related equipment and facilities (including
depletion, depreciation and amortization charges as described below) and other costs of operating and maintaining those
wells and related equipment and facilities, are expensed as incurred.
f) Intangible assets and property, plant and equipment
Intangible assets and property, plant and equipment are recognized at cost of acquisition or construction (including costs of
major inspection and general overhauls) and are presented net of accumulated depreciation and impairment losses.
The cost of purchased property, plant and equipment is the value of the consideration given to acquire the assets and the
value of other directly attributable costs which have been incurred in bringing the assets to their present location and
Notes to the consolidated financial statements for the year ended December 31, 2020
105
OMV Petrom Annual Report 2020 Consolidated Financial Statements
condition necessary for their intended use. The cost of self-constructed assets includes cost of direct materials, labour,
overheads and other directly attributable costs that have been incurred in bringing the assets to their present location and
condition.
Depreciation and amortization is calculated on a straight-line basis, except for Upstream assets, where depletion occurs to a
large extent on a unit-of-production basis. In the consolidated income statement, impairment losses for exploration assets
are disclosed as exploration expenses, and those for other assets are reported within depreciation, amortization,
impairments and write-ups line.
Intangible assets
Goodwill
Software
Concessions, licences and other intangibles
Business-specific property, plant and equipment
Upstream
Downstream Oil
Downstream Oil
Downstream Oil
Downstream Gas
Downstream Gas
Other property, plant and equipment
Production and office buildings
Other plant and equipment
Fixtures and fittings
Useful life (years)
Indefinite
3 -5
5 - 20, or contract duration
Oil and gas core assets
Unit of production method
Storage tanks and refinery facilities
Pipeline systems
Filling stations components
Gas pipelines
Gas fired power plant
25 – 40
20
5 – 20
20 - 30
8 – 30
20 – 50
10 – 20
5 – 10
For the application of the unit-of-production depreciation method, the Group has separated the areas where it operates into
regions. The unit-of-production factor is computed at the level of each productive region, based on the extracted quantities
and the proved reserves or proved developed reserves as applicable.
Capitalized exploration and evaluation activities are generally not depreciated as long as they are related to unproved
reserves, but tested for impairment. Once the reserves are proved and commercial viability is established, the related assets
are reclassified into tangible assets and once production starts depreciation commences. Capitalized development costs and
support equipment are generally depreciated based on proved developed reserves/total proved reserves by applying the
unit-of-production method once production starts.
The right-of-use assets are depreciated on a straight-line basis over the shorter of the asset’s useful life and the lease term.
An item of property, plant and equipment and any significant part initially recognized are derecognized upon disposal or
when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the
asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in
the consolidated income statement when the asset is derecognized.
Under the successful efforts method individual mineral interests and other assets are combined to cost centers (fields,
blocks, areas), which are the basis for depreciation and impairment testing. If single wells or other assets from a pooled
depreciation base with proved reserves are abandoned, the accumulated depreciation for the single asset might be not
directly identifiable. In general, irrespective if book values of abandoned assets are identifiable, no loss is recognized from
the partial relinquishment of assets from a pooled depreciation base as long as the remainder of the group of properties
continues to produce oil or gas. It is assumed that the abandoned or retired asset is fully amortized. The capitalized costs for
the asset are charged to the accumulated depreciation base of the cost center.
106
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Where an asset or part of an asset, that was separately depreciated and is now written off, is replaced and it is probable that
future economic benefits associated with the item will flow to the Group, the expenditure is capitalized. Where part of the
asset replaced was not separately considered as a component and therefore not depreciated separately, the replacement
value is used to estimate the carrying amount of the replaced asset(s) which is immediately written off.
Transactions in which control of an exploration entity is obtained are treated as asset acquisitions, if the entity does not
constitute a business as defined by IFRS 3 Business combinations.
Assets classified as held for sale are disclosed at the lower of carrying value and fair value net of any disposal costs. Non-
current assets and groups of assets are classified as held for sale if their carrying value will be recovered principally through
a sale transaction rather than through continuing use. This classification requires that the sale must be estimated as highly
probable, and that the asset must be available for immediate disposal in its present condition. The highly probable criteria
implies that management must be committed to the sale and an active plan to locate a buyer was initiated, the transaction
should be expected to qualify for recognition as a completed sale within one year from the date of classification (except if
certain conditions are met), the asset is actively marketed at a price that is reasonable in relation to its current fair value and
it is unlikely that significant changes will occur to the sale plan or that the plan will be withdrawn. Property, plant and
equipment and intangible assets are not depreciated or amortized once classified as held for sale.
Impairment of intangible assets and property, plant and equipment
In accordance with IAS 36, intangible assets as well as property, plant and equipment are reviewed at each reporting date
for any indications of impairment. For intangible assets with indefinite useful lives, impairment tests are carried out annually.
This applies even if there are no indications of impairment. Impairment tests are performed on the level of cash generating
units which generate cash inflows that are largely independent of those from other assets or groups of assets.
If any indication exists, or when annual impairment test for an asset is required, the Group estimates the asset’s recoverable
amount being the higher of fair value less costs of disposal and its value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. The
cash flows are generally derived from recent budgets and planning calculations, which are prepared separately for each of
the Group’s CGUs to which the individual assets are allocated.
If the carrying amount of an asset or cash generating unit exceeds its recoverable amount, the asset is considered impaired
and an impairment loss is recognized to reduce the asset to its lower recoverable amount. Impairment losses are recognized
in the consolidated income statement under depreciation, amortization, impairments and write-ups and under exploration
expenses.
If the reasons for impairment no longer apply in a subsequent period, a reversal is recognized in the consolidated income
statement. The increased carrying amount related to the reversal of an impairment loss shall not exceed the carrying amount
that would have been determined (net of amortization and depreciation) if no impairment loss had been recognized in prior
years.
g) Major maintenance and repairs
The capitalized costs of regular and major inspections and overhauls are separate components of the related asset or asset
groups. The capitalized inspection and overhaul costs are amortized on a straight line basis, or on basis of the number of
service hours or produced quantities or similar, if this better reflects the time period for the inspection interval (until the next
inspection date).
Notes to the consolidated financial statements for the year ended December 31, 2020
107
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Expenditure on major maintenance refits, inspections or repairs comprises the cost of replacement assets or parts of assets,
inspection costs and overhaul costs. Inspection costs associated with major maintenance programs are capitalized and
amortized over the period to the next inspection.
Cost of major remedial activities for wells workover, if successful, is also capitalized and depreciated using the unit-of-
production method.
All other day-to-day repairs and maintenance costs are expensed as incurred.
h) Research and development
Expenditure related to research activities is recognized as expense in the period in which it is incurred. Research and
development (R&D) expenses include all direct and indirect materials, personnel and external services costs incurred in
connection with the focused search for new insights related to the development and significant improvement of products,
services and processes and in connection with research activities. Development costs are capitalized if the recognition
criteria according to IAS 38 are fulfilled.
i) Leases
OMV Petrom Group as a lessee recognizes lease liabilities and right-of-use assets for lease contracts according to IFRS 16.
It applies the recognition exemption for short-term leases and leases in which the underlying asset is of low value and
therefore does not recognize right-of-use assets and lease liabilities for such leases. Leases to explore for and use oil and
natural gas, which comprise mainly land leases used for such activities, are not in the scope of IFRS 16. The rent for these
contracts is recognized on a straight-line basis over the contract term.
At the commencement date of the lease (i.e. the date the underlying asset is available for use), lease liabilities are
recognized at the net present value of fixed lease payments and lease payments which depend on an index or rate over the
determined lease term, with the applicable discount rate. The amount of lease liabilities is increased to reflect the accretion
of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if
there are changes in the lease term, lease payments or in the assessment of an option to purchase the underlying asset.
Right-of-use assets are recognized at commencement date, and measured at the present value of the lease liability plus
prepayments and initial direct costs and presented within property, plant and equipment. After the commencement date,
right-of-use assets are measured at cost, less any accumulated depreciation and any accumulated impairment losses (see
Note 4f) and adjusted for any remeasurement of the lease liability, if the case.
Non-lease components are separated from the lease components for the measurement of right-of-use assets and lease
liabilities.
Variable lease payments that do not depend on an index or a rate are recognized as expenses, in the period in which the
event or condition that triggers the payment occurs.
OMV Petrom Group as a lessor entered in contracts which were assessed as operating leases, for which payments received
for rent are recognized as revenue from rents and leases over the period of the lease.
108
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
j) Financial instruments
Non-derivative financial assets
At initial recognition, OMV Petrom Group classifies its financial assets as subsequently measured at amortized cost, fair
value through other comprehensive income (OCI) or fair value through profit or loss. The classification depends both on the
Group’s business model for managing the financial assets and the contractual cash flow characteristics of the financial
assets. The business model determines whether cash flows will result from collecting contractual cash flows, selling the
financial assets, or both.
Debt instruments are classified and measured at amortized cost if both of the following conditions are met:
the asset is held within the business model whose objective is to hold financial assets in order to collect contractual cash
flows; and
the contractual terms of the financial asset give rise on specific dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
These assets are subsequently measured at amortized cost using the effective interest method less any impairment losses.
Interest income, impairment losses and gains or losses on derecognition are recognized in profit or loss. The Group’s
financial assets at amortised cost include mainly trade receivables.
OMV Petrom Group recognizes allowances for expected credit losses (ECLs) for financial assets measured at amortized
costs. The ECL calculation is based on external or internal credit ratings of the counterparty, associated probabilities of
default and loss given default. External credit rating is based mainly on reports issued by well-known rating agencies and is
reflected in OMV Petrom Group by grouping financial assets in five risk classes (risk class 1 being the lowest risk category).
The probabilities of default used for each risk class, as presented in Note 9, are based on Standard & Poor’s average global
corporate default rates. A loss given default of 45% was applied for computation of ECL of financial assets which are not
credit impaired.
ECLs are recognized in two stages:
i. Where there has not been a significant increase in the credit risk since initial recognition, credit losses are
measured at 12 month ECLs. The 12 month ECL is the credit loss which results from default events that are
possible within the next 12 months. The Group considers a financial asset to have low credit risk when its credit risk
rating is equivalent to the definition of ‘investment grade’.
ii. Where there has been a significant increase in the credit risk since initial recognition, a loss allowance is required
for the lifetime ECL, i.e. the expected credit losses resulting from possible default events over the expected life of a
financial asset. For this assessment, OMV Petrom Group considers all reasonable and supportable information that
is available without undue cost or effort. Furthermore, OMV Petrom Group assumes that the credit risk on a
financial asset has significantly increased if it is more than 30 days past due. If the credit quality improves for a
lifetime ECL asset, OMV Petrom Group reverts to recognizing allowances on a 12 month ECL basis. A financial
asset is considered to be in default when the financial asset is 90 days past due unless there is reasonable and
supportable information that demonstrate that a more lagging default criterion is appropriate. A financial asset is
written off when there is no reasonable expectation that the contractual cash flows will be recovered.
For trade receivables a simplified approach is adopted, where the impairment losses are recognized at an amount equal to
lifetime expected credit losses. In case there are credit insurances or securities held against the balances outstanding, the
ECL calculation is based on the probability of default of the insurer/securer for the insured/secured element of the
outstanding balance and the remaining amount will take the probability of default of the counterparty.
Notes to the consolidated financial statements for the year ended December 31, 2020
109
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Non-derivative financial assets classified as at fair value through profit or loss include trade receivables from sales
contracts with provisional pricing because the contractual cash flows do not represent solely payments of principal and
interest on the principal amount outstanding. Furthermore, this measurement category includes portfolios of trade
receivables held with an intention to sell them. These assets are measured at fair value, with any gains or losses arising on
remeasurement recognized in profit or loss.
Equity instruments may be elected irrevocably as measured at fair value through other comprehensive income if they
are not held for trading.
The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or when it
transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the
Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the
transferred asset, the Group recognizes its retained interest in the asset and an associated liability that reflects the rights
and obligations that the Group has retained. If the Group retains substantially all the risks and rewards of ownership of a
transferred financial asset, the Group continues to recognize the financial asset and also recognizes a collateralized
borrowing for the proceeds received.
Financial assets are written off when there is no realistic prospect of future recovery and all collateral has been realized or
has been transferred to the Group.
Rights to payments to reimburse the Group for expenditure that it is required to settle a liability that is recognized as a
provision in accordance with IAS 37 “Provisions, Contingent liabilities and Contingent assets” are outside the scope of
IFRS 9. Expenditure recoverable from the Romanian State falls under this category.
Non-derivative financial liabilities
Non-derivative financial liabilities are carried at amortized cost, except for contingent consideration related to acquisition of
financial assets which is measured at fair value at the date of acquisition and subsequently measured at fair value with the
changes in fair value recognized in income statement. Long-term liabilities are discounted using the effective interest rate
method (EIR).
A financial liability (or a part of a financial liability) is removed from the statement of financial position when it is extinguished
– i.e. when the obligation specified in the contract is discharged or cancelled or expires.
Derivative financial instruments and hedge accounting
Derivative instruments are used to hedge risks resulting from changes in currency exchange rates and commodity prices.
Derivative instruments are recognized at fair value. Unrealized gains and losses are recognized as income or expense,
except where hedge accounting according to IFRS 9 is applied.
At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which it
wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge.
Those derivatives qualifying and designated as hedges are either (i) a fair value hedge when hedging exposure to changes
in the fair value of a recognized asset or liability or (ii) a cash flow hedge when hedging exposure to variability in cash flows
that is attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction.
For cash flow hedges, the effective part of the changes in fair value is recognized in other comprehensive income, while the
ineffective part is recognized immediately in the income statement. Where the hedging of cash flows results in the
recognition of a non-financial asset or liability, the carrying value of that item is adjusted for the accumulated gains or losses
recognized directly in other comprehensive income.
Contracts to buy or sell a non-financial item that can be settled net in cash or another financial instrument, or by exchanging
financial instruments, as if the contracts were financial instruments, are accounted for as financial instruments and measured
at fair value. Associated gains or losses are recognized in the consolidated income statement. However, contracts that are
110
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
entered into and continue to be held for the purpose of the receipt or delivery of a non-financial item in accordance with the
Group’s expected purchase, sale or usage requirements are not accounted for as derivative financial instruments, but rather
as executory contracts. However, even though such contracts are not financial instruments, they may contain embedded
derivatives. Embedded derivatives are accounted for separately from the host contract when the economic characteristics
and risks of the embedded derivatives are not closely related to the economic characteristics and risks of the host contract.
k) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifyed assets are capitalized until
these assets are substantially ready for their intended use or for sale. Borrowing costs include interest on bank short-term
and long-term loans, amortization of ancillary costs incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.
All other costs of borrowing are expensed in the period in which they are incurred.
l) Government grants
Government grants – except for emission rights (see Note 4.3 n) – are recognized as income or deducted from the related
asset where it is reasonable to expect that the granting conditions will be met and that the grants will be received.
m) Inventories
Inventories are recognized at the lower of cost and net realizable value, except for inventories held for trading which are
measured at fair value less cost to sell. Net realizable value is the estimated selling price in the normal course of activity less
any selling expenses.
Cost of producing crude oil and gas and refined petroleum products is accounted on weighted average basis, and includes
all costs incurred in the normal course of business in bringing each product to its present location and condition, including
the appropriate proportion of depreciation, depletion and amortization and overheads based on normal capacity.
Appropriate allowances are made for any obsolete or slow moving stocks based on the management’s assessments.
n) Provisions
Provisions are made for all present obligations (legal or constructive) to third parties resulting from a past event, when it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and the amount
of the obligation can be estimated reliably. Provision for individual obligations is based on the best estimate of the amount
necessary to settle the obligation. If the effect of the time value of money is material, provisions are discounted using a
current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is applicable, the
increase in the provision due to the passage of time is recognized as a finance cost.
Notes to the consolidated financial statements for the year ended December 31, 2020
111
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Decommissioning and environmental obligations
The Group’s core activities regularly lead to obligations related to dismantling and removal, asset retirement and soil
remediation obligations, more specifically consisting in:
plugging and abandoning wells;
cleaning of sludge pits;
dismantlement of production facilities;
restoration of producing areas in accordance with licence requirements and the relevant legislation.
These decommissioning and restoration obligations are mainly of material importance in the Upstream segment (oil and gas
wells, surface and offshore facilities). At the time the obligation arises, it is provided for in full by recognizing the present
value of future decommissioning and restoration expenses as a liability. An equivalent amount is capitalized as part of the
carrying value of related property, plant and equipment. The obligation is calculated on the basis of best estimates. The
capitalized asset is depreciated using the unit-of-production method for upstream activities and on straight-line basis for
downstream assets.
Liabilities for environmental costs are recognized when a clean-up is probable and the associated costs can be reliably
estimated. Generally, the timing of recognition of these provisions coincides with the commitment to a formal plan of action.
The amount recognized is the best estimate of the expenditure required. Estimates of future remediation costs are based on
current contracts concluded with suppliers, reports prepared by OMV Petrom Group engineers, as well as past experience.
Where the liability will not be settled for a number of years, the amount recognized is the present value of the estimated
future expenditure.
Based on the privatization agreement of OMV Petrom S.A., part of OMV Petrom’s decommissioning and environmental cost
will be reimbursed by the Romanian State. The portion to be reimbursed by the Romanian State has been presented as
receivable and reassessed in order to reflect the current best estimate of the cost at its present value, using the same
discount rate as for the related provisions.
Changes in the assumptions related to decommissioning costs are dealt with prospectively, by recording an adjustment to
the provision and a corresponding adjustment to property, plant and equipment (for Group obligation) or to the related
receivable from the Romanian State (for the works to be reimbursed by Romanian State).
The unwinding of the decommissioning provision is presented as part of the interest expenses in the consolidated income
statement, net of the unwinding of the related receivable from the Romanian State (for the works to be reimbursed by
Romanian State).
Changes in the assumptions related to environmental costs are dealt with prospectively, by recording an adjustment to the
provision and a corresponding adjustment in the consolidated income statement (for Group obligation) or to the related
receivable from the Romanian State (for the works to be reimbursed by Romanian State).
