Welcome to the OMV Group's Conference Call for the Q2 twenty sixteen Results. You should have received the presentation by e mail. However, if you do not have a copy of the presentation, the slides and the speech can be downloaded at www.omv.com. At this time, I would also like to refer you to the disclaimer, which includes our position on forward looking statements. Additionally, simultaneous to this conference call, a live audio webcast is available on OMV's website.
I would now like to hand the conference over to Ms. Magdalena Moll. Please go ahead, Ms. Moll.
Thank you very much, Simone, and good morning, ladies and gentlemen. I'm Maggie Moll, and this is my first conference call on behalf of OMV. I would therefore like to say a warm welcome to all of you who joined us this morning for the presentation on OMV's Q2 2016 results. 2016 continues to be a difficult year for the oil and gas industry. In the Q2, however, OMV managed to generate clean CCS net income attributable to stockholders of SEK 222,000,000 and delivered a positive cash flow after dividend of EUR 172,000,000 With me on the call today to explain the results are Rainer Sele, our Chairman of the Executive Board and our Chief Executive Officer and Rainer Flori, our Chief Financial Officer.
Rainer will highlight OMV's performance in the Q2 as well as discuss important portfolio developments. Then Reinhard will review key aspects of the financial statements and talk about the segment results in much more detail. Rainer will conclude with the outlook for the full year 2016, and afterwards, both gentlemen will be happy to take your questions. With this, I would already like to hand over to Rainer.
Yes. Ladies and gentlemen, good morning, and thank you for joining us. I'm more than happy to review OMV's 2nd quarter financial results performance together with our CFO, Reinhard Florey, who joined the team at the beginning of July. Let me start with the key messages. In Q2 2018, OIBDA delivered a strong cash flow from operations of more than €1,000,000,000 and a positive free cash flow after dividends of €172,000,000 We continued our rigorous CapEx discipline and reduced our CapEx guidance to €2,200,000,000 in 2016.
So we are successfully implementing the cost reduction program and will reach our target of €100,000,000 ahead of schedule. Yesterday, we signed an agreement to sell a 30% stake in the Rosebank field. Is expected to be completed in the Q4 of this year. It rebalances our upstream portfolio, and it reduces our future investment requirements. Health, safety and Security is a top priority for OMV and critical to the responsible delivery of energy.
This is why we apply stringent corporate regulations, hazard identification and foster culture of care to ensure that OMV is a healthy, safe and secure place to work. In the first half of twenty sixteen, the lost time injury rates unfortunately trended upwards. We are deeply concerned that there were more serious incidents. Senior management investigates and analyzes current and high potential incidents. We have already implemented a major accident prevention policy across the group and commenced the rollout of specific training programs.
Despite our cost reduction efforts, we do not compromise on health, safety and security. Now I would like to briefly talk about OMV's market environment. Let's start with the oil market. Average oil prices recovered from US34 dollars per barrel in the Q1 to US46 dollars per barrel in Q2 20 16. Speculations about the production freeze agreement among major oil producing countries, First signs of weakening U.
S. Production and temporary production outages were responsible for this development. The Central European gas prices were flat in Q2 2016 compared to Q1 2016. OMV's realized gas price in upstream was €13 per megawatt hour due to long term locked in gas agreements and pricing in countries not linked to the Central European gas hub price. A short remark on the refining market.
Compared to Q1 2016, the OMV indicator refining margin slightly declined, reaching an average of $4.7 per barrel in the Q2 2016. However, the middle distillates recovered slightly, supported by supply disruptions and a modest increase in demand. Finally, pathochemical margins decreased compared to the same period in 2015. In the previous year, shutdowns had kept supply in Europe on a relatively low level. I will now highlight the key figures of the 2nd quarter, and Reinhard will comment on them in greater detail later.
Clean CCS EBIT declined from €375,000,000 to EUR 214,000,000 due to lower Upstream and Downstream oil results. In contrast, the downstream gas business was clearly up due to successful restructuring efforts resulting in onetime effects. Clean CCS net income attributable to stockholders came into €222,000,000 This was slightly higher than the clean CCS EBIT because of the strong results from Borealis and low taxes on a clean basis. Clean CCS EPS amounted to €700,000 versus €1,100,000 in the same quarter last year. At €1036,000,000 cash flow from operation was slightly up versus Q2 2015, supported by the release of working capital.
