OMV PETROM S.A.
SEPARATE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
DECEMBER 31, 2022
Prepared in accordance with Order of the Ministry of Public Finance no. 2844/2016 approving the
accounting regulations compliant with the International Financial Reporting Standards
Contents
STATEMENT OF FINANCIAL POSITION
INCOME STATEMENT
STATEMENT OF COMPREHENSIVE INCOME
STATEMENT OF CHANGES IN EQUITY
STATEMENT OF CASH FLOWS
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
OMV PETROM S.A.
STATEMENT OF FINANCIAL POSITION AS OF DECEMBER 31, 2022

(all amounts are expressed in million RON, unless otherwise specified)
Notes
December 31, 2022
December 31, 2021
ASSETS
Intangible assets
5
2,812.19
2,693.74
Property, plant and equipment
6
22,768.34
23,897.03
Investments
7
1,793.93
1,732.08
Other financial assets
8
2,278.90
2,306.46
Other assets
9
311.01
321.83
Deferred tax assets
17
1,962.99
1,463.63
Non-current assets
31,927.36
32,414.77
Inventories
10
3,241.41
1,809.94
Trade receivables
8
3,969.99
2,635.69
Other financial assets
8
2,574.55
1,730.97
Other assets
9
910.17
217.75
Cash and cash equivalents
29
13,852.78
10,053.93
Current assets
24,548.90
16,448.28
Assets held for sale
11
14.83
14.83
Total assets
56,491.09
48,877.88
EQUITY AND LIABILITIES
Share capital
12
6,231.17
5,664.41
Reserves
32,912.41
27,205.30
Total equity
39,143.58
32,869.71
Provisions for pensions and similar obligations
13
150.51
163.28
Interest-bearing debts
14
-
16.49
Lease liabilities
29
295.54
295.43
Provisions for decommissioning and restoration obligations
13
6,700.58
6,032.03
Other provisions
13
667.18
660.65
Other financial liabilities
15
12.84
57.25
Other liabilities
16
50.85
52.01
Non-current liabilities
7,877.50
7,277.14
Trade payables
15
3,460.39
2,500.80
Interest-bearing debts
14
1,891.68
1,871.04
Lease liabilities
29
138.79
138.05
Income tax liabilities
496.37
157.10
Other provisions and decommissioning
13
1,309.93
383.42
Other financial liabilities
15
1,040.05
2,657.77
Other liabilities
16
1,132.80
1,022.85
Current liabilities
9,470.01
8,731.03
Total equity and liabilities
56,491.09
48,877.88
OMV PETROM S.A.
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2022

(all amounts are expressed in million RON, unless otherwise specified)
Notes
2022
2021
Sales revenues
18, 26
55,837.69
21,486.04
Other operating income
19
1,133.57
172.64
Net income from consolidated subsidiaries and investments in associates
20
685.43
354.51
Total revenues and other income
57,656.69
22,013.19
Purchases (net of inventory variation)
(26,998.67)
(8,207.38)
Production and operating expenses
(6,943.41)
(4,086.83)
Production and similar taxes
(5,435.21)
(1,982.86)
Depreciation, amortization, impairments and write-ups
22
(4,846.10)
(3,182.01)
Selling, distribution and administrative expenses
(1,066.23)
(759.89)
Exploration expenses
(120.45)
(189.08)
Other operating expenses
21
(255.69)
(239.14)
Operating result
26
11,990.93
3,366.00
Interest income
23
769.09
160.03
Interest expenses
23
(798.19)
(485.85)
Other financial income and expenses
24
(34.40)
67.02
Net financial result
(63.50)
(258.80)
Profit before tax
11,927.43
3,107.20
Taxes on income
25
(1,639.88)
(418.78)
Net income for the year
10,287.55
2,688.42
OMV PETROM S.A.
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2022

(all amounts are expressed in million RON, unless otherwise specified)
2022
2021
Net income for the year
10,287.55
2,688.42
Gains/(losses) on hedges arising during the year
57.15
(131.60)
Reclassification of (gains)/losses on hedges to income statement
(36.89)
7.43
Total of items that may be reclassified ("recycled")
subsequently to the income statement
20.26
(124.17)
Remeasurement gains/(losses) on defined benefit plans
3.95
18.16
Gains/(losses) on hedges that are subsequently transferred to
the carrying amount of the hedged item
(84.45)
57.22
Total of items that will not be reclassified ("recycled")
subsequently to the income statement
(80.50)
75.38
Income tax relating to items that may be reclassified ("recycled")
subsequently to the income statement
(3.24)
19.87
Income tax relating to items that will not be reclassified ("recycled")
subsequently to the income statement
12.88
(12.07)
Total income tax relating to components of other
comprehensive income
9.64
7.80
Other comprehensive income/(loss) for the year, net of tax
(50.60)
(40.99)
Total comprehensive income for the year
10,236.95
2,647.43
OMV PETROM S.A.
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2022

(all amounts are expressed in million RON, unless otherwise specified)
Statement of changes in equity for the year ended December 31, 2022
Share
capital
Revenue
reserves
Cash flow
hedge
reserve
Other
reserves
Treasury
shares
Total
equity
Balance at January 1, 2022
5,664.41
27,146.25
(18.03)
77.10
(0.02)
32,869.71
Net income for the year
-
10,287.55
-
-
-
10,287.55
Other comprehensive income/(loss) for the year
-
3.32
(53.92)
-
-
(50.60)
Total comprehensive income/(loss) for the year
-
10,290.87
(53.92)
-
-
10,236.95
Dividends distribution
-
(4,480.53)
-
-
-
(4,480.53)
Share capital increase*
566.76
-
-
(120.66)
-
446.10
Reclassification of cash flow hedges
to balance sheet
-
-
70.94
-
-
70.94
Other changes**
-
(43.15)
-
43.56
-
0.41
Balance at December 31, 2022
6,231.17
32,913.44
(1.01)
-
(0.02)
39,143.58
* On November 3, 2022, OMV Petrom S.A. completed the share capital increase with the value of RON 566.76 million, by in-kind contribution of the Romanian State in amount of RON 120.66 million and cash contribution of other shareholders in amount of RON 446.10 million. For more details please see Note 12.
** Other changes through “Revenue reserves” in amount of RON (43.15) million include RON (37.29) million representing increase of value of land plots subject to the land share capital increase carried out during 2022, as per independent valuation report, and RON (5.86) million representing directly attributable transaction costs associated with the share capital increase carried out during 2022.
Other changes through “Other reserves” in amount of RON 43.56 million include RON 37.29 million representing increase of value of land plots subject to the land share capital increase carried out during 2022, as per independent valuation report, and RON 6.27 million land for which ownership was obtained from the Romanian State during the year and that was subject to the land share capital increase carried out during 2022.
Statement of changes in equity for the year ended December 31, 2021
Share
capital
Revenue
reserves
Cash flow
hedge
reserve
Other
reserves
Treasury
shares
Total
equity
Balance at January 1, 2021
5,664.41
26,198.54
74.36
75.65
(0.02)
32,012.94
Net income for the year
-
2,688.42
-
-
-
2,688.42
Other comprehensive income/(loss) for the year
-
15.25
(56.24)
-
-
(40.99)
Total comprehensive income/(loss) for the year
-
2,703.67
(56.24)
-
-
2,647.43
Dividends distribution
-
(1,755.96)
-
-
-
(1,755.96)
Reclassification of cash flow hedges
to balance sheet
-
-
(36.15)
-
-
(36.15)
Other changes
-
-
-
1.45
-
1.45
Balance at December 31, 2021
5,664.41
27,146.25
(18.03)
77.10
(0.02)
32,869.71
For details on equity components, see Note 12.
OMV PETROM S.A.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2022

(all amounts are expressed in million RON, unless otherwise specified)
Notes
2022
2021
Profit before tax
11,927.43
3,107.20
Dividend income
(696.68)
(369.15)
Interest income
23
(750.49)
(133.85)
Interest expenses and other financial expenses
23, 24
115.50
55.28
Net movement in provisions and allowances for:
- Investments and loans
16.88
15.39
- Inventories
10.35
1.87
- Receivables
12.64
10.28
- Pensions and similar liabilities
(8.82)
(23.96)
- Decommissioning and restoration obligations
(30.80)
(98.31)
- Other provisions for risk and charges
909.70
(45.92)
Net gains on the disposal of businesses and non-current assets
19, 21
(21.12)
(63.53)
Net gains on the disposals of financial assets
24
-
(72.89)
Depreciation, amortization and impairments including write-ups
4,901.83
3,279.41
Other non-monetary adjustments
29
(1,386.10)
1,104.39
Dividends received
696.68
369.15
Interest received
803.66
124.81
Interest and other financial costs paid
(103.90)
(42.38)
Tax on profit paid
(1,803.85)
(283.89)
Cash generated from operating activities before working capital movements
14,592.91
6,933.90
(Increase)/decrease in inventories
(1,447.06)
(169.18)
(Increase)/decrease in receivables
(3,112.84)
(1,050.48)
Increase/(decrease) in liabilities
986.19
659.89
Cash flow from operating activities
11,019.20
6,374.13
Investments
Intangible assets and property, plant and equipment
(2,963.16)
(2,676.68)
Investments in subsidiaries and financial assets
29
(124.67)
-
Net loans reimbursed by/(given to) subsidiaries
29
(129.46)
35.23
Disposals
Proceeds in relation to non-current assets and financial assets
29
141.09
85.92
Proceeds from transfer of business
29
0.99
43.00
Proceeds from sale of investments
29
-
488.63
Cash flow from investing activities
(3,075.21)
(2,023.90)
Increase in share capital
13
446.10
-
Increase in/ (net repayment of) loans taken from subsidiaries
29
132.50
280.25
Net repayments of oher borrowings
29
(287.14)
(150.93)
Dividends paid
(4,438.11)
(1,740.98)
Cash flow from financing activities
(4,146.65)
(1,611.66)
Effect of foreign exchange rate changes on cash and cash equivalents
1.51
10.39
Net increase in cash and cash equivalents
3,798.85
2,748.96
Cash and cash equivalents at the beginning of the year
10,053.93
7,304.97
Cash and cash equivalents at the end of the year
29
13,852.78
10,053.93
  • 1. LEGAL PRINCIPLES AND BASIS OF PREPARATION
OMV Petrom S.A., with its headquarter based at 22 Coralilor Street, 013329 Bucharest, Romania, hereinafter referred to also as “the Company” or “OMV Petrom”, has activities in Exploration and Production (E&P), Refining and Marketing (R&M) and Gas and Power (G&P) business segments and it is listed on Bucharest Stock Exchange under “SNP” code and on London Stock Exchange under “PETB” and “PETR” codes.
Starting with January 1, 2022, OMV Petrom’s business segments were renamed as follows: Upstream to Exploration and Production; Downstream Oil to Refining and Marketing, and Downstream Gas to Gas and Power.
Stockholders’ structure as at December 31, 2022 and 2021
Percent 2022
Percent 2021
OMV Aktiengesellschaft
51.157%
51.011%
Romanian State
20.698%
20.639%
Fondul Proprietatea S.A.
-
6.997%
Legal entities and private individuals
28.145%
21.353%
Total
100.000%
100.000%
As of December 31, 2022 the number of Global Depository Receipts (GDRs) was 127,544, equivalent of 19,131,600 ordinary shares, representing 0.031% of the share capital.
As of December 31, 2021 the number of GDRs was 111,494, equivalent of 16,724,100 ordinary shares, representing 0.030% of the share capital.
Statement of compliance
The separate financial statements (“financial statements”) of the Company have been prepared in accordance with the provisions of Ministry of Finance Order no. 2844/2016 approving the accounting regulations compliant with the International Financial Reporting Standards, with all subsequent modifications and clarifications.
The Company also prepares consolidated financial statements in accordance with IFRS as endorsed by the European Union (EU), which are available on the Company’s website:
https://www.omvpetrom.com/en/investors/publications.
The financial year corresponds to the calendar year.
Basis of preparation
The financial statements of OMV Petrom S.A. are presented in RON (“Romanian Leu”) and are prepared using going concern principles. All values are presented in millions, rounded to the nearest two decimals. Accordingly, there may be rounding differences. The financial statements have been prepared on the historical cost basis, except for certain items that have been measured at fair value as described in Note 3 Accounting and valuation principles. For financial assets and liabilities where fair value differs from carrying amounts at the reporting date, fair values have been disclosed in Note 30.
  • 2. JUDGMENTS, ESTIMATES AND ASSUMPTIONS
Preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the amounts reported for assets, liabilities, income and expenses, as well as the disclosures in the notes. Estimates and judgments are continuously evaluated and are based on management’s experience and other factors, including expectation of future events that are believed to be reasonable under the circumstances. However, uncertainty about these assumptions and estimates could result in actual outcomes that may differ from these estimates and may require a material adjustment to the carrying amount of the assets or liabilities affected in future periods.
Other disclosures relating to the Company’s exposure to risks and uncertainties in relation to capital management and financial risk management and policies are included in Note 33.
Changes in estimates are accounted for prospectively.
