Thank you and good morning, ladies and gentlemen. Welcome to OMV's conference call for the Q4, 2022. With me on the call are our CEO, Alfred Stern, and Reinhard Florey, our CFO. As always, Alfred will walk you through the highlights of the quarter and discuss OMV's financial performance. After that, both gentlemen will be available to answer your questions. With that, I'll hand it over to Alfred.
Thank you very much, Florian. Ladies and gentlemen, good morning. Thank you for joining us. After a very strong macro environment in the Q3 of 2022, the warmer than usual winter weather in Europe and rising COVID cases in China fueled demand concerns and drove oil and gas prices down in the Q4. Brent oil prices decreased to around $89 per barrel on average for the quarter. European gas spot prices fell by around 50% due to the high filling level of storage facilities driven by mild weather and the prospect of increasing LNG importing capacity in Europe. Refining margins significantly increased quarter-on-quarter, supported by the diesel and jet fuel cracks in anticipation of the upcoming ban on Russian products in Europe. Olefin margins in Europe decreased compared to the Q3, driven by lower demand and ample supply.
Polyolefin margins recovered from the low level of the Q3, remained substantially below the strong prior year quarter, when imports in the European market were constrained due to shipping bottlenecks. With around EUR 2.1 billion Clean CCS operating result and EUR 1.2 billion cash flow from operating activities, excluding net working capital effects in the Q4 of 2022, we ended a year that was exceptional in many ways. In 2022, we generated in total EUR 11.2 billion in Clean CCS operating result and seven despite huge negative working capital movements. Our strong underlying cash flow, disciplined capital spend, and the strong balance sheet enable us to deliver on our progressive dividend policy and to continue with the transformation of the company.
For the financial year 2022, we will propose to the annual general meeting a regular dividend of EUR 2.80 per share, an increase of 22% versus the prior year regular dividend, which marks a new record in OMV's history. This is in addition to the special dividend of EUR 2.25 that we already announced back in October last year. Looking at operations year-over-year, polyolefin sales volumes went down slightly, while fuel sales volumes were flat. The utilization of the European crackers and refineries recovered. Oil and gas production was lower year-over-year, but at a similar level quarter-over-quarter. We were very active in advancing the execution of our strategy with a strong focus on sustainability. We signed an MOU with Wood for the commercial licensing of OMV's proprietary ReOil technology for chemical recycling.
We joined the consortium of the methanol to sustainable aviation fuel project in Germany, aiming to develop a new process technology to use sustainable aviation fuel as a drop-in fuel up to 100%. We signed additional MOUs with European airlines to supply sustainable aviation fuel. With these new agreements, the total sales volumes amount to up to 1.3 million tons in the period 2023 to 2030. We conducted a production and injection test to analyze the geothermal potential in the Vienna Basin, and the results were successful. Regarding the circular economy, we acquired an additional stake in Renasci, a Belgium-based provider of innovative recycling solutions in which we now have a majority share because we are convinced of the potential of Renasci's patented Smart Chain Processing concept.
The concept enables the processing of multiple waste streams using different recycling technologies under one roof, resulting in the exceptionally high valorization of waste. By leveraging its market access, know-how, and innovative technological capabilities, Borealis will accelerate the implementation of the Smart Chain Processing concept and will also explore opportunities for replicating the model in strategic locations. The acquisition will support our goals by providing increasing long-term access to chemically recycled feedstock from Renasci's Ostend facility and by enabling access to key circular technologies. We are proud to have been recognized once again as a sustainability leader by S&P Global and were included in the Dow Jones Sustainability World Index for the fifth time in a row.
We are one of the top 10 energy companies globally and one of Europe's 5 sustainability leaders in the energy industry. We are still the only Austrian company listed in this prestigious index. Last but not least, as of January this year, we have introduced a new corporate structure to drive sustainable growth and innovation. In addition to the CEO and CFO areas, we have 3 business segments, Chemicals and Materials, Fuels and Feedstock, and Energy. We are happy to welcome Daniela Vlad as the new Executive Board Member responsible for Chemicals & Materials, who joined us yesterday. Let's now turn to our financial performance in the Q4 of 2022. Our Clean CCS Operating Result in the Q4 of 2022 rose by 5% to around EUR 2.1 billion.
It's decreased by 40% compared with the extraordinarily strong Q3 of 2022, mainly driven by falling oil prices and the correction of gas prices. The Clean CCS tax rate increased to 54%, which was 17 percentage points higher than in the same quarter of the previous year, due to a higher share of E&P in the group profits, and therein, an increased contribution from E&P countries with a high tax regime. The solidarity contribution in Austria came in lower than expected at around EUR 90 million, and it was recorded as a special item. As a result of the increased tax rate compared to the Q4 of 2021, the Clean CCS net income attributable to stock holders declined by 31% to EUR 700 million. Clean CCS Earnings Per Share fell to EUR 2.14.
Let's now discuss the performance of our business segments. The Clean Operating Result of Chemicals & Materials dropped sharply to EUR 57 million. The result was impacted by a slowdown of the chemical sector, reflected in weaker margins and volumes, and substantial negative inventory valuation effects in polyolefins and the Nitro business, as well as a lower performance of the joint ventures. We have seen a huge swing of around EUR 200 million in inventory valuation effects. While in the prior year quarter, the inventory effects were positive and supported the result, in the Q4 of 2022, we recorded negative effects of around EUR 100 million, which weighed on the results. The polyethylene indicator margin declined by 19%, while the polypropylene indicator margin decreased substantially by 42%. The ethylene indicator margin improved by 7%, supported by reduced supply.
