At this time, I would like to refer you to the disclaimer, which includes our position on forward-looking statements. These forward-looking statements are based on beliefs, estimates, and assumptions currently held by and information currently available to OMV. By their nature, forward-looking statements are subject to risks and uncertainties that will or may occur in the future and are outside the control of OMV. Therefore, recipients are cautioned not to place undue reliance on these forward-looking statements.
OMV disclaims any obligation and does not intend to update these forward-looking statements to reflect actual results, revised assumptions and expectations of future developments and events. This presentation does not contain any recommendation or invitation to buy or sell securities in OMV. I'd now like to hand the conference over to Mr. Florian Greger, Senior Vice President, Investor Relations and Sustainability. Please go ahead, Mr. Greger.
Thank you. Good morning, ladies and gentlemen. Welcome to OMV's earnings call for the first quarter 2026. With me on the call are OMV's CEO Alfred Stern and our CFO Reinhard Florey. Alfred and Reinhard will walk you through the highlights of the quarter and will discuss OMV's financial performance. Following their presentations, the two gentlemen are available to answer your questions. With that, I'll hand it over to Alfred.
Thank you, Florian. Ladies and gentlemen, good morning, and thank you for joining us today. Let me start with the extraordinary and challenging environment being faced by global energy markets. The closure of the Strait of Hormuz at the end of February, following the escalation in the Middle East, has had far-reaching repercussions, not only for oil and LNG flows, but for global energy security as a whole. Our thoughts are with all those affected by the ongoing conflict, and we will continue to prioritize the safety and security of our people and assets in the region. Despite the current circumstances, we delivered a solid Clean CCS Operating Result of more than EUR 1 billion and cash flow from operations excluding net working capital of more than EUR 1.6 billion. Turning to the macro environment.
International energy markets in the first quarter were characterized by extremely volatile price developments. Prior to the crisis, around 20% of total oil and gas supply transited the Strait of Hormuz. Following the closure of the Strait, the price of Dated Brent experienced a significant upward momentum. The Brent price climbed from less than $70 per bbl in January and February to over $120 per bbl by the end of March, resulting in a quarterly average above $80 per bbl, more than 25% higher than the previous quarter and 7% higher year-on-year. European natural gas markets have also been severely impacted. The initial reaction to the closure of the Strait was even more pronounced in early March.
Roughly 20% of LNG supply was stuck in the Persian Gulf, and Qatari volumes were offline, causing the average THE gas price to rise by 32% quarter-on-quarter. Despite this, the THE gas price for the first quarter averaged EUR 41 per MWh and was 13% below the exceptionally high prior year quarter. Refining margins were also very volatile. Market shortages caused by the conflict in the Middle East drove prices and margins higher in March. The OMV refining indicator margin averaged $13.9 per bbl and was thus at a similar level to the previous quarter, but substantially above the prior year quarter, driven by tight middle distillate and gasoline supply in the region. In chemicals, olefin and polyolefin indicator margins posted varied developments.
Olefin margins declined by 17% compared to the prior year quarter as margins in March got squeezed due to the conflict in the Middle East. Naphtha prices rose more strongly over the course of the month than olefin contract prices set at the beginning of March. Polyolefin margins increased by 28% as polyolefin contract prices could be raised strongly in March, reflecting concerns regarding the security of supply following the breakout of the conflict in the Middle East. Although the extreme market volatility and ongoing conflict in the Middle East presented significant challenges, OMV achieved a solid performance and once again demonstrated resilience thanks to its integrated business model. In energy, hydrocarbon production came in 7% lower than the prior year quarter as the Middle East conflict impacted output. We increased our fuel sales volumes, thereby reinforcing our position as a supplier of choice in the downstream sector.
In chemicals, total polyolefin sales volumes, which included the joint ventures, decreased only slightly year-on-year despite logistical constraints in a challenging environment. Our Clean CCS Operating Result came in at more than EUR 1 billion, though this was down 12% year-on-year. A stronger chemicals result could not offset the lower energy contribution, while the fuel segment set a similar level to the prior year quarter. Clean CCS Earnings Per Share amounted to EUR 1. Cash flow from operating activities reached almost EUR 800 million. The decrease year-on-year and compared to the previous quarter was predominantly attributable to the significant net working capital build of around EUR 850 million. Excluding net working capital effects, the operating cash flow was substantially higher than in both periods, largely driven by a higher pricing environment while also benefiting from timing effects.
Before I discuss OMV's results in more detail, I would like to turn to the Borouge International transaction, which represents one of the most significant strategic steps in OMV's history and the pivotal move in the implementation of our Strategy 2030. On March 31st, OMV and XRG, ADNOC's international investment arm, announced the successful creation of Borouge International. The combination of Borealis and Borouge and the subsequent acquisition of NOVA Chemicals has resulted in the formation of the fourth-largest polyolefin player worldwide, boasting substantial scale and reach across the Americas, Europe, the Middle East, and Asia. These regions are pivotal in determining future demand growth and long-term industrial relevance. Borouge International will be jointly owned by OMV and XRG, with each holding a 50% share. To balance the shareholding, OMV injected EUR 1.5 billion into the new company.