Correction of material prior period errors is made retrospectively, through retained earnings, by restating the comparative amounts for the prior period(s) presented in which the error occurred or if the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented. Errors which are not material are corrected in the period when they are discovered, through the income statement.
Significant estimates and assumptions were required in particular with regards to the effects from the climate crisis and energy transition. These estimates and assumptions are described below.
Significant estimates and assumptions in assessing climate-related risks
OMV Petrom has considered the short- and long-term effects of climate change and energy transition in preparing the separate financial statements. They are subject to uncertainty and they may have significant impacts on the assets and liabilities currently reported by the Company.
In 2021, the Company defined the first time concrete short- and medium-term targets for its emissions reductions and committed to achieve net-zero operations by 2050 (Scopes 1 and 2). By 2030, OMV Petrom is aiming for a reduction of 30% for Scopes 1 and 2, both absolute emissions and carbon intensity, and 20% for Scopes 1, 2 and 3 emissions and net carbon intensity of energy supply1. For 2022, we have achieved a lower carbon intensity index of our operations, by around 11% vs. 2019. Scope 1 represents direct emissions from operations that are majority-owned or controlled by the organization, Scope 2 represents indirect emissions associated with the purchase of electricity, steam, heat etc., while Scope 3 refers to other indirect emissions that occur outside the organization from the use and processing of sold products.
The significant accounting estimates performed by management incorporate the future effects of OMV Petrom’s own strategic decisions and commitments on having its portfolio adhered to the energy transition targets, short and long-term impacts of climate risks and energy transition to lower carbon energy sources together with management’s best estimate on global supply and demand, including forecasted commodities prices.
Nevertheless, there is significant uncertainty around the changes in the mix of energy sources over the next 30 years and the extent to which such changes will meet the ambitions of the Paris Agreement. While companies can commit to such ambitions, financial reporting under IFRS requires the use of assumptions that represent management’s current best estimate of the range of expected future economic conditions, which may differ from such targets. These assumptions include expectations about future worldwide decarbonization efforts and the transition of economies to net zero emissions.
The Company uses two different scenarios: the base case and the stress case. The scenarios differ in the underlying expectations about the pace of the future worldwide decarbonization and lead to different assumptions for demand, prices and margins of fossil commodities. The base case is used for the mid-term planning, as well as for estimates going into the measurement of various items in the financial statements, including impairment testing of non-financial assets and the measurement of provisions. The stress case which is based on a faster decarbonization path than the base case is used for calculating sensitivities in order to recognize the uncertainty in the pace of the energy transition and to better understand the financial risk from energy transition on the existing assets of OMV Petrom. Both scenarios, the base and stress case, reflect more climate change mitigation efforts and a faster decarbonization path than the scenarios used in the prior year. But OMV Petrom still expects to see energy transition at different paces in different parts of the world.
The base case is built on a scenario in which OECD (Organisation for Economic Co-operation and Development) countries will achieve the net zero emissions goal between 2050 and 2070 (equivalent to a path between the IEA “net zero emissions” (NZE) and “sustainable development” (SDS) scenarios) and non-OECD countries will implement all announced decarbonization pledges in full and on time (equivalent to the IEA “announced pledges scenario” (APS)) 2.
For the stress test analysis, a decarbonization scenario is used which is a potential trajectory to reaching the climate goals according to the Paris agreement. In this scenario, it is assumed that advanced economies will reach the net zero emissions goal by 2050, while middle-income and developing economies will only follow at a later point but not later than 2070. This scenario is built on a path between the IEA SDS and IEA NZE scenarios. The entire world following the commitments of the Paris agreement leads to lower global demand for oil and gas and consequently to lower oil and gas prices than in the base case. In addition, this scenario incorporates other possible effects such as slower economic growth in the short term.
In an additional sensitivity analysis for assessing the recoverability of the oil and gas assets in the E&P segment, OMV Petrom used the Net Zero Emissions by 2050 scenario which was modeled by the IEA3. It shows a pathway for the global energy sector to achieve net zero CO2 emissions by 2050.
For investment decisions, business cases are calculated based on the same price and demand assumptions as are used for the mid-term planning and impairment tests. In addition, a business case calculation based on the stress case assumptions is mandatory for all investment decisions in order to assess the economic viability under a “Paris aligned” scenario. The IEA NZE scenario is not used for investment decisions.
Costs for CO2 emissions are taken into account in business case calculations impairment tests as well as the stress case scenario calculations to the extent carbon pricing schemes are in place in the respective countries.
Recoverability of assets
Commodity price assumptions have a significant impact on the recoverable amounts of E&A assets and PPE. For the impairment tests, the price set as defined for the mid-term planning and incorporating the energy transition scenario as described above was used. Disclosures on the impairment tests are included in Note 2c). The outcome of the impairment tests is not in line with the goals of the Paris agreement.
The sensitivities calculated based on the stress case indicate that there is mainly a risk for impairments in a Paris-aligned scenario for oil and gas assets in the E&P segment. In order to further assess the risk from different decarbonization scenarios and its impact on the Company’s oil and gas assets, an additional calculation of a possible effect of using the oil and gas prices in a 1.5°C compatible Net Zero Emission by 2050 (NZE) scenario by the IEA has been performed.
The impact of the OMV Petrom stress case and the “NZE by 2050” calculation on the carrying amounts of property, plant and equipment related to oil and gas assets are summarized in the table below.
Sensitivities on oil and gas assets*
Decrease of carrying amounts of oil and gas assets
Remaining carrying amounts of oil and gas assets
Brent oil price in real terms
2030/2040/2050**
in billion RON
in billion RON
USD/bbl
OMV Petrom stress case scenario
(11)
6
47/27/20
IEA NZE scenario
(12)
5
36/30/25
* property, plant and equipment related to oil and gas assets
** in 2027 real terms
Whereas the recoverability of the refinery in the R&M segment would also be impacted through globally declining demand for almost all products, resulting in lower margins and cracks in a scenario assuming a quicker decarbonization path, the carrying amounts of assets in the G&P segment are not expected to be at risk.
More details on the stress tests including a description of the assumptions applied are included in Note 2 c).
Useful lives
The pace of energy transition may have an impact on the remaining useful lives of assets. The depreciable fixed assets in R&M will in average be fully depreciated over the next 6 years. Demand for petroleum products is expected to stay robust over this period of time. It is therefore not expected that energy transition has a material impact on the expected useful lives of property, plant and equipment in the R&M segment.
In the E&P segment, oil and gas assets are depreciated using the unit-of-production method which is based on proved reserves. According to the current production plans, 39% of proved reserves as at December 31, 2022, will be left by 2030, 6% by 2040 and nil by 2050. The existing oil and gas assets with proved reserves will therefore be significantly depreciated until 2030 and fully depreciated until 2050.
As OMV Petrom doesn’t see the existing assets in the G&P segment materially impacted by the energy transition, there is also no material impact on useful lives in this segment expected.
Decommissioning provisions
Under the stress case scenario, where no consequential measures that management could implement are considered, the potential earlier economic cut-off date of some oil and gas assets does not significantly impact the carrying amount of the decommissioning provisions.
For refinery, no decommissioning provisions are recognized. The Petrobrazi refinery site is expected to continue to be used for production under a Paris-aligned energy transition scenario. There are significant investments planned in the next years with the goal to adapt the Company’s refinery site in the direction of biofuels and chemical feedstock production.
Estimates and assumptions
The key assumptions concerning the future and other key sources of uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market change or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
a) Oil and gas reserves
Mineral reserves (oil and gas reserves) are estimated by the Company’s own engineers, in accordance with international and industry agreed standards based on the availability of geological and engineering data, reservoir performance data, drilling of new wells and commodity prices. The estimates are reviewed externally periodically (usually every two years). The last external review for oil and gas reserves was performed in 2021 for the reserves as of year-end 2020. Commercial reserves are evaluated according to internal regulations, which are in line with the industry standards.
The oil and gas assets are depreciated on a unit of production basis at a rate calculated by reference to either total proved or proved developed reserves (please refer to depreciation, amortization and depletion accounting policy below), determined as presented above. Changes to the estimates of oil and gas reserves impact prospectively the amount of amortization and depreciation. The carrying amount of oil and gas assets at December 31, 2022 is shown in Notes 5 and 6.
The level of estimated commercial reserves is also a key determinant in assessing whether the carrying value of any of the Company’s development and production assets should be impaired. Downward revisions of these estimates could lead to impairment of the asset’s carrying amount.
b) Provisions for decommissioning and restoration obligations
The Company’s core activities regularly lead to obligations related to dismantling and removal, asset retirement and soil remediation activities. These decommissioning and restoration obligations are principally of material importance in the E&P segment (oil and gas wells, surface and offshore facilities). At the time the obligation arises, it is provided for in full by recognizing the present value of future decommissioning and restoration expenses as a liability. An equivalent amount is capitalized as part of the carrying amount of long-lived assets.
Decommissioning costs will be incurred by the Company at the end of the operating life of some of the facilities and properties.
Estimates of future restoration costs are based on current contracts concluded with suppliers, reports prepared by OMV Petrom engineers or by independent contractors, as well as past experience. Any significant downward changes in the expected future costs or postponement in the future affect both the provision and the related asset, to the extent that there is sufficient carrying amount. Otherwise the provision is reversed to income statement.
Provisions for decommissioning and restoration costs require estimates of discount rates and inflation rates. These estimates have a material effect on the amount of the provisions (see Note ‎13).
The ultimate decommissioning and restoration costs are uncertain and cost estimates can vary in response to many factors including changes to relevant legal requirements, the emergence of new restoration techniques or experience at other production sites. The expected timing and amount of expenditure can also change, for example, in response to changes in reserves or changes in laws and regulations or their interpretation. As a result, there could be significant adjustments to the provisions established which would affect future results.
c) Impairment of non-financial assets
The Company assesses each asset or cash generating unit (CGU) at each reporting period to determine whether any indication of impairment exists or whether past impairments should be reversed. When an indicator exists, a formal estimate of the recoverable amount is made, which is considered to be the higher of the fair value less costs to sell and value in use. The assessments require the use of different estimates and assumptions depending on the business such as prices, discount rates, reserves, growth rates, gross margins and spark spreads. The key estimates and assumptions used bear the risk of change due to the inherent volatile nature of various macro-economic factors and the uncertainty in asset or CGU specific factors like reserve volumes and production profiles, which can impact the recoverable amount of assets and/or CGUs. Changes in the economic situation, expectations about climate-related risks or other facts and circumstance might require a revision of these assumptions and could lead to impairments of assets or reversals of impairments in the future.
Significant assumptions
The price and margin assumptions used in impairment testing are based on management’s best estimate and were consistent with external sources. Whereas prices in the near term are anchored in recent forward prices and market developments, long term price assumptions are developed using a variety of long-term forecasts by reputable experts and consultants and consider long-term views of global supply and demand. The Company’s long term assumptions take into consideration the impacts of the climate change and the energy transition to lower-carbon energy sources.
Impairment testing in E&P
The key valuation assumptions for the recoverable amounts of E&P assets are prices and margins, production volumes, exchange and discount rates. The production profiles were estimated based on reserves estimates (see Note 2a) and past experience and represent management’s best estimate of future production. The cash-flow projections for the first five years are based on the mid-term plan and thereafter on a “life of field” planning and therefore cover the whole life term of the field.
The oil price assumptions as well as the RON/USD exchange rates are listed below (in nominal terms in the first 5 years and afterwards in 2027 real terms in 2022, and 2026 real terms in 2021):
Oil price assumptions in 2022
2023
2024
2025
2026
2027
2030
2040
2050
Brent oil price (USD/bbl)
80
75
70
65
65
65
60
60
RON/USD exchange rate
4.64
4.64
4.64
4.64
4.64
4.64
4.64
4.64
Brent oil price (RON/bbl)
371
348
325
301
301
301
278
278
Oil price assumptions in 2021
2022
2023
2024
2025
2026
2030
2040
2050
Brent oil price (USD/bbl)
65
65
65
65
65
65
60
60
RON/USD exchange rate
4.14
4.14
4.14
4.14
4.14
4.14
4.14
4.14
Brent oil price (RON/bbl)
269
269
269
269
269
269
248
248
In 2022, following the update of mid and long-term planning assumptions, an impairment test was performed for the Exploration and Production segment.
The update of mid and long-term planning assumptions led to impairments (net of write-ups) for tangible assets of RON 1,813 million, before tax, reported in the line “Depreciation, amortization, impairments and write-ups”. These net impairments were driven mainly by revised future production profiles for certain oil and gas assets due to a steeper than previously expected natural decline and by higher operating costs. The recoverable amount of impaired assets or for which a reversal of impairment was booked amounted to RON 9,455 million. The after-tax discount rate used was 10.28%. The recoverable amount was based on the value in use.
In 2021, an analysis of the triggering events was performed and it was concluded that there were no indicators for impairment or reversal of impairment, consequently no impairment test was necessary.
Impairment testing in R&M
In the R&M business, besides discount rates, the recoverable amounts are mainly impacted by the indicator refinery margin and the utilization rate in the refinery and by the retail margin and sales volumes in retail.
In 2022 and 2021, based on management estimations it was concluded that there were no triggering indicators for performing an impairment test in R&M.