The propylene indicator margin went down by 12% due to increased supply as a result of high refining runs. In our European operations, we recorded a negative market impact of around EUR 100 million compared to the Q4 of 2021. Despite weaker propylene margins and lower cracker utilization rates, the performance of OMV's operated-based chemicals business increased, supported by the insurance proceeds related to the incident at the Schwechat Refinery in 2022. The contribution of Borealis, excluding the joint ventures, turned negative to minus EUR 23 million, impacted by a negative Nitro result, lower polyolefin margins and sales volumes, and substantially lower inventory effects in polyolefins. In Borealis-based chemicals business, the weaker propylene margins and cracker utilization rates were, to a large extent, offset by slightly higher ethylene margins and increased light feedstock advantage and an improved phenol business contribution.
The contribution from the polyolefin business saw a significant decline impacted by the large negative inventory effects and a drop in margins and sales volumes. As a result of cautious European buying sentiment, sales volumes decreased by 11% with a more pronounced decrease in polypropylene as it has a greater exposure to the more cyclical durable goods. The decline was seen in the consumer products and infrastructure segments. Volumes in mobility and energy marginally increased. While the realized margin per ton for the specialty products slightly improved, the realized margin for the standard products declined more than the indicator margin due to higher utility costs. The performance of the JVs decreased by EUR 119 million, driven by a negative contribution from Baystar, and a lower contribution from Borouge compared to the prior year quarter.
Borouge results declined significantly, driven by industry-wide pricing pressure and a lower share of OMV following the listing of the company in June 2022. Polyolefin prices in Asia fell due to new production capacities and depressed Chinese consumer demand caused by lockdowns and the real estate crisis. The negative market impact on Borouge could only be compensated for partially by higher sales volumes, driven by the full ramp-up of the new polypropylene unit. At Baystar, the ethane cracker recorded a low utilization rate in the Q4 of 2022 due to operational issues during the startup and the hard freeze in Texas in December, which led to its shutdown. Combined with a weak market environment, the revenues at Baystar were limited, while costs increased due to the charge of full depreciation after the startup and higher interest expenses.
The Clean CCS Operating Results in refining and marketing almost doubled to EUR 714 million due to very strong refining indicator margins. A significantly higher contribution from ADNOC Refining and Trading and insurance proceeds related to the incident at the Schwechat refinery in 2022. This was partially offset by a substantially reduced contribution from Gas and Power in Romania, higher third-party supply costs, increased utility costs, and a low retail contribution. Total sales volumes were at the same level as in the Q4 2021. The divestment of the retail volumes in Germany was compensated for by an increase in jet fuel sales volumes following a recovery in the aviation market. The retail business performance declined, impacted by market price regulations in some countries and voluntary discounts in Romania, the missing contribution from Germany, and higher costs.
The contribution of the commercial business was similar to that in the Q4 of 2021, with constant volumes and margins. The contribution from ADNOC Refining and Trading rose from EUR 14 million to EUR 114 million, driven by higher refining margins and the strong performance of ADNOC Global Trading. The result of Gas and Power Eastern Europe decreased by EUR 87 million regulations related to the extended scope of capped prices and overtaxation for both Gas and Power in Romania in the amount of EUR 150 million. Better Gas and Power margins could only partially offset this. The clean operating result of Exploration and Production increased by 15% to EUR 1.3 billion.
The higher realized commodity prices and a stronger dollar more than offset the lower sales volumes caused by the exclusion of Russian volumes, higher operational costs, gas overtaxation in Romania of around EUR 90 million, and a negative result in the Gas Marketing Western Europe business. Compared with the Q4 2021, OMV's realized oil price increased by 12%, in line with trend. The realized gas price rose by 71% compared with the prior year quarter, driven by the increase in gas prices in Europe and the exclusion of Russian gas volumes. Production volumes decreased by 106,000 to 385,000 BOE per day, primarily due to the change in the consolidation method of Russian operations. Higher production in the UAE after a revision of OPEC restrictions compensated for decreased production in all other countries.
Production cost rose by 43% to $9.1 per barrel, significantly impacted by the exclusion of the low-cost Russian gas volumes and global cost pressures. Sales volumes declined to 367,000 BOE per day, driven by the change in Russia consolidation, compensated for by higher sales volumes in Libya and in the UAE. Depreciation increased by EUR 74 million, mainly driven by a higher asset base, partially following write-ups and increased production in the UAE. The gas marketing business in Western Europe recorded a loss of EUR 77 million due to supply curtailments from Gazprom. In the Q4 of 2022, we experienced significant volatility in the delivered gas volumes from Russia and market prices, which weighed on our efforts to adjust the hedged volumes and led to losses. This negative impact was partially offset by our LNG and logistics business.
OMV holds a throughput agreement in Gate, an LNG regasification terminal in Rotterdam. Given its key role in our operations of securing gas supplies, we decided to include its contribution in our clean operating results starting with the Q4 of 2022. Turning to cash flow. Our Q4 operating cash flow, excluding net working capital effects, was EUR 1.2 billion. Significantly lower than in the Q4 of 2021, when we received a special dividend from Borouge of EUR 1.3 billion. In addition, our tax payments in Norway were around EUR 700 million higher than in the Q4 of 2021.
Net working capital effects generated a positive cash inflow of around EUR 200 million, driven by lower prices and volumes in Chemicals & Materials, and lower liftings in Exploration & Production, partially offset by negative working capital in refining and marketing due to increased stocks. Cash inflows related to gas storage withdrawals were only small as the weather was mild and gas was only withdrawn to a limited extent. A result, cash flow from operating activities for the Q4 was around EUR 1.4 billion. The organic cash flow from investing activities generated an outflow of around EUR 900 million. This included the ReOil demo plant, the PDH plant in Belgium, the co-processing unit in Schwechat, maintenance of European refineries, and E&P projects in Romania, the UAE, and Austria.