The unwinding of the environmental provision is presented as part of the interest expenses in the consolidated income
statement, net of the unwinding of the related receivable from the Romanian State (for the works to be reimbursed by
Romanian State).
The effect of changes in discount rate and timing assumptions for the receivable from the Romanian State which are
additional to the changes in discount rates and timing assumptions for decommissioning costs and environmental costs, is
presented in the consolidated income statement under interest expenses or interest income.
Pensions and similar obligations
OMV Petrom Group has defined benefit plans and other benefits. Provisions for pensions and severance payments are
calculated using the projected-unit-credit method, which divides the costs of the estimated benefit entitlements over the
whole period of employment and thus takes future increases in remuneration into account. Actuarial gains/losses are
recognized in full in the period in which they occur as follows: for retirement benefits in consolidated other comprehensive
income and for other benefits in the consolidated income statement.
112
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Provisions for voluntary and involuntary separations under restructuring programs are recognized if a detailed plan
has been approved by management prior to the consolidated statement of financial position date, and an irrevocable
commitment is thereby established. Voluntary amendments to employees’ remuneration arrangements are recognized if the
respective employees have accepted the company’s offer. Provisions for obligations under individual separation agreements
are recognized at the present value of the obligation where the amounts and dates of payment are fixed and determined.
Emission allowances received free of cost from governmental authorities (EU Emissions Trading Scheme for greenhouse
gas emissions allowances) reduce obligations for CO2 emissions and are recognized based on net approach for
Government Grant (i.e. zero value in accounting). Provisions are recognized only for shortfalls. Provisions for shortfalls are
initially measured at the best estimation of expenditure required to settle the obligation. The related expenses are
recognized as emission costs, included in production and operating expenses. If, subsequently to the recognition of a
provision, emission rights are purchased, then an asset is only recognized for the excess of the emission rights over the
CO2 emissions.
o) Taxes on income and royalties
Current tax
Current income tax is the expected tax payable or receivable on the taxable net result for the year, using tax rates enacted
or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. The taxable
profit differs from the profit as reported in the consolidated income statement because it excludes items of income or
expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be
recovered from or paid to the taxation authorities. Management periodically evaluates positions taken in the tax returns with
respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where
appropriate.
Deferred tax
Deferred income tax is recognized in respect of temporary differences at the reporting date between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognized for all taxable temporary differences, except:
where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that
is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or
loss; and
in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint
ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused
tax losses, to the extent that it is probable that future taxable profit will be available against which the deductible temporary
differences and the carry forward of unused tax credits and unused tax losses can be utilized except:
where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset
or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and
in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in
joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will
reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be
utilized.
Notes to the consolidated financial statements for the year ended December 31, 2020
113
OMV Petrom Annual Report 2020 Consolidated Financial Statements
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer
probable that sufficient future taxable profit will be available to allow all or part of the deferred tax asset to be utilized.
Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has
become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is
realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the
reporting date.
Deferred tax relating to items recognized directly in other comprehensive income or equity is recognized in consolidated
other comprehensive income or equity and not in consolidated income statement.
Deferred tax assets and deferred tax liabilities at Group level are shown net, if there is a legally enforceable right to offset
and the deferred taxes relate to matters subject to the same tax jurisdiction.
Production taxes
Royalties are based on the value of oil and gas production and are included in the consolidated income statement under
production and similar taxes.
p) Revenue recognition
Revenues from contracts with customers
Revenue is generally recognized when control over a product or a service is transferred to a customer. It is measured based
on the consideration to which is expected to be entitled based on the contract with a customer and excludes amounts
collected on behalf of third parties.
When the performance obligation is not yet satisfied, but the consideration from customers is either received or due, OMV
Petrom Group recognizes contract liabilities which are reported as other liabilities in the consolidated statement of financial
position.
When goods such as crude oil, LNG, oil products and similar goods are sold, the delivery of each quantity unit normally
represents a single performance obligation. Revenue is recognized when control of the goods has been transferred to the
customer, which is the point in time when legal ownership as well as the risk of loss has passed to the customer and is
determined on the basis of the Incoterm agreed in the contract with the customer. These sales are done with normal credit
terms according to the industry standard.
In the Downstream Oil retail business, revenues from the sale of petroleum products are recognized at a point in time, when
products are supplied to the customers. Depending on whether the Group acts as a principal or as an agent for the sale of
shop merchandise, revenue and costs related to such sales are presented gross or net in the consolidated income
statement. The Group acts as principal if it controls the goods before they are transferred to the customer. The Group has
control over the goods when it bears the inventory risk before the goods have been transferred to the customers. A second
indicator for having control of the goods before transferring them to the customer is the Group’s ability to establish the price
of goods. For sales of non-oil products, the Group considers this as being a secondary criterion, therefore, if the Group has
the ability to set the price but it does not have inventory risk before transferring the goods to the customer, it acts as an
agent in providing the goods. At filling stations, payments are due immediately at the time of purchase.
The Group’s gas and power supply contracts include a single performance obligation which is satisfied over the agreed
delivery period. Revenue is recognized according to the consumption by the customer and in line with the amount to which
the Group has a right to invoice. Only in exceptional cases long-term gas supply contracts contain stepped prices in different
periods where the rates do not reflect the value of the goods at the time of delivery. In these cases, revenue is recognized
based on the average contractual price.
114
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
In some contracts for the delivery of natural gas, the fees charged to the customer comprise a fixed charge as well as a
variable fee depending on the volumes delivered. These contracts contain only one performance obligation which is
represented by the availability of supply for the delivery of gas over a certain period. The revenue from fixed charges and
variable fees is recognized in line with the amount chargeable to the customer. Gas and power deliveries are billed and paid
on a monthly basis.
Gas storage and gas transportation contracts contain a stand-ready obligation for providing storage or transportation
services over an agreed period of time. Revenue is recognized according to the amount to which the Group has a right to
invoice for those transactions in which it acts in the capacity of principal. These services are billed and paid on a monthly
basis.
Power and gas sales are often subject to fees or tariffs for facilitating the transfer of goods and services. When the Group
does not control the services related to such fees and tariffs before they are transferred to the customer and when it is not
involved in the rendering of the service nor does it control the pricing, the Group is only an agent in providing these services.
As the revenues are recognized in the amount to which the Group has a right to invoice, OMV Petrom Group applies the
practical expedient according to IFRS 15.121 in accordance with which the amount for unsatisfied remained performance
obligations need not be disclosed.
Revenues from other sources
Revenues from other sources mainly include revenues from commodity transactions that are within the scope of IFRS 9
Financial Instruments, realized and unrealized results from hedging of sales transactions, as well as rental and lease
revenues.
As per IFRS 9 Financial Instruments, commodity contracts that were entered into and continue to be held for the purpose of
the receipt or delivery of a non-financial item in accordance with the entity’s expected purchase, sale or usage requirements
fall within the own use exemption.
OMV Petrom Group obtains revenues from gas sales forward contracts with physical delivery, which are considered to fall
under own use exemption as mentioned above.
Dividend and interest income
Dividend income from investments is recognized when the shareholder’s right to receive payment has been established.
Interest income is accrued using the effective interest rate, which is the rate that discounts the estimated future cash receipts
through the expected life of the financial asset to that asset’s net carrying amount.
q) Cash and cash equivalents
Cash is considered to be cash on hand and in operating accounts in banks. Cash equivalents represent deposits and highly
liquid short-term investments with original maturities of less than three months.
Notes to the consolidated financial statements for the year ended December 31, 2020
115
OMV Petrom Annual Report 2020 Consolidated Financial Statements
5. FOREIGN CURRENCY AND TRANSLATION
a) Group companies
The consolidated financial statements are presented in RON, which is OMV Petrom S.A.’s functional currency and the
Group’s presentation currency. Each entity in OMV Petrom Group determines its own functional currency, and items
included in its individual financial statements are measured using that functional currency. The functional currency of the
foreign operations is generally their local currency, except for Kazakhstan entities that have USD as functional currency.
Where the functional currency differs from the Group’s presentation currency, individual financial statements are translated
using the closing rate method. Differences arising between the statement of financial position items translated at closing and
historical rates are presented as a separate item directly in equity and in consolidated other comprehensive income. Income
statement items are translated at average rates for the period. The use of average rates for translation of income statement
creates additional differences compared to the application of the closing rates in the statement of financial position which are
also recorded in equity and in consolidated other comprehensive income. On disposal of a foreign operation, the component
of consolidated other comprehensive income and equity relating to the translation of that particular foreign operation is
recognized in the consolidated income statement.
The rates applied in translating foreign currencies to RON were as follows:
Year ended
December 31,
2020*
Average for the
year ended
December 31, 2020
Year ended
December 31,
2019*
Average for the
year ended
December 31, 2019
3.9660
4.8694
0.2305
0.0414
2.4897
4.2413
4.8376
0.2451
0.0411
2.4734
4.2608
4.7793
0.2481
0.0407
2.4436
4.2392
4.7454
0.2413
0.0403
2.4263
Currencies
US dollar (USD)
Euro (EUR)
Moldavian Leu (MDL)
Serbian Dinar (RSD)
Bulgarian Leva (BGN)
*) as communicated by the National Bank of Romania
b) Transactions and balances
Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional currency spot
rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign
currencies are translated at the functional currency spot rates of exchange at the reporting date. Differences arising on
settlement or translation of monetary items are recognized in the consolidated income statement. Unrealized foreign
exchange gains and losses related to monetary items are recognized in the consolidated income statement for the year.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange
rates at the dates of the initial transactions.
116
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
6. INTANGIBLE ASSETS
COST
Balance as at January 1, 2020
1,350.29
3,411.65
4,761.94
Concessions,
licences and other
intangible assets
Oil and gas
assets with unproved
reserves
Total
Exchange differences
Additions
Transfers (Note 7)
Disposals*
Transfers to assets held for sale
Balance as at December 31, 2020
ACCUMULATED AMORTIZATION AND IMPAIRMENT
Balance as at January 1, 2020
Exchange differences
Amortization
Impairment
Transfers (Note 7)
Disposals
Write-ups
Transfers to assets held for sale
Balance as at December 31, 2020
CARRYING AMOUNT
As at January 1, 2020
As at December 31, 2020
0.69
3.00
0.41
(3.93)
(1.03)
0.80
277.66
(5.97)
(58.74)
-
1.49
280.66
(5.56)
(62.67)
(1.03)
1,349.43
3,625.40
4,974.83
1,258.20
0.49
10.59
-
-
(3.57)
(41.46)
(0.93)
1,223.32
92.09
126.11
371.73
1,629.93
-
-
628.95
(1.52)
(58.52)
(0.64)
-
0.49
10.59
628.95
(1.52)
(62.09)
(42.10)
(0.93)
940.00
2,163.32
3,039.92
3,132.01
2,685.40
2,811.51
*) Includes the amount of RON 0.19 million representing decrease from reassessment of decommissioning asset for exploration wells (under category "Oil and gas assets with unproved
reserves").
Oil and gas assets with unproved reserves include mainly expenditure capitalized in relation to Neptun project. OMV Petrom
remains keen to see the Neptun Deep strategic project being developed. Based on management assessment it was
concluded that there were no impairment triggers as at December 31, 2020 and 2019.
Notes to the consolidated financial statements for the year ended December 31, 2020
117
OMV Petrom Annual Report 2020 Consolidated Financial Statements
7. PROPERTY, PLANT AND EQUIPMENT
Land, land rights
and buildings,
incl. buildings on
third-party
property
Oil and gas
assets
Plant and
machinery
Other
fixtures
and fittings,
tools and
equipment
Assets under
construction
Total
COST
Balance as at January 1, 2020
5,180.77
43,366.55
11,281.87
1,592.24
671.34
62,092.77
Exchange differences
Additions*
Transfers**
13.76
97.23
(17.48)
2,589.33
109.58
(101.68)
0.03
326.56
321.10
2.21
62.84
56.63
Transfers to assets held for sale
(9.39)
(3,818.97)
(198.43)
(106.63)
Disposals
(41.08)
(409.80)
(70.70)
(40.45)
0.47
(1.01)
396.52
3,472.48
(380.07)
5.56
(4.92)
(0.22)
(4,138.34)
(562.25)
Balance as at December 31, 2020
5,350.87
41,607.95
11,660.43
1,566.84
683.12
60,869.21
ACCUMULATED DEPRECIATION
AND IMPAIRMENT
Balance as at January 1, 2020
2,394.14
24,077.43
6,671.92
Exchange differences
Depreciation
Impairment
Transfers**
5.49
(15.82)
217.61
1,931.24
5.15
0.07
846.34
0.95
0.11
722.14
13.94
(1.49)
Transfers to assets held for sale
(4.16)
(3,336.45)
(177.48)
Disposals
Write-ups
(24.87)
(1.05)
(400.77)
(366.66)
(67.74)
(476.11)
983.99
1.91
167.29
4.31
1.99
(90.25)
(34.44)
(2.11)
20.57
34,148.05
(0.18)
(8.49)
-
-
-
-
-
-
3,038.28
869.74
1.52
(3,608.34)
(527.82)
(845.93)
Balance as at December 31, 2020
2,592.38
22,736.26
6,685.29
1,032.69
20.39
33,067.01
CARRYING AMOUNT
As at January 1, 2020
2,786.63
19,289.12
4,609.95
As at December 31, 2020
2,758.49
18,871.69
4,975.14
*) Includes the amount of RON 487.01 million representing increase from reassessment of the decommissioning asset.
**) Net amount represents transfers from intangibles (Note 6).
608.25
534.15
650.77
27,944.72
662.73
27,802.20
Expenditure capitalized in the course of construction of tangible and intangible assets amounts to RON 529.58 million (2019:
RON 541.11 million).
For details on impairments see Note 23.
OMV Petrom Group as a lessee
OMV Petrom Group as a lessee recognized right-of-use assets related mainly to land for filling stations, cars, rail cars and
other transportation vehicles, the hydrogen plant at Petrobrazi Refinery and power generators, as well as other land and
office buildings leases.
Due to the nature of oil and gas operations, some lease contracts include the possibility for OMV Petrom Group as a lessee
to extend or terminate the original lease term. The existence of such options is a business necessity, as the activities are
largely dependent on the market factors and on the existence of oil and gas reserves. These provide operational flexibility in
terms of managing the assets used in the Group’s operation. These options are assessed by OMV Petrom Group at lease
commencement whether it is reasonably certain that they will be exercised or not.
118
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Right-of-use assets recognized under IFRS 16
Right-of-use assets as at January 1, 2020
Additions
Depreciation
Other movements
Right-of-use assets as at December 31, 2020
Amounts recognized in consolidated income statement
Land and
buildings
Plant and
machinery
Other fixtures,
fittings and
equipment
231.72
58.11
(25.69)
(5.38)
258.76
104.07
12.51
(23.13)
(0.41)
93.04
336.43
47.98
(93.59)
(5.57)
285.25
Total
672.22
118.60
(142.41)
(11.36)
637.05
Operating result
Short-term lease expenses
Low-value lease expenses
Variable lease expenses
Depreciation expense of right-of-use assets
Net financial result
Interest expense on lease liabilities
Foreign exchange loss on lease liabilities
2020
2019
20.78
0.72
20.70
142.42
10.95
5.66
65.47
0.60
26.84
108.93
10.51
10.25
In addition, OMV Petrom Group incurred in 2020 short term lease costs of RON 54.73 million (2019: RON 240.08 million)
which were capitalized in the cost of other assets.
Variable lease payments expensed in 2020 in amount of RON 20.70 million (2019: RON 26.84 million) were related to
contingent rent mainly for leased filling stations and power generators equipment, determined based on turnover, quantities
or other contractual parameters.
For other information on lease liability please see Note 16 and Note 32 a).
Notes to the consolidated financial statements for the year ended December 31, 2020
119
OMV Petrom Annual Report 2020 Consolidated Financial Statements
8. INVESTMENTS IN ASSOCIATED COMPANIES
As at December 31, 2020 and December 31, 2019 OMV Petrom Group had one associated company: OMV Petrom Global
Solutions S.R.L. with a shareholding of 25% and principal place of business in Romania.
The associate is not material to the Group. The table below summarizes financial information for the Group’s interest in
associate (aggregated):
Carrying amount of interests in individually immaterial associates
Group’s share of:
- profit from continuing operations (Note 21)
- other comprehensive income
- dividends during the year
Total comprehensive income
Carrying amount reconciliation for immaterial associates is as follows:
January 1, 2020
Share of total comprehensive income of associates (see above)
December 31, 2020
2020
31.68
4.47
0.27
-
4.74
2019
26.94
7.36
(0.34)
(0.13)
6.89
Associated companies
26.94
4.74
31.68
During 2019 the share capital of the associated entity OMV Petrom Global Solution S.R.L. was reduced by way of cash
distribution, with no impact on the shareholding of 25% held by OMV Petrom Group. For details please see Note 32 c).
9. TRADE RECEIVABLES AND OTHER FINANCIAL ASSETS
a) Trade receivables
Trade receivables are amounting to RON 1,258.13 million as at December 31, 2020 (2019: RON 1,891.86 million).