Impairment testing in G&P
In the G&P business, besides discount rates, the main valuation assumptions for the calculation of the recoverable amounts are the spark spreads (being the differences between the electricity prices and the cost of gas and cost of CO2 certificates) and net electrical output for the power plant. The assumptions used for prices are based on management’s best estimate, considering specifics of local market as well as the correlation between the local and regional markets.
In 2022 and 2021, based on management estimations it was concluded that there were no triggering indicators for performing an impairment test in G&P.
Sensitivities based on stress case
Sensitivities based on a stress case scenario have been calculated to test the resilience of assets against risks from a slower economic growth and the Ukraine conflict in the near term and from climate-related risks in the longer term. Long-term price and margin assumptions are based on a Paris-aligned scenario with a worldwide transition to net zero emissions between 2050 and 2070 (for more details see above note related to climate-related risks).
The assumptions of the oil price used in the sensitivity analysis are included in the table below (prices in nominal terms in the first 5 years and afterwards in 2027 real terms):
Oil price assumptions in 2022 for sensitivity analysis
2023
2024
2025
2026
2027
2030
2040
2050
Brent oil price (USD/bbl)
65
60
55
50
50
47
27
20
RON/USD exchange rate
4.25
4.25
4.25
4.25
4.25
4.25
4.25
4.25
Brent oil price (RON/bbl)
276
255
234
213
213
200
115
85
The stress case sensitivities were calculated using a simplified method. The calculation was based on a DCF model similar to a value in use calculation where no future investments for enhancements and improvements were considered. The calculations do not consider consequential measures that management could implement such as divestments and changes in business plans. The amounts presented should therefore not be seen as a best estimate of an expected impairment impact following such a scenario.
In the E&P segment, the cash flows are based on an adjusted mid-term planning for five years and a life of field planning for the remaining years until abandonment. The stress case does not include any other changes to input factors than prices and volumes and does not consider any restructuring measures.
Under this stress test scenario, the carrying amounts of property, plant and equipment related to the oil and gas assets with proved reserves would have to be decreased by RON 11 billion. For E&P oil and gas assets an additional sensitivity based on prices according to the IEA Net Zero by 2050 scenario was calculated and showed a decrease in the carrying amount of property, plant and equipment related to oil and gas assets with proved reserves of RON 12 billion (see above note related to climate-related risks). The value of oil and gas assets with unproved reserves that would be abandoned is not significant.
In the R&M segment, the stress case reflects globally declining demand for almost all products resulting in lower margins and cracks compared to the base case scenario. Under the stress case scenario, the carrying amounts related to Petrobrazi refinery would have to be decreased in total by RON 0.4 billion.
In the stress test calculations for Petrobrazi refinery, the cash flows of the 5-year mid-term planning were adjusted for the lower margins. The refining indicator margin was assumed to be lower by approximately 50% in the stress case than in the mid-term planning. The terminal value was calculated based on the cash flows derived from the last detailed planning period and a growth rate which is equivalent to the CAGR derived from a long-term estimate of margins and sales volumes. This growth rate is approximately -3%. In addition, cash flows assumed for the terminal value incorporate a significant decrease in operating costs and investments.
d) Exploration and evaluation expenditure
The application of the Company’s accounting policy for exploration and evaluation expenditure requires judgment in determining whether it is probable that future economic benefits are likely either from future operation or from sale or whether activities have not reached a stage which permits a reasonable assessment of the existence of reserves. The determination of reserves and resources is itself an estimation process that involves varying degrees of uncertainty depending on sub-classification and these estimates directly impact the point of deferral of exploration and evaluation expenditure.
The deferral policy requires management to make certain estimates and assumptions as to future events and circumstances, in particular whether an economically viable extraction operation can be established. Any such estimates and assumptions may change as new information becomes available. If, after expenditure is capitalized, information becomes available suggesting that the recovery of the expenditure is unlikely, the relevant capitalized amount is written off in the income statement in the period when the new information becomes available. The exploration and evaluation expenditure capitalized is presented under intangible assets in the statement of financial position.
e) Recoverability of Romanian State receivable
The management is periodically assessing the receivable related to expenditure recoverable from the Romanian State related to obligations for decommissioning and environmental costs, which was recognized based on the privatization agreement. The assessment process is considering, inter alia, the history of amounts claimed, documentation process related requirements and potential litigation or arbitration proceedings. For more details, see Note 8 b).
Judgments
In the process of applying the Company’s accounting policies, the following judgments were made, particularly with respect to the following:
f) Cash generating units
Management exercises judgment in determining the appropriate level of grouping E&P assets into CGUs, in particular with respect to the E&P assets which share significant common infrastructure and are consequently grouped into the same CGU.
g) Contingencies
By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The assessment of contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events.
h) Lease term and incremental borrowing rate
OMV Petrom determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Company has lease contracts which include prolongation and termination options. When determining the lease term to be used for the measurement of the lease, the Company takes into account all the relevant facts and circumstances that create an economic incentive for exercising either the extension or termination option of the lease term, such as market factors, the extent of oil and gas reserves or other relevant facts.
The Company cannot readily determine the interest rate implicit in its leases. Therefore, it uses the relevant incremental borrowing rates to measure lease liabilities. These incremental borrowing rates were determined taking into consideration factors such as the term of the lease, credit risk, currency in which the lease was denominated and economic environment.
  • 3. ACCOUNTING AND VALUATION PRINCIPLES
3.1. Changes in accounting policies
The accounting policies adopted are consistent with those of the previous financial year except for the following IFRS amendments to standards which have been adopted by the Company from January 1, 2022:
  • Amendment to IFRS 3 Business Combinations: Reference to the Conceptual Framework;
  • Amendment to IAS 16 Property, Plant and Equipment: Proceeds before intended use;
  • Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets: Onerous Contracts - Cost of Fulfilling a Contract;
  • Annual Improvements 2018-2020, making minor amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards, IFRS 9 Financial Instruments, IAS 41 Agriculture and the Illustrative Examples accompanying IFRS 16 Leases.
The amendments did not have a material impact on the Company’s financial statements.
3.2. New and revised standards not yet mandatory
The Company has not applied the following new or revised IFRSs that have been issued but are not yet effective. They are not expected to have a material effect on the Company’s financial statements. EU endorsement is still pending in some cases.
Standards and amendments
IASB effective date
IFRS 17 Insurance Contracts and Amendments to IFRS 17
January 1, 2023
Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies
January 1, 2023
Amendments to IAS 8: Definition of Accounting Estimates
January 1, 2023
Amendments to IAS 12: Deferred Tax related to Assets and Liabilities arising from a Single Transaction
January 1, 2023
Amendments to IAS 1: Classification of Liabilities as Current and Non-Current
January 1, 2024
Amendments to IAS 1: Non-current Liabilities with Covenants
January 1, 2024
Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback
January 1, 2024
3.3. Summary of accounting and valuation principles
  • a) Pre-licence costs
Pre-licence costs are expensed in the period in which they are incurred. Pre-license prospecting is performed in the very preliminary stage of evaluation when trying to identify areas that may potentially contain oil and gas reserves without having physical access to the area. Related costs may include seismic studies, magnetic measurements, satellite and aerial photographs, gravity-meter tests etc.
  • b) Licence acquisition costs
Exploration licence acquisition costs are capitalized in intangible assets.
Licence acquisition costs are reviewed at each reporting date to confirm that there is no indication that the carrying amount exceeds the recoverable amount. This review includes confirming that exploration drilling is still under way or firmly planned, or that it has been determined, or work is under way to determine that the discovery is economically viable based on a range of technical and commercial considerations and sufficient progress is being made on establishing development plans and timing.
If no future activity is planned or the licence has been relinquished or has expired, the carrying value of the licence acquisition costs is written off through income statement.
Upon recognition of proved reserves and internal approval for development, the relevant expenditure is transferred to oil and gas assets within tangible assets.
  • c) Exploration and evaluation costs
Exploration expenses relate exclusively to the E&P business segment and comprise the costs associated with unproved reserves. These include geological and geophysical costs for the identification and investigation of areas with possible oil and gas reserves and administrative, legal and consulting costs in connection with exploration.
Exploration and evaluation costs are accounted for using the successful efforts method of accounting. Costs related to geological and geophysical activity are expensed as incurred. The costs associated to exploration and evaluation drilling are initially capitalized as oil and gas assets with unproved reserves until the existence or absence of potentially commercially viable reserves is determined. If prospects are subsequently deemed to be unsuccessful on completion of evaluation, the associated costs are included in the income statement for the year. If the prospects are deemed commercially viable, such costs are transferred to tangible oil and gas assets upon recognition of proved reserves and internal approval for development. The status of such prospects and related costs are reviewed regularly by technical, commercial and executive management including review for impairment at least once a year to confirm the continued intent to develop or otherwise extract value from the discovery. When this is no longer the case, the costs are written off. Exploratory wells in progress at year -end which are determined to be unsuccessful subsequent to the date of the statement of financial position are treated as non-adjusting events, meaning that the costs incurred for such exploratory wells remain capitalized in the financial statements of the reporting period under review and will be expensed in the subsequent period.
  • d) Development and production costs
Development costs including costs incurred to gain access to proved reserves and to prepare development wells locations for drilling, to drill and equip development wells and to construct and install production facilities, are capitalized as oil and gas assets.
Production costs, including those costs incurred to operate and maintain wells and related equipment and facilities (including depletion, depreciation and amortization charges as described below) and other costs of operating and maintaining those wells and related equipment and facilities, are expensed as incurred.
  • e) Intangible assets and property, plant and equipment
Intangible assets and property, plant and equipment are recognized at cost of acquisition or construction (including costs of major inspection and general overhauls) and are presented net of accumulated depreciation and impairment losses.
The cost of purchased property, plant and equipment is the value of the consideration given to acquire the assets and the value of other directly attributable costs which have been incurred in bringing the assets to their present location and condition necessary for their intended use. The cost of self-constructed assets includes cost of direct materials, labour, overheads and other directly attributable costs that have been incurred in bringing the assets to their present location and condition.
Depreciation and amortization is calculated on a straight-line basis, except for Exploration and Production assets, where depletion occurs to a large extent on a unit-of-production basis. In the income statement, impairment losses for exploration assets are disclosed as exploration expenses, and those for other assets are reported within depreciation, amortization, impairments and write-ups line.
Intangible assets
Useful life (years)
Goodwill
Indefinite
Software
3 – 5
Concessions, licences and other intangibles
5 - 20, or contract duration
Business-specific property, plant and equipment
E&P
Oil and gas core assets
Unit of production method
R&M
Storage tanks and refinery facilities
25 – 40
R&M
Pipeline systems
20
G&P
Gas pipelines
20 - 30
G&P
Gas fired power plant
8 – 30
Other property, plant and equipment
Production and office buildings
20 – 50
Other plant and equipment
10 – 20
Fixtures and fittings
5 – 10
For the application of the unit of production depreciation method, the Company has separated the areas where it operates into regions. The unit of production factor is computed at the level of each productive region, based on the extracted quantities and the proved reserves or proved developed reserves as applicable.
Capitalized exploration and evaluation activities are generally not depreciated as long as they are related to unproved reserves but tested for impairment. Once the reserves are proved and commercial viability is established, the related assets are reclassified into tangible assets and once production starts depreciation commences. Capitalized development costs and support equipment are generally depreciated based on proved developed reserves/ total proved reserves by applying the unit-of-production method once production starts.
The right-of-use assets are depreciated on a straight-line basis over the shorter of the asset’s useful life and the lease term.
An item of property, plant and equipment and any significant part initially recognized are derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognized.
Under the successful efforts method, individual mineral interests and other assets are combined to cost centers (fields, blocks, areas), which are the basis for depreciation and impairment testing. If single wells or other assets from a pooled depreciation base with proved reserves are abandoned, the accumulated depreciation for the single asset might be not directly identifiable. In general, irrespective if book values of abandoned assets are identifiable, no loss is recognized from the partial relinquishment of assets from a pooled depreciation base as long as the remainder of the group of properties continues to produce oil or gas. It is assumed that the abandoned or retired asset is fully amortized. The capitalized costs for the asset are charged to the accumulated depreciation base of the cost center.
Where an asset or part of an asset, that was separately depreciated and is now written off, is replaced and it is probable that future economic benefits associated with the item will flow to the Company, the expenditure is capitalized. Where part of the asset replaced was not separately considered as a component and therefore not depreciated separately, the replacement value is used to estimate the carrying amount of the replaced asset(s) which is immediately written off.
Transactions in which control of an exploration entity is obtained are treated as asset acquisitions, if the entity does not constitute a business as defined by IFRS 3 Business Combinations.
Assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Non-current assets and groups of assets are classified as held for sale if their carrying value will be recovered principally through a sale transaction rather than through continuing use. This classification requires that the sale must be estimated as highly probable, and that the asset must be available for immediate disposal in its present condition. The highly probable criteria implies that management must be committed to the sale and an active plan to locate a buyer was initiated, the transaction should be expected to qualify for recognition as a completed sale within one year from the date of classification (except if certain conditions are met), the asset is actively marketed at a price that is reasonable in relation to its current fair value and it is unlikely that significant changes will occur to the sale plan or that the plan will be withdrawn. Property, plant and equipment and intangible assets are not depreciated or amortized once classified as held for sale.