Free cash flow before dividends came in at €551,000,000 driven by the strong operating cash flow, which already reflects the first benefits of our cost saving program and substantially lower cash outflows from investments. A major accomplishment was that free cash flow after dividends was also positive at €172,000,000 despite making dividend and hybrid coupon payments. OMV generated a negative EBITDA of €300,000,000 We incurred special changes of €608,000,000 mainly as a result of the Rosebank impairment, which I will explain a bit later. Consequently, the net loss attributable to stockholders amounted to €168,000,000 Moving on to our financial performance. In the first half of twenty sixteen, OMV realized solid operating results despite the 31% decrease in the oil price.
OMV reported clean CCS EBIT of €381,000,000 46% lower than in the previous year. Both upstream and downstream turned in lowest results. Clean TCS net income attributable to stockholders decreased from €600,000,000 in the first half of twenty fifteen to €396,000,000 Free cash flow before dividends showed a huge improvement from a negative €421,000,000 in the first half of twenty fifteen to a positive €406,000,000 this year. Following dividend and hybrid coupon payments, free cash flow after dividends also came in positive in line with our strategic target. In the Q2 of 20 we continued our negotiations with Gazprom on the asset swap.
As you know, OMB has been offered a stake of 24.98% in the Achimov 4.5 project. In turn, Gazprom would receive a share in an OMV NAZI subsidiary. We are aiming to reach agreement with Gazprom on the commercial terms in the second half of twenty sixteen. Once this happens, the approval process with the authorities will start, which may take 1 or 2 years. As announced on August 8, 9, 2016, we will be selling 30% of our share in the Rosebank project to Suncor Energy headquartered in Canada.
As you know, Rosebank was part of the StarLe deal in August 2013. At that time, we increased our share, Rosebank, to 50%. Under the terms of the agreement, Suncor will make an initial payment of $50,000,000 on closing. The transaction is subject to conditions, including regulatory approval and is anticipated to close in the Q4 of 2016. Following the co venture's approval of the Rosebank project final investment decision, OMV will receive an additional cost duration of up to $165,000,000 As a consequence, we have to write down the book value of the asset by €530,000,000 The deal will significantly reduce our exposure in the UK deepwater oilfield development.
At the same time, OMV's related future investment requirement will decrease in line with our strategy to focus on low cost regions. The divestment of our minority stake in Gasconc Austria continues to make progress. Due diligence is ongoing, and numerous financial and strategic buyers have indicated strong interest in the 49% stake. We are targeting to close the deal in 2016, which will positively impact our cash flow. OMV is continuing its divestments of efforts for OMV Petro Lofisi.
The recent events in Turkey put stress on the M and A market, no doubt. However, our view is that the specific transaction will not be negatively affected given the stable performance of petrol fees in past quarters. OMV has finished the information memorandum and sent it recently to prospective buyers. OMB finalized the takeover of the 35.7% share in econgas at the end of May 2016. We are now streamlining the organization with a major focus of integrating the Econ Gas sales activities into OMV.
In the Q2, we also started a marketing campaign in Germany. In this market, we ensured a good long term supply position from increasing equity gas production as well as from long term contracts. This is currently being marketed by a hub trading and direct sales channels. OMV envisages to achieve a market share in Germany of 10% until 2025. Well, OMV's objective is to focus on profitable barrels and a sustainable reduction of unit CapEx costs.
Therefore, OMV has a rigorous CapEx discipline. At the beginning of 2016, we estimated CapEx to come in at €2,400,000,000 We made an effort to reduce this amount. And according to our current forecast, we will only spend €2,200,000,000 This will not impact our production forecast. In the first half of twenty sixteen, we spent €1,000,000,000 with upstream projects amounting to €700,000,000 OMB Patram spent roughly €240,000,000 on field redevelopment project as well as on workovers and drilling, including the Neptune project in the Black Sea. In the North Sea, the majority of our CapEx has been allocated to the development of the Goldfax, Chihalian and the Asda Hansteen fields as they continue to be rolled out.