120
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Credit quality of trade receivables
December 31, 2020
Risk class 1
Risk class 2
Risk class 3
Risk class 4
Risk class 5
Total
Expected credit
loss rate
Gross carrying
amount
Expected credit
loss
Net carrying
amount
0.07%
0.25%
1.19%
10.26%
100.00%
66.14
357.68
739.98
98.39
200.03
1,462.22
-
0.06
4.86
1.61
197.56
204.09
66.14
357.62
735.12
96.78
2.47
1,258.13
December 31, 2019
Expected credit
loss rate
Gross carrying
amount
Expected credit
loss
Net carrying
amount
Risk class 1
Risk class 2
Risk class 3
Risk class 4
Risk class 5
Total
0.07%
0.24%
1.22%
10.27%
100.00%
293.98
641.63
898.34
60.84
201.13
2,095.92
0.01
0.13
5.05
1.11
197.76
204.06
The movements in impairment of trade receivables are as follows:
January 1
Amounts written off
Net remeasurement of expected credit losses
Foreign exchange rate differences
December 31
b) Other financial assets (net of impairment)
2020
204.06
(0.68)
0.52
0.19
204.09
293.97
641.50
893.29
59.73
3.37
1,891.86
2019
243.20
(20.79)
(18.61)
0.26
204.06
Expenditure recoverable from Romanian State
Derivative financial assets (Note 33)
Investments
Other financial assets
Total
December 31, 2020
less than 1 year
over 1 year
Liquidity term
2,402.19
647.52
0.91
255.45
359.05
646.13
-
207.93
2,043.14
1.39
0.91
47.52
3,306.07
1,213.11
2,092.96
Notes to the consolidated financial statements for the year ended December 31, 2020
121
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Expenditure recoverable from Romanian State
Derivative financial assets (Note 33)
Other financial assets
Total
December 31, 2019
less than 1 year
over 1 year
Liquidity term
1,962.83
281.64
364.20
2,608.67
-
1,962.83
231.23
254.87
486.10
50.41
109.33
2,122.57
Expenditure recoverable from Romanian State
As part of the privatization agreement, OMV Petrom S.A. is entitled to reimbursement by the Romanian State of part of
decommissioning and environmental costs incurred to restore and clean up areas pertaining to activities prior to privatization
in 2004. Consequently, OMV Petrom S.A. has recorded as receivable from the Romanian State the estimated
decommissioning obligations having a net present value of RON 2,152.42 million as at December 31, 2020 (2019: RON
1,793.22 million) and the environmental liabilities with net present value of RON 249.77 million (2019: RON 169.61 million),
as these were existing prior to privatization of OMV Petrom S.A.
On 7 March 2017, OMV AG, as party in the privatization agreement, initiated arbitration proceedings against the Romanian
Ministry of Environment, in accordance with the International Chamber of Commerce (“ICC”) Rules, regarding certain claims
unpaid by the Ministry of Environment for costs incurred by OMV Petrom with well decommissioning and environmental
remediation works, amounting to RON 287.66 million. On July 9, 2020, the Arbitral Tribunal issued the Final Award on the
arbitration and requested the Ministry of Environment to reimburse to OMV Petrom S.A. the amount of RON 287.62 million
and related interest (see Note 24). As of December 31, 2020, the procedure for recognition and enforcement in Romania of
the Award is ongoing.
On 2 October 2020, OMV AG, as party in the privatization agreement, initiated arbitration proceedings against the Romanian
Ministry of Environment, in accordance with the ICC Rules, regarding certain claims unpaid by the Ministry of Environment in
relation to well decommissioning and environmental remediation works amounting to RON 155.73 million. As of December
31, 2020, the arbitration procedure is ongoing.
Investments
Investments are related to companies that were not consolidated, as the Group neither has control nor significant influence
over their operations, or they were considered immaterial for the Group.
Other financial assets
On 14 September 2016, OMV Petrom signed a financing contract with the Romanian Ministry of Energy for a government
grant to be received for Brazi power plant investment, which was subsequently increased through two addendums in 2017
and 2018, recorded as other financial assets against reduction of cost of fixed assets.
As of December 31, 2020 the present value of the financial asset representing government grant to be received for Brazi
power plant investment was in amount of RON 39.15 million (2019: RON 172.47 million). During 2020 an amount of RON
140.19 million from third tranche was collected, whilst during 2019 the first two tranches in amount of RON 226.59 million
were collected (see Note 32 d).
122
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Credit quality other financial assets at amortized cost – gross carrying amount
December 31, 2020
Risk class 1
Risk class 2
Risk class 3
Risk class 4
Risk class 5
Total
Expected
credit loss
rate
0.07%
0.25%
1.19%
10.26%
100.00%
12-month ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
0.05
2,522.13
138.41
2.39
0.25
2,663.23
-
-
-
-
-
-
-
45.68
-
-
538.90
584.58
Total
0.05
2,567.81
138.41
2.39
539.15
3,247.81
For risk class 2, “12-month ECL” included an amount of RON 2,405.64 million and “Lifetime ECL credit impaired” included
an amount of RON 45.68 million, related to expenditure recoverable from the Romanian State.
December 31, 2019
Risk class 1
Risk class 2
Risk class 3
Risk class 4
Risk class 5
Total
Expected
credit loss
rate
0.07%
0.24%
1.22%
10.27%
100.00%
12-month ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
42.57
2,201.06
85.66
2.56
0.14
2,331.99
-
-
-
-
-
-
-
67.38
-
-
542.42
609.80
Total
42.57
2,268.44
85.66
2.56
542.56
2,941.79
For risk class 2, “12-month ECL” included an amount of RON 1,965.92 million and “Lifetime ECL credit impaired” included
an amount of RON 67.38 million, related to expenditure recoverable from the Romanian State.
Credit quality other financial assets at amortized cost – expected credit loss
December 31, 2020
Expected credit
loss rate
12-month ECL
Lifetime ECL not
credit impaired
Lifetime ECL
credit impaired
Risk class 1
Risk class 2
Risk class 3
Risk class 4
Risk class 5
Total
0.07%
0.25%
1.19%
10.26%
100.00%
-
4.83
0.54
0.11
0.11
5.59
-
-
-
-
-
-
-
45.68
-
-
538.90
584.58
Total
-
50.51
0.54
0.11
539.01
590.17
For risk class 2, “12-month ECL” included an amount of RON 3.45 million and “Lifetime ECL credit impaired” included an
amount of RON 45.68 million, related to expenditure recoverable from the Romanian State.
Notes to the consolidated financial statements for the year ended December 31, 2020
123
OMV Petrom Annual Report 2020 Consolidated Financial Statements
December 31, 2019
Expected credit
loss rate
12-month ECL
Lifetime ECL not
credit impaired
Lifetime ECL
credit impaired
Risk class 1
Risk class 2
Risk class 3
Risk class 4
Risk class 5
Total
0.07%
0.24%
1.22%
10.27%
100.00%
-
3.36
1.48
0.12
-
4.96
-
-
-
-
-
-
-
67.38
-
-
542.42
609.80
Total
-
70.74
1.48
0.12
542.42
614.76
For risk class 2, “12-month ECL” included an amount of RON 3.09 million and “Lifetime ECL credit impaired” included an
amount of RON 67.38 million, related to expenditure recoverable from the Romanian State.
The amounts in the above tables do not include derivative financial assets which are measured at fair value.
The movements in impairment of other financial assets at amortized cost were as follows:
January 1, 2020
Amounts written off
Net remeasurement of expected credit losses
Foreign exchange rate differences
December 31, 2020
January 1, 2019
Amounts written off
Net remeasurement of expected credit losses
Foreign exchange rate differences
December 31, 2019
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
4.96
-
0.75
(0.12)
5.59
-
-
-
-
-
609.80
(12.99)
(12.23)
-
584.58
12-month
ECL
Lifetime ECL
not credit
impaired
Lifetime
ECL credit
impaired
4.45
-
0.50
0.01
4.96
-
-
-
-
-
614.14
(0.01)
(4.33)
-
609.80
Total
614.76
(12.99)
(11.48)
(0.12)
590.17
Total
618.59
(0.01)
(3.83)
0.01
614.76
124
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
10. OTHER ASSETS
The carrying value of other assets was as follows:
Receivable from taxes
Advance payments on fixed assets
Prepaid expenses and deferred charges
Rental and lease prepayments
Other non-financial assets
Total
Receivable from taxes
Advance payments on fixed assets
Prepaid expenses and deferred charges
Rental and lease prepayments
Other non-financial assets
Total
December 31, 2020
less than 1 year
over 1 year
Liquidity term
272.91
52.55
49.70
18.20
69.69
463.05
85.06
52.55
10.74
11.73
69.69
187.85
-
38.96
6.47
-
229.77
233.28
Liquidity term
December 31, 2019
less than 1 year
over 1 year
303.03
52.61
81.56
17.17
250.54
704.91
120.13
182.90
52.61
55.08
11.08
250.54
489.44
-
26.48
6.09
-
215.47
The decrease in “Other non-financial assets” is mainly related to lower stock of emission certificates, following sale and
consumption in 2020.
11. INVENTORIES
Crude oil
Natural gas
Other materials
Work in progress
Finished products
Total
December 31, 2020 December 31, 2019
474.30
104.24
279.02
95.44
1,149.90
2,102.90
482.66
180.81
279.17
154.05
1,367.76
2,464.45
The cost of materials and goods consumed during 2020 (whether used in production or re-sold) is of RON 8,781.06 million
(2019: RON 11,392.29 million).
As at December 31, 2020 and 2019 there are no inventories pledged as security for liabilities.
Notes to the consolidated financial statements for the year ended December 31, 2020
125
OMV Petrom Annual Report 2020 Consolidated Financial Statements
12. ASSETS HELD FOR SALE
Land and buildings
Plant and equipment
Other assets
Cash and cash equivalents
Assets held for sale
Provisions for decommissioning and restoration
Other provisions and liabilities
Liabilities associated with assets held for sale
December 31, 2020 December 31, 2019
6.61
722.91
100.80
30.58
860.90
319.33
93.35
412.68
1.53
215.67
-
-
217.20
222.55
1.20
223.75
As at December 31, 2020, assets and liabilities held for sale referred to Upstream segment and are related to:
the two subsidiaries in Kazakhstan, as in December 2020 OMV Petrom signed a transaction for the sale of its 100%
shareholding in Kom-Munai LLP and Tasbulat Oil Corporation LLP to Magnetic Oil Limited, which led to the
reclassification of their assets and liabilities to “held for sale” as of December 31, 2020. The transaction had a positive
effect of RON 134.64 million in Operating Result triggered by the reversal of previously recorded impairments, presented
under “Depreciation, amortization, impairments and write-ups”. At closing, the Group expects an estimated negative net
effect of RON 91.98 million in the consolidated income statement, generated by recycling of the exchange rate
differences from the translation of these foreign operations and by recycling of exchange differences on loans considered
net investments in the two subsidiaries.
40 marginal onshore oil and gas fields, for which OMV Petrom S.A. reached an agreement with Dacian Petroleum S.R.L.
in January 2020, which led to their reclassification of related assets and liabilities to “held for sale”. As of December 31,
2020, management expects that this transaction will be closed within the following twelve months.
As at December 31, 2019, assets and liabilities held for sale referred to Upstream segment, as OMV Petrom S.A. reached
an agreement with Dacian Petroleum S.R.L. to transfer 40 marginal onshore oil and gas fields, which led to the
reclassification of related assets and liabilities to “held for sale”. This triggered an overall negative impact on operating result
amounting to RON 220.00 million, including a pre-tax impairment of property, plant and equipment of RON 171.16 million
shown in the line “Depreciation, amortization, impairments and write-ups”.
126
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
13. STOCKHOLDERS’ EQUITY
Share capital
The share capital of OMV Petrom S.A. consists of 56,644,108,335 fully paid shares as at December 31, 2020 and 2019 with
a total nominal value of RON 5,664.41 million.
Revenue reserves
Revenue reserves include retained earnings, as well as other non-distributable reserves (legal and geological quota facility
reserves, other reserves from fiscal facilities).
Geological quota is amounting to RON 5,062.84 million as at December 31, 2020 and 2019. Until December 31, 2006, OMV
Petrom S.A. benefited from geological quota facility whereby it could charge up to 35% of the market value of the volume of
oil and gas extracted during the year. This facility was recognized directly in reserves. This quota was restricted to
investment purposes, it is not distributable and it was non-taxable.
Legal reserves are amounting to RON 1,132.88 million as at December 31, 2020 and 2019. OMV Petrom S.A. sets its legal
reserve in accordance with the provisions of the Romanian Companies Law, which requires that minimum 5% of the annual
accounting profit before tax is transferred to “legal reserve” until the balance of this reserve reaches 20% of the share capital
of the Company.
Other reserves from fiscal facilities are amounting to RON 500.47 million (2019: RON 454.06 million). The amount of RON
46.41 million was allocated to other reserves, representing fiscal facilities from reinvested profit in the year 2020 (2019: RON
31.14 million).
At the Annual General Meeting of Shareholders held on April 27, 2020, the shareholders of OMV Petrom S.A. approved the
distribution of gross dividends in amount of RON 0.031 per share for the financial year 2019.
On March 17, 2021, the Supervisory Board endorsed the management’s proposal to distribute gross dividends of RON
0.031 per share for the financial year 2020. The dividend proposal is subject to further approval by the Ordinary General
Meeting of Shareholders, on April 27, 2021.
Cash flow hedge reserve
In order to protect the Group’s result and cash flows against commodity price volatility, OMV Petrom Group uses derivative
instruments for both hedging selected product sales and reducing exposure to price risks on inventory fluctuations. Crude oil
and product swaps are used to hedge the refining margin (crack spread) which is the difference between product prices and
crude oil prices.
Certain financial instruments were accounted as cash flow hedges, with the effective part of the change in value of the
derivative being accounted for in other comprehensive income. The cumulative unrealized gain recognized in other
comprehensive income, net of tax, is in amount of RON 74.36 million as at December 31, 2020 (2019: RON 27.70 million).
The hedged item (underlying transaction) can affect profit or loss or balance sheet; when this happens the amounts
previously accounted for in other comprehensive income are recycled to income statement or transferred to the carrying
amount of the hedged item, respectively. For more details on hedges please refer to Note 36.
Other reserves
Other reserves contain mainly reserves from business combinations in stages, land for which land ownership certificates
were obtained but was not yet included in share capital and exchange differences on loans considered net investment in a
foreign operation.
Notes to the consolidated financial statements for the year ended December 31, 2020
127
OMV Petrom Annual Report 2020 Consolidated Financial Statements
14. PROVISIONS
January 1, 2020
thereof short-term
thereof long-term
Exchange differences
Liabilities associated with assets
held for sale
Used
Net allocations/(releases)
December 31, 2020
thereof short-term
thereof long-term
Pensions and
similar obligations
Decommissioning
and restoration
Other
provisions
240.70
-
240.70
0.01
-
(19.28)
(7.74)
213.69
-
213.69
6,768.27
312.19
6,456.08
(0.19)
(49.05)
(201.21)
1,021.97
7,539.79
267.37
7,272.42
899.99
311.12
588.87
(0.22)
(31.44)
(104.35)
130.64
894.62
249.50
645.12
Total
7,908.96
623.31
7,285.65
(0.40)
(80.49)
(324.84)
1,144.87
8,648.10
516.87
8,131.23
Provisions for pensions and similar obligations
Employees of several Group companies are entitled to receive retirement benefits on reaching normal retirement age. The
entitlements depend on years of service and final compensation levels. Retirement benefits obligation as of December 31,
2020 amounts RON 140.55 million (2019: RON 156.50 million). In addition, employees receive other benefits consisting in
death and coffin benefits. Other benefits obligation as of December 31, 2020 amounts to RON 73.14 million (2019: RON
84.20 million).
Provisions have been set up based on actuarial calculations performed by qualified actuaries using the following
parameters: a discount rate of 3.35% (2019: 4.41%) and an estimated average yearly salary increase of 3.10% (2019:
4.19%).
Present value of the pensions and similar obligations
Present value of obligations as of January 1
Current service cost
Past service cost
Interest cost
Benefits paid
Remeasurements for the year
Present value of obligations as of December 31
2020
240.70
8.50
(43.56)
10.83
(19.28)
16.50
213.69
2019
211.38
7.51
2.08
10.06
(11.59)
21.26
240.70
In 2020 past service cost is related mainly to outsourcing of activities for general surface services.
Sensitivities changes in absolute terms
Pensions and other similar obligations increase/
(decrease)
(11.33)
11.83
3.49
(4.29)
Discount rate
Salary increase rate
0.50%
-0.50%
0.25%
-0.25%
128
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Maturity profile
Retirement benefits
Maturity profile
1-5 years
6-10 years
>10 years
32.75
35.63
72.16
Duration
in years
11.42
Provisions for decommissioning and restoration obligations
Changes in provisions for decommissioning and restoration are shown in the table below. In the event of changes in
estimated restoration costs the effect of the change in present value is recognized in the period concerned. If the value
increases, the increase is depreciated over the remaining useful life of the asset, and if it decreases, the decrease is
deducted from capitalized asset value or recognized in the consolidated income statement if it exceeds the carrying amount
of the related asset. Net discount rates applied for calculating of decommissioning and restoration costs at December 31,
2020 were between 0.50% and 0.57% for onshore (2019: between 0.00% and 1.65%) and 3.10% for offshore (2019:
1.65%). A decrease of 1 percentage point in the real interest rates used to calculate the decommissioning and restoration
provisions would lead to an additional provision of RON 936 million.
The provision for decommissioning and restoration costs includes mainly obligations in respect of OMV Petrom S.A.
amounting to RON 7,511.13 million (2019: RON 6,702.45 million). In relation to part of the OMV Petrom S.A.
decommissioning and restoration obligations, there is a corresponding receivable from the Romanian State, as disclosed
under “Other financial assets” (Note 9b).
Revisions in estimates for decommissioning and restoration provisions arise from the yearly reassessment of the unit cost,
the number of wells and other applicable items, as well as the expected timing of the decommissioning and restoration and
revision of estimated net discount rates.
Details on the decommissioning and restoration obligations are as follows:
January 1
Exchange differences
Revisions in estimates
Unwinding effect
Used in current year
Transfer to liabilities associated with assets held for sale
December 31
2020
6,768.27
(0.19)
733.55
288.42
(201.21)
(49.05)
7,539.79
2019
6,238.63
4.81
651.61
293.95
(197.37)
(223.36)
6,768.27
The revisions in estimates impact the assets subject to decommissioning, the consolidated income statement or the related
receivable from the Romanian State. The unwinding effect is included in the consolidated income statement under the
interest expenses line (Note 24) net of the unwinding effect on the related receivable from the Romanian State. The effect of
changes in net discount rate or timing of the receivable from the Romanian State (which are additional to the changes in net
discount rate or timing of the decommissioning costs) is included in the consolidated income statement under interest
expenses or interest income.
Impact from revision in estimates in 2020 was generated by lower net discounting rates and higher estimated average unit
costs for onshore assets in Romania.
Impact from revision in estimates in 2019 was generated mainly by the decrease of net discount rates and higher estimated
average unit costs for onshore wells in Romania.