Impairment of intangible assets and property, plant and equipment
In accordance with IAS 36, intangible assets as well as property, plant and equipment, are reviewed at reporting date for any indications of impairment. For intangible assets with indefinite useful lives, impairment tests are carried out annually. This applies even if there are no indications of impairment. Impairment tests are performed at the level of cash generating units which generate cash inflows that are largely independent of those from other assets or groups of assets.
If any indication exists, or when annual impairment test for an asset is required, the Company estimates the asset’s recoverable amount being the higher of fair value less costs of disposal and its value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. The cash flows are generally derived from recent budgets and planning calculations, which are prepared separately for each of the Company’s CGUs to which the individual assets are allocated.
If the carrying amount of an asset or cash generating unit exceeds its recoverable amount, the asset is considered impaired and an impairment loss is recognized to reduce the asset to its lower recoverable amount. Impairment losses are recognized in the income statement under depreciation, amortization, impairments and write-ups or under exploration expenses.
If the reasons for impairment no longer apply in a subsequent period, a reversal is recognized in the income statement. The increased carrying amount related to the reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortization and depreciation) if no impairment loss had been recognized in prior years.
  • f) Major maintenance and repairs
The capitalized costs of regular and major inspections and overhauls are separate components of the related asset or asset groups. The capitalized inspection and overhaul costs are amortized on a straight line basis, or on basis of the number of service hours or produced quantities or similar, if this better reflects the time period for the inspection interval (until the next inspection date).
Expenditure on major maintenance refits, inspections or repairs comprises the cost of replacement assets or parts of assets, inspection costs and overhaul costs. Inspection costs associated with major maintenance programs are capitalized and amortized over the period to the next inspection.
Cost of major remedial activities for wells workover, if successful, is also capitalized and depreciated using the unit-of-production method.
All other day-to-day repairs and maintenance costs are expensed as incurred.
  • g) Research and development
Expenditure related to research activities is recognized as expense in the period in which it is incurred. Research and development (R&D) expenses are presented in the income statement within the line Other operating expenses and include all direct and indirect materials, personnel and external services costs incurred in connection with the focused search for new insights related to the development and significant improvement of products, services and processes and in connection with research activities. Development costs are capitalized if the recognition criteria according to IAS 38 are fulfilled.
  • h) Leases
OMV Petrom as a lessee recognizes lease liabilities and right-of-use assets for lease contracts according to IFRS 16. It applies the recognition exemption for short-term leases and leases in which the underlying asset is of low value and therefore does not recognize right-of-use assets and lease liabilities for such leases. Leases to explore for and use oil and natural gas, which comprise mainly land leases used for such activities, are not in the scope of IFRS 16. The rent for these contracts is recognized on a straight-line basis over the contract term.
At the commencement date of the lease (i.e. the date the underlying asset is available for use), lease liabilities are recognized at the net present value of fixed lease payments and lease payments which depend on an index or rate over the determined lease term with the applicable discount rate. The amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there are changes in the lease term, lease payments or in the assessment of an option to purchase the underlying asset.
Right-of-use assets are recognized at commencement date and measured at the present value of the lease liability plus prepayments and initial direct costs and presented within property, plant and equipment. After the commencement date, right-of-use assets are measured at cost, less any accumulated depreciation and any accumulated impairment losses (see Note 3e) and adjusted for any remeasurement of the lease liability, if the case.
Non-lease components are separated from the lease components for the measurement of right-of-use assets and lease liabilities.
Variable lease payments that do not depend on an index or a rate are recognized as expenses, in the period in which the event or condition that triggers the payment occurs.
OMV Petrom as a lessor entered in contracts which were assessed as operating leases, for which payments received for rent are recognized as revenue from rents and leases over the period of the lease.
  • i) Financial instruments
Non-derivative financial assets
At initial recognition, OMV Petrom classifies its financial assets as subsequently measured at amortized cost, fair value through other comprehensive income (OCI) or fair value through profit or loss. The classification depends both on the Company’s business model for managing the financial assets as well as the contractual cash flow characteristics of the financial assets. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.
Debt instruments are classified and measured at amortized cost if both of the following conditions are met:
  • the asset is held within the business model whose objective is to hold financial assets in order to collect contractual cash flows; and
  • the contractual terms of the financial asset give rise on specific dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
These assets are subsequently measured at amortized cost using the effective interest method less any impairment losses. Interest income, impairment losses and gains or losses on derecognition are recognized in income statement. The Company’s financial assets at amortised cost include mainly trade receivables.
OMV Petrom recognizes allowances for expected credit losses (ECLs) for financial assets measured at amortized costs. The ECL calculation is based on external or internal credit ratings of the counterparty, associated probabilities of default and loss given default. External credit rating is based mainly on reports issued by well-known rating agencies and is reflected in OMV Petrom by grouping financial assets in six risk classes (risk class 1 being the lowest risk category).
The probabilities of default used for each risk class, as presented in Note 8, are based on Standard & Poor’s average global corporate default rates. A loss given default of 45% was applied for computation of ECL of financial assets which are not credit impaired.
ECLs are recognized in two stages:
  • i. Where there has not been a significant increase in the credit risk since initial recognition, credit losses are measured at 12 month ECLs. The 12 month ECL is the credit loss which results from default events that are possible within the next 12 months. The Company considers a financial asset to have low credit risk when its credit risk rating is equivalent to the definition of ‘investment grade’.
  • ii. Where there has been a significant increase in the credit risk since initial recognition, a loss allowance is required for the lifetime ECL, i.e. the expected credit losses resulting from possible default events over the expected life of a financial asset. For this assessment, OMV Petrom considers all reasonable and supportable information that is available without undue cost or effort. Furthermore, OMV Petrom assumes that the credit risk on a financial asset has significantly increased if it is more than 30 days past due. If the credit quality improves for a lifetime ECL asset, OMV Petrom reverts to recognizing allowances on a 12 month ECL basis. A financial asset is considered to be in default when the financial asset is 90 days past due unless there is reasonable and supportable information demonstrating that a more lagging default criterion is appropriate. A financial asset is written off when there is no reasonable expectation that the contractual cash flows will be recovered.
For trade receivables a simplified approach is adopted, where the impairment losses are recognized at an amount equal to lifetime expected credit losses. In case there are credit insurances or securities held against the balances outstanding, the ECL calculation is based on the probability of default of the insurer/securer for the insured/secured element of the outstanding balance and for the remaining amount on the probability of default of the counterparty.
Non-derivative financial assets classified as at fair value through profit or loss include trade receivables from sales contracts with provisional pricing because the contractual cash flows do not represent solely payments of principal and interest on the principal amount outstanding. Furthermore, this measurement category includes portfolios of trade receivables held with an intention to sell them. These assets are measured at fair value, with any gains or losses arising on remeasurement recognized in income statement.
Equity instruments may be decided irrevocably as measured at fair value through other comprehensive income if they are not held for trading.
Interests in subsidiaries, associates and joint ventures that are accounted for in accordance with IFRS 10 Consolidated Financial Statements, IAS 27 Separate Financial Statements, or IAS 28 Investments in Associates and Joint Ventures are measured at cost less any impairment losses.
OMV Petrom derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognizes its retained interest in the asset and an associated liability that reflects the rights and obligations that the Company has retained. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.
Financial assets are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the Company.
Rights to payments to reimburse the Company for expenditure required to settle a liability that is recognized as a provision in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets are outside the scope of IFRS 9. Expenditure recoverable from the Romanian State falls under this category.
Non-derivative financial liabilities
Non-derivative financial liabilities are carried at amortized cost except for contingent consideration related to acquisition of financial assets, which is measured at fair value at the date of acquisition and subsequently measured at fair value with the changes in fair value recognized in income statement. Long-term liabilities are discounted using the effective interest rate method (EIR).
A financial liability (or a part of a financial liability) is removed from the statement of financial position when it is extinguished – i.e. when the obligation specified in the contract is discharged or cancelled or expires.
Derivative financial instruments and hedge accounting
Derivative financial instruments are used to hedge risks resulting from changes in currency exchange rates and commodity prices. Derivative instruments are recognized at fair value. Unrealized gains and losses are recognized as income or expense, except where hedge accounting according to IFRS 9 is applied.
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which it wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge.
Those derivatives qualifying and designated as hedges are either (i) a fair value hedge when hedging exposure to changes in the fair value of a recognized asset or liability or (ii) a cash flow hedge when hedging exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction.
For cash flow hedges, the effective part of the changes in fair value is recognized in other comprehensive income, while the ineffective part is recognized immediately in the income statement. Where the hedging of cash flows results in the recognition of a non-financial asset or liability, the carrying value of that item will be adjusted for the accumulated gains or losses recognized directly in other comprehensive income.
As per IFRS 9 Financial Instruments, contracts to buy or sell non-financial items that can be settled net in cash or another financial instrument, or by exchanging financial instruments, as if the contracts were financial instruments, are accounted for as financial instruments and measured at fair value. Associated gains or losses are recognized in the income statement, as follows: the result of derivative financial instruments related to petroleum products and power is presented in sales revenues and the result of derivative financial instruments related to materials (e.g. crude oil, CO2) is presented in purchases (net of inventory variation).
However, commodity contracts that are entered into and continue to be held for the purpose of the receipt or delivery of non-financial items in accordance with the Company’s expected purchase, sale or usage requirements are not accounted for as derivative financial instruments, but rather as executory contracts and they fall under own use exemption. OMV Petrom enters into gas forward contracts with physical delivery, creating links within the value chain for the commodity. These contracts are not settled net. Therefore gas forward contracts fall under own use exemption as mentioned above.
  • j) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualified assets are capitalized until these assets are substantially ready for their intended use or for sale. Borrowing costs include interest on bank short-term and long-term loans, amortization of ancillary costs incurred in connection with the arrangement of borrowings and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs. All other costs of borrowing are expensed in the period in which they are incurred.
  • k) Government grants
Government grants – except for emission rights (see Note 3.3m) – are recognized as income or deducted from the carrying amount of the related assets where it is reasonable to expect that the granting conditions will be met and that the grants will be received.
  • l) Inventories
Inventories are recognized at the lower of cost and net realizable value, except for inventories held for trading which are measured at fair value less cost to sell. Net realizable value is the estimated selling price in the normal course of activity less any selling expenses.
Cost of producing crude oil, natural gas and refined petroleum products is accounted on weighted average basis, and includes all costs incurred in the normal course of business in bringing each product to its present location and condition, including the appropriate proportion of depreciation, depletion and amortization and overheads based on normal capacity.
Appropriate allowances are made for any obsolete or slow moving stocks based on the management’s assessments.
  • m) Provisions
Provisions are made for all present obligations (legal or constructive) to third parties resulting from a past event, when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and the amount of the obligation can be estimated reliably. Provision for individual obligations is based on the best estimate of the amount necessary to settle the obligation. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is applicable, the increase in the provision due to the passage of time is recognized as a finance cost.
Decommissioning and environmental obligations
The Company’s core activities regularly lead to obligations related to dismantling and removal, asset retirement and soil remediation obligations, more specifically consisting in:
  • plugging and abandoning wells;
  • cleaning of sludge pits;
  • dismantlement of production facilities;
  • restoration of producing areas in accordance with licence requirements and the relevant legislation.
These decommissioning and restoration obligations are mainly of material importance in the Exploration and Production segment (oil and gas wells, surface and offshore facilities). At the time the obligation arises, it is provided for in full by recognizing the present value of future decommissioning and restoration expenses as a liability. An equivalent amount is capitalized as part of the carrying value of related property, plant and equipment. Any such obligation is calculated on the basis of best estimates. The capitalized asset is depreciated using the unit-of-production method for upstream activities and on straight-line basis for downstream assets.
Liabilities for environmental costs are recognized when a clean-up is probable and the associated costs can be reliably estimated. Generally, the timing of recognition of these provisions coincides with the commitment to a formal plan of action. The amount recognized is the best estimate of the expenditure required. Estimates of future remediation costs are based on current contracts concluded with suppliers, reports prepared by Company engineers or by independent contractors, as well as past experience. Where the liability will not be settled for a number of years, the amount recognized is the present value of the estimated future expenditure.
Based on the privatization agreement of the Company, part of its decommissioning and environmental costs will be reimbursed by the Romanian State. The portion to be reimbursed by the Romanian State has been presented as receivable and reassessed in order to reflect the current best estimate of the costs at their present value, using the same discount rate as for the related provisions.
Changes in the assumptions related to decommissioning costs are dealt with prospectively, by recording an adjustment to the provision and a corresponding adjustment to property, plant and equipment (for OMV Petrom obligation) or to the related receivable from the Romanian State (for the works to be reimbursed by Romanian State).
Changes in the assumptions related to environmental costs are dealt with prospectively, by recording an adjustment to the provision and a corresponding adjustment in the income statement (for Company obligation) or to the related receivable from the Romanian State (for the works to be reimbursed by Romanian State).
The unwinding of the decommissioning and environmental provisions is presented as part of the interest expenses in the income statement, net of the unwinding of the related receivable from the Romanian State (for the works to be reimbursed by Romanian State).