As a result, the organic free cash flow before dividends for the Q4 came in at EUR 534 million. Looking at the full year picture, cash from operating activities, excluding net working capital, amounted to EUR 9.8 billion, up by almost EUR 1 billion compared to 2021. Despite a cash outflow for net working capital effects of more than EUR 2 billion, cash flow from operating activities in 2022 was up 11% to EUR 7.8 billion. After payment of almost EUR 1.5 billion for dividends to shareholders, minorities, and hybrid holders, the organic free cash flow amounted to EUR 3.4 billion. Moving on to the balance sheet. We have been able to further reduce net debt by around EUR 500 million to EUR 2.2 billion since the end of September 2022.
As a result, our leverage ratio further decreased to 8%. At the end of December 2022, OMV had a cash position of EUR 8.1 billion and EUR 5.2 billion in undrawn committed credit facilities. We have updated our capital allocation priorities framework and included special dividends as a new additional instrument to the existing progressive dividend policy, as announced mid-December. Special dividends are not a one-time event, but they are part of our principles of allocating capital and rewarding our shareholders. We are committed to delivering an attractive shareholder return. According to our new capital allocation policy, first priority is to invest in our organic portfolio. Second, to pay progressive regular dividends. Third, to pursue inorganic opportunities for an accelerated transformation. Fourth, deleveraging, and fifth, to pay special dividends.
When our leverage ratio is below 30%, we aim to distribute approximately 20%-30% of our yearly operating cash flow, including net working capital effects to our shareholders through the regular dividend as a priority. Additionally, if sufficient funds are available through the new instrument of a special dividend. Of course, when determining the levels of dividends, we will also take into consideration the company performance and the economic outlook. If the leverage ratio is 30% or higher, only our progressive regular dividend will be paid. The progressive dividend policy for the regular dividend is unchanged. We aim to increase or at least maintain our regular dividend at the respective prior year level. Ladies and gentlemen, we have delivered strongly on this promise.
As mentioned before, we will propose to the annual general meeting a regular dividend of EUR 2.80 for the financial year 2022, an increase of EUR 0.50 per share or 22% versus 2021. This is not only a new record dividend, but also the highest increase of regular dividends in a year in OMV's history. Together with the special dividend of EUR 2.25 per share announced already in October, our total dividend for 2022 will amount to EUR 5.05. Both dividends are subject to approval of the annual general meeting and will be paid in June 2023. Ladies and gentlemen, I think this is a strong testament to our promise to reward our shareholders. I would like to give you an update on the synergies program we announced following the acquisition of Borealis in 2022.
By 2025, we expect synergies of more than EUR 800 million from operational cost savings, combined purchasing, debottlenecking, value chain optimization, and tax benefits. The program is well on track. In 2022, once again, we achieved more than EUR 200 million. After two successful years, we have already achieved more than half of the targeted synergies. In the coming years up to 2025, we expect synergies in the range of EUR 150 million-EUR 200 million per year. I will now move on to the outlook and start with capital spending. We are expecting organic CapEx of around EUR 3.7 billion, in line with our strategic commitment of around three and a half billion euros per year until 2030.
We have already included some inflation rate assumptions in our CapEx budget. We are very disciplined in sticking to the plan when it comes to spending. In Chemicals & Materials, our organic CapEx is estimated to be around EUR 1.1 billion. If we exclude the non-cash leases, our organic cash CapEx in 2023 in Chemicals & Materials increases by around EUR 100 million compared to 2022. Major projects are the PDH plant in Kallo, the ReOil demo plant at our integrated chemical and refining site in Schwechat, and the FID for the mechanical recycling plant in Austria. The ReOil plant is planned to start up in the second half of 2023 at the Schwechat refinery, will have a design capacity of 16,000 tons per year.
Plastic waste that is not fit to be mechanically recycled and would otherwise be sent to waste incineration, will be turned into raw material and later processed into virgin-quality base chemicals. The feedstock will be sourced in Austria in cooperation with local waste management companies. The startup of the demo plant is an essential step for the construction of the 200,000 ton world-scale plant by 2026. In fuels and feedstock, our organic CapEx is estimated to be around EUR 1 billion. We will invest in finalizing the co-processing plant in Austria, building a new unit for aromatic products, and performing the necessary maintenance turnaround at the Petrobrazi refinery. The new co-processing plant at the Schwechat refinery will have the capacity to process up to 160,000 metric tons of vegetable oil, waste products, or advanced feedstocks, together with fossil-based materials into sustainable fuels.
The plant is planned to start up in the second half of 2023. In energy, organic CapEx will increase to EUR 1.6 billion, given our plan to develop gas projects in Romania, the UAE, Norway, and Malaysia. In Romania, we are working toward the FID of Neptun, planned for the middle of this year. In Malaysia, we are progressing with the development of the Jerun field, which is scheduled to start production in 2024 with an estimated plateau production of around 25,000 BOE per day for our share. We will also invest in line with our 5% share to develop the Ghasha megaproject in the UAE, with first production expected in 2025.
For the Berling gas field in Norway, where we hold a 30% stake and we are the operator, we took FID for development in December 2022, and first gas is expected in 2028. Over the strategic period until 2030, we remain committed to spending around 40% of our organic CapEx on sustainable projects. Let me move on with an outlook for commodities and operations in 2023. Before I go into the details, as I mentioned, starting with the Q1, we adjust our reporting structure of the three segments. Chemicals and Materials continues to cover the entire chemicals value chain. Fuels and Feedstock will cover the refining and marketing areas, excluding the Eastern Gas marketing business, which is now included in the Energy segment. The Energy segment includes the traditional exploration and production business, the entire gas marketing business, and the new low-carbon business.