Notes to the consolidated financial statements for the year ended December 31, 2020
129
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Other provisions
December 31, 2020
Environmental provision
Other personnel provisions
Provisions for litigations
Other
Total
December 31, 2019
Environmental provision
Other personnel provisions
Provisions for litigations
Other
Total
Total
less than 1 year
over 1 year
410.22
118.66
83.83
281.91
894.62
55.18
117.15
5.13
72.04
249.50
355.04
1.51
78.70
209.87
645.12
Total
less than 1 year
over 1 year
397.11
101.76
82.49
318.63
899.99
51.20
99.13
5.47
155.32
311.12
345.91
2.63
77.02
163.31
588.87
Environmental provisions
The environmental provisions were estimated by the management based on the list of environment related projects that
must be completed by OMV Petrom Group. Provisions recorded as at December 31, 2020 and 2019 represent the best
estimate of the Group’s experts for environmental matters. Environmental provisions are mainly computed using a discount
rate of 3.10% (2019: 4.41%).
OMV Petrom S.A. recorded certain environmental liabilities against receivable from the Romanian State, as these
obligations existed prior to privatization (as further explained in Note 9b “Expenditure recoverable from Romanian State”).
Provisions for litigations
OMV Petrom Group monitors all litigations instigated against it and assesses the likelihood of losses and the related costs
using in house lawyers and external legal advisors. OMV Petrom Group has assessed the potential liabilities with respect to
ongoing cases and recorded its best estimate of likely cash outflows.
Emissions certificates
Directive 2003/87/EC of the European Parliament and of the European Council established a greenhouse gas emissions
trading scheme, requiring member states to draw up national plans to allocate emissions certificates. Romania was admitted
to the scheme in January 2007, when it joined the EU.
The only company from the Group included in this scheme is OMV Petrom S.A. Under this scheme OMV Petrom S.A. is
entitled to an allocation of 643,767 emission certificates for the year 2020 (2019: 1,018,845 emission certificates). During
2020 the Company received 973,979 emission certificates, out of which 330,212 emission certificates representing the 2019
entitlement according to article 10c) of the Directive and 643,767 emission certificates from 2020 entitlement according to
article 10a) of the Directive.
During 2020 the Group had net sales of 329,915 emissions certificates (2019: net other purchases of 1,153,324 emissions
certificates).
A shortfall in emission certificates is provided for. As of December 31, 2020, the Group was not short of certificates.
130
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
15. INTEREST-BEARING DEBTS
As at December 31, 2020 and December 31, 2019 OMV Petrom Group had the following loans:
Borrower
Lender
Interest-bearing debts short-term
OMV Petrom S.A.
OMV Petrom S.A.
European Investment Bank (a)
OMV Petrom Global Solutions S.R.L. (b)
Accrued interest and other
Prepayments in relation with loan amounts drawn
Total interest bearing debts short-term
Interest-bearing debts long-term
OMV Petrom S.A.
European Investment Bank (a)
Prepayments in relation with loan amounts drawn
Total interest-bearing debts long-term
thereof maturing after more than 1 year but not later than 5 years
Total interest-bearing debts
December 31, 2020
December 31, 2019
92.75
81.22
1.13
(0.07)
175.03
108.98
(0.04)
108.94
108.94
283.97
91.03
39.67
1.62
(0.07)
132.25
198.00
(0.12)
197.88
197.88
330.13
(a)
For the construction of the Brazi Power Plant, OMV Petrom S.A. concluded an unsecured loan agreement for an
amount of EUR 200.00 million with European Investment Bank. The agreement was signed on May 8, 2009 and the final
maturity date is June 15, 2023. The outstanding amount as at December 31, 2020 was RON 201.73 million (equivalent of
EUR 41.43 million) (2019: RON 289.03 million, equivalent of EUR 60.48 million).
(b)
A cash pooling agreement with maturity on April 18, 2021, renewable each year, was signed between OMV Petrom
S.A. and OMV Petrom Global Solutions S.R.L. on April 25, 2014. The aggregated amount of the loan is RON 100.00 million,
usable in RON, EUR, USD or GBP. The amount drawn by the Group as at December 31, 2020 was RON 81.22 million
(2019: RON 39.67 million).
The OMV Petrom Group’s companies have several credit facilities in place as at December 31, 2020 as follows:
(c)
An unsecured credit facility granted by Raiffeisen Bank S.A. up to EUR 50.00 million (equivalent of RON 243.47
million) consisting in two subfacilities: subfacility A with maturity date prolonged to December 31, 2021 (for an amount of
EUR 30.00 million, equivalent of RON 146.08 million) and subfacility B with maturity date prolonged to December 31, 2024
(for an amount of EUR 20.00 million, equivalent of RON 97.39 million). Subfacility A can be used only in RON and only by
OMV Petrom S.A. as overdraft credit line. Subfacility B can be used in EUR, USD, GBP or RON by OMV Petrom S.A., OMV
Petrom Marketing S.R.L. and OMV Petrom Gas S.R.L. (up to the limit of EUR 20.00 million, equivalent of RON 97.39 million)
and by OMV Petrom Aviation S.R.L. (only up to the maximum limit of EUR 10.00 million, equivalent of RON 48.69 million)
only for the issuance of letters of credit and/or issuance of letters of bank guarantee. As at December 31, 2020 no
withdrawings were made (2019: an amount of RON 0.01 million was used from the cash portion of the credit facility, being
included in “Accrued interest and other” line).
An unsecured facility contracted by OMV Petrom S.A. from ING Bank N.V., that can be used in USD, RON or EUR,
(d)
up to the maximum amount of EUR 50.00 million (equivalent of RON 243.47 million), for issuance of letters of bank
guarantee and as overdraft for working capital financing. The maturity of the credit facility is November 22, 2022. No
drawings under the overdraft were made as at December 31, 2020 and 2019.
Notes to the consolidated financial statements for the year ended December 31, 2020
131
OMV Petrom Annual Report 2020 Consolidated Financial Statements
An uncommitted and unsecured credit facility contracted by OMV Petrom S.A. from BRD – Groupe Société
(e)
Générale S.A. with maximum limit of EUR 90.00 million (equivalent of RON 438.25 million) that can be used in RON, with
maturity date prolonged until April 30, 2021. The facility is designated to finance OMV Petrom S.A. current activity and for
issuance of bank guarantees, opening letters of credit and similar. The cash portion of the credit facility was not used as at
December 31, 2020 and 2019.
A committed and unsecured credit facility contracted by OMV Petrom S.A. from Banca Comercială Română S.A.,
(f)
that can be used in USD, EUR or RON, up to a maximum amount of EUR 200.00 million (equivalent of RON 973.88 million),
for issuance of letters of bank guarantee and similar and as overdraft for working capital financing. As at December 31,
2020, the maturity for letters of bank guarantee and similar is January 13, 2024 and for overdraft the maturity is January 11,
2022, with the possibility to further extend the maturity for additional successive periods, final maturity being January 13,
2024. The cash portion of the credit facility was not used as at December 31, 2020 and 2019.
An unsecured credit facility agreement was signed by OMV Petrom S.A. with Garanti Bank S.A. for up to EUR
(g)
15.00 million (equivalent of RON 73.04 million) to be utilized for issuance of letters of bank guarantee and similar and as
overdraft for working capital financing. The maturity is January 15, 2022 for overdraft purposes and March 15, 2023 for
issuance of bank guarantees. The cash portion of the credit facility was not used as at December 31, 2020 and 2019.
(h)
An unsecured facility contracted by OMV Serbija from Raiffeisen Banka a.d. Belgrad, with a maximum limit of RSD
600.00 million (equivalent of RON 24.84 million) and maturity date until March 30, 2022. The destination of the facility is for
general corporate purposes financing. As at December 31, 2020 there is no amount used under the overdraft facility (2019:
RON 0.01 million used from overdraft facility, included in “Accrued interest and other” line).
An unsecured credit facility agreement was signed by Petrom Moldova SRL with Banca Comercială Română
(i)
Chișinău SA for up to MDL 20.00 million (equivalent of RON 4.61 million) to be utilized as overdraft for working capital
financing. Final maturity is March 19, 2021. No drawings were made under the overdraft facility as at December 31, 2020
and 2019.
A credit facility contracted on October 02, 2014 by Tasbulat Oil Corporation LLP and Kom-Munai LLP as Borrowers
(j)
from JSK Citibank Kazakhstan, accessible to both companies up to the maximum limit of USD 15.00 million (equivalent of
RON 59.49 million) and maturity date prolonged to July 31, 2024. The purpose of the facility is for general corporate needs,
working capital financing, letters of credit and letters of bank guarantee. The credit facility was not used as at December 31,
2020 and 2019.
(k)
An unsecured facility contracted by OMV Bulgaria OOD from Raiffeisenbank Bulgaria EAD, with a limit of BGN
19.75 million (equivalent of RON 49.17 million) and maturity date January 30, 2024. The destination of the facility is the
financing of current operational activities and issuance of letters of bank guarantee. There were no drawings under the
overdraft facility as at December 31, 2020 and 2019.
OMV Petrom Group’s companies have signed also facilities with several banks for issuing letters of bank guarantee and
letters of credit, as follows:
An unsecured facility agreement was signed by OMV Petrom S.A. with BNP Paribas Fortis Bank S.A./N.V. –
(l)
Bucharest branch – for up to EUR 30.00 million (equivalent of RON 146.08 million), to be utilized only for issuance of letters
of bank guarantee and letters of credit, with maturity date prolonged to March 27, 2021. Maturity is subject to possibility of
further automatic extensions for successive periods of 12 months, but not longer than March 27, 2022.
An unsecured credit facility received by OMV Petrom S.A. from Banca Transilvania S.A., up to EUR 25.00 million
(m)
(equivalent of RON 121.74 million), to be utilized only for issuance of letters of bank guarantee, with maturity until March 31,
2022.
A frame facility contracted by OMV Serbija from Raiffeisen Banka a.d. Belgrad, with a maximum limit of EUR 2.00
(n)
million (equivalent of RON 9.74 million) and maturity date until March 31, 2023. The destination of the facility is the issuance
of letters of bank guarantee and letters of credit.
132
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
An unsecured credit facility agreement was signed by Petrom Moldova SRL with Banca Comercială Română
(o)
Chișinău SA for up to MDL 1.00 million (equivalent of RON 0.23 million) to be utilized for issuance of letters of bank
guarantees. Maturity is March 19, 2021 and it is expected to be prolonged.
As at December 31, 2020 and 2019, OMV Petrom Group is in compliance with all financial covenants stipulated by the loan
agreements.
Please refer also to Note 36 for details regarding interest rate risks of interest-bearing debt.
16. OTHER FINANCIAL LIABILITIES
Derivative financial liabilities (Note 33)
Financial liabilities in connection with joint operations
Other financial liabilities
Total
Derivative financial liabilities (Note 33)
Financial liabilities in connection with joint operations
Other financial liabilities
Total
December 31, 2020
less than 1 year
over 1 year
472.64
5.22
371.62
849.48
472.64
5.22
324.75
802.61
-
-
46.87
46.87
December 31, 2019
less than 1 year
over 1 year
213.72
1.12
264.52
479.36
171.54
1.12
199.88
372.54
42.18
-
64.64
106.82
Maturity profile of financial liabilities
The table below summarizes the maturity profile of the Group’s financial liabilities based on contractual undiscounted cash
flows (i.e. also including future finance charges):
December 31, 2020
Interest-bearing debts
Lease liabilities
Trade payables
Derivative financial liabilities
Other financial liabilities
Total
December 31, 2019
Interest-bearing debts
Lease liabilities
Trade payables
Derivative financial liabilities
Other financial liabilities
Total
< 1 year
1-5 years
> 5 years
176.87
147.63
2,858.64
472.64
329.97
3,985.75
110.38
351.59
-
-
15.04
477.01
-
273.95
-
-
31.83
305.78
< 1 year
1-5 years
> 5 years
135.05
138.60
3,372.35
171.54
201.00
4,018.54
202.08
372.13
-
42.18
31.82
648.21
-
285.40
-
-
32.82
318.22
Total
287.25
773.17
2,858.64
472.64
376.84
4,768.54
Total
337.13
796.13
3,372.35
213.72
265.64
4,984.97
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly
different amounts.
Notes to the consolidated financial statements for the year ended December 31, 2020
133
OMV Petrom Annual Report 2020 Consolidated Financial Statements
17. OTHER LIABILITIES
Tax liabilities
Social security
Contract liabilities
Deferred income
Other liabilities
Total
Tax liabilities
Social security
Contract liabilities
Deferred income
Other liabilities
Total
December 31, 2020
less than 1 year
over 1 year
413.57
49.70
143.63
91.24
74.69
772.83
413.57
49.70
143.63
77.15
74.69
758.74
-
-
-
14.09
-
14.09
December 31, 2019
less than 1 year
over 1 year
462.62
44.69
145.44
23.37
76.13
752.25
462.62
44.69
145.44
9.48
76.13
738.36
-
-
-
13.89
-
13.89
Contract liabilities
Contract liabilities include mainly contract liabilities recognized for vouchers sold to customers in the retail business and
advance payments received from customers for future deliveries of goods or services.
The changes in contract liabilities were as follows:
January 1
Revenue recognized that was included in the contract liability balance
at the beginning of the year
Increases due to cash received, excluding amounts recognized
as revenue during the year
December 31
2020
145.44
2019
138.86
(110.34)
(131.92)
108.53
143.63
138.50
145.44
134
Notes to the consolidated financial statements for the year ended December 31, 2020
18. DEFERRED TAX
December 31, 2020
Tangible and intangible assets
Inventories
Receivables and other assets
Provisions for pensions and similar obligations
Other provisions
Liabilities
Tax loss carried forward
Total
Netting (same tax jurisdiction/country)
Total deferred tax, net
December 31, 2019
Tangible and intangible assets
Inventories
Receivables and other assets
Provisions for pensions and similar obligations
Other provisions
Liabilities
Tax loss carried forward
Total
Netting (same tax jurisdiction/country)
Total deferred tax, net
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Deferred tax
assets total
Deferred tax
assets not
recognized
Deferred tax
assets
recognized
Deferred tax
liabilities
296.63
21.95
151.86
36.22
1,067.90
68.91
-
1,643.47
-
-
(38.51)
-
-
(0.65)
-
(39.16)
296.63
21.95
113.35
36.22
1,067.90
68.26
-
1,604.31
(70.57)
1,533.74
27.57
-
40.94
2.06
-
-
-
70.57
(70.57)
-
Deferred tax
assets total
Deferred tax
assets not
recognized
Deferred tax
assets
recognized
Deferred tax
liabilities
369.83
26.54
161.27
42.47
954.30
71.09
0.29
(15.24)
(0.47)
(38.32)
-
(5.81)
(1.85)
-
1,625.79
(61.69)
354.59
26.07
122.95
42.47
948.49
69.24
0.29
1,564.10
(73.17)
1,490.93
46.23
-
43.80
4.05
-
-
-
94.08
(73.17)
20.91
2019
26.13
0.74
6.37
6.41
17.79
67.44
–
–
124.88
Notes to the consolidated financial statements for the year ended December 31, 2020
135
As at December 31, 2020, losses carry-forward for tax purposes amounted to RON 242.75 million (2019: RON
124.88 million). Eligibility of losses for carry-forward expires as follows:
2020
2021
2022
2023
2024
2025 / After 2024
After 2025
unlimited
Total
2020
0
22.17
1.02
10.82
5.40
15.01
86.78
101.55
242.75
OMV Petrom Annual Report 2020 Consolidated Financial Statements
No deferred tax asset was recognized for part of tax losses carry-forward included in the above table, in amount of
RON 230.20 million (2019: RON 123.43 million). As of December 31, 2020, the deferred tax asset recognised for part of tax
losses carried-forward is included under "Assets held for sale".
19. SALES REVENUES
Revenues
Revenues from contracts with customers
Revenues from other sources
Total sales revenues
2020
18,120.39
1,596.59
19,716.98
2019
24,326.96
1,158.51
25,485.47
Revenues from contracts with customers
In the following tables, revenues recorded in 2020 and 2019 are disaggregated by products and reportable segments.
2020
Upstream Downstream
thereof
Downstream
Oil
thereof
Downstream
Gas
Corporate &
Other
Crude Oil, NGL, condensates
Natural gas, LNG and power
Fuels and heating oil
Other goods and services*
259.50
47.63
5.33
4,671.28
47.63
9.30
-
9,821.33
9,821.33
39.06
3,261.73
3,197.25
-
4,661.98
-
64.48
Total
307.13
4,676.61
9,821.33
-
-
-
14.53
3,315.32
Total
2019
Crude Oil, NGL, condensates
Natural gas, LNG and power
Fuels and heating oil
Other goods and services*
303.89
17,801.97
13,075.51
4,726.46
14.53
18,120.39
Upstream Downstream
thereof
Downstream
Oil
thereof
Downstream
Gas
Corporate &
Other
420.63
60.81
5.84
5,532.69
60.81
13.24
-
5,519.45
-
14,157.52
14,157.52
-
-
-
-
Total
481.44
5,538.53
14,157.52
48.70
4,087.01
3,981.16
105.85
13.76
4,149.47
Total
475.17
23,838.03
18,212.73
5,625.30
13.76
24,326.96
*) Mainly non-fuel business in Downstream Oil
Revenues from other sources
Revenues from other sources mainly include revenues from commodity transactions that are within the scope of IFRS 9
Financial Instruments, realized and unrealized results from hedging of sales transactions, as well as rental and lease
revenues.
OMV Petrom Group acts as a lessor for lease arrangements assessed as operating leases mainly for land and buildings and
equipment. Rental and lease revenues in 2020 amount to RON 48.34 million (2019: RON 50.31 million).
136
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
20. OTHER OPERATING INCOME
Exchange gains from operating activities
Gains on disposal of non-current assets
Other operating income
Total
2020
46.58
52.79
329.58
428.95
2019
29.17
84.07
145.53
258.77
Other operating income in 2020 includes revenues from sales of CO2 certificates in amount of RON 180.99 million and gains
of RON 71.50 million from the fair value measurement of CO2 certificates held for trading in Downstream. During 2019 this
line included income related to clarification of a tax related topic in Romania, in amount of RON 66.96 million.