The effect of changes in discount rate and timing assumptions for the receivable from the Romanian State which are additional to the changes in discount rates and timing assumptions for decommissioning costs and environmental costs is presented in the income statement under interest expenses or interest income.
Pensions and similar obligations
The Company has defined benefit plans and other benefits. Provisions for pensions and severance payments are calculated using the projected-unit-credit method, which divides the costs of the estimated benefit entitlements over the whole period of employment and thus takes future increases in remuneration into account. Actuarial gains/losses are recognized in full in the period in which they occur as follows: for retirement benefits in other comprehensive income (not reclassified to income statement in subsequent periods) and for other benefits in the income statement.
Provisions for restructuring programs are recognized if a detailed plan has been approved by management prior to the date of the statement of financial position, and an irrevocable commitment is thereby established. Voluntary amendments to employees’ remuneration arrangements are recognized if the respective employees have accepted the Company’s offer. Provisions for obligations under individual separation agreements are recognized at the present value of the obligation where the amounts and dates of payment are fixed and determined.
Emission allowances received free of charge from governmental authorities (EU Emissions Trading Scheme for greenhouse gas emissions allowances) reduce financial obligations for CO2 emissions and are recognized based on net approach for Government Grant (i.e. zero value in accounting). Provisions are recognized only for shortfalls. Provisions for shortfalls are initially measured at the best estimation of expenditure required to settle the obligation. The related expenses are recognized as emission costs, included in production and operating expenses. If, subsequently to the recognition of a provision, emission rights are purchased then an asset is only recognized for the excess of the emission rights over the CO2 emissions.
  • n) Taxes on income and royalties
Current tax
Current income tax is the expected tax payable or receivable on the taxable net result for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. The taxable profit differs from the profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred tax
Deferred income tax is recognized in respect of temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognized for all taxable temporary differences, except:
  • where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
  • in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilized except:
  • where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss, and
  • in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profits will be available against which the temporary differences can be utilized.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient future taxable profits will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized, or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognized directly in other comprehensive income or equity is recognized in other comprehensive income or equity and not in income statement.
Deferred tax assets and deferred tax liabilities at Company level are shown net if there is a legally enforceable right to offset and the deferred taxes relate to matters subject to the same tax jurisdiction.
Production taxes
Royalties are based on the value of oil and gas production and are included in the income statement under production and similar taxes.
  • o) Revenue recognition
Revenues from contracts with customers
Revenue is generally recognized when control over a product or a service is transferred to a customer. It is measured based on the consideration expected to be entitled to according to the contract with a customer and excludes amounts collected on behalf of third parties.
When the performance obligation is not yet satisfied, but the consideration from customers is either received or due, OMV Petrom recognizes contract liabilities which are reported as other liabilities in the statement of financial position.
When goods such as crude oil, LNG, oil products and similar goods are sold, the delivery of each quantity unit normally represents a single performance obligation. Revenue is recognized when control of the goods has been transferred to the customer, which is the point in time when legal ownership as well as the risk of loss has passed to the customer and is determined on the basis of the Incoterm agreed in the contract with the customer. These sales are done with normal credit terms according to the industry standards.
In the R&M retail business, revenues from the sale of petroleum products are recognized at a point in time, when products are supplied to the customers. Depending on whether the Company acts as a principal or as an agent in the sale of shop merchandise, revenue and costs related to such sales are presented gross or net in the income statement. The Company acts as principal if it controls the goods before they are transferred to the customer. The Company has control over the goods when it bears the inventory risk before the goods have been transferred to the customers. A second indicator for having control of the goods before transferring them to the customer is the Company’s ability to establish the price of goods. For sales of non-oil products, the Company considers this as being a secondary criterion, therefore, if the Company has the ability to set the price but it does not have inventory risk before transferring the goods to the customer, it acts as an agent in providing the goods.
The Company’s gas and power supply contracts include a single performance obligation which is satisfied over the agreed delivery period. Revenue is recognized according to the consumption by the customer and in line with the amount to which the Company has a right to invoice. Only in exceptional cases long-term gas supply contracts may contain stepped prices in different periods where the rates do not reflect the value of the goods at the time of delivery. In these cases, revenue is recognized based on the average contractual price.
In some contracts for the delivery of natural gas, the fees charged to the customer comprise a fixed charge as well as a variable fee depending on the volumes delivered. These contracts contain only one performance obligation which is represented by the availability of supply for the delivery of gas over a certain period. The revenue from fixed charges and variable fees is recognized in line with the amount chargeable to the customer. Gas and power deliveries are billed and paid on a monthly basis.
Gas storage contracts contain a stand-ready obligation for providing storage services over an agreed period of time. Revenue is recognized according to the amount to which the Company has a right to invoice for those transactions in which it acts in the capacity of principal. These services are billed and paid on a monthly basis.
Power and gas sales are often subject to fees or tariffs for facilitating the transfer of goods and services. When the Company does not control the services related to such fees and tariffs before they are transferred to the customer and when it is not involved in the rendering of the service nor does it control the pricing, the Company is only an agent in providing these services.
As the revenues are recognized in the amount to which the Company has a right to invoice, OMV Petrom applies the practical expedient according to IFRS 15.121 in accordance with which the amount for unsatisfied remained performance obligations need not be disclosed.
Revenues from other sources
Revenues from other sources include mainly revenues from commodity transactions that are within the scope of IFRS 9 Financial Instruments, realized and unrealized results from hedging of sales transactions, as well as rental and lease revenues.
Dividend and interest income
Dividend income from investments is recognized when the shareholder’s right to receive payment has been established.
Interest income is accrued using the effective interest rate, which is the rate that discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.
  • p) Cash and cash equivalents
Cash is considered to be cash on hand and in operating accounts in banks. Cash equivalents represent deposits and highly liquid short-term investments with original maturities of less than three months.
  • q) Joint arrangements
IFRS defines joint control as the contractually agreed sharing of control over an arrangement, which exists only when decisions about the relevant activities (i.e. activities that significantly affect the returns of the arrangement) require the unanimous consent of the parties sharing the control.
Joint ventures are joint arrangements in which the parties that share control have rights to the net assets of the arrangement. Joint operations are joint arrangements in which the parties that share joint control have rights to the assets and obligations for the liabilities relating to the arrangement.
As of December 31, 2022 and 2021 the Company had joint arrangements classified as joint operations.
The Company recognizes in relation to its interest in a joint operation its assets including its share of any assets held jointly, its liabilities including its share of any liabilities incurred jointly, its revenue from the sale of its share of the output arising from the joint operation, its share of the revenue from the sale of the output by the joint operation, as well as its expenses, including its share of any expenses incurred jointly. The Company accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation, line by line, in its financial statements.
The material joint arrangements where OMV Petrom is partner, as well as commitments in relation to the joint arrangements, are presented in Note 32.
  • r) Exploration and production sharing agreements
Exploration and production sharing agreements are contracts for oil and gas licenses in which the oil or gas production is shared between one or more oil companies and the host country/national oil company in defined proportions. Exploration expenditures are carried by the oil companies as a rule and recovered from the state or the national oil company through so called “cost oil” in a successful case only.
  • 4. FOREIGN CURRENCY TRANSACTIONS
Foreign currency transactions are recorded at the exchange rate ruling on transaction date. Monetary assets and liabilities denominated in foreign currency are converted into RON at the exchange rate on the reporting date, communicated by the National Bank of Romania:
Currencies
December 31, 2022
December 31, 2021
Euro (EUR)
4.9474
4.9481
US dollar (USD)
4.6346
4.3707
All differences resulting from foreign currency amounts settlements are recognized in income statement in the period they occurred. Unrealized foreign exchange gains and losses related to monetary items are recognized in the income statement for the year. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions.
The functional currency of the Company, assessed in accordance with IAS 21, is the RON.
  • 5. INTANGIBLE ASSETS
Concessions,
licences and other
intangible assets
Oil and gas
assets with
unproved reserves
Total
COST
Balance as at January 1, 2022
1,306.20
3,472.20
4,778.40
Additions*
2.68
174.01
176.69
Transfers (Note 6)
0.55
(8.11)
(7.56)
Disposals
(0.27)
(130.50)
(130.77)
Balance as at December 31, 2022
1,309.16
3,507.60
4,816.76
ACCUMULATED AMORTIZATION AND IMPAIRMENT
Balance as at January 1, 2022
1,182.76
901.90
2,084.66
Amortization
10.61
0.98
11.59
Impairment
-
39.09
39.09
Transfers (Note 6)
-
-
-
Disposals
(0.27)
(130.50)
(130.77)
Balance as at December 31, 2022
1,193.10
811.47
2,004.57
CARRYING AMOUNT
As at January 1, 2022
123.44
2,570.30
2,693.74
As at December 31, 2022
116.06
2,696.13
2,812.19
*) Includes the amount of RON 0.31 million representing increase from reassessment of decommissioning asset for exploration wells (under category "Oil and gas assets with unproved reserves").
Oil and gas assets with unproved reserves include mainly expenditure capitalized in relation to Neptun project. OMV Petrom remains keen to see the Neptun Deep strategic project being developed. Based on management assessment it was concluded that there were no impairment triggers as at December 31, 2022 and 2021.
  • 6. PROPERTY, PLANT AND EQUIPMENT
Land, land rights
and buildings,
incl. buildings on
third-party
property
Oil and gas
assets
Plant and
machinery
Other fixtures
and fittings,
tools and
equipment
Assets under
construction
Total
COST
Balance as at January 1, 2022
2,527.86
41,719.77
11,182.56
748.70
710.46
56,889.35
Additions*
27.02
2,868.16
177.55
78.02
590.34
3,741.09
Transfers**
24.72
(65.31)
214.77
6.79
(173.41)
7.56
Transfers to assets held for sale
0.11
0.02
–
–
–
0.13
Disposals
(40.01)
(655.90)
(218.30)
(46.40)
(39.73)
(1,000.34)
Balance as at December 31, 2022
2,539.70
43,866.74
11,356.58
787.11
1,087.66
59,637.79
ACCUMULATED DEPRECIATION AND
IMPAIRMENT
Balance as at January 1, 2022
1,320.91
24,500.59
6,720.58
430.97
19.27
32,992.32
Depreciation
98.30
1,720.14
653.30
124.39
–
2,596.13
Impairment
17.08
2,227.10
35.38
5.18
26.02
2,310.76
Transfers**
5.35
(5.24)
(0.10)
(0.01)
–
–
Transfers to assets held for sale
0.11
0.02
–
–
–
0.13
Disposals
(30.90)
(653.97)
(211.99)
(44.98)
(39.73)
(981.57)
Write-ups
(0.18)
(47.40)
(0.74)
–
–
(48.32)
Balance as at December 31, 2022
1,410.67
27,741.24
7,196.43
515.55
5.56
36,869.45
CARRYING AMOUNT
As at January 1, 2022
1,206.95
17,219.18
4,461.98
317.73
691.19
23,897.03
As at December 31, 2022
1,129.03
16,125.50
4,160.15
271.56
1,082.10
22,768.34
*) Includes the amount of RON 578.25 million representing increase from reassessment of the decommissioning asset.
**) Net amount represents transfers from intangibles (Note 5)
Expenditure capitalized in the course of construction of tangible and intangible assets amounts to RON 516.64 million (2021: RON 475.54 million).
For details on impairments see Note 22.
OMV Petrom as a lessee
OMV Petrom as a lessee recognized right-of-use assets related mainly to cars, rail cars and other transportation vehicles, the hydrogen plant at Petrobrazi Refinery, power generators and other equipment, as well as other land and office buildings leases.
Due to the nature of oil and gas operations, some lease contracts include the possibility for OMV Petrom as a lessee to extend or terminate the original lease term. The existence of such options is a business necessity, as the activities are largely dependent on the market factors and on the existence of oil and gas reserves. These provide operational flexibility in terms of managing the assets used in the Company’s operation. These options are assessed by OMV Petrom at lease commencement whether it is reasonably certain that they will be exercised or not. Optional periods, which have not been taken into account in the measurement of the leases, exist mainly for equipment and some transportation vehicles in E&P.
Leases not yet commenced in 2022 but committed amounted to RON 47.69 million (2021: RON 20.32 million).
Right-of-use assets recognized under IFRS 16
Land and
buildings
Plant and machinery
Other fixtures, fittings and equipment
Total
Right-of-use assets as at January 1, 2022
51.89
87.70
261.13
400.72
Additions
17.45
61.10
77.43
155.98
Depreciation
(7.64)
(25.16)
(111.50)
(144.30)
Other movements
(0.09)
-
(1.63)
(1.72)
Right-of-use assets as at December 31, 2022
61.61
123.64
225.43
410.68
Amounts recognized in income statement
2022
2021
Operating result
Short-term lease expenses
2.65
1.47
Low-value lease expenses
0.61
0.47
Variable lease expenses
8.21
4.60
Depreciation expense of right-of-use assets
144.30
126.68
Net financial result
Interest expense on lease liabilities
6.53
5.70
Foreign exchange loss on lease liabilities
0.20
4.18
In addition, OMV Petrom incurred in 2022 short-term lease costs of RON 41.51 million (2021: RON 55.74 million), which were capitalized in the cost of other assets.