In Tunisia, we have proceeded with the development of the Nabara field. For 2017, we are again budgeting CapEx up around €2,400,000,000 In 2016, we will reduce exploration and appraisal by 20 6% to €450,000,000 In the first half, we spent €166,000,000 mainly related to the Visting well in Norway and exploration and appraisal activities in Romania. We also started the drilling process at the Polch Kops well in Bulgaria. A review of our sub Saharan Africa position made us decide to cease activities in Gabon and onshore Madagascar. In the second half of twenty sixteen, we will increase our spending with a focus on projects in the Middle East, Romania and in the North Sea.
OMV's strategic target in 2017 will be to reduce exploration and appraisal expenditure to €300,000,000 euros OMV is making good progress implementing the cost reduction and efficiency program. At our Strategy Day in February, we told you that OMV plans to achieve a cost reduction of €100,000,000 over 2017. The program is ahead of schedule, and we are pleased to inform you that OMV will already reach its target by the year end of 2016. In Upstream, we optimized fuel costs, renegotiated with contractors, cut corporate costs and restructured operations in Romania. Downstream continued the implementation of its strict cost management program across all business units.
This all means that for 2017, we can commit to more than €150,000,000 in cost savings compared to 2015. Further cost reduction efforts are on go.
Good morning, ladies and gentlemen. This is Ryan Stora speaking. A very warm welcome from my side. I'm very pleased to be speaking to you today, I'm looking forward to meeting many of you during my upcoming roadshow. Starting now with the summary of the Q2 income statement.
Reported EBIT was negative at €300,000,000 as a result of the special charges pre booked. These were mainly related to the impairment of our 50% stake in the Rosebank field as well as the upstream licenses in Norway, Madagascar and Romania. As Raina already said, the signing of the sale agreement with Suncor for 30% stake in Rosebank was very recently concluded and that was also normally yet included in our trading statement. The net financial result was €72,000,000 with Borealis again contributing positively with 100,000,000 111,000,000 The comparable number in the previous year was €127,000,000 Our media over recorded €111,000,000 in cash income, which is mainly attributable to losses from high tax upstream countries, including the effects from the Rosebank impairment. Clean tax rate is in the single digit given the strong contribution from Borealis and losses from high tax upstream countries.
Non controlling interests were down driven by a lower contribution from OMB Petron. This brings us on a reported basis to a net loss attributable to our stockholders of €168,000,000 which is equivalent to €0.61 per share. If you clean the results for the special charges, you see that our performance was solid. Clean net income attributable to stockholders in the quarter on a CCS basis amounted to 222,000,000 Let me now turn to our cash flow, which was very strong in Q2 2016. At €1,036,000,000 the cash flow from operating activities was significantly stronger than both prior quarter and previous year.
Cash inflow from net working capital amounted to €345,000,000 supported also by trade financing measures. Depreciation and impairments amounted to €1,157,000,000 We used €526,000,000 in cash for investment. The free cash flow before dividends came in at €551,000,000 driven by the strong operating cash flow and substantially lower cash outflows for its investments. Major accomplishment was that free cash flow after dividend was also positive at €172,000,000 despite making a €326,000,000 dividend payment to O and V stockholders and a €51,000,000 hybrid coupon payment. But of course, the current market environment puts pressure on the Q2 2016 results.
Clean CCS EBIT declined from €375,000,000 to 2 €14,000,000 Despite the 26% lower oil price, upstream clean EBIT broke EBIT. Production volumes were up 3%, reaching 316,000 barrels of oil equivalent a day, mainly attributable to higher production in Norway. The clean CCS EVIT performance has been supported by the successful implementation of our cost reduction program, which resulted in 0.15 percent lower OpEx per barrel. Downstream, Keane CCS CEIC declined from €269,000,000 to 2 €50,000,000 This was a combination of some lower downstream oil but higher downstream gas results. The OMV indicator refining margin decreased mainly due to higher crude prices.
In contrast, the downstream gas business was clearly up, also thanks to some onetime effect. Net corporate costs were at minus €12,000,000 and we recorded a negative effect in the consolidation line of €24,000,000 predominantly in OMV Petro. Now let's look at the reconciliation from clean CCS EDIC to EDIC as reported. Adding back the inventory effect of €94,000,000 shown as CCS gain and deducting the special items in the amount of €600,000,000 negative, which I explained earlier. EBIT came in at a negative value of €300,000,000 On our next class, we've seen the upstream clean EVIC development in Q2 versus previous years.