Our partnership is founded on clear governance, shared responsibilities, and most importantly, a shared ambition to create long-term value and future growth. It is also a reflection of our belief in the value of this platform, which repositions OMV's chemical segment to deliver substantial global potential. We recently also announced the executive leadership team, which unites decades of senior leadership experience across the international chemicals, commodities, and refining sectors with deep commercial and operational knowledge and a proven track record of strategic execution. The combined businesses have historically delivered average pro forma EBITDA of approximately $4.5 billion, despite recent years being more challenging. We expect EBITDA to increase significantly and reach more than $7 billion through the cycle. This will represent a significant enhancement in terms of earnings quality and cash flow generation, thereby also substantially strengthening OMV's long-term value creation.
It will be achieved primarily by growth projects where we see strong progress and near-term execution, but will also be supported by considerable synergies and the expected normalization of the chemicals markets. The asset usage agreement announced last month further underpins this growth path. It enables Borouge PLC to operate and market the substantial Borouge 4 volumes, which will add 1.4 million tons of polyethylene once fully online. Lastly, the new company achieved strong investment-grade credit ratings, demonstrating substantial confidence in the balance sheet and the sustainability of future cash flows. Borouge International is a leader in operational excellence. The strong results of Borouge International are also the result of the disciplined and consistent approach to managing its assets. Recent years showed that Borouge International is among the best operators in the industry, proven by both asset availability and plant utilization.
The company has consistently operated at utilization levels above the industry average, supported by high asset availability and the use of advanced technologies to optimize maintenance costs and production planning. Over the past five years, this focus has yielded significant outcomes, bringing the pro forma average utilization rate close to 90% compared with an industry average of just over 80%. This is supported by a modern, well-maintained asset base underpinned by substantial past investments. This higher utilization rate directly translates into stronger operational leverage, better customer service levels, more resilient cash flows, and better financial outcomes through the cycle. One thing also has to be clear. Operational excellence does not stop at asset level. It is also founded on an unwavering commitment to health, safety, and asset integrity. Product quality and pricing are of paramount importance to the strength of Borouge International.
Borouge International's innovative positioning, consistently high quality of its products, and substantial share of specialty products in its portfolio are clearly recognized by its customers, which directly impacts commercial outcomes. Over the past five years, pro forma price premiums of almost 20% have been consistently achieved when compared with local market benchmarks. This is a structural advantage and not just a cyclical one. It forms a solid foundation and contributes significantly to the strength and resilience of the company's margins, which have demonstrated stability across various market conditions in previous years. It is crucial that this premium pricing remains consistent throughout the entire cycle, and Borouge International has consistently demonstrated its ability to maintain premiums even at the bottom of the cycle. This underscores the technological innovation capabilities and the vital function of its products, as well as substantial customer trust.
This commercial strength is closely linked to the aforementioned operational excellence. Reliable supply, consistent product performance, and strong customer relationships all reinforce the ability to price sustainably at a premium. Let me turn to the historical earnings performance of Borouge International. Margins at Borouge International have been structurally higher than those of competitors, both when markets were strong and when conditions turned out to be more challenging. When comparing the pro forma EBITDA margins with those of specialty chemicals category leaders and global chemical players, the difference becomes clear. In strong market environments, Borouge International's margins are ahead of its peer group. Most importantly, in weaker market conditions, EBITDA margins remain high and close to 20%, well above the broader industry level. For 2025, the margin level of Borouge International remained twice as high as above the industry average across global chemical players.
Specialty chemicals leaders were in the same ballpark despite their materially different business models. Between 2021 and 2025, Borouge International proved to be the most profitable player through the cycle. Even at the bottom of the cycle, the margin profile was comparable with the very best in the specialty chemicals industry. This performance reflects everything we have already mentioned: operational discipline and advantaged feedstock, premium product positioning based on proprietary technologies, and scale. It is the core reason why this platform delivers sustainable value no matter the market environment. Let me now turn to OMV's performance in the first quarter of 2026. The clean operating result of the energy segment declined year- on- year by 21% to EUR 723 million.
The main driver of this was a lower result in exploration and production, which primarily reflected negative market effects and reduced sales volumes. In addition, the prior year quarter was supported by a positive one-time effect of EUR 48 million as a result of an arbitration award. The realized crude oil price remained virtually unchanged year-on-year, averaging $72 per bbl, while Brent increased by 7% to $81 per bbl. This was largely attributable to different pricing mechanisms that in some countries have a delay of 2 months. OMV's average realized natural gas price fell by 19% to EUR 31 per MWh . The stronger decline than the European benchmark, the THE, which decreased by 13%, was mainly due to the composition of the portfolio. Hydrocarbon production declined by 7% to 288,000 barrels of oil equivalent per day.
This was predominantly due to the temporary shut-ins caused by the conflict in the Middle East and natural decline in New Zealand and Romania. Production in Libya was slightly higher, which partially offset the declines elsewhere. Absolute production costs decreased as a result of various cost reduction measures. However, unit production costs rose to $11.6 per bbl. This increase resulted mainly from unfavorable exchange rate effects and lower production volumes. Sales volumes decreased by 31,000 to 252,000 bbl of oil equivalent per day, to a large extent due to lower production caused by the conflict in the Middle East and the lifting schedule in other countries. The gas marketing and power result decreased by EUR 30 million - EUR 72 million. The main driver of this was the missing positive effect of the arbitration award received in the first quarter of 2025.