2023 will likely be another challenging year with only moderate global GDP growth, high inflation, lower confidence, and tighter monetary policy. We assume commodity prices will come down from the exceptional level of 2022. We forecast an average Brent price above $80 per barrel in 2023. The TTF gas price is forecast in the range of EUR 60-70 per megawatt hour, and the OMV average realized gas price is expected to be around EUR 35 per megawatt hour. In Chemicals & Materials, we believe the market environment will remain challenging, at least in the first half of 2023. Inflation, low GDP growth, high energy prices, subdued demand, and higher capacities are expected to weigh on margins.
In Europe, we forecast the ethylene indicator margin to be slightly lower than the level of 2022, at around EUR 530 per ton. The propylene indicator margin is expected to decline compared to 2022 to around EUR 480 per ton due to an increase in European refining runs following the Russian diesel export ban. The European polyethylene indicator margin is forecasted around EUR 350 per ton in 2023, while the polypropylene indicator margin is estimated to be around EUR 400 per ton. The prior year margins had benefited from a strong first half year. The utilization rate of our European steam crackers is forecast to increase significantly compared to 2022 to around 90%. We have several planned turnarounds this year. The Borstar II cracker is underway until March.
In the Q2, the Schwechat cracker, and in the Q3, the Porvoo cracker. The polyolefin sales volumes of Borealis excluding JVs, are projected to be slightly higher than the 2022 level. In order to offset ongoing market pressure, we initiated a value enhancement program in Chemicals & Materials, which is expected to deliver around EUR 100 million in 2023, coming from cost efficiencies, commercial excellence, asset reliability, uplift, and energy efficiencies. We expect the Baystar ethane cracker to resume operations by the end of February, with efforts focused on stabilizing production and increasing utilization rate. The construction of the 625,000 ton Borstar polyethylene plant is close to mechanical completion, and commissioning activities are progressing. The plant is expected to start up at the end of the Q1.
Upon startup, Baystar will run a 1 million tons integrated ethane to polyethylene production complex in Texas. Ethane prices in the US are expected to be low in 2023 due to strong gas production supporting the ethylene margins. The demand for polyethylene remains hampered by weak economic fundamentals. In fuels and feedstock, the refining indicator margin is projected to drop from the record level of 2022 to between $10-$15 per barrel. The start to the year has been strong. However, we expect normalization in the quarters to come. We anticipate the utilization rate of our European refineries to increase to around 95%, including a planned turnaround at the Petrobrazi refinery in the Q2.
Despite the divestment of the retail network in Germany, total product sales volumes are projected to be slightly higher than in 2022, supported by demand recovery and aviation. Retail margins are estimated to be around the 2022 level, while commercial margins are expected to increase following the removal of price caps. In energy, we expect average production of around 360,000 barrels per day in 2023, following the exclusion of the Russian volumes and natural decline, in particular in Norway and Romania. Exploration and appraisal expenditures for the group is expected to be around EUR 200 million-EUR 250 million. Production costs at OMV group level is expected to be above $9 per barrel for the full year of 2023 due to inflationary pressure.
Looking at cash flow, I would like to mention that our outstanding tax liabilities in Norway for 2022 amounts to around EUR 2 billion due to significantly higher commodity prices and are expected to be paid in the first half of 2023. With regard to cash inflows, we expect to receive around $234 million from Borouge in the Q1 of 2023 as remaining dividends for 2022, and at least $468 million for 2023 to be paid in part in the Q3 of 2023, and the remainder in 2024. The divestment of the Nitro business with an enterprise value of EUR 810 million is expected to be closed at the end of March, conditional to the EU antitrust approval.
Regarding the divestment of the Slovenian business, we are waiting for the buyer to obtain clearance from the EU antitrust authority. Closing is expected in the first half of 2023. The clean tax rate for the full year is expected to be around 50%. Now, thank you for your attention, and Reinhard and I will now be happy to take your questions.
Thank you, Alfred. We now come to your questions. I'd ask you to limit your question to only two at a time, so that we can take as many questions as possible. You can of course, always rejoin the queue for a follow-up. Today's Q&A session, we start with questions from Joshua Stone, Barclays.
Thanks, Florian. Good morning, everyone. I have 2 questions. Firstly, focusing on the chemicals division and the weak performance in the Q4. You've highlighted some relates to inventory effects and weaker margins, but you also highlight higher utility costs. Are you able to say just how much of the underperformance relates to these higher utility costs? Cause presumably some of that's going to come out as we go into 2023 with the fall in power prices. Maybe on that, any other notable negatives that you'd like to highlight that you think will come out and unwind for next year? Secondly, on acquisitions, can you update us on your appetite for acquisitions in the chemical space? Have you narrowed down the type of businesses you're looking at?
Can you also talk about your preference for going for listed chemical companies versus buying assets? Thank you.
Yeah. Thank you, Joshua, for your questions. let me start with the Chemicals & Materials performance, where we have seen compared to the last year, of course, a huge swing in inventory.
Contributions last year in 2021, so second last year, 2021, we had a positive contribution, and then in the Q4 of 2022 it turned negative, which provided for quite a significant piece. What we have also seen then in the Q4 that we had a poor performance by the Nitro business also to a significant degree driven by inventory effects coming into that business. Last but not least, really the significant driver also the startup issues related and the winter freeze issues related to the Baystar joint venture cracker, where we started the full depreciation after the startup, but then not enough production.