Clean EVIT declined from €116,000,000 to 0 as a result of significantly lower oil and gas prices. The realized crude oil and gas prices dropped by 32% and 19%, respectively. Realization, which also includes hedging and foreign exchange effects on revenues, had a negative impact of 2 €73,000,000 on Q2 DDIT. Please note that from Q2 2016 onwards, the hedging effects are included in the realization figure. Upstream reported a 3% lower sales volume compared to last year, but under list situation led to a buildup in stocks.
The net effect increased clean EBIT by €11,000,000 Lower clean exploration expenses caused by reduced exploration activities, particularly in Romania and the North Sea, positively impacted clean EBIT by €69,000,000 And lower depreciation as a result of the lower asset base following impairment in 2015 contributed €28,000,000 to clean EBIT. Finally, lower production costs, which are reported under the section other, contributed to an improvement in clean EBIT. This reflects the successful implementation of our strict cost reduction program. Looking now into our upstream key performance indicators. Here, you see the quarterly development of 2 of our key performance indicators, hydrocarbon production and operating expenditures on the unit level.
Production increased by 3% versus last year with a roughly even split between oil and gas. Several projects in Norway are contributing to this higher production level. Ramp up at Edvard Grieg, which brought up on stream in Q4 2015, progressed according to plan. Edvard Grieg produced 14,000 barrels of oil equivalent per day. In addition, gas blowdown at Goldbach also started in Q4 2015 and contributed 7,000 barrels of oil equivalent per day.
At the Goodrum field, 2 new wells were brought on stream, producing 3,000 barrels of oil equivalent per day. On the other hand, OpEx in U. S. Dollars per barrel of oil equivalent decreased by 15% to 11.5% in Q2 2016 due to strict cost management coupled with higher production. The cost savings measures included reductions in the cost of materials, personnel and services.
Downstream Clean CCS BBIG decreased from €269,000,000 to €50,000,000 This was attributable to the lower refining and petrochemical margins in downstream oil as well as scheduled turnaround activities at the Schrecher and Petrobras Refineries. The turnaround cost about €20,000,000 In the retail business, margins improved, driven by a strong recovery in Turkey. In contrast, downstream gas clean EBIT was up by €89,000,000 largely driven by restructuring efforts, which resulted in one off effects in the amount of approximately €40,000,000 This included a higher valuation on forward contracts as well as settlements for a gas storage contract, which resulted in a gain. Here, you see the decrease in refining margins from USD 7.8 per barrel in Q2 2015 to now $4.7 per barrel in Q2 2016. The indicator refining margin for the Western refineries decreased from $7.4 per barrel to $4.0 per barrel, driven by lower gasoline and middle particulate spreads, jet, diesel and heating oil.
The indicator refined margin is decreased from US9 dollars per barrel to US6.8 dollars per barrel. Due to a higher own crude consumption, Petrobras benefited more from lower oil prices than the refineries in the West. The scale of the turnarounds of the fuel units at Sveta Petrobras each lasted for approximately 1 month. Consequently, the refining utilization rate decreased from 92% to 72%. At 7,600,000 tonnes, total refined product sales were stable.
They were not affected by the turnaround since we have prepared for them by the Ligar stocks. Sales volumes in the petrochemicals business were flat. Despite network optimization in Turkey, retail sales volumes of 2,600,000 tonnes remained on the high level of the previous year. Looking at downstream gas. Key performance indicators at now 24.4 terawatt hours.
Natural gas sales volumes were 6% higher than in the same period of the previous year, mainly due to Austria. OME Petron sales to 3rd parties were slightly led because of lower demand from petrochemical customers. Sales in Turkey were slightly up due to a contagious supply condition. The natural gas sales margin was higher compared to Q2 2015 since we realized positive onetime effect. Due to the regulated tariff, the gas transportation business, Gasconnex Austria showed stable clean EDIC contribution of €30,000,000 The next slide shows now the development of operating results at the OMV technical.
Clean CCS DDIC decreased significantly from €148,000,000 in Q2 'fifteen to €49,000,000 This was driven by lower results in both upstream and downstream. While the upstream results in OMV Petron was lower than last year, it still amounted to a positive number of €43,000,000 Downstream also contributed €30,000,000 to Earth. At 177,000 barrels of oil equivalent per day, production was also down by 2%. The cost reduction program at O and B Petron made significant progress and is reflected in the 8% decrease in upstream production cost to $12.1 per barrel oil equivalent. Downstream Clean CCS PBIC decreased by 39% to €30,000,000 due to lower refining margins and the turnaround at the Petrobras refinery.