Gas West was further impacted by a lower storage result following decreased summer-winter spreads. The contribution of Gas East rose strongly, supported by the power market deregulation in Romania, effective from July 2025. The Clean CCS Operating Result of the fuels segment remained largely constant at EUR 113 million. Substantially stronger refining indicator margins were offset by several factors. Among them were operational one-off hedging losses amounting to around EUR 100 million related to equity production due to global disruptions in crude flows. Lower utilization and a lower contribution from the marketing business were also offsetting. The European refining indicator margin more than doubled to $13.9 per bbl in the quarter. However, planned shutdowns, particularly in March, limited the ability to capitalize on the high March margins.
Because of these maintenance activities, the refinery utilization rate declined from 92% in the prior year quarter to 87%. The marketing business contribution declined substantially as retail performance was impacted by lower fuel unit margins due to higher oil product quotations triggered by the conflict in the Middle East. Increased fuel sales volumes could only partly offset this. The commercial business result also decreased because of lower margins, though higher sales volumes and a slightly improved contribution from the aviation business mitigated this to a certain extent. The contribution from ADNOC Refining and ADNOC Global Trading improved to EUR 7 million, mainly attributable to a better trading result. This was partly offset by impacts resulting from the conflict in the Middle East.
The clean operating result of the chemicals segment rose sharply to EUR 245 million, driven by improved polyolefin margins and the stop of Borealis depreciation. In our European business, we recorded unfavorable market effects totaling EUR 20 million, reflecting lower olefin indicator margins, partly compensated for by higher polyolefin margins. Inventory effects were positive. The utilization rate of our European crackers was stable at 91%. Nevertheless, the result of OMV-based chemicals decreased due to weaker olefin margins and lower butadiene results. The contribution from Borealis, excluding joint ventures, rose to EUR 223 million to a large extent driven by the stop of depreciation. In addition, the results of Borealis-based chemicals and polyolefins increased. Borealis-based chemicals benefited from higher light feedstock advantage and positive inventory effects.
The contribution of polyolefins grew because of better margins and increased sales volumes driven by improved specialty sales volumes in the energy and mobility sector. Earnings from our joint ventures decreased by EUR 10 million, mainly due to a lower contribution from Borouge. Borouge performance was impacted by low pricing in January and February, as well as logistics disruptions and cost increases in March caused by the conflict in the Middle East. Thank you for your attention up to here, and I would like to now hand over to Reinhard.
Thanks, Alfred. Good morning and welcome also from my side. Let's turn to some more financial details of OMV's first quarter. Starting with cash flows, our first quarter operating cash flow, excluding networking capital effects, was very strong at EUR 1.6 billion, considerably higher than the previous quarter and the prior year quarter. The main drivers were substantially stronger refining margins and improved Gas & Power Eastern Europe contribution, as well as higher prices in fuels, which are not visible in the Clean CCS to the CCS adjustment. Cash flow further benefited from realized gas derivatives. It is important to note that the higher prices also affected networking capital with the opposite effect. Higher prices, together with increased inventory levels, led to substantial networking capital build of approximately EUR 850 million.
As a result, cash flow from operating activities for the quarter was around EUR 800 million. Organic cash flow from investing activities in the first three months of the year was around EUR 900 million, related to ordinary ongoing business investments and major growth projects such as Neptun Deep, the PDH plant in Belgium, the SAF HVO plants in Romania, and green hydrogen in Austria. As a result, the organic free cash flow before dividends for the first quarter of 2026 came in at minus EUR 125 million. Our balance sheet remains very strong. The impact of the Borouge International transaction on our leverage ratio was fairly limited. It rose from 14% - 17% at the end of the first quarter.
This was mainly attributable to the impact of the Borealis deconsolidation on our equity and net debt, as well as the capital injection of EUR 1.5 billion into Borouge International to equalize OMV's and the XRG's shareholdings. I think it is worth highlighting that even after this game-changing transaction, our leverage ratio remains well below the mid and long-term threshold of 30%. This reflects our commitment to maintaining a robust capital structure and healthy balance sheet. At the end of March, OMV had a cash position of EUR 3.5 billion and EUR 3.1 billion in addition in undrawn committed credit facilities. Given the significance of Borouge International transaction, I'd like to briefly explain the impact on reported numbers.
Clean CCS net income amounted to EUR 495 million in the first quarter of 2026, only slightly lower compared with the EUR 561 million a year before. The deconsolidation of Borealis led to a gain in the amount of EUR 886 million, which reflects the difference between the fair value and the book value of Borealis at the time of deconsolidation. This gain is recognized in net income and reported as a special item. As a result, it is not included in the Clean CCS net income or the Clean CCS result. Thus, reported net income rose to more than EUR 1.6 billion in the first quarter of 2026, largely impacted by the gain from deconsolidation. In the prior year quarter, reported net income was EUR 288 million.
Let me now briefly walk you through the general financial implications of the Borouge International transaction going forward. In the first quarter, most financial metrics have been reported under the previous group structure in line with the previous quarters. This applies to the clean operating result, net income, and operating cash flow. At the same time, the balance sheet already captures the technical effects of closing. This includes the EUR 1.5 billion capital injection into Borouge International and the deconsolidation of Borealis cash balances. From the second quarter 2026 onwards, Borealis will be fully deconsolidated and the new company, Borouge International, will be accounted for at equity. This means in operating result and net income, we will report OMV's share of Borouge International's net income. In operating cash flow, we will reflect dividends received from Borouge International.