We are working hard in order to bring this back on stream and are expecting by the end of February, this should be working. On the M&A for chemicals, our strategy in chemicals and materials is continuing the same. Where we said, we want to use our strong basis of a leadership position in polyolefins today. In this polyolefins business, we want to drive geographic expansion. We want to drive the sustainability and transformation with circular economy and recycling.
Our organic growth projects there with the PDH, the Baystar joint venture in Borouge, will provide already for about a 30% growth in monomers and a little bit more in polymers by 2025. What we also said is that we are open to acquisitions to accelerate the growth. That was not only constrained to polyolefins, but also potentially to a diversification of the portfolio. We also said it needs to be value accretive to our activities where we can do that. This is still the same intention that we have, and we are always actively looking at the market for opportunities.
Thank you.
Thank you, Joshua. Now we come to Michele Della Vigna, Goldman Sachs.
Thank you very much for taking my question, and really congratulations on the record dividend. I think it's certainly very welcome news to the shareholders. I had two questions, if I may. The first one, you're clearly accelerating your green CapEx . I was wondering if you could actually quantify under the EU green taxonomy, what is your eligible number for revenues and for CapEx ? Secondly, I wondered how your negotiations are going with the Romanian government over potential windfall taxes and if there's been any development there. Thank you.
Michele, regarding the green CAPEX and the eligibility, we will come up with these numbers in the course of our sustainability report, which will come out in March. Therefore, I cannot give you the number today. This is something that of course is very relevant for us and as we are heavily investing also in those sustainability businesses, in more or less all three of the segments that we have, this also has to be proven that it is EU taxonomy conform. Regarding the windfall taxes, I think, there are, if you take the legislation from EU, in principle, three countries under which OMV would be looking into this legislation. One is Romania, one is Germany, one is Austria.
Both in Romania as well as in Germany, we see that under current legislation, OMV Petrom in Romania as well as OMV Germany in Germany are not due to this legislation. It's not applicable there because the thresholds simply regarding the total of the business are not met. When it comes to Austria, we have originally estimated a value up to EUR 150 million. We have specified that now in our results as EUR 90 million, taking into account that Austrian legislation only goes for six months of the year 2022.
Thank you.
Thanks a lot, Michele. Next is Karen Kostanian, Bank of America.
Yes. Thank you very much, Florian. Gentlemen, thank you very much for presentation. I just have one question. In terms of the news about the disposal of your E&P division, are you looking at the entire division or are you looking at the specific assets?
If so, could you list those assets and where would you use the proceeds, you know, when selling these assets from the E&P division, especially at such higher oil prices? Thank you very much.
I will try to answer that question. In our strategy that we announced last year, we said that for the entire company, but for E&P in particular, a portfolio review will be part of our strategy execution. The intent of that portfolio review was really to make sure that we always have a strong core portfolio of E&P assets. We do not intend to sell the entire E&P of the company.
We are, as we have also in the past, we are continuing to always look at the portfolio of our assets, and looking at what portfolio measures could be useful to further drive the transformation, but also ensure that we have a strong oil and gas portfolio. More than that, I do not have to report at this moment.
Thank you.
Thanks, Karen. We now come to Sasikanth Chilukuru, Morgan Stanley. Please go ahead, Sasi.
Hi, thanks for taking my questions. I had two, please. The first was regarding the dividend policy. I was just wondering if you could expand more on that. You highlighted dividends, regular and special will form 20%-30% of the operating cash flow when leverage ratio is below 30%. Now for 2022, dividends form 21% of the CFFO, and the leverage is also very low. I was just wondering how we should be thinking about the dividends potentially moving to the upper end of that range, to the 30% of CFFO. If you could explain the rationale behind the split of dividends between regular and special in 2022. What would constitute excess cash flow for OMV that feeds into the special dividends?
For regular dividends itself, is greater than 20% annual growth rate that we have seen for the last couple of years sustainable for next year, should 2023 be in line with the outlook that you have presented today? The second was just a small question, I was wondering if it was possible to isolate the financial impact of results in the gas marketing, Western Europe, to overall E&P earnings. Just wanted to check how you would expect these earnings to evolve into 2023 as well. Thanks.
Sasi, I may take your question on the dividend policy. First of all, I think we are proud that we were able to announce a strong hike of our progressive dividend policy, our base dividend today. In combination also with the special dividend announced last year already of EUR 2.25. This amounts to a total of EUR 5, which is unprecedented with OMV. You're right that within the range of our percentage of operating cash flow, this still is in the lower end, around 22%, while we are having a range between 20% and 30%. First of all, I think we have to look into the total situation of the company.
We have certainly seen in Q4 a slight decline of our profitability. Secondly, as Alfred has said in his speech, we are expecting from the year 2022, quite significant cash payments on Norwegian areas. We are also exposed to the solidarity taxation that I have just in the previous question commented on. When you are looking into what is the rationale that this could rise, of course, if the ratio of a cash flow from the outflow in perspective to the next year is a very positive one, we will be now try to also go to the maximum of this range. We also have to look a little bit into the split of the regular and the special dividend.
I think by giving the highest ever increment that we had in the history of OMV dividends, we made it clear that the progressiveness also has something to do with the absolute result and with the absolute performance of the company in the year. To say this percental increase of 22% will persist for the future, this is, I think, too much to promise, because of course, we have to look into the gradual development of our results as well. On the other hand, the special dividend always gives us the opportunity to then give additional return to our shareholders, which we will definitely appreciate. When it comes to the impact of gas waste on the total-Energy sector for 2023, it's hard to give a prognosis.