Downstream gas clean EBIT improved from minus €19,000,000 in Q2 2015 to minus €7,000,000 Benefiting from the strong cash generation of the OMD of the group, OMD reported net debt just below €4,000,000 Despite the impairment, the gearing and equity ratio remained relatively stable at 29% 45%, respectively. Thus, gearing is in line with our long term target of maximum 30%. OMV's balance sheet is in a healthy state, reflecting a strong liquidity position with €1,300,000,000 in cash and cash equivalents and €3,600,000,000 in undrawn credit facilities. The management team has 3 financial priorities: focus on cash flow, maintaining a strong balance sheet and improved shareholder reserve. Now let's discuss cash flow first.
We have to make sure that we generate sufficient cash to finance our investment, enable dividend payment and at the same time manage our debt level. The strength of the balance sheet is very much in focus in order to get good access to the capital markets and to ensure that RMB compares well with peers, both regarding its financial stability and its rating. Finally, we strive to improve shareholder return so that the OMB share is and will remain
finalize now with the outlook for the full year 2016. For the full year 2016, we stay with our oil price assumption of US40 dollars per barrel on average Due to persisting overcapacity in European markets, refining margins are projected to be below the levels of the first half twenty 16. Capacity utilization is expected to be above 9% in the second half since we will have no major turnarounds. The gas market environment in Europe is characterized by oversupply with natural gas margins expected to be to remain on low levels. Gas prices on European spot markets are expected to remain flat compared to prices at the end of Q2 2016.
Current market forwards, however, show a slight upward trend for the next month. We updated our production guidance for 2016 to slightly above 300,000 barrels of oil equivalent today, given that we managed a good production performance in the first half. We continued with our rigorous CapEx discipline and thus reduced our CapEx guidance to €2,200,000,000 in 2016, approximately 70% of this amount will be spent in Upstream. Exploration and appraisal expenditure guidance remains unchanged at €450,000,000 In summary, while 2016 continues to be a difficult year for the entire industry, OMV's integrated business model supports the group's profitability and cash flow performance, and we are well on track to deliver on our promises. Thank you for your attention, and we are now happy to take your questions.
Thank you, Reinhard. And now ladies and gentlemen, I would like to open the call for questions. I ask you to please limit your questions to only 1 at a time so that we can take as many questions as possible. Of course, you're always welcome to rejoin the queue for a follow-up question, and we will definitely take your questions. So with this, I would like to ask first, Haeften Rashid from Morgan Stanley for his question.
Good morning, Haeften.
Good morning, Magdalena. Thank you very much, and thank you for the presentation, gentlemen. My question really is perhaps a little bit more for Reinhard and his sort of views just actually on his last sort of area of focus in the slides around financial priorities. I just wondered if you could talk a little bit more about sort of how you are looking at sort of balancing shareholder return versus maintaining a strong balance sheet in the current environment over the next sort of 6 to 12 months? And in particular, what I'm really sort of wanting to discuss is or would love to hear your thoughts on is the dividend policy, whether you think the sort of 30% payout ratio is something that is kind of consistent with this or whether you are looking at it from a slightly different perspective?
And as I say, whether for you sort of the de gearing is really the priority at the moment as opposed to shareholder return. And I do appreciate you mentioned the one question. Just a very quick follow-up hopefully is just to understand if there are any sort of working capital tailwinds that we should be expecting in the second half of this year given you've had a bit of a benefit in the first half, if you don't mind?
Yes. Thanks, Usim, for your question. Of course, we mean what we say in terms of the financial priorities. And that is that the strengthening of the balance sheet is something that is important in the industry as long as there are challenges out there. But our focus on cash flow should very much be targeted at enabling us to provide a significant and appropriate dividend also going forward.
What does that mean? That means that the target and policy that we have in place of the 30%, it's something that we stick to. And on the other hand, we have clearly said that we are not going to go in our cash flows after dividend to a negative value. So this means in order to do that, our focus on operative cash flow and the ability also to limit on our CapEx in order to be able to pay the dividend is the one thing that we are concentrating on. That is also why we are focusing so much also on the self help programs with cost savings where we have now increased our target.