Gains on disposal of non-current assets include in 2019 the amount of RON 52.82 million in relation to non-current assets
transferred to Mazarine Energy Romania S.R.L. (see Note 32e).
21. NET INCOME FROM INVESTMENTS IN ASSOCIATES
Share of net result of associated companies
Total
22. OTHER OPERATING EXPENSES
Exchange losses from operating activities
Losses on disposal of non-current assets
Other operating expenses
Total
2020
4.47
4.47
2020
32.93
11.54
303.99
348.46
2019
7.36
7.36
2019
34.15
5.81
244.45
284.41
Other operating expenses include an amount of RON 110.47 million (2019: RON 53.06 million) representing restructuring
expenses mainly in relation with outsourcing of activities for general surface services and an amount of RON 8.50 million
(2019: RON 9.41 million) representing costs with digitalization initiatives at group level.
Notes to the consolidated financial statements for the year ended December 31, 2020
137
OMV Petrom Annual Report 2020 Consolidated Financial Statements
23. COST INFORMATION
For the years ended December 31, 2020 and December 31, 2019 the consolidated income statement includes the following
personnel expenses:
Wages and salaries
Other personnel expenses
Total personnel expenses
2020
1,557.08
263.75
1,820.83
2019
1,580.08
239.56
1,819.64
The above personnel expenses included the amount of RON 19.42 million, representing Group’s contribution to state
pension plan for the year ended December 31, 2020 (2019: RON 19.90 million).
Depreciation, amortization and impairment losses net of write-ups of intangible assets and property, plant and equipment
consisted of:
Depreciation and amortization
Impairment tangible and intangible assets
Write-ups tangible and intangible assets
Total depreciation, amortization and net impairment
2020
3,044.09
1,521.79
(888.03)
3,677.85
2019
2,955.34
683.96
(5.18)
3,634.12
Net impairment losses booked during the year ended December 31, 2020 for intangible assets and property, plant and
equipment (including those classified as held for sale) were related mostly to Upstream segment in amount of
RON 1,151.77 million, reflecting mainly impairment at CGU level and write-offs of exploration intangibles as described in
Note 2, unsuccessful workovers and obsolete or replaced assets in Romania. These were partially offset by a write-up in
amount of RON 518.65 million related to Brazi power plant in Downstream Gas segment (see Note 2). Net impairments in
Downstream Oil segment were in amount of RON 0.59 million and in Corporate & Other segment in amount of RON
0.05 million.
Net impairment losses booked during the year ended December 31, 2019 for intangible assets and property, plant and
equipment (including those classified as held for sale) were related to Upstream segment in amount of RON 669.15 million
(including mainly impairments for replaced assets, unsuccessful workovers, assets held for sale and unsuccessful
exploration assets in Romania), to Downstream Oil segment in amount of RON 4.84 million, Downstream Gas segment in
amount of RON 3.82 million and Corporate & Other segment in the amount of RON 0.97 million.
In the consolidated income statement for the year ended December 31, 2020 net impairments are included under
depreciation, amortization, impairments and write-ups in amount of RON (48.03) million (2019: RON 551.37 million) and
under exploration expenses in amount of RON 681.79 million (2019: RON 127.42 million).
138
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
24. INTEREST INCOME AND INTEREST EXPENSES
Interest income
Interest income from receivables and other
Interest income from short term bank deposits
Unwinding income for other financial assets and positive effect of changes in discount rate
and timing for Romanian State receivable
Total interest income
Interest expenses
Interest expenses
Unwinding expenses for retirement benefits provision
2020
2019
118.91
146.23
72.19
337.33
(24.23)
(10.60)
86.86
138.09
92.68
317.63
(26.16)
(10.01)
Unwinding expenses for decommissioning provision, net of the unwinding income for related
Romanian State receivable
(234.53)
(231.96)
Unwinding expenses and discounting for other items and negative effect of changes in
discount rate and timing for Romanian State receivable
Total interest expenses
Net interest revenues/ (expenses)
(26.08)
(295.44)
41.89
(8.85)
(276.98)
40.65
Interest income from receivables and other in 2020 is mainly related to clearance of the arbitration proceedings initiated by
OMV Aktiengesellschaft at the International Chamber of Commerce Paris against the Romanian Ministry of Environment.
25. OTHER FINANCIAL INCOME AND EXPENSE
Net foreign exchange gains/(losses) from financing activities
Net gains/(losses) from investments and financial assets
Other financial expenses
Other financial income and expenses
26. TAXES ON INCOME
Current income taxes
Deferred income taxes
Taxes on income - (expense)/revenue
2020
(27.07)
-
(3.21)
(30.28)
2019
(4.67)
(1.33)
(2.91)
(8.91)
2020
(238.07)
50.38
(187.69)
2019
(699.81)
57.69
(642.12)
Notes to the consolidated financial statements for the year ended December 31, 2020
139
OMV Petrom Annual Report 2020 Consolidated Financial Statements
The reconciliation of net deferred tax is as follows:
Deferred tax, net January 1
Deferred tax, net December 31
Changes in deferred tax
thereof deferred tax expense in consolidated other comprehensive income
thereof deferred tax transferred to "held for sale"
thereof deferred tax revenue in the consolidated income statement
Reconciliation
Profit before tax
Income tax rate applicable for Parent company
Profit tax expense based on income tax rate of the Parent
Effect of differing foreign tax rates
Profit tax expense based on applicable rates
Tax effect of items that are (non-deductible) / non-taxable
Profit tax expense in the consolidated income statement
2020
1,470.02
1,533.74
63.72
(5.16)
18.50
50.38
1,478.70
16%
(236.59)
(1.20)
(237.79)
50.10
(187.69)
2019
1,412.51
1,470.02
57.51
(0.18)
-
57.69
4,276.80
16%
(684.29)
0.85
(683.44)
41.32
(642.12)
In 2020, main amounts included under items that are (non-deductible) / non-taxable relate to fiscal credits.
27. EARNINGS PER SHARE
Calculation of earnings per share is based on the following data:
Net profit attributable to stockholders of the parent
Weighted average number of shares
Earnings per share in RON
December 31, 2020 December 31, 2019
1,290.96
3,634.59
56,643,903,559
56,643,903,559
0.0228
0.0642
The basic and diluted earnings per share are the same, as there are no instruments that have a dilutive effect on earnings.
140
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
28. SEGMENT INFORMATION
OMV Petrom Group is organized into three operating business segments: Upstream, Downstream Oil and Downstream Gas,
while management, financing activities and certain service functions are concentrated in the Corporate & Other segment.
OMV Petrom Group’s involvement in the oil and gas industry, by its nature, exposes it to certain risks. These include political
stability, economic conditions, changes in legislation or fiscal regimes, as well as other operating risks inherent in the
industry such as the high volatility of crude prices and of the US dollar. A variety of measures are used to manage these
risks.
Apart from the integration of OMV Petrom Group’s upstream and downstream operations, and the policy of maintaining a
balanced portfolio of assets in the Upstream segment, the main instruments used are operational in nature. There is a
Group-wide environmental risk reporting system in operation, designed to identify existing and potential obligations and to
enable timely action to be taken. Insurance and taxation are also dealt with on a Group-wide basis. Regular surveys are
undertaken across OMV Petrom Group to identify current litigation and pending court and administrative proceedings.
Business decisions of fundamental importance are made by the Executive Board of OMV Petrom S.A. The business
segments are independently managed, as each represents a strategic unit with different products and markets.
Upstream activities consist of exploration, development and production of crude oil and natural gas and are focused on
Romania, Bulgaria and Kazakhstan. Upstream products consisting of crude oil and natural gas are sold mainly inside of
OMV Petrom Group.
Downstream Oil produces and delivers gasoline, diesel and other petroleum products to its customers. Refining division,
part of Downstream Oil segment, operates one Romanian refinery, Petrobrazi, with an annual capacity of 4.5 million tons.
Marketing division, part of Downstream Oil segment, delivers products to both retail and wholesale customers and operates
in Romania, Bulgaria, Serbia and Republic of Moldova. OMV Petrom Group is the main player on the Romanian fuels
market.
Gas business unit, part of Downstream Gas segment, has the strategic objective to focus on gas sales, becoming a
regional player. Business division Power, part of Downstream Gas segment, mainly extends the gas value chain into a gas
fired power plant.
The key figure of operating performance for OMV Petrom Group is Operating result. In compiling the segment results,
business activities with similar characteristics have been aggregated. Intra-Group sales and cost allocations by the parent
company are determined in accordance with internal group policies. Management is of the opinion that the transfer prices of
goods and services exchanged between segments correspond to market prices.
Notes to the consolidated financial statements for the year ended December 31, 2020
141
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Operating segments:
December 31,
2020
Upstream
Downstream
*
Downstream
Oil
Downstream
Gas
Downstream
elimination
Corpo-
rate &
Other
Total
Consoli-
dation
Consoli-
dated
total
Intersegment
sales
Sales with
third parties
5,852.05
214.83
92.04
256.74
(133.95)
197.01
6,263.89 (6,263.89)
-
309.87
19,376.70
13,564.84
5,811.86
-
30.41 19,716.98
- 19,716.98
Total sales
6,161.92
19,591.53
13,656.88
6,068.60
(133.95)
227.42 25,980.87 (6,263.89) 19,716.98
Operating
result
(985.10)
2,317.41
1,060.30
1,257.11
Total assets**
22,906.69
7,272.13
5,785.32
1,486.81
Additions in
PPE/IA
Depreciation
and
amortization
Impairment
losses/ (write-
ups), net
2,917.04
813.21
805.03
8.18
2,138.06
860.10
749.59
110.51
1,151.77
(518.06)
0.59
(518.65)
-
-
-
-
-
(104.88)
1,227.43
239.66
1,467.09
434.89 30,613.71
- 30,613.71
22.89
3,753.14
-
3,753.14
45.93
3,044.09
-
3,044.09
0.05
633.76
-
633.76
*) Sales Downstream = Sales Downstream Oil + Sales Downstream Gas – intersegmental elimination Downstream Oil and Downstream Gas;
**) Intangible assets (IA), property, plant and equipment (PPE).
Information about geographical areas:
December 31, 2020
Sales with third parties*
Total assets**
Additions in PPE/IA
Romania
17,066.90
29,688.26
3,554.25
Rest of Central
Eastern Europe
2,627.14
925.45
176.50
Rest of Europe
Rest of world
-
-
-
22.94
-
22.39
Consolidated
total
19,716.98
30,613.71
3,753.14
*) Sales are allocated per countries/regions based on the location where the risks and benefits are transferred to the customer;
**) Intangible assets (IA), property, plant and equipment (PPE).
Sales with third parties made in Rest of Central Eastern Europe include sales made in Bulgaria amounting to
RON 1,302.14 million in 2020.
142
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Operating segments:
December 31,
2019
Upstream
Downstream
*
Downstream
Oil
Downstream
Gas
Downstream
elimination
Corpo-
rate &
Other
Total
Consoli-
dation
Consoli-
dated
total
Intersegment
sales
Sales with
third parties
9,059.89
234.00
109.00
241.52
(116.52)
199.70
9,493.59 (9,493.59)
-
481.49
24,973.93
18,236.98
6,736.95
-
30.05 25,485.47
- 25,485.47
Total sales
9,541.38
25,207.93
18,345.98
6,978.47
(116.52)
229.75 34,979.06 (9,493.59) 25,485.47
Operating
result
2,589.46
1,913.18
1,475.38
437.80
Total assets**
23,802.46
6,808.65
5,738.25
1,070.40
Additions in
PPE/IA
Depreciation
and
amortization
Impairment
losses/ (write-
ups), net
3,853.21
908.04
822.89
85.15
2,083.32
830.83
742.77
88.06
669.15
8.66
4.84
3.82
-
-
-
-
-
(156.00)
4,346.64
(101.58)
4,245.06
465.62 31,076.73
- 31,076.73
52.59
4,813.84
-
4,813.84
41.19
2,955.34
-
2,955.34
0.97
678.78
-
678.78
*) Sales Downstream = Sales Downstream Oil + Sales Downstream Gas – intersegmental elimination Downstream Oil and Downstream Gas
**) Intangible assets (IA), property, plant and equipment (PPE).
Information about geographical areas:
December 31, 2019
Sales with third parties*
Total assets**
Additions in PPE/IA
Romania
21,565.86
29,857.21
4,693.87
Rest of Central
Eastern Europe
3,848.88
807.59
130.07
Rest of Europe
Rest of world
41.66
-
-
29.07
411.93
(10.11)
Consolidated
total
25,485.47
31,076.73
4,813.84
*) Sales are allocated per countries/regions based on the location where the risks and benefits are transferred to the customer;
**) Intangible assets (IA), property, plant and equipment (PPE).
Sales with third parties made in Rest of Central Eastern Europe include sales made in Bulgaria amounting to
RON 1,848.38 million in 2019.
Additions in PPE/IA from Rest of world include RON (42.43) million net decrease from reassessment of the
decommissioning asset.
29. AVERAGE NUMBER OF EMPLOYEES
Total OMV Petrom Group
thereof:
OMV Petrom S.A.
Subsidiaries
December 31, 2020 December 31, 2019
11,791
12,720
10,949
842
11,814
906
The number of employees was calculated as the average of the month’s end number of employees during the year.
Notes to the consolidated financial statements for the year ended December 31, 2020
143
OMV Petrom Annual Report 2020 Consolidated Financial Statements
30. RELATED PARTIES
The terms of the outstanding balances receivable from/payable to related parties are typically 0 to 120 days. The balances
are unsecured and will be settled mainly in cash.
There are no guarantees given or paid to related parties as at December 31, 2020 and December 31, 2019.
Dividends receivable are not included in the below balances and revenues.
During 2020, OMV Petrom Group had the following transactions with related parties (including balances as of December 31,
2020):
Nature of transactions
Purchases Balances payable
OMV Petrom S.A. - parent company
OMV Supply & Trading Limited
Acquisition of crude oil and
petroleum products
OMV Petrom Global Solutions S.R.L.
Financial, IT and other services
OMV Gas Marketing & Trading GmbH
Acquisition of natural gas and other
OMV Exploration & Production GmbH
Delegation of personnel and other
OMV Downstream GmbH (former
OMV Refining & Marketing GmbH)
OMV Aktiengesellschaft
OMV Gas & Power GmbH
Acquisition of petroleum products
and services
Delegation of personnel and other
Delegation of personnel and other
OMV Austria Exploration & Production GmbH
Acquisition of materials
OMV New Zealand Limited
OMV - International Services Ges.m.b.H.
Total OMV Petrom S.A.
Various services
Various services
OMV Petrom Group subsidiaries
OMV Downstream GmbH (former
OMV Refining & Marketing GmbH)
Acquisition of petroleum products,
other materials and services
OMV Petrom Global Solutions S.R.L.
Financial, IT and other services
OMV Hungária Ásványolaj Korlátolt Felelösségü Társaság
Acquisition of bitumen
OMV - International Services Ges.m.b.H.
Various services
OMV Exploration & Production GmbH
Delegation of personnel and other
Borealis L.A.T GmbH
OMV Aktiengesellschaft
OMV Gas & Power GmbH
Total subsidiaries
Total OMV Petrom Group
Acquisition of materials
Delegation of personnel and other
Various services
1,130.86
468.61
424.98
104.99
65.86
31.51
0.39
0.12
0.06
0.01
238.76
113.21
115.20
34.52
39.27
38.71
1.68
-
0.06
-
2,227.39
581.41
92.74
72.40
27.59
6.98
3.23
1.15
0.71
0.20
205.00
2,432.39
16.06
8.37
1.32
28.90
0.41
-
0.05
0.20
55.31
636.72
144
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Nature of transactions
Revenues
Balances
receivable
OMV Petrom S.A. - parent company
OMV Gas Marketing & Trading GmbH
Sales of natural gas and other
OMV Deutschland Marketing & Trading GmbH & Co. KG
Sales of propylene
OMV Deutschland GmbH
OMV Downstream GmbH (former
OMV Refining & Marketing GmbH)
OMV Supply & Trading Limited
Sales of propylene
Sales of petroleum products,
delegation of personnel and other
Sales of petroleum products
OMV Exploration & Production GmbH
Delegation of personnel and other
OMV Petrom Global Solutions SRL
Various services
OMV Aktiengesellschaft
Delegation of personnel and other
OMV Austria Exploration & Production GmbH
Sale of fixed assets
Borealis L.A.T Romania s.r.l.
Total OMV Petrom S.A.
Various services
OMV Petrom Group subsidiaries
OMV Petrom Global Solutions S.R.L.
Various services
OMV Česká republika, s.r.o.
OMV Downstream GmbH (former
OMV Refining & Marketing GmbH)
Delegation of personnel
Delegation of personnel and other
OMV Exploration & Production GmbH
Delegation of personnel
OMV - International Services Ges.m.b.H.
Various services
Total subsidiaries
Total OMV Petrom Group
333.96
119.32
111.37
91.34
29.54
26.08
23.18
11.92
0.33
0.07
747.11
1.77
0.82
0.65
0.52
-
3.76
750.87
0.45
31.78
-
3.02
-
3.14
2.09
2.61
-
0.02
43.11
0.19
-
1.71
0.16
12.59
14.65
57.76
During 2020, OMV Petrom Group had the following interest expenses with related parties (including balances as of
December 31, 2020 for interest payable):
OMV Petrom S.A. - parent company
OMV Petrom Global Solutions S.R.L.
Total OMV Petrom S.A.
Total OMV Petrom Group
Interest expense
Balances interest
payable
1.87
1.87
1.87
0.14
0.14
0.14
There were no interest income and interest receivables with related parties in 2020.
In December 2019, OMV Petrom S.A. signed a contract to acquire OMV Offshore Bulgaria GmbH, the transaction being
completed in August 2020 (see Note 34 and Note 35 for more details). This transaction was accounted for as asset
acquisition, given that the acquired entity does not constitute a business as defined by IFRS 3 Business Combinations.