On the balance sheet, Borouge International will be shown as an equity accounted investment as it is already shown at the end of the first quarter of 2026. This structure results in cleaner financials, stronger cash generation visibility through dividends, and a more resilient earnings profile going forward. In addition, in the appendix, we provided high-level pro forma figures for the years 2024 and 2025, which show OMV excluding Borealis and Borouge that should help you with modeling. Let me end with the outlook for this year. Recent escalations in the Middle East, including military activities and restrictions on shipping through the Strait of Hormuz, have significantly increased volatility in global energy markets. While we are constantly monitoring the latest developments, it remains difficult to predict the environment as a trajectory of the regional conflict is highly uncertain.
In light of these events, we currently forecast an average Dated Brent price for 2026 of between $85 and $95 per bbl. The average THE gas price is estimated to be around EUR 45 per MWh. While the OMV average realized gas price is expected to be in the region of EUR 35-EUR 40 per MWh . In energy, we expect average oil and gas production for 2026 of between 280,000 and 290,000 bbl of oil equivalent per day, reflecting the current situation in the Middle East and subject to the timing and extent of the lifting of restrictions on the shipping through the Strait of Hormuz. Unit production cost is now expected to be around $11 per barrel.
In fuel, the refining indicator margin is projected to be between $10-$15 per bbl, a range that reflects current market disruptions and uncertainties. These disruptions are also leading to a significant widening of crude oil differentials to Dated Brent, which are not reflected in the OMV refining indicator margin or in the full-year sensitivities and thus could have a material adverse impact on the fuels business. We anticipate the utilization rate of our European refineries to be above 90%, with no major maintenance turnarounds planned at our refineries in the remainder of the year. Total fuel sales volumes are expected to be higher than last year, while retail and commercial margins are projected to be below the levels seen in 2025.
Moreover, several European countries have implemented or are considering implementing initiatives to limit or reduce margins in the fuel business as a means of mitigating the surge in fuel prices. In chemicals, we expect the ethylene indicator margin to be above EUR 550 per ton and the propylene indicator margin to be above EUR 420 per ton. This increase reflects the current market situation in Europe with inherent supply disruptions and increases in restocking activities. The utilization rate of the olefin cracker is expected to be around 90% in 2026. There are no major turnarounds planned for the rest of the year. The clean tax rate for the full year is currently expected to be at the same level as in the first quarter of 2026, so slightly below 50%. Thank you for your attention.
Alfred and I will now be happy to take your questions.
Thank you, Reinhard and Alfred. Let's now come to your questions. As always, I'd ask you to limit your questions to only two at a time so that we can take as many questions as possible. You can always, of course, rejoin the queue for a follow-up. We start the Q&A session with Guy Levy from Morgan Stanley.
Hi, good morning.
Hi.
Thank you for taking my questions. If we could start talking a little bit about refining, perhaps if you could tell us about the refining margins that you're seeing at the moment. Also, looking at the remainder of the year, the company highlighted risks to the fuel segment on the back of the volatility of crude differentials. I wondered what can you do in advance to hedge or protect yourself against those type of risks? Then secondly, a few on refining, thinking about storage, could you perhaps say a few words about current storage levels, your ability to procure crude over the coming months?
If you could just remind us how much of your crude supplies come from spot transactions vis-a-vis long-term agreements that you might have, that would be great. Thank you.
Okay. Thank you, Guy, for your question. Let me start a little bit with the refining margins. As you could see, right, the refining indicator margins, in particular in Europe, we saw after the closure of the Strait of Hormuz that they went up dramatically, I would say. Then after that, some normalization happened, but continuing at a high level. We have seen April now to start at about $16 per bbl. I think there's a couple of different things I think that probably play into this. The basket of crudes and the crude pricing, of course, is quite a volatile thing.
At OMV, we had very limited exposure, physical exposure to crudes coming out of the Strait of Hormuz. Our crude baskets were more focused on other crudes, with a significant amount actually from Kazakhstan and then other crudes. We'll our expectation, we have now for the rest of the year, given a pretty broad range of $10-$15 per bbl, because we see the really a significant volatility on the way forward, around kind of an average assumption in that range.
Maybe to the storage of crudes for the production to the refineries is actually rather limited, right, to a few weeks of storage. As you so, if you look at our refineries, we are actually here in the Austrian refinery connected through a pipeline to the Adriatic Sea, also the refinery in Germany is connected to that pipeline here in Austria. We also have some equity production, which makes about 10% of the feed. In Romania, in the refinery, we are about integrated with 70-plus % into equity production from the oil production in Romania with the oils there.
I don't know, on hedging, if Reinhard has anything to add.
Very briefly. Of course, in the downstream area, we do apply some hedging in order to mitigate risks. Of course, we also need to keep some flexibility in order to take also advantages. Then we also suffered from hedge in March, a loss of around EUR 100 million, and that was simply due to the situation that oil that was going to be listed and transported to the Strait of Hormuz was physically not available while a hedge was on there, therefore, one leg of the hedge disappeared, which had to be covered in the situation of rising oil prices. However, that's a not uncommon situation. On the other hand, some of the hedges also protected us from further damage.
Understood. Thank you so much.
Thank you, Guy, for your questions. We now move on to Michele Della Vigna, Goldman Sachs.
Thank you very much, and congratulations on the very good results given the unstable situation. There were two areas I wanted to concentrate on. First of all, on Borouge, I was wondering, is there a simple way to think about how the new ownership and reported structure would affect net income? Let's say, how much higher or lower that would be if the new reporting structure had already been in place in Q1 for OMV? Secondly, I wanted to ask about jet fuel availability. This is certainly a concern going into the summer. Austria actually seems to be better prepared for it than some of the other European countries. What is your view on the visibility, especially as we go into the late summer, on the availability of jet fuel and the potential for dealing with relatively low amount of inventory days?