So in order that to be understood rightly, yes, we stick to the policy in place, and we are confident that also the target of being at a positive operating cash flow after dividend is intact. Regarding your working capital question, we have in Q2 definitely a positive impact from working capital. And we have also to see the seasonality of our business when it comes to gas storage, where we certainly are, again, going down over the summer and picking up before the winter. But working capital will be also strongly in the focus of our efforts to optimize and be most efficient. So in that sense, while the working capital will probably not trend positive in the second half, we still would have a positive impact for the full year in total.
So we're now moving to the next question from Michael Alsford from Citigroup.
Thank you. Thanks for taking my question. So I'll keep it to 1. I just wanted to get a sense as to the Gazprom asset swap. I know you sort of say that the negotiations are ongoing, but I don't know if you could provide a bit more color as to what the steps we should think about as to needing to be finalized before, I guess, announcing the deal.
And if it really if it's related at all to the sanctioning of Nord Stream 2? Or is it completely independent? Thank you. All
right. Well, some more details on the asset swap. We had a little bit of a delay because Gazprom needed more time in the data room to make up their mind about the different assets we do have in the NRC. And given the complexity of our asset base, they just need more time to finalize their evaluation. And what we have now in our plan is that we in September will start continuing our negotiations with Gazprom.
And we do have an agreement that we would like to sign a basic agreement until the year end.
This is going to be
the starting point for us to implement the swap transaction, which means that we need something like a year or 2 for closing the deal. Given the fact that we do have a long list of approvals from different authorities waiting us in Russia as well as in Europe. Well, as we have explained in our first conversation with you on the asset swap is that we are targeting in our agreements with Gazprom an integrated corporation along the entire value chain. So we both have an understanding that we don't want to exclusively work in upstream or exclusively working in downstream. So we do have both the same kind of understanding that we would like to have both.
That's why we have an interest to finalize all deals we do have in the pipeline with Gazprom.
Okay. That's very helpful. Thank you.
So moving on to the next question from Henri Patricot from UBS. Yes.
Good morning, everyone. Thank you for the presentation. One question on the cost reductions. Why have you been able to reach your target earlier than expected? And where are the additional reductions of €50,000,000 coming from more precisely?
Thank you.
The cost reduction efforts have, of course, been taken with a high rigor in OMV. And when we go out with a promise, we want to keep it, and we have aligned the organization very much behind this target. Now our teams have done fantastic work, and we have progressed faster but also more in-depth and specifically in the area of procurement, where, of course, we have a quite significant spend, we see opportunities, and we see that the main parts of also the additional savings will come from procurement but also from effect of restructuring, taking the organization to the adequate lean competitiveness that we have as well as the ability to optimize systems and processes throughout the company.
So then we are moving on to Thomas Adolff from Credit Suisse. Good morning, Thomas.
Thank you. Just a question, I want to start with disposals, if you don't mind. So you've done 30% in Rosebank. I believe Jaap used to say when he was at OMV that he would do 10% to 20%. So I wanted to better understand why 30% so a bit more and why you still went ahead despite the fact that your book value was significantly higher than what was realized.
But if we continue with disposals, excluding Rosebank, you seem quite confident on Gas Connect, I agree. You seem very confident on Petro Lovisi. Let's see, Turkey looks a bit tricky. But the bottom line is between now and the end of 2017, you will get a lot of cash in from these disposals and your gearing ratio already is at 29% below your soft ceiling of 30%. Kind of coming back to the first question, I kind of wanted to better understand also the balance between distribution and reinvestment at some point in future?
And regarding the LatAm reinvestment, what is the what does OMV have to reinvest outside of Akimov, if you can remind me? Thank you.
Okay. So very briefly on the disposal. I think the scope of the disposal with 30% is very much in line with what we had in our strategic target. In order to reduce the exposure to quite investment heavy, but on the other hand, also strategic exposure. So we are not out of Rosebank.
We are still there with 20%. We think that we received a fair valuation given the current market conditions. We received a good structure and also a very good and reliable partner with Suncor in this process. So in that sense, the write down of the impairment, which has a consequence of the changes that we see in the environment and in the schedule of this project, which was still different in the assumption of what we have in our books. And just to clarify, of course, the impairment is not only looking at the 30%, but at our remaining 20% as well.