Variable lease payments expensed in 2022, in amount of RON 8.21 million (2021: RON 4.60 million), were related to contingent rent mainly for power generators equipment, determined based on quantities.
For other information on lease liability please see Notes 15 and 29 a).
  • 7. INVESTMENTS
As at December 31, 2022, OMV Petrom had investments in the following companies:
Company Name
Field of activity
Share
interest
percent
Cost
Impairment
Net book
value
Subsidiaries 
OMV Petrom Marketing S.R.L.
Fuel distribution
100.00%
1,303.79
-
1,303.79
Petrom Moldova S.R.L.
Fuel distribution
100.00%
122.57
(122.57)
-
OMV Offshore Bulgaria GmbH
Exploration activities
100.00%
95.85
-
95.85
OMV Petrom Georgia LLC
Exploration and production services
100.00%
-
-
-
OMV Petrom E&P Bulgaria S.R.L.
(former OMV Petrom Gas S.R.L.)
Exploration and production services
100.00%
8.77
-
8.77
Petromed Solutions S.R.L.
Medical services
100.00%
3.00
-
3.00
OMV Petrom Aviation S.R.L.
Airport services
99.99%
54.14
(17.27)
36.87
OMV Srbija DOO
Fuel distribution
99.96%
181.92
-
181.92
OMV Bulgaria OOD
Fuel distribution
99.90%
138.02
-
138.02
OMV Petrom Biofuels S.R.L.
Production of bioethanol
75.00%
18.55
-
18.55
Petrom Exploration & Production Limited
Exploration and production services
99.99%
0.91
(0.75)
0.16
Associates
OMV Petrom Global Solutions S.R.L.
Financial, IT and other services
25.00%
7.00
-
7.00
Asociatia Romana pentru Relatia cu Investitorii
Public representation
20.00%
-
-
-
Other investments
Telescaun Tihuta S.A.
Touristic facilities
1.68%
0.01
(0.01)
-
Credit Bank
Other financial services
0.22%
0.32
(0.32)
-
Forte Asigurari - Reasigurari S.A.
Insurance services
0.09%
0.02
(0.02)
-
Total
1,934.87
(140.94)
1,793.93
On January 17, 2022, OMV Petrom S.A. acquired the remaining 0.003% interest in the subsidiary Petromed Solutions S.R.L., reaching 100% ownership in this subsidiary.
On March 28, 2022, OMV Petrom S.A. set up a new subsidiary, OMV Petrom Biofuels S.R.L., wherein OMV Petrom S.A. holds 75% and OMV Downstream GmbH holds 25% of the shares.
On October 27, 2022, four separate legal entities were set up in relation to the partnership agreements signed by OMV Petrom S.A. with Complexul Energetic Oltenia to build four photovoltaic parks, in a 50% - 50% equity interest structure: S. Parc Fotovoltaic Isalnita S.A.; S. Parc Fotovoltaic Rovinari Est S.A.; S. Parc Fotovoltaic Tismana 1 S.A. and S. Solarist Tismana 2 S.A.. The legal entities represent joint operations, accounted for as OMV Petrom’s share of assets, liabilities, income and expenses held or incurred jointly.

As at December 31, 2021 OMV Petrom had investments in the following companies:
Company Name
Field of activity
Share
interest
percent
Cost
Impairment
Net book
value
Subsidiaries 
OMV Petrom Marketing S.R.L.
Fuel distribution
100.00%
1,303.79
-
1,303.79
Petrom Moldova S.R.L.
Fuel distribution
100.00%
122.57
(111.17)
11.40
OMV Offshore Bulgaria GmbH
Exploration activities
100.00%
41.43
-
41.43
OMV Petrom Georgia LLC
Exploration and production services
100.00%
-
-
-
OMV Petrom E&P Bulgaria S.R.L.
(former OMV Petrom Gas S.R.L.)
Gas supply
100.00%
8.65
-
8.65
Petromed Solutions S.R.L.
Medical services
99.99%
3.00
-
3.00
OMV Petrom Aviation S.R.L.
Airport services
99.99%
54.14
(17.43)
36.71
OMV Srbija DOO
Fuel distribution
99.96%
181.92
-
181.92
OMV Bulgaria OOD
Fuel distribution
99.90%
138.02
-
138.02
Petrom Exploration & Production Limited
Exploration and production services
99.99%
0.91
(0.75)
0.16
Associates
OMV Petrom Global Solutions S.R.L.
Financial, IT and other services
25.00%
7.00
-
7.00
Asociatia Romana pentru Relatia cu Investitorii
Public representation
20.00%
-
-
-
Other investments
Telescaun Tihuta S.A.
Touristic facilities
1.68%
0.01
(0.01)
-
Credit Bank
Other financial services
0.22%
0.32
(0.32)
-
Forte Asigurari - Reasigurari S.A.
Insurance services
0.09%
0.02
(0.02)
-
Total
1,861.78
(129.70)
1,732.08
On May 21, 2021, OMV Petrom Georgia LLC was incorporated in Georgia following the signing of a Production Sharing Contract between OMV Petrom S.A. and the State of Georgia in relation to the exploration offshore Block II from Georgia.
On December 15, 2021, OMV Petrom S.A. acquired the remaining 0.01% interest in the subsidiary OMV Petrom Gas S.R.L., reaching the ownership of 100% in this subsidiary. During 2022, OMV Petrom Gas S.R.L. was renamed as OMV Petrom E&P Bulgaria S.R.L., with its main future activity being exploration and production of hydrocarbons.
The details about addresses, equity and profit or loss of the companies in which OMV Petrom holds an interest of at least 20%, except those which do not have activity, are shown in the following table. Amounts are taken from the latest approved financial statements of the subsidiaries and of the associate (for the year ended December 31, 2021).
Company Name
Address
Currency
Equity at
December 31, 2021 (in million currency)
Profit or (loss) for the year ended
December 31, 2021
(in million currency)
Subsidiaries 
OMV Petrom Marketing S.R.L.
22 Coralilor Street, District 1, Bucharest, Romania
RON
2,272.31
501.98
Petrom Moldova S.R.L.
269, Sos Muncesti, Chisinau, 2002, Republic of Moldova
MDL
48.22
(4.33)
OMV Offshore Bulgaria GmbH
Trabrennstrasse 6-8, 1020 Wien, Austria
EUR
(7.06)
(3.48)
OMV Petrom E&P Bulgaria S.R.L. (former OMV Petrom Gas S.R.L.)
22 Coralilor Street, District 1, Bucharest, Romania
RON
83.41
65.20
Petromed Solutions S.R.L.
22 Coralilor Street, District 1, Bucharest, Romania
RON
5.33
1.76
OMV Petrom Aviation S.R.L.
31A Aurel Vlaicu, Otopeni, Ilfov County, Romania
RON
42.38
(3.16)
OMV Bulgaria OOD
2 Donka Ushlinova Str. Garitage park, Office Bld. 4, fl. 1 1766 Sofia, Bulgaria
BGN
149.98
28.77
OMV Srbija DOO
Omladinskih brigada 90a, Belgrade, Serbia
RSD
10,063.58
1,192.53
Associates
OMV Petrom Global Solutions S.R.L.
22 Coralilor Street, District 1, Bucharest, Romania
RON
136.69
24.60
The movements in impairment for investments were as follows:
2022
January 1
129.70
Net allocations/(releases)
11.24
December 31
140.94
  • 8. TRADE RECEIVABLES AND OTHER FINANCIAL ASSETS
    • a) Trade receivables
Trade receivables amount to RON 3,969.99 million as at December 31, 2022 (2021: RON 2,635.69 million), thereof trade receivables measured at fair value amounting to RON 9.04 million (2021: nil).
Credit quality of trade receivables
December 31, 2022
Expected credit loss rate
Gross carrying amount
Expected credit loss
Net carrying amount
Risk class 1
0.13%
17.39
-
17.39
Risk class 2
0.44%
1,492.21
0.18
1,492.03
Risk class 3
1.18%
2,032.31
0.56
2,031.75
Risk class 4
8.52%
278.64
2.63
276.01
Risk class 5
29.54%
157.42
16.31
141.11
Risk class 6
100.00%
75.44
72.78
2.66
Total
4,053.41
92.46
3,960.95
December 31, 2021
Expected credit loss rate
Gross carrying amount
Expected credit loss
Net carrying amount
Risk class 1
0.07%
18.00
-
18.00
Risk class 2
0.24%
1,708.91
0.05
1,708.86
Risk class 3
1.21%
856.20
1.70
854.50
Risk class 4
10.37%
38.05
0.53
37.52
Risk class 5
10.37%
17.26
0.48
16.78
Risk class 6
100.00%
70.45
70.42
0.03
Total
2,708.87
73.18
2,635.69
In 2022 the previous Risk class 4 was split in two different risk classes (Risk classes 4 and 5) in order to provide a more transparent view on the credit risk position of the Company. Former Risk class 5 became the new Risk class 6. The figures from 2021 were updated accordingly.
The amounts in the above tables do not include trade receivables which are measured at fair value.
The movements in impairment of trade receivables are as follows:
2022
2021
January 1
73.18
68.90
Amounts written off
(1.12)
(0.14)
Net remeasurement of expected credit losses
20.40
4.42
December 31
92.46
73.18
There was no impairment for trade receivables with related parties (see Note 28) as of December 31, 2022 and December 31, 2021.
b) Other financial assets (net of impairment)
Liquidity term
December 31, 2022
less than 1 year
over 1 year
Expenditure recoverable from Romanian State
1,614.37
-
1,614.37
Derivative financial assets (Note 30)
1,502.05
1,144.80
357.25
Loans to subsidiaries (Note 28)
436.26
204.57
231.69
Other financial assets
1,300.77
1,225.18
75.59
Total
4,853.45
2,574.55
2,278.90
Liquidity term
December 31, 2021
less than 1 year
over 1 year
Expenditure recoverable from Romanian State
1,841.21
80.18
1,761.03
Derivative financial assets (Note 30)
1,556.04
1,393.94
162.10
Loans to subsidiaries (Note 28)
311.79
0.20
311.59
Other financial assets
328.39
256.65
71.74
Total
4,037.43
1,730.97
2,306.46
Expenditure recoverable from Romanian State
As part of the privatization agreement, OMV Petrom S.A. is entitled to reimbursement by the Romanian State of part of decommissioning and environmental costs incurred to restore and clean up areas pertaining to activities prior to privatization in 2004. Consequently, OMV Petrom S.A. has recorded as receivable from the Romanian State the estimated decommissioning obligations having a net present value of RON 1,573.54 million as at December 31, 2022 (2021: RON 1,740.45 million) and the environmental liabilities with net present value of RON 40.83 million (2021: RON 100.76 million), as these were existing prior to privatization of OMV Petrom S.A.
On March 7, 2017, OMV AG, as party in the privatization agreement, initiated arbitration proceedings against the Romanian Ministry of Environment, in accordance with the International Chamber of Commerce Rules (“ICC”), regarding certain claims unpaid by the Ministry of Environment for costs incurred by OMV Petrom with well decommissioning and environmental remediation works, amounting to RON 287.66 million. On July 9, 2020, the Arbitral Tribunal issued the Final Award on the arbitration and requested the Ministry of Environment to reimburse to OMV Petrom S.A. the amount of RON 287.62 million and related interest. The amount of RON 287.62 million representing the principal and the amount of RON 82.34 million representing default interest were collected in 2021 and 2022, respectively.
On October 2, 2020, OMV AG, as party in the privatization agreement, initiated arbitration proceedings against the Romanian Ministry of Environment, in accordance with ICC rules regarding certain claims unpaid by the Ministry of Environment in relation to well decommissioning and environmental remediation works amounting to RON 155.73 million. On August 30, 2022, the Arbitral Tribunal issued the Final Award on the arbitration and requested the Ministry of Environment to reimburse to OMV Petrom S.A. the amount of RON 155.52 million and related interest. In October 2022, the Ministry of Environment challenged the award in front of Paris Court of Appeal, procedure which is ongoing as of December 31, 2022.
Furthermore, towards the end of 2022, OMV AG, as party in the privatization agreement, initiated two other arbitration proceedings against the Romanian Ministry of Environment, in accordance with the ICC Rules, regarding certain claims unpaid by the Ministry of Environment in relation to well decommissioning and environmental remediation works amounting to RON 231.37 million. As of December 31, 2022, the arbitration procedure is ongoing.
Derivative financial assets
As of December 31, 2022 and December 31, 2021, derivative financial assets are mainly related to unrealized power forward contracts.
Other financial assets
“Other financial assets” line in 2022 is mainly related to cash guarantees concluded for transactions with energy products.
Credit quality other financial assets at amortized cost – gross carrying amount
December 31, 2022
Expected credit loss rate
12-month ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Total
Risk class 1
0.13%
50.45
-
-
50.45
Risk class 2
0.44%
2,702.71
-
42.44
2,745.15
Risk class 3
1.18%
129.39
-
-
129.39
Risk class 4
8.52%
19.05
-
-
19.05
Risk class 5
29.54%
26.57
-
-
26.57
Risk class 6
100.00%
-
-
494.46
494.46
Total
2,928.17
-
536.90
3,465.07
For risk class 2 in 2022, the gross carrying amount for “12-month ECL” included an amount of RON 1,620.64 million and for “Lifetime ECL credit impaired” included an amount of RON 42.44 million, related to expenditure recoverable from Romanian State, which are outside the scope of IFRS 9.