It depends very much on the situation of the stable or predictable gas deliveries from Russian contracts. Far, we were in the not-so-pleasant situation to have losses from hedges when there was a volatility of these deliveries, and we were not in the position to on-the-spot hedge in a month-ahead contract. Therefore, there have been this in average, 50 or slightly more EUR 1 million per month losses. We hope that this will go down in 2023, but it is really today not entirely predictable what it is. On the other hand, we can see that the operations, both on the gas side, have been significantly successful also through our LNG business.
Part of maybe losses can certainly be offset by positive results that we have in the ordinary gas west business. Gas east is very profitable anyway, so in total, even in 2022, we made a positive result on gas in total.
Thank you very much.
Thanks, Sasi. We now come to Henri Patricot, UBS.
Yes, hello, everyone. Thank you for the update. Just one last on my side. I want to check on the production outlook, can you forecast for the drop, you only achieve 360,000 barrel a day? It's hard to expect a pretty steady decline over the course of the year, you can exit 2023 around maybe 330, 340 perhaps. Can you stay around this level until approach the start-up of Neptun Deep? Any additional color would be helpful. Thank you.
Yes, Henri, thanks for the question. I think it is clearly attributable to 2 factors that we have in 2023. On the one hand side, we have the natural decline. Natural decline certainly is quite stable but significant in Romania, but also in Norway. We also see some decline, smaller decline in Malaysia as well as in Austria. Until the big projects come on, which is the Jerun project as well as the Neptun project. There will be major additions to that level. We, on the other hand, see the shutdowns and turnarounds that we have in 2023. We have in 2Q some turnarounds in Norway at Aasta Hansteen and Gullfaks.
We have in the Q1, some smaller standstills planned for New Zealand, and in the Q3, some standstill in Romania. That is all included in this figure. This may be seen as one-time effects, but of course, this is reoccurring over the time as we have to, of course, maintain and keep in full operation, all these areas. About the exit rate, I would be positive that the exit rate is at around 340 or higher.
Okay. Thank you.
Thanks, Henri. Next is Raphaël Dubois, Société Générale.
Hello. Good day, everyone. Thanks for taking my questions. The first one is on the outlook you give for polyolefin margins. They are not very dissimilar from the margins that you have obtained, or at least the trading indicators that you show in Q4 2022. Can you just maybe explain the how you see those margins trending over the year? Based on what I see, you're not really yet able to call the truth of those polyolefin margins. It will be interesting to see what you see, especially for the specialty part of your business.
Are there any pressure, either on volumes or on prices, from the negotiations you have with your clients? That's my first question. The second one is on the CapEx. You've mentioned some inflationary pressure. Have you already adjusted the CapEx budget for Neptun, or is your EUR 3.7 billion CapEx budget still implying less than EUR 2 billion net to OMV just for Neptun? Thank you.
Thank you, Raphael. Let me start with the first question on the polyolefin margins. What we have seen in the polyolefin margins, so both polyethylene and polypropylene, we have seen that in the Q4, we had a slight strengthening of the margins in last year. When you now look at the Q4 of last year, when we now look at the January outlook, we find more or less a similar situation that we found in December.
In this, I want to maybe give a bit of a bigger picture there. While in the Q4 the margins have become a little bit stronger, we saw soft demand. We believe part of this is also. There's a couple of drivers for this. I think one part of it is inventory destocking that is going on due to the situation the month before, in particular, by Corona. People have stocked up on materials and the parts from it. We see some destocking going on. We also saw Q4 in Chinese inland demand relatively weak because of Corona infections being strong there.
As we go forward, we believe that both of these things will slowly come out and improve further. The Q1 of this year will not continue to be a tough quarter. Like I said, we started January a little bit at December level. We believe then, second half of the year, we will see some improvements due to some of these drivers. You also. Yes, you are correct. We are saying about EUR 350 per ton for polyethylene, and about EUR 400 per ton polypropylene, which is similar to the Q4 levels that we had.
The specialty question that you had is a bit of a differentiated picture because in automotive we saw continued good demand. Even a little bit increase in volumes. It looks like there's pent-up demand in the automotive industry. We are hoping that this will continue through the year 2023. We have also seen good demand in our energy sector. This is our most profitable segment where we make wire and cable insulation, capacitor film materials. We have actually seen increasing activities. Here we have specifically the German Corridor Project that is the north-south link basically for renewable electricity in Germany that will drive significant demand.
If you remember, we reported last year that we were able to secure the largest share of supply for these insulation materials for this project. In specialty, we see the margins holding up good. In segments like automotive, energy, but also healthcare, we have seen a good demand compared to the quarter before, but also the year before. Now on the Neptun project, cost inflation, Petrom took over their operatorship for Neptun in August.
Since then, they have put a big team on it that is now working on all the plans, how to develop that field, working with engineering companies making the purchasing requests and everything and getting competitive bids. We believe today that by the middle of this year, we should then have all the information together that we can make the final investment decision. By that time, we will then also have the final CapEx cost available for this field. Also here, you are correct. In our strategy presentation, we said that the 50% share of Petrom will be up to about EUR 2 billion of CapEx.
Thank you very much.
Thanks, Raphaël. We now come to Henry Tarr Berenberg.
Thank you. Apologies if these questions have already been asked. I missed a little bit earlier. Just on the tax rate, as you look into 2023, how do you see that evolving, given the sort of special contributions and E&P business? I guess that's the first question. The second question, just on the gas marketing business in Europe, in Western Europe. Is again, is there anything, what was it that really drove the losses in Q4? Was it lower volumes coming from Russia? Was it the hedges? Was it the price volatility, or was it something else? Thank you.
Yes, Henry. Regarding the tax rate, you have seen that.