Thank you.
Thank you, Michele, for your excellent and your good question. I will start with the excellent one because I can answer it, and then I will ask Reinhard for help on the good question about the net income reflection. Jet fuel, it is indeed like like this, Michele, that in Austria, we. Maybe let me start different. We can say at the moment, we can supply all our contract customers with jet fuel, also including the required mandate of 2% renewable fuel addition, the SAF addition, and that covers the big airports, of course, in Munich, in Austria and then in Bucharest and a couple of smaller airports across that thing.
Our contract customers, we are covered, and because we are able to actually produce about the most part of that by ourselves. In general, we do, of course, see in particular in Europe, but also globally, that there is a shortage of jet fuel. There was significant amount of jet coming out of the Strait, going to Asia, but also Europe heavily depends on imports of jet fuel. From an OMV perspective, we can supply and provide security of supply to all our co-contract customers. We, of course, try then to also maximize our business around those airports that I just mentioned before. Now for the good question.
Yeah, Michele, it's not so difficult.
So far what we have shown in a net profit is a fully consolidated net profit of Borealis that also included the net profit of 36% of Borouge. In the net profit attributable to stockholders, we of course only showed the 75% of Borealis, so 75% of that full consolidation, because 25% were minorities of ADNOC. The situation with Borouge International changes that we consolidate at equity, which is 50% of the net profit of Borouge International. That consists of 50% of Borealis, so a little bit less of Borealis. 50% of Borouge, that is more than we had, and 50% of Nova, that's completely new.
That plays a role because what we currently see in the current environment, NOVA has a positive business environment at the moment, so we can also expect that there is a good contribution of NOVA now for the rest of the year.
Thank you.
Thanks, Michele Della Vigna. The next questions will come from Joshua Stone, UBS.
Thanks. Good morning. Apologies for my voice. I've seem to have lost it today, hopefully you can bear with me. 2 questions. 1 on chemical margin outlook. Curious what you're seeing in the U.S. market in particular, given your now ownership of Nova, and also is this a path of Baystar to finally make some money? Just curious what you're thinking there. Secondly, on UAE, your net production capacity is around 50,000 bpd in the upstream, something like that. If you were asked to, do you think you can actually produce more from these fields? Obviously I'm asking given the headline recently about the UAE leaving OPEC. Thank you.
Yeah. Thank you, Josh, for your questions and all the best for getting better there soon. I try to answer the questions. Hopefully I understood everything correctly. The chemical margins in the U.S., as Reinhard Florey just explained, right, with NOVA Chemicals being in there with 50%, but then there's also Baystar that was previously part in the Borealis results. These entities benefit, let's say, of the current crisis of the Middle East. What we have seen because of the closure of the Strait, right, it's not just oil and gas and oil products.
It is also a significant amount of chemical products that came through there, in particular also polyolefin products, but it's also been a significant amount of naphtha, so chemical feedstock that has come out and mainly went to Asia for the production there. There's shortage on this and in our view, the markets of Borouge International products have switched from being somewhat long to being short now. With this, we have seen significant price increases across the globe actually, also in the U.S. The prices for the products have gone up. With this, the margins have also expanded for those products.
In the U.S. in particular, what I think is maybe a slightly different there is, that, of course, U.S. gas on Henry Hub, that is also a reference for ethane pricing, then that has not moved as much as gas prices in other regions. There will be some benefit of this. NOVA Chemicals will benefit from this with better margins, but also the Baystar joint venture will be able to benefit from these better margins. Also, there is of course the opportunity or the potential opportunity that global shortfall in volumes can then be supplied from some of this production. I hope that answers your question.
The second question that you had on the production in the UAE, I would confirm that last year the average production there was about 50,000 bpd . We, of course, in March, as we reported here, this was affected by the supply chain issues with lower production coming out of the asset there. At the moment, this is back online into production. How this will continue exactly, I think, is a bit volatile depending on the situation in the Middle East. Hence also our guidance for the full year. The total production between 280 and 290.
Thank you, Josh, for your questions. We now come to Ram Kamath from Barclays. Ram, please go ahead.
Hi. Thanks for taking my question. My question is largely on the chemicals. As polyolefin prices have recovered strongly at the end of the first quarter, and feedstock tied to polyolefin rates have also rising. In a market where supply drives pricing and volumes are softer, how should we assess the effect on the margins? The second one, possibly on Borouge 4 ramp up, whether the current situation in the Middle East has impacted the ramp-up phase. If you can comment also on the feedstock pricing mechanism, particularly for Borouge. Sure, as I understand, it would be a new price mechanism that possibly the company will be entered into with the suppliers. If you can comment on that. Thank you.
Thank you for your question, Ram. Maybe I just start with the polyolefin price environment, or maybe let me expand this a little bit because it's an integrated supply chain, so there's olefin and polyolefin prices. What we have seen in March is that Naphtha prices went up quite significantly. Feedstock prices went up significantly, while at the same time, olefin prices were then to a large degree, locked in from price discussions at the beginning of the month. This has changed significantly in April because olefin prices have rised strongly in in April. They have gone up by, like, EUR 400-500 per ton.