December 31, 2021
Expected credit loss rate
12-month ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Total
Risk class 1
0.07%
108.73
-
-
108.73
Risk class 2
0.24%
1,899.86
-
47.80
1,947.66
Risk class 3
1.21%
120.43
-
-
120.43
Risk class 4
10.37%
24.25
-
-
24.25
Risk class 5
10.37%
26.52
-
-
26.52
Risk class 6
100.00%
-
-
498.58
498.58
Total
2,179.79
-
546.38
2,726.17
For risk class 2 in 2021, the gross carrying amount for “12-month ECL” included an amount of RON 1,848.39 million and for “Lifetime ECL credit impaired” included an amount of RON 47.80 million, related to expenditure recoverable from Romanian State, which are outside the scope of IFRS 9.
Credit quality other financial assets at amortized cost – expected credit loss
December 31, 2022
Expected credit loss rate
12-month ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Total
Risk class 1
0.13%
-
-
-
-
Risk class 2
0.44%
8.42
-
42.44
50.86
Risk class 3
1.18%
0.35
-
-
0.35
Risk class 4
8.52%
0.73
-
-
0.73
Risk class 5
29.54%
3.53
-
-
3.53
Risk class 6
100.00%
-
-
494.46
494.46
Total
13.03
-
536.90
549.93
For risk class 2 in 2022, the expected credit loss for “12-month ECL” included an amount of RON 6.27 million and for “Lifetime ECL credit impaired” included an amount of RON 42.44 million, related to expenditure recoverable from the Romanian State, which are outside the scope of IFRS 9.
December 31, 2021
Expected credit loss rate
12-month ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Total
Risk class 1
0.07%
-
-
-
-
Risk class 2
0.24%
7.24
-
47.80
55.04
Risk class 3
1.21%
0.58
-
-
0.58
Risk class 4
10.37%
1.13
-
-
1.13
Risk class 5
10.37%
1.24
-
-
1.24
Risk class 6
100.00%
-
-
498.58
498.58
Total
10.19
-
546.38
556.57
For risk class 2 in 2021, the expected credit loss for “12-month ECL” included an amount of RON 7.18 million and for “Lifetime ECL credit impaired” included an amount of RON 47.80 million, related to expenditure recoverable from the Romanian State, which are outside the scope of IFRS 9.
The amounts in the above tables do not include derivative financial assets as these are measured at fair value and neither loans to subsidiaries which are disclosed separately in Note 28.
The movements in impairment of other financial assets at amortized cost were as follows:
12-month ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Total
January 1, 2022
10.19
-
546.38
556.57
Amounts written off
-
-
(22.63)
(22.63)
Net remeasurement of expected credit losses
2.84
-
13.15
15.99
December 31, 2022
13.03
-
536.90
549.93
12-month ECL
Lifetime ECL not credit impaired
Lifetime ECL credit impaired
Total
January 1, 2021
5.55
-
540.37
545.92
Amounts written off
-
-
(11.93)
(11.93)
Net remeasurement of expected credit losses
4.64
-
17.94
22.58
December 31, 2021
10.19
-
546.38
556.57
  • 9. OTHER ASSETS
The carrying value of other assets was as follows:
Liquidity term
December 31, 2022
less than 1 year
over 1 year
Receivable from taxes
218.42
42.02
176.40
Advance payments on fixed assets
121.60
54.17
67.43
Prepaid expenses and deferred charges
65.85
33.31
32.54
Rental and lease prepayments
48.47
13.83
34.64
Other non-financial assets
766.84
766.84
-
Total
1,221.18
910.17
311.01
Liquidity term
December 31, 2021
less than 1 year
over 1 year
Receivable from taxes
176.40
-
176.40
Advance payments on fixed assets
179.82
112.39
67.43
Prepaid expenses and deferred charges
64.87
21.92
42.95
Rental and lease prepayments
47.43
12.38
35.05
Other non-financial assets
71.06
71.06
-
Total
539.58
217.75
321.83
“Other non-financial assets” line in 2022 mainly includes receivables from Romanian authorities in relation to the compensations for the natural gas sales at capped prices to clients allocated to the Company as Supplier of Last Resort and for electricity sales at capped prices, as well as receivables in relation with the subsidies supporting half of the RON 0.50 per liter voluntary price reduction for the sale of diesel and gasoline. These measures were introduced via several Government Emergency Ordinances in order to mitigate the consequences of the energy crisis.
  • 10. INVENTORIES
December 31, 2022
December 31, 2021
Crude oil
598.20
476.57
Natural gas
667.70
83.38
Other materials
401.68
304.76
Work in progress
197.54
136.48
Finished products
1,376.29
808.75
Total
3,241.41
1,809.94
The cost of materials and goods consumed during 2022 (whether used in production or re-sold) is RON 29,336.00 million (2021: RON 9,640.28 million) and includes also the cost related to CO2 emissions amounting to RON 770.02 million (2021: RON 370.69 million) and the unrealized fair value losses from CO2 forward contracts of RON 152.96 million (2021: unrealized gains of RON 178.02 million).
As at December 31, 2022 and 2021 there were no inventories pledged as security for liabilities.
  • 11. ASSETS HELD FOR SALE
December 31, 2022
December 31, 2021
Land and buildings
14.83
14.83
Assets held for sale
14.83
14.83
As at December 31, 2022 and 2021, assets held for sale refer to plots of land from Corporate segment.
  • 12. EQUITY
Share capital
As at December 31, 2022, the share capital of OMV Petrom S.A. consists of 62,311,667,058 fully paid shares (2021: 56,644,108,335 fully paid shares) with a total nominal value of RON 6,231.17 million (2021: RON 5,664.41 million).
On November 3, 2022, OMV Petrom S.A. completed the share capital increase by in-kind and cash contribution, with the value of RON 566.76 million, from RON 5,664.41 million to RON 6,231.17 million, through the issue of a number of 5,667,558,723 new ordinary nominative shares, in dematerialized form, each share having a nominal value of RON 0.1, as follows:
  • (i) 1,206,602,392 new shares, with a total value of RON 120.66 million, established according to valuation report issued by an independent expert valuator, representing the in-kind contribution of the Romanian State, through the Ministry of Energy, as a result of obtaining land ownership certificates;
  • (ii) 4,460,956,331 new shares (including underlying 1,612,500 new shares represented by 10,750 new global depositary receipts), with a total value of RON 446.10 million, subscribed in cash, within the exercise of the preference rights, by the shareholders of OMV Petrom SA, other than the Romanian State.
The newly issued shares and the new share capital of OMV Petrom S.A. were registered with the Trade Register Office on 25 October 2022, with the Romanian Financial Supervisory Authority on 1 November 2022 and with the Romanian Central Depositary on 3 November 2022.
Revenue reserves
Revenue reserves include retained earnings, as well as other non-distributable reserves (legal and geological quota facility reserves, other reserves from fiscal facilities).
Geological quota is amounting to RON 5,062.84 million as at December 31, 2022 and 2021. Until December 31, 2006, OMV Petrom S.A. benefited from geological quota facility whereby it could charge up to 35% of the market value of the volume of oil and gas extracted during the year. This facility was recognized directly in reserves. This quota was restricted to investment purposes, it is not distributable and it was non-taxable.
As at December 31, 2022, legal reserves are amounting to RON 1,246.23 million (2021: RON 1,132.88 million). OMV Petrom S.A. sets its legal reserve in accordance with the provisions of the Romanian Companies Law, which requires that minimum 5% of the annual accounting profit before tax is transferred to “legal reserve” until the balance of this reserve reaches 20% of the share capital of the Company.
Other reserves from fiscal facilities are amounting to RON 623.94 million (2021: RON 560.65 million). The amount of RON 63.29 million was allocated to other reserves, representing fiscal facilities from reinvested profit in the year 2022 (2021: RON 60.18 million).
At the Annual General Meeting of Shareholders held on April 27, 2022, the shareholders of OMV Petrom S.A. approved the distribution of dividends for the financial year 2021 for the gross amount of RON 1,931.56 million (gross base dividend per share of RON 0.0341).
At the Ordinary General Meeting of Shareholders held on July 26, 2022, the shareholders of OMV Petrom S.A. approved the
distribution of special dividends for the gross amount of RON 2,548.98 million (gross special dividend per share of RON 0.0450).
Total dividends distributed in 2022 amounted to RON 4,480.53 million (gross total dividend per share of RON 0.0791).
On March 16, 2023, the Supervisory Board endorsed the management’s proposal to distribute gross dividends for financial year 2022 of RON 2,336.68 million (gross base dividend per share of RON 0.0375). The dividend proposal is subject to further approval by the Ordinary General Meeting of Shareholders, on April 26, 2023.
Cash flow hedge reserve
In order to protect the Company’s result and cash flows against commodity price volatility, OMV Petrom uses derivative instruments for both hedging selected product sales and reducing exposure to price risks on inventory fluctuations. Crude oil and product swaps are used to hedge the refining margin (crack spread) which is the difference between product prices and crude oil prices.
Certain financial instruments were accounted as cash flow hedges, with the effective part of the change in value of the derivative being accounted for in other comprehensive income. The cumulative unrealized loss recognized in other comprehensive income, net of tax, is in amount RON 1.01 million as at December 31, 2022 (2021: unrealized loss of RON 18.03 million). The hedged item (underlying transaction) can affect either profit or loss or balance sheet; when this happens, the amounts previously accounted for in other comprehensive income are recycled to income statement or transferred to the carrying amount of the hedged item, respectively. For more details on hedges please refer to Note 33.
Other reserves
As at December 31, 2021, other reserves contained land for which land ownership certificates were obtained from the Romanian State and that was subject to the share capital increase carried out during 2022.
Treasury shares
The total number of own shares held by OMV Petrom S.A. as of December 31, 2022 amounted to 204,776 (2021: 204,776).
  • 13. PROVISIONS
Pensions and similar obligations
Decommissioning and restoration
Other provisions
Total
January 1, 2022
163.28
6,233.57
842.53
7,239.38
thereof short-term
-
201.54
181.88
383.42
thereof long-term
163.28
6,032.03
660.65
6,855.96
Used
(10.92)
(329.34)
(83.89)
(424.15)
Net allocations/(releases)
(1.85)
1,009.14
1,005.68
2,012.97
December 31, 2022
150.51
6,913.37
1,764.32
8,828.20
thereof short-term
-
212.79
1,097.14
1,309.93
thereof long-term
150.51
6,700.58
667.18
7,518.27
Provisions for pensions and similar obligations
Employees of the Company are entitled to receive retirement benefits on reaching normal retirement age. The entitlements depend on years of service and final compensation levels. Retirement benefits obligation as of December 31, 2022 amounts to RON 105.23 million (2021: RON 107.29 million). In addition, employees receive other benefits consisting in death and coffin benefits. Other benefits obligation as of December 31, 2022 amounts to RON 45.28 million (2021: RON 55.99 million).
Provisions have been set up based on actuarial calculations performed by qualified actuaries using the following parameters: a discount rate of 8.00% (2021: 5.22%) and an estimated average yearly salary increase of 4.69% (2021: 3.00%).
Present value of the pensions and similar obligations
2022
2021
Present value of obligations as of January 1
163.28
205.40
Current service cost
5.53
7.08
Past service cost
-
(13.94)
Interest cost
8.52
6.87
Benefits paid
(10.92)
(13.39)
Remeasurements for the year
(15.90)
(28.75)
Present value of obligations as of December 31
150.51
163.28
In 2021 past service cost is related mainly to outsourcing and restructuring of activities in Exploration and Production.
Sensitivities changes in absolute terms
Discount rate
Salary increase rate
+0.50%
-0.50%
+0.25%
-0.25%
Pensions and other similar obligations increase/ (decrease)
(6.10)
6.52
2.52
(2.44)
Maturity profile
Maturity profile
Duration
1-5 years
6-10 years
>10 years
in years
Retirement benefits
29.14
37.59
38.51
9.86
Provisions for decommissioning and restoration
Changes in provisions for decommissioning and restoration are shown in the table below. In the event of changes in estimated restoration costs, the effect of the change in present value is recognized in the period concerned. If the value increases, the increase is depreciated over the remaining useful life of the asset, and if it decreases, the decrease is deducted from capitalized asset value or recognized in the income statement if it exceeds the carrying amount of the related asset. The net discount rate applied for calculating the decommissioning and restoration costs at December 31, 2022 was 3.79% (2021: 2.41% for onshore and 5.22% for offshore). A decrease of 1 percentage point in the real interest rates used to calculate the decommissioning and restoration provisions would lead to an additional provision of RON 871 million, while in an opposite case the provision would decrease by RON 743 million.
In relation to part of the Company’s decommissioning and restoration obligations, there is a corresponding receivable from the Romanian State, as presented in Note 8.