Notes to the consolidated financial statements for the year ended December 31, 2020
145
OMV Petrom Annual Report 2020 Consolidated Financial Statements
During 2019, OMV Petrom Group had the following transactions with related parties (including balances as of December 31,
2019):
Nature of transactions
Purchases Balances payable
OMV Petrom S.A. - parent company
OMV Supply & Trading Limited
Acquisition of crude oil and
petroleum products
OMV Petrom Global Solutions SRL
Financial, IT and other services
OMV Gas Marketing & Trading GmbH
Acquisition of natural gas and other
OMV Exploration & Production GmbH
Delegation of personnel and other
OMV Refining & Marketing GmbH
OMV Aktiengesellschaft
OMV Gas & Power GmbH
OMV Deutschland GmbH
OMV Gas Marketing & Trading Hungária Kft.
OMV - International Services Ges.m.b.H.
Trans Gas LPG Services S.R.L.
Total OMV Petrom S.A.
OMV Petrom Group subsidiaries
Acquisition of petroleum products,
other materials and services
Delegation of personnel and other
Delegation of personnel and other
Acquisition of propylene
Various services
Various services
Various services
OMV Gas Marketing & Trading GmbH
Acquisition of natural gas
OMV Refining & Marketing GmbH
Acquisition of petroleum products,
other materials and services
OMV Petrom Global Solutions SRL
Financial, IT and other services
OMV Hungária Ásványolaj Korlátolt Felelösségü Társaság
Acquisition of bitumen
OMV Gas Marketing & Trading Hungária Kft.
Acquisition of natural gas
OMV - International Services Ges.m.b.H.
Various services
OMV Exploration & Production GmbH
Delegation of personnel and other
OMV Gas & Power GmbH
OMV Aktiengesellschaft
Borealis
Total subsidiaries
Total OMV Petrom Group
Delegation of personnel and other
Delegation of personnel and other
Various services
2,111.41
450.73
356.56
85.49
58.02
35.64
5.66
0.10
0.01
0.01
0.01
204.02
101.29
51.55
34.91
30.15
30.84
2.84
-
-
-
-
3,103.64
455.60
159.53
130.58
77.69
27.08
18.09
7.66
4.99
0.77
0.73
-
427.12
3,530.76
-
19.09
15.36
1.17
-
81.39
0.63
-
0.06
0.01
117.71
573.31
146
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Nature of transactions
Revenues
Balances
receivable
OMV Petrom S.A. - parent company
OMV Gas Marketing & Trading GmbH
Sales of electrivcity and other
OMV Deutschland GmbH
Sales of propylene
OMV Refining & Marketing GmbH
Sales of petroleum products,
delegation of personnel and other
OMV Exploration & Production GmbH
Delegation of personnel and other
OMV Petrom Global Solutions SRL
Various services
OMV Aktiengesellschaft
Borealis
Delegation of personnel and other
Various sales and services
OMV Austria Exploration & Production GmbH
Sale of fixed assets
Energy Production Enhancement S.R.L.
Trans Gas LPG Services S.R.L
Total OMV Petrom S.A.
OMV Petrom Group subsidiaries
OMV Petrom Global Solutions SRL
OMV Gas Marketing & Trading GmbH
OMV Refining & Marketing GmbH
OMV Česká republika, s.r.o.
Various services
Various services
Various services
Sales of natural gas
Delegation of personnel and other
Delegation of personnel and other
OMV Exploration & Production GmbH
Delegation of personnel and other
Borealis
OMV Offshore Bulgaria GmbH
OMV - International Services Ges.m.b.H.
Total subsidiaries
Total OMV Petrom Group
Various sales and services
Various services
Various services
322.69
298.76
78.47
28.88
23.92
11.65
0.03
0.03
0.02
0.01
36.37
44.57
14.54
4.31
2.39
2.65
0.01
-
-
-
764.46
104.84
4.24
1.55
0.95
0.83
0.16
0.10
0.06
-
7.89
772.35
(0.04)
-
0.14
-
0.02
-
0.01
12.75
12.88
117.72
During 2019, OMV Petrom Group had the following interest expenses with related parties (including balances as of
December 31, 2019 for interest payable):
OMV Petrom S.A. - parent company
OMV Petrom Global Solutions S.R.L.
Total OMV Petrom S.A.
Total OMV Petrom Group
There were no interest income and interest receivables with related parties in 2019.
Interest expense
Balances interest
payable
1.67
1.67
1.67
0.14
0.14
0.14
Notes to the consolidated financial statements for the year ended December 31, 2020
147
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Ultimate parent
As disclosed in Note 1, OMV Petrom S.A.’s major shareholder is OMV Aktiengesellschaft, being the ultimate parent of the
Group, with its office based at Trabrennstraße 6-8, 1020 Vienna, Austria. The main shareholders of OMV Aktiengesellschaft
are Österreichische Beteiligungs AG (ÖBAG; previously Österreichische Bundes- und Industriebeteiligungen GmbH (ÖBIB),
Vienna, which is in turn wholly owned by the Republic of Austria – 31.5%) and Mubadala Petroleum and Petrochemicals
Holding Company L.L.C. (MPPH, Abu Dhabi – 24.9%).There is a consortium agreement in place between MPPH and ÖBAG
providing for coordinated behavior and certain restrictions on transfers of shareholdings.
The consolidated financial statements of OMV Aktiengesellschaft are prepared in accordance with IFRS as adopted by the
EU and in accordance with the supplementary accounting regulations pursuant to Sec. 245a, Para. 1 of the Austrian
Company Code (UGB) and are available on OMV’s website:
http://www.omv.com/portal/01/com/omv/OMV_Group/investors-relations/reportsandpresentations.
Key management remuneration
For 2020, the General Meeting of Shareholders of OMV Petrom S.A. approved an annual gross remuneration corresponding
to a net remuneration for each member of the Supervisory Board amounting to EUR 20,000 per year (2019: EUR 20,000 per
year), an additional gross remuneration per meeting corresponding to a net remuneration of EUR 4,000 for each member for
the Audit Committee (2019: EUR 4,000 per meeting) and an additional gross remuneration per meeting corresponding to a
net remuneration of EUR 2,000 for each member for the Presidential and Nomination Committee (2019: EUR 2,000 per
meeting).
As at December 31, 2020 and 2019, there were no loans or advances granted by any of the Group companies to the
members of the Supervisory Board. As at December 31, 2020 and 2019, the Group companies did not have any obligations
regarding pension payments to former members of the Supervisory Board.
The aggregate amount of remuneration and other benefits, including benefits in-kind, paid in 2020 to the members of the
Executive Board and the directors reporting to Executive Board members, collectively as a group, for their activities
performed in all capacities, amounted to RON 69.40 million (2019: RON 81.51 million).
The remuneration paid to members of the Executive Board and to the directors reporting to Executive Board members aims
to be at competitive levels and consists of:
fixed remuneration based on contractual arrangements;
performance-related remuneration assessed against financial and non-financial metrics (including OMV Petrom S.A.
share price evolution, HSSE and sustainability metrics) in line with company strategy, to align the interests of
management and shareholders, including both short and long term plans:
▸ performance bonus program of 1 year;
▸ long term incentive as multi-year performance plan of 3 years;
benefits in kind (non-cash benefits) as support to properly carry out job related activities, including accident and liability
insurance.
148
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
31. DIRECT AND INDIRECT INVESTMENTS OF OMV PETROM GROUP WITH AN INTEREST
OF AT LEAST 20% AS OF DECEMBER 31, 2020
Company Name
Subsidiaries (>50%)
Tasbulat Oil Corporation LLP
Kom Munai LLP
Petrom Moldova S.R.L.
OMV Petrom Marketing S.R.L.
OMV Petrom Aviation S.R.L.*
OMV Offshore Bulgaria GmbH
OMV Petrom Gas S.R.L.
Petromed Solutions S.R.L.
OMV Srbija DOO
OMV Bulgaria OOD
Petrom Exploration & Production Limited
Associated companies (20-50%)
OMV Petrom Global Solutions S.R.L.
Asociatia Romana pentru Relatia cu Investitorii
*) 1 (one) equity interest owned through OMV Petrom Marketing S.R.L.
**) Consolidation treatment:
Share interest
percentage
Consolidation
treatment** Activity
Country of
incorporation
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
99.99%
99.99%
99.96%
99.90%
99.99%
25.00%
20.00%
Oil exploration and production
in Kazakhstan
FC
Oil exploration and production
in Kazakhstan
FC
FC Fuel distribution
FC Fuel distribution
FC Airport services
FC Exploration activities
FC Gas supply
FC Medical services
FC Fuel distribution
FC Fuel distribution
Kazakhstan
Kazakhstan
Moldova
Romania
Romania
Austria
Romania
Romania
Serbia
Bulgaria
NC Exploration and production services
Isle of Man
EM Financial, IT and other services
NAE Public representation
Romania
Romania
FC
EM
NC
NAE
Full consolidation
Accounted for at equity (associated company)
Not-consolidated subsidiary (companies of relative insignificance, both individually and collectively, to the consolidated financial statements)
Other investment recognized at cost (associated companies of relatively little importance to the assets and earnings of the consolidated financial statements).
On August 31, 2020, OMV Petrom S.A. completed the acquisition of 100% shares in OMV Offshore Bulgaria GmbH, which
holds an interest in Han Asparuh offshore block in Bulgaria, from OMV Exploration & Production GmbH. The new subsidiary
is consolidated starting with the acquisition date.
Starting with October 31, 2020, the subsidiary Petrom Exploration & Production Ltd was deconsolidated due to immateriality.
During 2019, the legal form of OMV Petrom Aviation was changed from a joint stock company to a limited liability company,
Trans Gas LPG Services S.R.L. was liquidated and Brazi Oil & Anghelescu Prod Com S.R.L. was sold.
The subsidiaries which are not consolidated have very low volumes of business; the total sales, net income/losses and
equity of such companies represent less than 1% of the consolidated totals.
Notes to the consolidated financial statements for the year ended December 31, 2020
149
OMV Petrom Annual Report 2020 Consolidated Financial Statements
32. CASH FLOW STATEMENT INFORMATION
a) Drawings and repayments of borrowings
The following tables show the reconciliation of the changes in liabilities arising from financing activities:
1 January 2020
Repayments of interest bearing debts and
principal portion of lease liabilities
Increase in interest bearing debts
Total cash flows relating to financing activities
Lease liabilities recognized during the year
Net other changes
Total non-cash changes
31 December 2020
thereof short-term
thereof long-term
1 January 2019
Repayments of interest bearing debts and
principal portion of lease liabilities
Total cash flows relating to financing activities
Lease liabilities recognized during the year,
including transition to IFRS 16
Net other changes
Total non-cash changes
31 December 2019
thereof short-term
thereof long-term
Interest-
bearing debts
Lease
liabilities
Total
330.13
700.94
1,031.07
(91.80)
41.55
(50.25)
-
4.09
4.09
283.97
175.03
108.94
Interest-
bearing debts
549.30
(226.85)
(226.85)
-
7.68
7.68
330.13
132.25
197.88
(130.31)
-
(130.31)
118.61
(8.85)
109.76
680.39
137.33
543.06
Lease
liabilities
169.44
(100.80)
(100.80)
637.38
(5.08)
632.30
700.94
128.79
572.15
(222.11)
41.55
(180.56)
118.61
(4.76)
113.85
964.36
312.36
652.00
Total
718.74
(327.65)
(327.65)
637.38
2.60
639.98
1,031.07
261.04
770.03
150
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
b) Non-controlling interest
There were no changes in non-controlling interest during 2020 and 2019.
c) Investments and other financial assets
During 2019, OMV Petrom Group received RON 38.24 million following the reduction in the share capital of the associated
entity OMV Petrom Global Solutions S.R.L., and it increased its contribution to the share capital of the not-consolidated
subsidiary Energy Production Enhancement S.R.L. with RON 0.05 million.
d) Proceeds in relation to non-current assets
In 2020, proceeds in relation to non-current assets include the amount of RON 140.19 million representing the encashment
by OMV Petrom S.A. from the third tranche of the government grant for Brazi power plant investment (2019: RON 226.59
million representing the first two tranches). For details please see Note 9 b).
e) Transfer of business
In 2020, OMV Petrom Group did not transfer any business.
In March 2019, OMV Petrom transferred 9 marginal onshore fields to Mazarine Energy Romania S.R.L.
Net assets at the date of transfer
Intangible assets and property, plant and equipment
Provisions for decommissioning and restoration
Other adjustments related to items transferred
Net assets
Gain/(Loss) on transfer of business
Proceeds on transfer of business
Net assets disposed of
Gain on transfer of business
Net cash flow from transfer of business
Net consideration received
Net cash inflow on transfer of business
2019
129.63
(103.87)
1.05
26.81
2019
78.58
(26.81)
51.77
2019
78.58
78.58
Notes to the consolidated financial statements for the year ended December 31, 2020
151
OMV Petrom Annual Report 2020 Consolidated Financial Statements
The gain on transfer of business comprises the amount of RON 52.82 million reflected under “Gains on disposal of non-
current assets” (see Note 20) and losses related to other items in amount of RON 1.05 million.
f) Disposal of Group companies
During 2020 and 2019, OMV Petrom Group did not dispose of any subsidiary. In 2020 the Group received an advance for
the expected sale of Kazakhstan subsidiaries, in amount of RON 71.59 million.
g) Exploration cash-flows
The amount of cash outflows in relation to exploration activities incurred by OMV Petrom Group for the year ended
December 31, 2020 is of RON 253.70 million (2019: RON 497.10 million), out of which the amount of RON 144.58 million is
related to operating activities (2019: RON 129.51 million) and the amount of RON 109.12 million represents cash outflows
for exploration investing activities (2019: RON 367.59 million).
h) Other non-monetary adjustments
Other non-monetary adjustments include mainly the change in the fair value of derivatives through income statement and
impact from reassessment of long-term receivables.
i) Cash and cash equivalents
Cash at banks and on hand
Short-term deposits
Cash and cash equivalents
December 31, 2020 December 31, 2019
303.15
7,147.49
7,450.64
334.24
6,679.30
7,013.54
152
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
33. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
The following overview presents the measurement of assets and liabilities recognized at fair value.
In accordance with IFRS 13, the individual levels are defined as follows:
Level 1: Using quoted prices in active markets for identical assets or liabilities.
Level 2: Using inputs for the asset or liability, other than quoted prices, that are observable either directly (i.e. as prices) or
indirectly (i.e. derived from prices). In order to determine the fair value for financial instruments, usually forward prices of
commodities, as obtained from the market, and foreign exchange rates are used as inputs to the valuation model. Net
amount of assets and liabilities associated with assets held for sale are measured at fair value. The basis of the valuation
was fair values less cost of disposal derived from an agreed sales price.
Level 3: Using inputs for the asset or liability that are not based on observable market data such as prices, but on internal
models or other valuation methods.
Fair value hierarchy of financial assets and assets held for sale as at December 31, 2020
Derivatives designated and effective as hedging instruments
Other derivatives
Net amount of assets and liabilities associated with assets held for sale
Total
.
Fair value hierarchy of financial liabilities as at December 31, 2020
Derivatives designated and effective as hedging instruments
Other derivatives
Other financial liabilities
Total
Fair value hierarchy of financial assets as at December 31, 2019
Derivatives designated and effective as hedging instruments
Other derivatives
Total
Level 1
Level 2
Level 3
-
-
-
-
16.33
631.19
448.22
1,095.74
-
-
-
-
Total
16.33
631.19
448.22
1,095.74
Level 1
Level 2
Level 3
Total
-
-
-
-
(19.58)
(453.06)
-
-
(19.58)
(453.06)
-
(15.88)
(15.88)
(472.64)
(15.88)
(488.52)
Level 1
Level 2
Level 3
Total
-
-
-
227.01
54.63
281.64
-
-
-
227.01
54.63
281.64
Notes to the consolidated financial statements for the year ended December 31, 2020
153
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Fair value hierarchy of financial liabilities and liabilities associated with assets held for sale
as at December 31, 2019
Derivatives designated and effective as hedging instruments
Other derivatives
Net amount of assets and liabilities associated with assets held for sale
Other financial liabilities
Total
Level 1
Level 2
Level 3
Total
-
-
-
-
-
(194.03)
(19.69)
(6.55)
-
-
-
(194.03)
(19.69)
(6.55)
-
(14.31)
(14.31)
(220.27)
(14.31)
(234.58)
There were no transfers between levels of the fair value hierarchy. There were no changes in the fair value measurement
techniques for assets and liabilities that are measured at fair value.
The financial liabilities whose fair values differ from their carrying amounts as at December 31, 2020 and December 31,
2019, as well as the respective differences are presented in the tables below. The fair value of these financial liabilities was
determined by discounting future contractual cash flows using interest rates prevailing at reporting date for similar liabilities
with similar maturities, obtained from the market for similar transactions (Level 2 – observable inputs).
The management assessed that the fair values of other financial assets and financial liabilities that were measured at
amortized cost approximate their carrying amounts.
December 31 2020
Financial liabilities
Interest-bearing debts
Total
December 31 2019
Financial liabilities
Interest-bearing debts
Total
Fair value
286.66
286.66
Fair value
335.55
335.55
Carrying
amount
283.96
283.96
Carrying
amount
330.13
330.13
Difference
2.70
2.70
Difference
5.42
5.42
Offsetting of financial instruments
Financial assets and liabilities are offset and the net amounts are reported in the consolidated statement of financial position
when OMV Petrom Group has a current legally enforceable right to set-off the recognized amounts and there is an intention
to settle on a net basis or realize the asset and settle the liability simultaneously. OMV Petrom Group enters in the normal
course of business into various master netting arrangements in the form of International Swaps and Derivatives Association
(ISDA) agreements or European Federation of Energy Traders (EFET) agreements or other similar arrangements that do not
meet the criteria of offsetting in the consolidated statement of the financial position in accordance with IAS 32.
The following tables present the carrying amounts of recognized financial assets and financial liabilities that are subject to
various netting arrangements. The net column would be on the Group’s consolidated statement of financial position, if all
set-off rights were exercised.