That is leading to a significant price expansion. The polyolefin prices, they reacted a little bit faster already in March, and the margins expanded there. But again, in beginning of April, in March also, the contract prices have gone up, which helped that situation to expand the margins. In April, we have now seen additional price increases also in polyolefins, with further expansion of the margins. At the moment, we have seen still continuing good demand, and it is more a question now of supply capability, to make sure to be able to supply the demand.
We have with Borouge International, they are actually in a very strong position with this, with the assets distributed quite well globally and with more than 70% of their production in advantaged feedstock position. As I also presented, so this is the situation now. We will see how this is on the way forward. I do want to highlight again, I don't want to go into all the same again, but as you could see, the EBITDA margins, the margin capability of Borouge International is really exceptional.
We are with Borouge International is significantly ahead of the competitors in their own field, but they are more playing from a margin level in a specialty chemical kind of margin environment. That we anticipate to continue, reason the combination of a good technology platform that gives innovative products that can get price premiums plus the good feedstock position. On the Borouge 4 ramp up, I can explain that throughout the year. There's multiple production assets that are there.
The plan has been and continues to be that throughout the year, we are bringing online the different assets to then have all of the assets online before the end of the year. As it so is with all these huge assets, there can always be some delays, but currently, our plan stays the same. I can also report that the first asset, an XLPE line, has already been brought online for this.
On the feedstock, I want to emphasize again that about 70% of the feedstock in Borouge International is based on advantaged feedstock that will continue to be in this way with some modification on the Borouge assets on the way forward, where there will be some adjustments, but these will be compensated with additional capacities that are coming on stream with Borouge 4 on the way forward.
Thank you.
Thank you, Rem, for your questions. We now move to Sasikanth Chilukuru from Jefferies.
Hi, thanks for taking my questions. I've got 2 left on these. The first was coming back to your refining margin indicator guidance. You've raised it to $10-$15 per barrel, but now highlighted the widening of the crude oil differentials to have a material adverse impact. I was just wondering if you could quantify the level of these adverse impacts you have seen in April so far or currently. The second one was regarding the dividends from your JVs. Are you expecting any dividends from ADNOC Refining and Trading this year? And from Borouge International, I was just wondering if there was any risk to that updated dividend payments and also the timing for these payments to OMV. Thanks.
Sasi, thanks. I can start with the question of the dividend. In terms of the dividends from JVs, of course, we are expecting also a dividend from ADNOC Refining and specifically also ADNOC Global Trading. This is two entities where we have participations in, and while we are seeing that ADNOC Refining, of course, also bears some of the burden of the conflict, we are seeing for the rest of the year rather a stabilizing development in that, whereas ADNOC Global Trading is doing a great job and is earning very good money, and we're expecting also dividends from from that side.
On the Borouge International dividends, we have announced that the anticipated dividends were in that way that we are taking only 50% of the anticipated minimum dividend in 2026. Why is that? Because the uncertainty around the situation in Middle East provided some safety measures of safeguarding the balance sheet, making sure that also this excellent rating that we have in the group stays in that way. However, we are not expecting that there are any further modifications to that, so we are expecting, of course, the other 50%, and we're expecting that for the second half of the year.
Let me take your question on the refining indicator margins. As we, as I described, we saw in the first quarter, let's say January, February, quite different than March. We saw a significant increase in refining indicator margins, but important, and I think that's your question then, to realize this is a very crude measure, right? To a very rough measure of taking the fuel prices. It's a little bit more complicated in reality how we see this and the market distortions are also quite significant on the way forward.
For the second quarter, we expect some, let's say, adverse effects, one from increased crude differentials, that will depend on how these geopolitical issues and risks continue. We do definitely see tighter supply conditions, which we of course are continuously optimizing to make sure that we get ourself in the best possible position. In addition, we do see local supply dynamics working out and increasingly also in Europe in particular, regulatory interventions and price caps that are affecting then also the results. For this reason, we have also left a gap of the 10-15 to reflect this.
We will of course be managing to optimize our result in that volatile environment.
Thanks, Sassi. The next questions will come from Matt Lofting, JP Morgan.
Thanks for taking the questions, and appreciate the update, gents. Two things if I could. First, I mean, you highlighted through the update, the strength of the balance sheet, which is quite right. I guess there are lots of volatility, but the outlook, the cash flows is better net-net than was expected at the beginning of the year.
Going back to the update that was provided sort of last month on BGI and the revisions to the next steps, I just wanted to understand the thinking in terms of the feed-through on the lower BGI dividend payment to OMV and that impacting, I think, the dividend that you expect to pay to your shareholders by EUR 0.6-0.7 per share for FY 2026. Why that perhaps couldn't be protected more strongly through the higher cash flows on the rest of the business, and whether there is still scope to re-revise that view and take a more positive stance on that.
Second, I think there was some reports earlier this month on Austria being one of the countries that was pushing the EU to look at revised EU windfall tax measures on the energy sector in the context of the sort of the price shock. Could you just share your understanding of the sort of the current status and situation there? Thank you.
Yeah. Thanks, Matt. Maybe, let me take the first question regarding the outlook on dividends. The question that you raised was whether our improved outlook on cash flows would somehow put the open six to open seven, yeah, EUR 0.60-0.70, lower dividends into question. I would say, why not? It's too early to say. Yeah. This is something where we believe that with the higher dividends that we could pay from operating cash flows, if the operating cash flows move up, then there is a part of a compensation of that EUR 0.60-0.70 that we will miss from Borouge International.