Regarding the other disposals, GCA, Petroolfici processes are on track. Of course, Turkey has lived through quite difficult times, but our business model in PetroLofisi is not impacted by the situation. We are also seeing that the current performance of Petrolofisi stays stable. So we are going ahead with the divestment process with good confidence.
Well, Tom, it's one remark from my side on your questions. First of all, I think it's a good track record that especially in these days where it's not record that especially in these days where it's not pretty easy to sell big investment projects, sorry, to the market, that we reached out a 30% stake being farmed out than 10% to 20%. So the lifting we do have and the financial flexibility coming with this, supporting our cash flow is substantial. And coming back to your question, what do we do with the money? First, let's collect the money, and then we are going to tell you what we are going to do with the money.
Sounds good. Thank you.
The next question comes from Marc Koffler from Jefferies.
Hi. Thanks, everyone, for taking my question. I just wanted to focus in the Upstream and the guidance, which I know this still excludes Yemen and Libya. I think in recent weeks, sort of the industry seems to have been warming up a bit more in terms of potentially resolving some of the outages in both countries. Given your operations there, I was hoping perhaps for an update on the assets themselves and then if you saw any possibilities of some listings before year end in either country.
Thank you.
Well, Marc, we are still planning with no production from both countries, neither Yemen nor Libya, until year end. But I share your view that there is some warming up, especially in Libya. We do see our operations in very good conditions. So we don't have any damages in our operations. But we have limitations as far as we speak about the logistics.
Some pipelines are not in good shape and have been destroyed during some military activities in the neighborhood. And one of the 2 export terminals, we are exporting via Zwietina and Rachlanoff. 1 is also not in operation as we speak about the capability to restart the export terminal capacities. So we would be limited to 1 terminal the day we can restart our operation. As we speak about the fields, well, everything is in good shape.
We can restart, but it will depend whether or not export capacities in the infrastructure is going to be available for OMV.
That's great. Thanks very much.
So this brings us now to Lydia Laneworth from Barclays. Good morning, Lydia.
Thanks. Good morning, and thank you all for the presentation. I will stick to one question. It's coming back to the assets what we've got from, if I could. Given that we are seeing a lot of volatility within the oil market at the moment and that in terms of the views, in terms of what the loan renewal price will be, they vary quite significantly across investors and across industry participants.
How do you actually protect the value for OMV in terms of if it's going to take 2 years to actually close the deal? Are you looking at putting some form of link to the oil price into the deal that you're doing with Gazprom?
Well, I agree with you that volatility is
the natural environment we have to live in our industry right now. But as we speak about the deal, 2 things are important for us. First of all, we would like to have an evaluation of both assets based on our long term oil price scenario. Especially as we speak about Achimov 45, we expect that first production will start something around 2019, yes? The current volatility is really not impacting or guiding us in our negotiations.
As we are going to speak about the gas production in Russia, I would say 30% of our production is condensate and therefore is reflecting the oil price scenario we do have. And of course, we do have a gas production then coming with Achimov 45, which is based on our gas price forecast, yes? I don't see an oil price index as a future pricing model for gas in Europe. And as we are targeting in our negotiations that we would like to have a net back to the European gas prices for some gas we are producing. First of all, we have to get that done in our negotiations.
And secondly, I think the European gas price will more or less, it's a matter of time dealing from the oil price.
That's really helpful. Thanks very much.
And next question is from Nitin Sharma from JPMorgan. Nitin? Mute, mute. It's on mute.
Hello?
No. No, no, no.
You didn't have one. Good. Sorry, it showed up on our list. Is there anybody who still would like to pose a question? On our list, basically, we have answered all the questions.
So if this is not the case, then ladies and gentlemen, this would bring us to the end of our conference call. OMV will next report on its Q3 results on November 9, 2016. At this point, I would like to thank you for joining us this morning. And should you have any further questions, please contact any member of the Investor Relations team, and we will be very happy to help you. With this, we would all like to say a goodbye and wish you a nice day.
Bye bye. Thank you.
That concludes today's telephone conference call. A replay of the call will be available for 1 week. The number is printed on the telephone conference invitation or alternatively, please contact OMV's Investor Relations department directly to obtain the replay number.