154
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Offsetting of financial assets 2020
Derivative financial instruments
Trade receivables
Other financial assets
Total
Amounts set-
off in the
statement
of financial
position
Net amounts
presented in
the statement
of financial
position*
Assets with
right of set-off
(not offset)
-
(42.72)
-
(42.72)
647.52
1,258.13
255.45
2,161.10
(429.41)
-
(62.33)
(491.74)
Net amounts
218.11
1,258.13
193.12
1,669.36
Gross amounts
647.52
1,300.85
255.45
2,203.82
*) Net amounts presented in the statement of financial position are detailed in Note 9.
Offsetting of financial liabilities 2020
Derivative financial instruments
Trade payables
Other financial liabilities
Total
Amounts set-
off in the
statement
of financial
position
Net amounts
presented in
the statement
of financial
position*
Liabilities with
right of set-off
(not offset)
-
(42.72)
-
(42.72)
472.64
2,858.64
371.62
3,702.90
(429.41)
-
(62.33)
(491.74)
Net amounts
43.23
2,858.64
309.29
3,211.16
Gross amounts
472.64
2,901.36
371.62
3,745.62
*) Net amounts presented in the statement of financial position are detailed in Note 16.
Offsetting of financial assets 2019
Derivative financial instruments
Trade receivables
Other financial assets
Total
Amounts set-
off in the
statement
of financial
position
Net amounts
presented in
the statement
of financial
position*
Gross amounts
281.64
1,958.23
452.65
2,692.52
-
(66.37)
(88.45)
(154.82)
281.64
1,891.86
364.20
2,537.70
Assets with
right of set-off
(not offset)
(188.31)
-
-
(188.31)
Net amounts
93.33
1,891.86
364.20
2,349.39
*) Net amounts presented in the statement of financial position are detailed in Note 9.
Offsetting of financial liabilities 2019
Derivative financial instruments
Trade payables
Other financial liabilities
Total
Amounts set-
off in the
statement
of financial
position
Net amounts
presented in
the statement
of financial
position*
Gross amounts
213.72
3,527.17
264.52
4,005.41
-
(154.82)
-
(154.82)
213.72
3,372.35
264.52
3,850.59
Liabilities with
right of set-off
(not offset)
(188.31)
-
-
(188.31)
Net amounts
25.41
3,372.35
264.52
3,662.28
*) Net amounts presented in the statement of financial position are detailed in Note 16.
Notes to the consolidated financial statements for the year ended December 31, 2020
155
OMV Petrom Annual Report 2020 Consolidated Financial Statements
34. COMMITMENTS AND CONTINGENCIES
Commitments
As at December 31, 2020 the total commitments engaged by OMV Petrom Group for investments (except those in relation to
joint arrangements) are in amount of RON 796.26 million (2019: RON 914.34 million), out of which RON 623.75 million
related to property, plant and equipment (2019: RON 737.72 million) and RON 172.51 million for intangible assets (2019:
RON 176.62 million).
The Group has additional commitments in relation to joint arrangements - for details please refer to Note 35.
Litigations
We face a variety of litigations, arbitrations, proceedings and disputes referring to a wide range of subjects, such as, but
without being limited to, real estate matters, fiscal matters, intellectual property, environmental, competition, administrative
matters, commercial matters, labour related litigation, debt recovery, insolvency of contractors, criminal deeds, and
contraventional matters. It is possible that unanticipated judicial outcomes might occur.
OMV Petrom Group provides for litigations that are likely to result in obligations. Management is of the opinion that
litigations, to the extent not covered by provisions or insurance, will not materially affect OMV Petrom Group’s financial
position.
Contingent liabilities
The production facilities and properties of all Group companies are subject to a variety of environmental protection laws and
regulations in the countries where they operate; provisions are made for probable obligations arising from environmental
protection measures.
In December 2019, OMV Petrom S.A. signed a contract to acquire OMV Offshore Bulgaria GmbH, which holds a stake in the
Han Asparuh exploration license in Bulgaria. The transaction was completed at the end of August 2020, by means of
acquisition of 100% shares in OMV Offshore Bulgaria GmbH from OMV Exploration & Production GmbH.
The contract between OMV Petrom S.A. and the seller OMV Exploration & Production GmbH includes contingent variable
payments to be made by OMV Petrom S.A. which are dependent on reserves determinations at final investment decision
milestone and at reserves revision milestone. The reserves determinations will have to be certified by a jointly appointed
suitable qualified and experienced third party reserves auditor.
At the date of these financial statements, a reliable estimate of the potential variable payments and timing, if any, cannot be
made. Therefore, no provision has been recognized in this respect in OMV Petrom’s Group Financial Statements as at
December 31, 2020.
On April 16, 2020, the Bulgarian Commission for Protection of Competition announced the initiation of an investigation
regarding the determination of the prices on fuel market. OMV Bulgaria EOOD is subject to this investigation, among other
major manufacturers and retailers on Bulgarian market. During 2020 two requests of providing information were received
from authorities and the responses were submitted in due time. The sanctions for antitrust infringements are up to 10% of
the total company’s turnover of the respective undertaking for the financial year prior to the sanctioning decision. At the date
of these financial statements, we are not able to evaluate the outcome of the investigation and no provision was recorded in
this respect.
In addition, OMV Petrom Group has contingent liabilities representing performance guarantees in amount of RON 371.84
million as at December 31, 2020 (2019: RON 196.73 million).
156
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
35. INTERESTS IN JOINT ARRANGEMENTS
In 2008 OMV Petrom S.A. entered into a farm out arrangement with ExxonMobil Exploration and Production Romania
Limited (“Exxon”) with the purpose to explore and develop the Neptun Deepwater block in the Black Sea and has a
participating interest of 50%. Starting August 2011, ExxonMobil has been appointed as operator (previously OMV Petrom
S.A. was operator).
In 2010 OMV Petrom S.A. entered into a farm out arrangement with Hunt Oil Company of Romania S.R.L. (“Hunt”) with the
purpose to explore and develop Adjud and Urziceni East onshore blocks and has a participating interest of 50%. Starting
October 2013, Hunt has been appointed as operator (previously OMV Petrom S.A. was operator).
In December 2019, OMV Petrom S.A. signed a contract to acquire OMV Offshore Bulgaria GmbH, which at that time held a
30% stake in the Han Asparuh exploration license in Bulgaria, alongside Repsol and Total. In June 2020, this percentage
increased to 42.86% following Repsol’s exit from the joint venture, as approved by the Bulgarian regulator. The remaining
interest of 57.14% is held by Total, which is also the operator. The transaction was completed at the end of August 2020, by
means of acquisition of 100% shares in OMV Offshore Bulgaria Gmbh from OMV Exploration & Production Gmbh.
Joint activities described above were classified as joint operations according with IFRS 11.
OMV Petrom’s share of the aggregate capital commitments for these joint arrangements as at December 31, 2020 is
amounting RON 44.73 million (2019: RON 57.86 million), mainly in relation to offshore activities requirements.
36. RISK MANAGEMENT
Capital risk management
OMV Petrom Group continuously manages its capital adequacy to ensure that its entities will be optimally capitalized, in
accordance with their risk exposure, in order to maximize the return to stakeholders. The capital structure of OMV Petrom
Group consists of equity attributable to stockholders of the parent (comprising share capital, reserves and revenue reserves
as disclosed in the “Consolidated Statement of Changes in Equity”) and debt (which includes the short and long term
Interest bearing debts and Lease liabilities). Capital risk management at OMV Petrom Group is part of the value
management and it is based on permanent review of the gearing ratio of the Group.
Net debt is calculated as interest-bearing debts and lease liabilities, less cash and cash equivalents. Due to the significant
cash balance, the Group reported a net cash position of RON 6,486.28 million at December 31, 2020 (2019: net cash
position of RON 5,982.47 million).
OMV Petrom Group’s management reviews the capital structure, as well as group risk reports regularly. As part of this
review, the cost of capital and the risks associated with each class of capital are considered.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognized, in respect of each class of financial asset,
financial liability and equity instrument are disclosed in Note 4 to the consolidated financial statements.
Financial risk management objectives and policies
The objective of OMV Petrom Risk Management function is to assess if the risk estimations are within the tolerance levels
set in the Risk Appetite statement and to provide assurance that the risks are well managed and kept under control by the
risk owners. Low probability high potential impact risks are assessed and monitored individually, with a dedicated set of
mitigating measures put in place.
Notes to the consolidated financial statements for the year ended December 31, 2020
157
OMV Petrom Annual Report 2020 Consolidated Financial Statements
To ensure that management takes risk-informed decisions, with adequate consideration of actual and prospective
information/data, OMV Petrom Executive Board has empowered a dedicated Risk Management function with the objective to
centrally lead and coordinate the Group’s risk management-related processes. This department ensures that well-defined
and consistent risk management processes, tools, and techniques are applied across the entire organization. Risk
ownership is assigned to the managers who are best suited to oversee and manage the respective risk. OMV Petrom’s
consolidated risk profile is reported twice a year to the Executive Board and to Supervisory Board’s Audit Committee.
Risk exposures and responses
OMV Petrom’s Risk Management function performs a central coordination of a mid-term Enterprise Wide Risk Management
(EWRM) and a long-term Strategic Risk Management processes in which it actively pursues the identification, analysis,
evaluation and treatment of significant risks (market and financial, operational and strategic) in order to assess their effects
on planned cash flows, to engage management in planning and implementing mitigating actions and to provide to the
executive and Supervisory Board’s Audit Committee members the assurance that risks are under control and within the
tolerance levels from the risk appetite.
The main purpose of the OMV Petrom’s EWRM process is to deliver value through risk-based management and decision-
making. OMV Petrom Group is constantly enhancing the EWRM process based on internal and external requirements. The
process is facilitated by OMV Petrom Group-wide IT system supporting the established individual process steps (risk
identification, risk analysis, risk evaluation, risk treatment, reporting, and risk review through continuous monitoring of
changes to the risk profile), guided by the ISO 31000 risk management framework.
Beside the business operational and strategic category of exposures, the market and financial risk category plays an
important role in the Group’s risk profile and it is managed with dedicated diligence – market and financial risks include
commodity market price risk, foreign exchange risk, interest rate risk, counterparty credit risk, and liquidity risk.
Response wise, any risk which increases near to its significance level or which is sensitive to the risk appetite level is
monitored and specific treatment plans are proposed, approved and implemented accordingly in order to decrease the risk
exposure.
Climate Change Risks
OMV Petrom consistently evaluates the Group’s exposure to risks related to climate-change in addition to the market price
risk from European Emission Allowances. Such risks comprise the potential impact of acute or chronic events like more
frequent extreme weather events or systemic changes to our business model due to a changing legal framework or
substitution of OMV Petrom Group’s products due to changing consumer behavior. OMV Petrom Group recognizes climate
change as a key global challenge. We thus integrate the related risks and opportunities into the development of the Group’s
business strategy.
Commodity Market Price Risk
In regard to the market price risk, OMV Petrom Group is naturally exposed to the price-driven volatility of cash flows
generated by production, refining, and marketing activities associated with crude oil, oil products, gas, and electricity. Market
risk has core strategic importance within OMV Petrom Group’s risk profile and liquidity. The market price risks of OMV
Petrom Group commodities are closely analysed, quantified, and evaluated.
Financial derivative instruments are used where appropriate to hedge the main industry risks resulting from changes in
commodity prices which could have a negative effect on assets, liabilities or expected future cash flows.
Hedges are generally placed in the legal entities where the underlying exposure exists. When certain conditions are met, the
Group may elect to apply IFRS 9 hedge accounting principles in order to recognize the offsetting effects in the income
statement of changes in the fair value of the hedging instruments at the same time with the hedged items.
In 2020 the risk management objective for the refinery margin hedges for diesel and jet changed and therefore the
corresponding hedging relationships were discontinued. The accumulated gains and losses remain in the cash flow hedging
reserve upon realization of the hedged items. The gains and losses related to the forecast sales and purchases of specific
158
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
products for which the hedged future cash flows were no longer expected to occur, being affected by COVID-19 outbreak,
were immediately reclassified from other comprehensive income.
Derivatives are only used for economic hedging purposes and not as speculative investments. However, where derivatives
are not designated as hedging instruments, they are classified as fair value through profit or loss (FVPL) in accordance with
IFRS 9.
Cash flow hedge accounting
In Downstream Oil Business, OMV Petrom Group is especially exposed to volatile refining margins and inventory risks. In
order to mitigate those risks the Group enters into corresponding hedging activities, which include margin hedges as well as
stock hedges.
The risk management strategy is to harmonize the pricing of product sales and purchases in order to remain within an
approved range of priced stocks at all times, by means of undertaking stock hedges so as to mitigate the price exposure. In
respect of refinery margin hedges, crude oil and products are hedged with the aim to protect future margins.
During 2019, OMV Petrom S.A. concluded margin hedges in relation to highly probable sales of diesel, jet and fuel oil and
stock hedges in relation to crude oil inventory purchased, using oil swaps instruments.
In case of refinery margin hedges for diesel and jet, the product crack spread is designated as the hedged item, buying
Brent crude oil on a fixed basis and selling the product on a fixed basis. The crack spread for diesel and jet is a separately
identifiable component and can therefore represent the specific risk component designated as hedged item. In case of
refinery margin hedges on fuel oil, forecast sales and purchase transactions for fuel oil and oil products are designated as
the hedged items. In 2020 most of the refinery margin hedges were discontinued due to the change in the risk management
objective.
Stock hedges are used to mitigate price exposure whenever actual priced stock levels deviate from target levels. Forecast
sales and purchase transactions for crude oil and oil products are designated as the hedged item.
Hedge ineffectiveness can arise from timing differential between derivative and hedged item delivery and pricing differentials
(derivatives are valued on the future monthly average quotations (or other periods) and sales/purchases are valued on
prices at the date of transaction/delivery).
Nominal and fair values of derivatives designated and effective as hedging instruments
2020
Nominal value
Below one year
More than one year
Fair value - assets
Fair value - liabilities
Cash flow hedge reserve (before tax)
2019
Nominal value
Below one year
More than one year
Fair value - assets
Fair value - liabilities
Cash flow hedge reserve (before tax)
Forecast
purchases
Forecast
sales
91.87
91.87
-
-
14.18
(14.18)
Forecast
purchases
313.77
193.60
120.17
26.76
-
26.76
147.85
147.85
-
16.33
5.40
10.93
Forecast
sales
4,120.59
2,794.79
1,325.80
200.25
194.03
6.22
Total
239.72
239.72
-
16.33
19.58
(3.25)
Total
4,434.36
2,988.39
1,445.97
227.01
194.03
32.98
Notes to the consolidated financial statements for the year ended December 31, 2020
159
OMV Petrom Annual Report 2020 Consolidated Financial Statements
The tables above show the fair values of derivative financial instruments designated and effective as hedging instruments
together with their notional amounts. The notional amount, reflected gross, is the amount of a derivative’s underlying asset
and is the basis upon which changes in the value of derivatives are measured. The notional amounts indicate the volume of
the transactions outstanding at the year-end and are not indicative of either the market risk or the credit risk. Fair values are
presented in lines “Other financial assets” and “Other financial liabilities” in consolidated statement of financial position.
Cash flow hedging - Impact of hedge accounting
2020
Cash flow hedge reserve as of 1 January 2020 (net of tax)
Gains/(losses) of the period recognized in OCI
Amounts reclassified to income statement
Amounts reclassified from OCI because the hedged future cash flows no longer
expected to occur
Amounts transferred to cost of non-financial item
Tax effects
Cash flow hedge reserve as of 31 December 2020 (net of tax)
Thereof discontinued hedges
Hedge ineffectiveness recognized in income statement
2019
Cash flow hedge reserve as of 1 January 2019 (net of tax)
Gains/(losses) of the period recognized in OCI
Amounts reclassified from OCI
Tax effects
Cash flow hedge reserve as of 31 December 2019 (net of tax)
Thereof discontinued hedges
Hedge ineffectiveness recognized in income statement
Forecast
purchases
22.48
(134.60)
-
14.79
78.87
6.55
(11.91)
-
(3.81)
Forecast
sales
5.22
467.80
(369.69)
(1.62)
-
(15.44)
86.27
77.09
9.72
Forecast
purchases
Forecast
sales
-
32.52
(5.76)
(4.28)
22.48
-
0.05
4.22
(7.83)
9.02
(0.19)
5.22
-
(0.34)
Total
27.70
333.20
(369.69)
13.17
78.87
(8.89)
74.36
77.09
5.91
Total
4.22
24.69
3.26
(4.47)
27.70
-
(0.29)
For “Forecast purchases” the hedge ineffectiveness is included in line item “Purchases (net of inventory variation)” in the
consolidated income statement. The hedge ineffectiveness and recycling of “Forecast sales” for hedges where a risk
component of the non-financial item is designated as the hedged item in the hedging relationship are shown in line item
“Sales revenues” in the consolidated income statement.
Foreign exchange risk management
Because OMV Petrom Group operates in many currencies therefore the corresponding exchange risks are analyzed. OMV
Petrom Group is mostly exposed to the movement of the US dollar and Euro against Romanian Leu. Other currencies have
only limited impact on cash flows and Operating result.
Financial derivative instruments may be used where appropriate to hedge the risk associated with foreign currency
transactions, whereas a decrease of USD/RON currency rate or an increase of EUR/RON currency rate is unfavorable to the
Group’s cash flows.
Foreign currency sensitivity analysis
The carrying amounts at the reporting date of foreign currency denominated monetary assets and liabilities of OMV Petrom
Group companies, which induce sensitivity to RON/EUR and RON/USD exchange rates in the consolidated financial
statements, are as follows:
160
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Assets
Liabilities
December 31, 2020
December 31, 2019
December 31, 2020
December 31, 2019
Thousand USD
Thousand EUR
248,806
125,303
153,748
72,171
234,593
234,242
130,547
250,068
Translation risk arises on the consolidation of subsidiaries preparing their financial statements in other currencies than in
Romanian lei, but also from the consolidation of assets and liabilities naturally denominated in foreign currency. Foreign
currency assets and liabilities are those which result from transactions denominated in other currencies than the functional
currencies of OMV Petrom Group companies. The largest exposures result from changes in the value of the US dollar and
Euro against the Romanian Leu.