I wouldn't be too pessimistic to say, the view of the first quarter on overall OMV dividends could not improve over the time. Nevertheless, there will be a little bit shift, if we are lucky, from dividends coming from the BGI, which will be EUR 0.60-EUR 0.70 lower, to dividends coming from our operating cash flow, where we dividend out 20%-30%. That could be a part mitigation compared to the view from the beginning of the year. Of course, the structure as we have described it, stays exactly the same. Let me try on the windfall tax. Maybe I stick with the facts a little bit here.
Indeed, Austria was one of the signatories of a letter that was sent to Brussels, up until this point, that our information is that not more than that has actually happened than a letter being sent. Hopefully also, in Europe, we will continue to pursue free market economy kind of principles, with the possibility to manage this difficult supply and demand situation that we have around this. At this point, I have no additional information about this.
Thank you.
Thanks, Matt. We now move to Oleg Galbur from Oddo BHF.
Good afternoon, and thank you for the presentation. I have one question which has two parts. Investors are keen to understand the overall impact of the Middle East crisis on OMV, and I hope you can help us provide them with bit more detail. Firstly, could you please update us on the current status of the oil production in the UAE and capacity utilization at Borouge? Specifically, to what extent is the closure of the Strait of Hormuz affecting OMV's ability to produce, and more importantly, to sell crude oil and petrochemicals products produced in the UAE?
Secondly, while you mentioned that, NOVA Chemicals is benefiting and is expected to positively contribute to OMV's results, I hope you can tell us how are Borealis results, being affected by the current market environment, which is characterized by significantly high feedstock costs, particularly for Borealis. Thank you.
Okay, Oleg, thank you for your question. Let me maybe pick up here and try and go through your questions. As you say, we also participate in assets in the Middle East, and we are a joint venture owner in the oil production there together with ADNOC. The production there was reduced in March, it is now back in production and also then supplying the local demand there. We expect that this will also be optimized in the months before. On Borouge, I can tell you that in the first quarter, we had an asset...
Borouge had an asset utilization of high 90%, close to 100%. They had a preexisting contingency plan on exporting products in case of the waterways not being available, and they activated this mechanism, and with this in March, they were able to export more than 90% of the production in March through these alternative logistics channels. Sorry, more than 60%. I think I misspoke here. More than 60% through those alternative logistics channels. The additional production volumes they put in storage for shipment done in the 2nd quarter of this year.
Of course, they will continue to maximize their production levels as well. There's alternative evacuation routes there in order to keep up and storage capability to keep up the high production levels. On NOVA Chemicals and Borealis, maybe let me focus a little bit on the European market here because also that has quite developed accordingly. There was very significant price corrections in the European market. We actually see that monomers, ethylene, propylene are quite short and that there is significant demand.
We have seen modest price increase in ethylene and propylene in March, a significant step up of EUR 400-500 per ton in April now. I've also reported that our utilization of our crackers was about 91%, the Borealis and OMV crackers together, which is about more than 10% higher than the European average utilization rate. That's because all the crackers are either integrated into the OMV refineries or they have a light feedstock advantage on the Borealis side. That's for the olefins. Also on the polyolefins, we have seen that the contract prices have gone up.
We've actually seen also some closing of the gaps between spot and contract prices, which is always an indicator of tight markets. Now in April, again, the prices have gone up again, around EUR 1,000 per ton for both polyethylene and polypropylene in the prices. That is significant increases in the prices reflecting the market tightness. We have also seen the demand levels to be good, so that Borealis and now Borouge International is able to take advantage of the better market environment.
Thank you very much.
Thank you, Oleg. Next is Adnan Dhanani from RBC.
Hi. Thanks for taking my questions. 2 for me, please. Just the first one on the European gas market. Can we just get your latest views. Obviously we're now facing a 2nd crisis in the energy market in 4 years, and presumably there's going to be more focus on domestic energy security in Europe. As a major producer of gas in Europe, how do you see that opportunity set for you in the coming years? Related to that, any update on your search on Neptun Deep lookalikes. Just a question for Reinhard, maybe just on the results this morning. Significant timing effects in your cash flow that benefited and drove quite a material beat versus market expectations.
Just wondering what the moving parts are there, do you expect those timing effects to revert going forward? Thank you.
Thank you, Adnan. I will start with the gas, and then I will ask for help from Reinhard on the timing effect on the cash flows. The gas market, indeed, it is also quite a volatile kind of market environment. We are now giving an outlook of an increased average price for THE for the German market benchmark of about EUR 45 per MWh. The first quarter was around EUR 41-42 per MWh . That was that consisted of lower January and February and then significantly increased March versus the bump that we got in March. It has come down a little bit again to EUR 45-46 in the beginning of April.
Yesterday's announcement again added, increased the price again up. A very volatile situation. As you know, the Qatar LNG represented a significant amount of LNG coming to the global markets. Most of the shipment via did go to Asia, as it is a global market, we have seen a increase in the prices. We have then seen here that after 24, 26, right, 26. 24, 25. 25 was slightly higher than 24 in the average annual price for the THE. Now it's gone up again back to more like the 23 type of levels.
European storages are on the low side, and we do see some intermittent windows where we can lock in some winter spread and increase the storage. We have seen a little bit over the last week increases of the storage, but it's still on the low side, and we see the forward curves, they are more on the flat side to making that refilling of the storages more complicated. I see a certain risk that getting towards the winter then, that we will potentially enter with lower storage levels. If the demand then in the coming winter goes up, prices will then also strengthen in the market.