Tax rate has, of course, in 2022 increased significantly. This has, of course, to do also with the positive situation that we had much higher earnings on the E&P side due to the higher prices. As we traditionally have higher tax rates on the energy sector side compared to the chemicals, respectively refining side, the average tax rate was on the rise. We are also expecting in 2023 a quite similar tax rate. First of all, as we also have good anticipation regarding at least oil prices, but also relatively strong gas prices, but specifically because we are paying the tax for the year 2022 with two quarters delay into also the next year.
The Q1 and Q2 will be a strong cash out also from the tax payments in Norway. Regarding the special contributions, we do not expect that the situation regarding 2022 and 2023 would significantly change. However, as I explained, Austrian legislation did only take into account 6 months for the solidarity tax, whereas for 2023 it will be a full year. Of course, we have to see for 2023 whether anything changes regarding legislation in countries like Romania. This is up to be seen. We are currently not expecting any major impact there. Yeah. The second question was on gas marketing business and what were the reasons for the losses in Q4. You're absolutely right.
It is the volatility of the supplies from Russia. As this is a month-ahead contract, we do have some difficulties to find the sweet spot of a hedge. Of course, we cannot go without the hedge, else we would be fully exposed to the market dynamic, which is currently very high.
If there is over or under delivery, we run the risk that, of course, the satisfaction of the volumes that we have promised to our customers according to what we think we get, can be then creating losses, because either the prices go up and we get less, and we have to buy it on the market, or the price go down and we have more and then have to sell at the higher prices of the month ahead. It is the combination of volatility of supply and the hedges we have to do that are currently causing these kind of issues. I have, in my previous answer, indicated that this can carry on in 2023, but we hope that the intensity also will decrease over time.
Okay. Thank you.
Thanks, Henry. We now come to Matt Lofting, JP Morgan.
Thanks, gents, for taking the questions. 2, if I could please. Firstly, on cash return, could you talk about how you intend to manage the 30% leverage threshold in the renewed policy? Fully understand the logic, given where inorganic M&A sits within the capital allocation priorities you outlined, I'm not fully clear how sustained the full 20%-30% distribution range may be, and how you deal with a scenario of a temporary M&A-induced period above 30. Second, more big picture, perhaps, I guess we're approaching 12 months on from last year's CMD, there's been a lot of moving parts since, some of which wouldn't have necessarily been anticipated at the time. Can you just summarize how you see OMV's medium-term equity proposition here and the key milestones the market should look to through 2023?
Headline free cash flow has clearly been very strong. Question marks appear to remain over the chemicals outlook and in some ways repeated and mixed M&A-related headlines arguably create some degree of uncertainty on the mid-decade portfolio makeup and free cash flow drivers versus the prior CMD frame. Appreciate if you could update latest thoughts there. Thank you.
Maybe on your first question regarding cash return. There is a clear commitment that as long as the leverage ratio of OMV is below 30%, it will be a possibility for us to go into that 20%-30% range of the operating cash flow, and that would then include a normal progressive dividend as well as a special dividend. Now, if there would be a situation that by acquisition, by an inorganic growth, we would surpass the 30% threshold, our first aim is to bring the leverage down below 30%. We have proven in the past that this can be quite fast.
We have, for instance, in the case of the Borealis majority acquisition, it took only 3 quarters, 9 months, to bring it back under the level of 30%. I don't think that there is really a realistic threat that we would, for a multitude of years, fall out of that range. Therefore, I think this is a very strong promise that we are giving and a commitment that also special dividends can be sent out.
Matt, I want to then comment on your second question around the strategic direction. Maybe I start with saying, it's, you are absolutely correct. I think a lot of things have happened in 2022 that were not completely anticipated in the way we thought. I think realistically, making a 2030 strategy, one has to anticipate that there will be agility and adjustments needed on the way to get to 2030. Now that they would be this big as we encountered last year, maybe that is also a bit extreme. I think, we have done extremely well because we were able, in my opinion, to manage 3 different things that were quite remarkable.
The first one was we reacted really quick to this Ukraine crisis. We made decisions quickly about our deconsolidation impairments, removing Russia as a core region, and then also setting up a gas task force to manage both the liquidity, but also the capability to supply our supply obligations to our customers. Where we stand today has shown that we did have to take some impairments, but I think we have done in overall very good in managing this.
The second piece is that the opportunity to take advantage of a of very special market situations where in the year we saw exceptional prices and margins for almost all three of our segments, with the chemical segment becoming softening in the second half of the year. Making sure and that has led to a overall record result in actually all profitability cash drivers and we are extremely satisfied that we can actually announce this record progressive dividend, but also the on top the special dividend on that.
Now, the third piece is that we also kept firmly our eye on our strategic direction, where we said over time, we will develop into a sustainable fuels, chemicals, and materials company. We will decarbonize net zero the company by 2050, with milestones in between. On the energy sector, we maintain our position there that we say we will make sure that at any time we have a strong E&P portfolio. We will also look at portfolio optimization measures if they make financial sense and help us to accelerate our strategy. At the same time, in the energy sector, we have started to work on developing a low-carbon business.
I will just point out two things we have done there in Romania, in Petrom. Last year, we have announced a joint venture with Ortivia on a 450 MW photovoltaic plant that is very attractive because it receives significant subsidies. We have also completed the first geothermal test here close to Vienna for this low-carbon business. On the fuels and feedstock sector, there we are also committed to our journey in the direction of sustainable fuels and feedstocks. It was actually very nice that already last year we could supply first commercial quantities to Austrian Airlines. We have actually received a significant interest from other airlines.