The following table details OMV Petrom Group’s sensitivity to a 10% increase and decrease in the USD and EUR against
the relevant functional currencies. The sensitivity analysis includes outstanding foreign currency denominated monetary
items and adjusts their translation at the year-end for a 10% change in foreign currency rates. A positive number below
indicates an increase in total comprehensive income before tax generated by a 10% currency fluctuation and a negative
number below indicates a decrease in total comprehensive income before tax with the same value.
+10% increase in the foreign currencies rates
Profit/ (Loss)
Other comprehensive income
-10% decrease in the foreign currencies rates
Profit/ (Loss)
Other comprehensive income
Thousand USD Impact (i)
Thousand EUR Impact (ii)
2020
1,503
(82)
2019
14
2,306
2020
2019
(10,894)
(17,790)
-
-
Thousand USD Impact (i)
Thousand EUR Impact (ii)
2020
(1,503)
82
2019
(14)
(2,306)
2020
10,894
-
2019
17,790
-
(i) This is mainly attributable to the exposure on USD of derivative financial assets, cash and cash equivalents, derivative financial liabilities and trade payables at the year end.
(ii) This is mainly attributable to the exposure on EUR of trade receivables, interest bearing debts, lease liabilities and trade payables.
The effect in equity is the effect in profit or loss before tax and other comprehensive income, net of income tax (16%).
The above sensitivity analysis of the inherent foreign exchange risk shows the translation exposure at the end of the year;
however, the cash flow exposure during the year is continuously monitored and managed by OMV Petrom Group.
Interest rate risk management
To facilitate management of interest rate risk, OMV Petrom Group’s liabilities are analyzed in terms of fixed and variable rate
borrowings, currencies and maturities. Currently, OMV Petrom Group has limited exposure to this risk.
The sensitivity analyses below have been determined based on the exposure to interest rates for borrowings at the reporting
date. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the reporting date
was outstanding for the whole year. A 1% increase or decrease represents management’s assessment of the reasonably
possible change in interest rates (with all other variables held constant).
Notes to the consolidated financial statements for the year ended December 31, 2020
161
OMV Petrom Annual Report 2020 Consolidated Financial Statements
Analysis for change in interest rate risk
Balance as at
Effect of 1% change in
interest rate, before tax
Short term borrowings
Long term borrowings
173.97
108.98
130.70
198.00
1.74
1.09
1.31
1.98
December 31,2020
December 31,2019
December 31,2020
December 31,2019
In 2020 and 2019, there was no need for hedging the interest rate risk, hence no financial instruments were used for such
purpose.
Counterparty Credit Risk management
Credit risk refers to the risk that counterparty will default on its contractual obligations or on its financial standing, resulting in
financial loss to OMV Petrom Group. The main counterparty credit risks are assessed, monitored and managed at Group
level using predetermined limits for specific countries, banks and business partners. On the basis of creditworthiness, all
counterparties are assigned maximum permitted exposures in terms of credit limits (amounts and maturities), and the
creditworthiness assessments and granted limits are reviewed on a regular basis. For all counterparties depending on their
liquidity class, parts of their credit limits are secured via liquid contractual securities such as bank guarantee letters, credit
insurance and other similar instruments. The credit limit monitoring procedures are governed by internal guidelines.
OMV Petrom Group does not have any significant credit risk concentration exposure to any single counterparty or any group
of counterparties having similar characteristics. The Group’s cash and cash equivalent is primarily invested in banks with
rating at least BBB- (S&P and Fitch) and Baa3 (Moody’s).
Liquidity risk management
For the purpose of assessing liquidity risk, budgeted operating and financial cash inflows and outflows throughout OMV
Petrom Group are monitored and analyzed on a monthly basis in order to establish the expected net change in liquidity. This
analysis provides the basis for financing decisions and capital commitments. To ensure that OMV Petrom Group remains
solvent at all the times and retains the necessary financial flexibility, liquidity reserves in form of committed credit lines are
maintained. The maturity profile of the Group financial liabilities is presented in Note 16.
37. EXPENSES GROUP AUDITOR
In 2020 the statutory auditor Ernst & Young Assurance Services SRL had a contractual statutory audit fee of EUR 545,000
(2019: EUR 586,920) (for the statutory audit of the standalone and consolidated annual financial statements of the Company
and of its Romanian subsidiaries and associates). Services contracted with the statutory auditor other than audit services
were of EUR 128,920 (2019: EUR 120,400), representing mainly other assurance services in relation to certain reports
issued by the Company that are not prohibited by Article 5(1) of Regulation (EU) No. 537/2014 of the European Parliament
and of the Council.
Other EY network firms performed audit services for the OMV Petrom subsidiaries of EUR 153,900 (2019: EUR 147,900)
and non-audit services that are not prohibited by Article 5(1) of Regulation (EU) No. 537/2014 of the European Parliament
and of the Council of EUR 5,946 (2019: EUR 2,405).
162
Notes to the consolidated financial statements for the year ended December 31, 2020
OMV Petrom Annual Report 2020 Consolidated Financial Statements
38. SUBSEQUENT EVENTS
There are no significant events subsequent to the reporting date.
These financial statements, presented from page 88 to page 163, comprising the consolidated statement of financial
position, consolidated income statement, consolidated statement of comprehensive income, consolidated statement of
changes in equity, consolidated statement of cash flows and notes to the consolidated financial statements, were approved
on March 17, 2021.
_____________________
Christina Verchere,
Chief Executive Officer
President of the EB
_____________________
Alina Popa,
Chief Financial Officer
Member of the EB
_____________________
Christopher Veit,
Member of the EB
Upstream
_____________________
Franck Neel,
Member of the EB
Downstream Gas
_____________________
Radu Căprău,
Member of the EB
Downstream Oil
_____________________
Irina Dobre,
Vice President Finance Department
_____________________
Nicoleta Drumea,
Head of Financial Reporting
Notes to the consolidated financial statements for the year ended December 31, 2020
163
OMV Petrom Annual Report 2020 Consolidated report on payments to governments
Consolidated report on payments to governments for the year 2020
Cover+picture
164
Consolidated report on payments to governments for the year 2020
OMV Petrom Annual Report 2020 Consolidated report on payments to governments
Consolidated report on payments to governments for the year 2020
Introduction
Chapter 8 of the Annex 1 of Ministry of Finance Order 2844/2016 for approval of Accounting Regulations according to
International Financial Reporting Standards (hereinafter the “Regulation”), transposing Chapter 10 of the Accounting
Directive (2013/34/EU) of the European Parliament and of the Council, requires that large undertakings and public interest
entities that are active in the extractive industry or logging of primary forests prepare and publish a report on payments to
governments on an annual basis. Large undertakings and public interest entities which are under the obligation to prepare
consolidated financial statements are required to prepare a consolidated report on payments to governments.
OMV Petrom S.A. (hereinafter the “Company”) is, on one side, operating in the extractive industry and, on the other side,
admitted for trading on Bucharest Stock Exchange (with shares) and London Stock Exchange (with global depositary
receipts). Therefore, in accordance with the above mentioned Regulation, the Company has prepared the following
consolidated report (hereinafter the “Report”’) on payments to governments. The Report covers OMV Petrom S.A. and its
subsidiaries performing extractive activities (Upstream business segment).
The ‘Basis of Preparation’ section provides information to the reader about the contents of the Report. This section also
includes information on the type of payment for which disclosure is required and on the manner in which OMV Petrom has
interpreted the Regulation for the purpose of the preparation of the Report.
From a socio-economic perspective, our Company and its subsidiaries (hereinafter OMV Petrom group) have a larger
contribution to countries in which they operate, than the reportable payments under the Regulation. OMV Petrom group
companies make payments to governments also in connection with other segments of activity, not only Upstream, i.e.
Downstream Oil, Downstream Gas, Corporate & Other. Beside government payments, OMV Petrom group companies
contribute to the economies of the countries in which they operate by providing jobs for employees and contractors,
purchasing goods and materials from local suppliers and undertaking social investment activities.
Basis of preparation
Reporting entities
Under the requirements of the Regulation, OMV Petrom is required to prepare a consolidated report covering payments
made to Governments by itself and any subsidiary undertakings included in the consolidated group financial statements,
which is active in the extractive industry. Therefore, the reporting entities for the purpose of this Report are OMV Petrom
S.A. (Romania), Tasbulat Oil Corporation LLP (Kazakhstan), KOM-Munai LLP (Kazakhstan) and OMV Offshore Bulgaria
GmbH (Bulgaria). For the last one, no payments in scope of this report are to be reported for the year 2020.
Activities within the scope of the Report
Payments made by OMV Petrom group to governments in connection with any of the following activities: exploration,
prospection, discovery, development and extraction of minerals, oils and natural gas deposits or other materials (“extractive
activities”) are presented in this Report.
Government
A “government” is defined as any national, regional or local authority of a country and includes a department, agency or
entity undertaking that is controlled by the government authority.
Project
According to the Regulation, the payments are reported:
on government and governmental body basis;
by type of payment;
on “project” basis, where possible.
Consolidated report on payments to governments for the year 2020
165
OMV Petrom Annual Report 2020 Consolidated report on payments to governments
For the purpose of this report “project” is defined as the operational activities which are governed by a single contract,
licence, lease, concession or similar legal agreement, and form the basis for payment liabilities to the government. Where
these agreements as per the aforementioned definition are substantially interconnected, they are treated for the purpose of
this Report as a single project.
“Substantially interconnected” is defined as a set of operationally and geographically integrated contracts, licences, leases or
concessions or related agreements with substantially similar terms that are signed with a government, giving rise to payment
liabilities. Such agreements can be governed by a single contract, joint venture, production sharing agreement or other
overarching legal agreement.
There may be instances - for example, corporate income taxes - where it is not possible to attribute the payment to a single
project and therefore OMV Petrom discloses these payments at the country level in the current Report.
Cash and Payments in Kind
In accordance with the Regulation, amounts have to be reported on a cash basis, meaning that they are reported in the
period in which they are paid, regardless of the period in which they are accounted for on an accruals basis.
Refunds are also reported in the period in which they are received and will either be offset against payments made in the
period or be shown as negative amounts in the Report.
Payments in kind made to a government are converted to an equivalent cash value based on the most appropriate and
relevant valuation method for each payment type. This can be at cost or market value and an explanation is provided in the
Report to help explain the valuation method. If applicable, the related volumes would be also included in the Report.
Materiality
Payments made as a single payment or a series of related payments that fall below EUR 100,000 within a financial year are
excluded from this Report.
Reporting currency
Reporting currency is Romanian Leu (RON). Payments made in currencies other than RON are translated for the purposes
of this Report at the average exchange rate of the reporting period.
Payment types
Production Entitlements
Under production sharing agreements (PSA’s) the host government is entitled to a share of the oil and gas produced and
these entitlements are often paid in kind. OMV Petrom group has not made such payments in the year.
Taxes
Taxes levied on income, production or profits of companies are reported. Refunds will be netted against payments and
shown accordingly. Consumption taxes, personal income taxes, social security contributions, sales taxes are not reported
under the Regulation. Also, other taxes such as property and environmental taxes are not reported.
Royalties
Royalties are payments for the rights to extract oil and gas resources, typically at set percentage of production value.
Dividends
In accordance with the Regulation, dividends are reported when paid to a government in lieu of production entitlements or
royalties. Dividends that are paid to a government as an ordinary shareholder are not reported, as long as the dividends are
paid in the same terms and conditions as to other shareholders.
For the year ended 31 December 2020, OMV Petrom group had no such reportable dividend payments to a government.
166
Consolidated report on payments to governments for the year 2020
OMV Petrom Annual Report 2020 Consolidated report on payments to governments
Bonuses
Bonuses include signature, discovery and production bonuses in each case to the extent paid in relation to the relevant
activities. OMV Petrom group has not made any payments in the category in the year.
Fees
These include licence fees, rental fees, entry fees and other considerations for licences and/or concessions, respectively for
access to the area where extractive activities will be performed.
The Report excludes fees paid to a government for administrative services that are not specifically related to extractive
activities or access to extractive resources. In addition, payments made in return for services provided by a government are
also excluded.
Infrastructure Improvements
The Report should include payments made by OMV Petrom group for infrastructure improvements such as a building of a
road or bridge that serve the community, irrespective if OMV Petrom group pays the amounts to non-government entities.
These are reported either when the cash contribution was paid to the government or when the relevant assets are handed
over to the government or made available for use by the local community. Payments that have a social investment nature,
donations or sponsorships are excluded from the Report.
Payments overview
The overview table below shows the relevant payments to governments that were made by OMV Petrom group in the year
that ended December 31, 2020.
Out of the seven payment types that are required by the Regulation to be reported upon, OMV Petrom group did not pay any
dividends, production entitlements, bonuses or infrastructure improvements that met the Regulation definition and therefore
these categories are not shown.
(in thousands of RON)
Romania
Kazakhstan
Total
Taxes
(on income,
production or profit)
Royalties
Fees (license,
rental, entry and
others)
Total of Payments
683,785
53,958
737,742
584,356
-
584,356
128,467
4,044
132,511
1,396,607
58,002
1,454,609
Consolidated report on payments to governments for the year 2020
167
OMV Petrom Annual Report 2020 Consolidated report on payments to governments
Payments by project, government and type of payment
(in thousands of RON)
ROMANIA
Payments per project
Onshore production zones
Onshore Joint Operations
Offshore Black Sea
Payments not attributable to projects
Total
Payments per Government
State Budget
National Company of Forests - Romsilva
Various Local City Councils
National Authority for Electricity Regulation (ANRE)
National Agency for Mineral Resources (ANRM)
Offshore Operations Regulatory Authority (ACROPO)
CONPET S.A.
Total
KAZAKHSTAN
Payments per project
Tasbulat, Turkmenoi, Aktas
Komsomolskoe
Total
Payments per Government
State Revenue Committee1
Licensed Research and Development Organizations2
Akimat of Mangystau Region3
Training centers, universities 4
Total
Total
Taxes (on income,
production or
profit)
Royalties
Fees (license,
rental, entry and
others)
Total
Payments
-
-
61,046
622,739
683,785
444,381
5,085
134,890
-
107,613
-
3,457
17,397
551,994
5,085
199,393
640,136
584,356
128,467
1,396,607
683,785
584,356
-
1,268,140
-
-
-
-
-
-
-
-
-
-
-
-
74,244
21,928
17,397
11,656
2,770
472
74,244
21,928
17,397
11,656
2,770
472
683,785
584,356
128,467
1,396,607
19,860
34,097
53,958
53,958
-
-
-
53,958
737,742
-
-
-
-
-
-
-
-
2,763
1,281
4,044
-
2,581
1,096
367
4,044
22,623
35,379
58,002
53,958
2,581
1,096
367
58,002
584,356
132,511
1,454,609
1 State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan;
2 Various expenses with regard to research and development works;
3 Financing of various projects under the joint control of the Akimat of Mangystau Region and OMV Petrom;
4 Financing of various expenses with regard to university training centers as agreed within the concession.
Christina Verchere
Chief Executive Officer
President of the EB
Alina Popa
Chief Financial Officer
Member of the EB
Christopher Veit
Member of the EB
Upstream
Franck Neel
Member of the EB
Downstream Gas
Radu Căprău
Member of the EB
Downstream Oil
168
Consolidated report on payments to governments for the year 2020
OMV Petrom Annual Report 2020 Contact and Disclaimer
Contact and Disclaimer
Contact at Investor Relations
OMV Petrom S.A.
Mailing address: 22 Coralilor Street, District 1, Bucharest
Tel: +40 (0) 372 161 930; Fax: +40 (0) 372 868 518
E-mail: investor.relations.petrom@petrom.com
Disclaimer:
This report does not, and is not intended to, constitute or form part of, and should not be construed as, constituting or
forming part of, any actual offer to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares
issued by OMV Petrom S.A. (the Company) or any of its subsidiaries in any jurisdiction or any inducement to enter into
investment activity; nor shall this document or any part of it, or the fact of it being made available, form the basis of, or be
relied on in any way whatsoever. No part of this report, nor the fact of its distribution, shall form part of or be relied on in
connection with any contract or investment decision relating thereto; nor does it constitute a recommendation regarding the
securities issued by the Company. The information and opinions contained in this report are provided as at the date of this
report and may be subject to updating, revision, amendment or change without notice. Where this report quotes any
information or statistics from any external source, it should not be interpreted that the Company has adopted or endorsed
such information or statistics as being accurate.
No reliance may be placed for any purpose whatsoever on the information contained in this report, or any other material
discussed verbally. No representation or warranty, express or implied, is given as to the accuracy, fairness or currentness of
the information or the opinions contained in this ocument or on its completeness and no liability is accepted for any such
information, for any loss howsoever arising, directly or indirectly, from any use of this report or any of its content or otherwise
arising in connection therewith.
This report may contain forward-looking statements. These statements reflect the Company’s current knowledge and its
expectations and projections about future events and may be identified by the context of such statements or words such as
“anticipate”, “believe”, “estimate”, “expect”, “intend”, “plan”, “project”, “target”, “may”, “will”, “would”, “could” or “should” or
similar terminology. By their nature, forward-looking statements are subject to a number of risks and uncertainties, many of
which are beyond the Company’s control that could cause the Company’s actual results and performance to differ materially
from any expected future results or performance expressed or implied by any forward-looking statements.
None of the future projections, expectations, estimates or prospects in this report should in particular be taken as forecasts
or promises nor should they be taken as implying any indication, assurance or guarantee that the assumptions on which
such future projections, expectations, estimates or prospects have been prepared or the information and statements
contained herein are accurate or complete. As a result of these risks, uncertainties and assumptions, you should in particular
not place reliance on these forward-looking statements as a prediction of actual results or otherwise. This report does not
purport to contain all information that may be necessary in respect of the Company or its shares and in any event each
person receiving this report needs to make an independent assessment. The Company undertakes no obligation publicly to
release the results of any revisions to any forward-looking statements in this report that may occur due to any change in its
expectations or to reflect events or circumstances after the date of this report. This report and its contents are proprietary to
the Company and neither this document nor any part of it may be reproduced or redistributed to any other person.
Contact and Disclaimer
169