From a OMV perspective on the storage levels, Austria is here in a special situation because Austria has about in total, about 1 year of demand storage capacity. With this, the storage requirement is a bit lower, at 35%, and we are already above that storage requirement. From that perspective, on the way forward, we will commercially optimize what we are doing here. Neptun Deep, you asked, of course, here on the project, we are continue to be on plan on executing on the project. As we have reported previously, the first 4 wells on the more shallow end, they have been drilled.
We have now started the drilling on the further six wells on the deeper end of things and advancing also with the platform and all the things are on plan so that we are still looking at the original time plan, 2027 startup. I do think that is the right moment to come because we see the wedge of import requirements into Europe opening up year over year on the way forward. That Neptun Deep will come into a good time to improve security of supply in the market that will be priced mainly from LNG import differentials.
Adnan Dhanani, regarding timing effects in cash flow, let me start with saying OMV has once again shown that we have a very strong and resilient cash flows. We have come up with EUR 1.6 billion, a little bit above EUR 1.6 billion of operating cash flow, excluding networking capital and almost EUR 800 million of operating cash flow, including the networking capital effects. Now the timing effects, you can more or less differentiate three different factors. One, of course, is the networking capital. This networking capital is an effect that came with the sudden increase of the prices, where we both had on the inventories, but also in the netting of the payables and receivables, a significant negative impact.
A build up of networking capital that negatively influenced the cash flow in first quarter. That's a little bit of a savings account, and according to the development of the prices, this will come back if prices normalize again. Therefore, I see that as a positive timing effect. On the other hand, there's a little bit of an opposite effect in the CCS, in the valuation effects regarding our inventories. There we have seen a gain from the CCS in the result that of course, then also is visible in the cash flow. If we see then prices going down again, this time difference effect also will go away. We are talking here about EUR 250 million positive from the first quarter.
The third element actually is gas derivatives. This is really a timing effect where we have seen a positive effect, so something between EUR 100 million-EUR 150 million in the first quarter. This over time, when these derivatives then can be resolved, will have the adverse effect coming a little bit over the 3 quarters distributed. Yes, it will come back, but it will have a smaller impact on this. In total, again, the basis cash flows have been resilient and strong, and I think this is what we'll also keep for the rest of the year.
Great. Thank you.
Thanks, Adnan. Now we come to Sadnam Ali from HSBC.
Hi there. Thanks for taking my questions. The first one I just wanted to ask, I see for the first time it looks like in for country-level productions, but that you've grouped together the UAE and the Kurdistan region of Iraq. I just want to get a sense of your decision behind making that. Secondly, just overall, you know, it's been 2 months since the conflict started. Just kind of your thoughts on what you think you've managed well and what you think you could have done better. Thank you.
Sadnan, maybe let me start with the first question, why we grouped together Middle East, simply because this is a region that breathes and lives with geopolitical situations in that region. If we would do that asset by asset, it would still have the same kind of volatility. Therefore, we have grouped that together. We are talking here about our asset participations in Kurdistan region of Iraq, KRI, on the one hand side, and our participations in the SARB and in the Umm Lulu fields in Abu Dhabi that together had a volume of around 60,000 bbl all together. You have seen in the past it's 50,000 from UAE, it's 10,000 from KRI.
We still see that putting that from a region together makes more sense to look at the volatilities that we have. Just to give you an example, temporarily, we have been impacted in both of these regions from the Gulf War. As soon as these things is improving and being resolved, both will come back to full volumes. The real difference is KRI is gas and and the Emirates volumes are oil. Otherwise, for the impact that will show with that, they are very easily connected.
Yeah. Let me maybe try and follow up on on what what we think we have done well and what we could have done better. Maybe I think it was really timely to close on Borouge International transaction. As we try to describe, this is transformative for OMV. It will be very important on the way forward. It is a very strong company that we put forward. If we could have done that even earlier, that would have been good, but I think it's a fantastic step on the way forward that will be important for our integrated business model in the future to come.
I also, we have not talked about this specifically, but I do want to remind you, we have our cash flow efficiency program that we are executing on, and part of that is also our cost reduction program. This is good online, and we continue to move forward because we believe this is still efficiency.
Productivity is a key driver that we need to do on the way forward, even if prices have gone up and are higher today. On what we could have done better, I would say that that hedge that Reinhard described before, where one leg was missing in the end, if we had had somehow the information that the strait would close, I would have loved to forego that piece, quite honestly. This is part of our normal business, and as Reinhard said, it's not unusual and was also compensated on some positive effects on the other side. The last, but this is only half serious, quite honestly.
If you remember, a few years ago, we Borealis divested their fertilizer business. I still think that was a very important strategic move at the time and will continue to be so because it was mainly a European focus. It was only a European-focused production for ammonia or nitrogen-based fertilizer. At this moment, of course, fertilizer globally is quite short, and the prices are high. That would be something that at this moment could be quite fun.
Thank you.
Thank you.
Thanks, Adnan, for your questions. We now are at the end of our conference call and would like to thank you for joining us. If you have any further questions, please contact the investor relations team. We will be happy to help. Goodbye, and have a nice day.
Thank you very much, and have a great day.
Thank you. Bye-bye.
That concludes today's teleconference call. A replay of the call will be available for one week. The replay link is printed on the invitation, or alternatively, please contact OMV's Investor Relations Department directly to obtain the replay link.