As a consequence of this, we're able to sign a number of MOUs for supply of sustainable aviation fuel with other big airlines such as Lufthansa Group, Ryanair, Wizz Air, just demonstrating that this market will be short, and there will be a high demand because it is something that the airlines need in order to decarbonize their operations. That transformation we will continue to be committed to. On the chemical side, yes, we are seeing a soft part of the cycle here.
As I also pointed out, some of our most valuable business segments, like in automotive, like in energy healthcare, so our specialty segments, we see rather stable and see continued very strong growth opportunities in those different segments. We will make sure that we capture as many of those. On the transformation driver, the recycling activity also receives a lot of interest. We will be the one of the companies that is first able to supply actual real commercial quantities, both on mechanical recycled materials, but also on chemically recycled materials, with our additional share purchase to get a majority of Renasci.
We are actually able to already supply chemical quantities now. Our ReOil pilot plant will do that, and the next size is coming on stream today. I think we are on a good way with this and, of course have also seen, significant cash delivery out of all three segments through the year.
Okay. Thank you very much.
Thank you, Matt. We now come to Peter Low, Redburn.
Hi. Thanks. Hopefully, a couple of very quick clarifications. Can you quantify the insurance proceeds included in the base chemicals result? That's the first one. Then the second just is on the negative inventory effects in Borealis excluding JVs. I'm just trying to understand how much of that, in theory, would unwind in a stable commodity price environment. Would the add back be the EUR 100 million number rather than the EUR 200 million number you also talk about? Thanks.
Yeah. The insurance part. That's the insurance part from the refinery incident and this was distributed then between the different business areas. The chemical part was about EUR 50 million.
Peter, maybe you can repeat the second part or the second question again.
Sure. I'm just conscious that there's kind of a negative impact in Borealis relating to inventory effects. You have talked about two numbers, I think EUR 200 million and EUR 100 million. I'm just trying to think how much we should assume kind of comes back. I think it's the EUR 100 million number, because I think that was the loss in 4Q relating to inventory effects. I just wanted to clarify that.
Yeah. Overall the inventory effect of the total year was in the chemicals area was actually a positive inventory effect. I think it was a higher two-digit kind of million amount. The EUR 200 million that we reported was actually the difference between the Q4 2021 result and the Q4 2022 result, Q4 2021 positive EUR 100, Q4 2022, and negative EUR 100, right? You get that from from this reduction now to of the prices from these extremely high prices that we saw during lockdown period.
Okay. Thank you.
Thanks, Peter. Last but not least, Bertrand Hodde, Kepler Cheuvreux
Hello. Thank you for taking my question too. If I may, the first one coming back on your production guidance for 2023, can you give us a bit of more granularity on the expected decline you expect both for Romania and Norway this year? The second question is on working capital. You had in 2022 a large working capital outflow of around EUR 2 billion. Do you expect some of this to unwind in 2023 should commodity prices stay where they are today?
Sure, Bertrand. Maybe to give you a little bit more on the production guidance. If we're looking at the biggest decline that we actually have, those are the more mature fields that we have in Romania and Norway. Specifically, where it is gas fields, we of course have a higher depletion rate, and therefore also a higher rate of the expected decline. This means there we have some magnitude of above 10,000 BOE in Norway that we are expecting to decline.
On Romania it is also you have seen it that there have been some writedowns in Romanian assets due to the slightly lower expectation of reserves and also the higher decline rate, the decline rate that is between 6% and 8% in some of these specific fields that has, in total for the year, also about the same magnitude that we have in Norway. I hope that helps to balance. Of course, this is not the only part of the picture because we are also having projects and developments that come online in parallel. Therefore, take that as the only negative contributing part, partly balanced by a positive contribution of the developments. Your second question was on the net working capital. Yes, you're absolutely right.
We had a total delta net working capital of EUR 2.1 billion in 2022. Of course, data is valuables when we are looking into the year-end figures pertaining in 2023. We would expect some of that net working capital to come back. We have certainly not seen in quarter three and quarter four, where we each had small positive networking capital contributions, the full of the impact that we had specifically from the gas side coming back. Please take into account that, of course, the next winter is coming, and in Q4, we will again have higher levels in our storage, and that is the main driver for building up the networking capital. However, if gas prices are lower, then also the networking capital in total will be lower.
Thank you.
I just heard there's a follow-up question from Raphaël Dubois, Société Générale.
Yes. two very quick questions. The first one is for Western Gas Europe. I think I understand that the result in Q4 was less negative than in Q3 because you included it for the first time, the contribution from your LNG business Gate. Will it be possible to have a bit more granularity on what was this contribution since you will be booking it this way going forward? Roughly similar question for ADNOC Refining and Trading. Would it be possible to have some feel for what came from refining in 4Q and what came from trading? How, how much of a tailwind does this trading business has given you? Thank you.
Yeah. Raphaël, very detailed questions indeed. If you take the LNG business, of course, taking that into account was a consequence of the fact that we saw now with long-term contracts, with booking cargoes, with a long perspective also on a positive development of the LNG business. After years of losses, now we're very glad that we are in this position. We took the impact for the year also into account, and this is what you have seen in quarter four. Not the full impact of what you have seen in quarter four will be continued, but we will continue to have positive results from LNG, and I think this is the good news about the development of the overall gas business.
When it comes to ADNOC Refining, I can confirm that we had both positive contributions from the trading as well as from the refining. Unfortunately, we do not split also in agreement with our partner here the results as those are very strongly integrated operations on the production and on the trading side. Unfortunately, I cannot give you the split.
Thank you, Reinhard.
Yes. Thank you, Raphaël. This now brings us to the end of our conference call. Thanks a lot for joining today. As always, if you have further questions, please contact the investor relations team. We're happy to help. Thanks a lot, and have a good day. Bye.
Thank you.