Revisions in estimates for decommissioning and restoration provisions arise from the yearly reassessment of the unit cost, the number of wells and other applicable items, as well as the expected timing of the decommissioning and restoration and revision of estimated net discount rates.
Details on the decommissioning and restoration obligations are as follows:
2022
2021
January 1
6,233.57
7,511.13
Revisions in estimates
587.81
(1,205.78)
Unwinding effect
421.33
251.72
Used in current year
(329.34)
(323.50)
December 31
6,913.37
6,233.57
The revisions in estimates impact the assets subject to decommissioning, the income statement or the related receivable from the Romanian State. The unwinding effect is included in the income statement under the interest expenses line (Note 23), net of the unwinding effect on the related receivable from the Romanian State. The effect of changes in the net discount rate or timing of the receivables from the Romanian State (which are additional to the changes in the net discount rate or timing of the decommissioning costs) is included in the income statement under interest expenses or interest income.
Impact from revision in estimates in 2022 was driven mainly by the higher estimated unit costs, partially offset by higher net discounting rate.
Impact from revision in estimates in 2021 was driven mainly by the higher net discounting rates.
Other provisions
December 31, 2022
Total
less than 1 year
over 1 year
Environmental provision
403.94
51.39
352.55
Other personnel provisions
98.79
93.27
5.52
Provisions for litigations
62.73
3.14
59.59
Other provisions
1,198.86
949.34
249.52
Total
1,764.32
1,097.14
667.18
December 31, 2021
Total
less than 1 year
over 1 year
Environmental provision
386.49
46.73
339.76
Other personnel provisions
58.50
53.11
5.39
Provisions for litigations
81.82
3.01
78.81
Other provisions
315.72
79.03
236.69
Total
842.53
181.88
660.65
Environmental provisions
The environmental provisions were estimated by the management based on the list of environment related projects that must be completed by the Company. Provisions recorded as at December 31, 2022 and 2021 represent the best estimate of the Company’s experts for environmental matters. Environmental provisions are computed using mainly a net discount rate of 3.79% (2021: 2.41%).
The Company recorded certain environmental liabilities against receivable from the Romanian State, as these obligations existed prior to privatization (as further explained in Note 8b) “Expenditure recoverable from Romanian State”).
Provisions for litigations
The Company monitors all litigations instigated against it and assesses the likelihood of losses and the related costs using in house lawyers and external legal advisors. The Company has assessed the potential liabilities with respect to ongoing cases and recorded its best estimate of likely cash outflows.
Other provisions
“Other provisions” line in 2022 is mainly in connection with other risks assessed by the Company in the area of gas and power taxation.
Emissions certificates
Directive 2003/87/EC of the European Parliament and of the European Council established a greenhouse gas emissions trading scheme, requiring member states to draw up national plans to allocate emissions certificates. Romania was admitted to the scheme in January 2007, when it joined the EU.
Under this scheme, OMV Petrom S.A. is entitled to an allocation of 544,450 emission certificates for the year 2022 (2021: 561,041 emission certificates), received during the year according to article 10a) of the Directive.
During 2022 the Company had net purchases of 2,549,711 emissions certificates (2021: 2,385,751 emissions certificates).
A shortfall in emission certificates is provided for. As of December 31, 2022 and 2021, the Company was not short of certificates.
  • 14. INTEREST-BEARING DEBTS
As at December 31, 2022 and December 31, 2021, OMV Petrom S.A. had the following loans:
Lender
December 31, 2022
December 31, 2021
Interest bearing debts short-term
European Investment Bank (a)
16.49
94.25
Cash pooling (b)
1,865.30
1,772.26
Accrued interest and other
9.89
4.58
Prepayments in relation with loan amounts drawn
-
(0.05)
Total interest bearing debts short-term
1,891.68
1,871.04
Interest-bearing debts long-term
European Investment Bank (a)
-
16.49
Total interest-bearing debts long-term
-
16.49
thereof maturing after more than 1 year but not later than 5 years
-
16.49
Total interest-bearing debts
1,891.68
1,887.53
(a) For the construction of the Brazi Power Plant, OMV Petrom S.A. concluded an unsecured loan agreement for an amount of EUR 200.00 million with European Investment Bank. The agreement was signed on May 8, 2009 and the final maturity date is June 15, 2023. The outstanding amount as at December 31, 2022 was RON 16.49 million (equivalent of EUR 3.33 million) (2021: RON 110.74 million, equivalent of EUR 22.38 million).
(b) Cash pooling agreements with valability until April 18, 2026, are signed between OMV Petrom S.A. and the following companies:
(i)OMV Petrom Marketing S.R.L. for an aggregated amount of RON 2,400.00 million. The amount drawn as at December 31, 2022 amounts to RON 1,725.18 million (2021: RON1,574.99 million).
(ii)OMV Petrom Global Solutions S.R.L. for an aggregated amount of RON 250.00 million. The amount drawn as at December 31, 2022 amounts to RON 120.63 million (2021: RON 160.08 million).
(iii)OMV Petrom E&P Bulgaria S.R.L. for an aggregated amount of RON 150.00 million. The amount drawn as at December 31, 2022 amounts to RON 8.82 million (2021: RON 23.80 million).
(iv)Petromed Solutions S.R.L. for an aggregated amount of RON 15.00 million. The amount drawn as at December 31, 2022 amounts to RON 8.13 million (2021: RON 8.77 million).
(v)OMV Petrom Aviation S.R.L. for an aggregated amount of RON 25.00 million. The amount drawn as at December 31, 2022 amounts to RON 2.54 million (2021: RON 4.62 million).
The Company had several credit facilities in place as at December 31, 2022 and at December 31, 2021 as follows:
(c) An unsecured credit facility granted by Raiffeisen Bank S.A. up to EUR 80.00 million (equivalent of RON 395.79 million) consisting in two subfacilities: subfacility A with maturity date prolonged to December 31, 2023 (for an amount of EUR 20.00 million, equivalent of RON 98.95 million) and subfacility B with maturity date prolonged to December 31, 2025 (for an amount of EUR 60.00 million, equivalent of RON 296.84 million). Maturities for both subfacilities are subject to possibility of further automatic extensions for successive periods of 12 months. Subfacility A can be used only in RON and only by OMV Petrom S.A. as overdraft credit line. Subfacility B can be used in different currencies by OMV Petrom S.A., OMV Petrom Marketing S.R.L., OMV Petrom E&P Bulgaria S.R.L. and by OMV Petrom Aviation S.R.L. only for the issuance of letters of credit and/or issuance of letters of bank guarantee. As at December 31, 2022 and 2021 no withdrawings were made under the overdraft credit line.
(d) An unsecured facility contracted by OMV Petrom S.A. from ING Bank N.V., that can be used in USD, RON or EUR, up to the maximum amount of EUR 100.00 million (equivalent of RON 494.74 million), for issuance of letters of bank guarantee and as overdraft for working capital financing. The maturity of the credit facility is November 9, 2026. On January 31, 2023 the maximum amount of the credit facility was increased to EUR 200 million ((equivalent of RON 989.48 million) and the validity was changed to “until further notice”. No drawings under the overdraft were made as at December 31, 2022 and 2021.
(e) An uncommitted and unsecured credit facility contracted by OMV Petrom S.A. from BRD – Groupe Société Générale S.A. with maximum limit of EUR 90.00 million (equivalent of RON 445.27 million) that can be used in RON, with maturity date prolonged until April 30, 2023. The facility is designated to finance OMV Petrom’s current activity and for issuance of bank guarantees, opening letters of credit and similar. The cash portion of the credit facility was not used as at December 31, 2022 and 2021. The credit facility is expected to be prolonged.
(f) A committed and unsecured credit facility contracted by OMV Petrom S.A. from Banca Comercială Română S.A., that can be used in USD, EUR or RON, up to a maximum amount of EUR 250.00 million (equivalent of RON 1,236.85 million), for issuance of letters of bank guarantee and similar and as overdraft for working capital financing. As at December 31, 2022, the maturity for letters of bank guarantee and similar was January 13, 2024 and for overdraft the maturity was January 11, 2023, with the possibility to further extend the maturity for additional successive periods, final maturity being January 13, 2024. On January 11, 2023, the maximum amount of the credit facility was increased to EUR 270.00 million (equivalent of RON 1,335.80 million) and the validity was changed to “until further notice”. The cash portion of the credit facility was not used as at December 31, 2022 and 2021.
OMV Petrom S.A. has signed also facilities with several banks for issuing letters of guarantee and letters of credit, as follows:
(g) An unsecured facility agreement was signed by OMV Petrom S.A. with BNP Paribas Fortis S.A/N.V– Bucharest branch – for up to EUR 100.00 million (equivalent of RON 494.74 million), to be utilized only for issuance of letters of bank guarantee and letters of credit, with maturity date prolonged to July 15, 2023. Maturity is subject to possibility of further automatic extensions for successive periods of 12 months, but not longer than July 15, 2028.
(h) An unsecured credit facility received by OMV Petrom S.A. from Banca Transilvania S.A., up to EUR 25.00 million (equivalent of RON 123.69 million), to be utilized only for issuance of letters of bank guarantee, with maturity until September 17, 2025.
(i) An unsecured credit facility received by OMV Petrom S.A. from Unicredit Bank S.A., up to EUR 130.00 million (equivalent of RON 643.16 million), to be utilized only for issuance of letters of bank guarantee, with maturity until September 7, 2025.
(j) An unsecured credit facility received by OMV Petrom S.A. from Banca Comercială Română S.A., up to RON 22.00 million to be utilized for issuance of guarantee instruments in favour of Romanian authorities generally in relationship with customs taxes and excises, with open-end maturity.
As at December 31, 2022 and 2021, OMV Petrom S.A. is in compliance with all financial covenants stipulated by the loan agreements.
Please refer to Note ‎33 for details regarding interest rate risk of interest-bearing debts.
  • 15. OTHER FINANCIAL LIABILITIES
December 31, 2022
less than 1 year
over 1 year
Derivative financial liabilities (Note 30)
652.00
648.25
3.75
Other financial liabilities
400.89
391.80
9.09
Total
1,052.89
1,040.05
12.84
December 31, 2021
less than 1 year
over 1 year
Derivative financial liabilities (Note 30)
2,406.76
2,356.53
50.23
Other financial liabilities
308.26
301.24
7.02
Total
2,715.02
2,657.77
57.25
Derivative financial liabilities
As at December 31, 2022 and 2021, derivative financial liabilities are mainly related to unrealized power forward contracts. The significant decrease during 2022 is mainly driven by the realization of power forward sales contracts open as of December 31, 2021.
Other financial liabilities
As of December 31, 2022, “Other financial liabilities” line includes, among others, amounts related to supplier finance programs, cash guarantees received, dividends payable and amounts due to employees in relation to salaries.
As of December 31, 2021, “Other financial liabilities” line includes amounts payable related to realized swaps on crude oil and petroleum products and amounts due to employees in relation to salaries.
Maturity profile of financial liabilities
The tables below summarize the maturity profile of the Company´s financial liabilities based on contractual undiscounted cash flows (i.e. also including future finance charges):
< 1 year
1-5 years
> 5 years
Total
December 31, 2022
Interest-bearing debts
1,891.79
-
-
1,891.79
Lease liabilities
147.35
238.70
89.09
475.14
Trade payables
3,460.39
-
-
3,460.39
Derivative financial liabilities
648.25
3.75
-
652.00
Other financial liabilities
391.80
9.09
-
400.89
Total
6,539.58
251.54
89.09
6,880.21
< 1 year
1-5 years
> 5 years
Total
December 31, 2021
Interest-bearing debts
1,871.90
16.60
-
1,888.50
Lease liabilities
142.99
249.24
71.67
463.90
Trade payables
2,500.80
-
-
2,500.80
Derivative financial liabilities
2,356.53
50.23
-
2,406.76
Other financial liabilities
301.24
7.02
-
308.26
Total
7,173.46
323.09
71.67
7,568.22
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.
OMV Petrom participates in several supplier finance programs under which its suppliers may elect to receive early payment of their invoice from a bank by factoring their receivable from the Company to the bank. Under the afore mentioned agreements, the bank agrees to pay the invoices to a supplier participating in the program and receives settlement from OMV Petrom later. The principal purpose of those programs is to increase for OMV Petrom the payment term of the invoices and to allow the consenting suppliers to cash in their receivables before their maturity. These liabilities are presented within Other financial liabilities until payment.
  • 16. OTHER LIABILITIES
December 31, 2022
less than 1 year
over 1 year
Tax liabilities
902.14
902.14
-
Social security
38.36
38.36
-
Contract liabilities
121.03
121.03
-
Deferred income
76.84
25.99
50.85
Other liabilities
45.28
45.28
-
Total
1,183.65
1,132.80
50.85
December 31, 2021
less than 1 year
over 1 year
Tax liabilities
886.02
886.02
-
Social security
36.07
36.07
-
Contract liabilities
56.75
56.75
-
Deferred income
59.85
7.84
52.01
Other liabilities
36.17
36.17
-
Total
1,074.86
1,022.85
52.01
Contract liabilities
Contract liabilities include mainly advance payments received from customers for future deliveries of goods or services.
The changes in contract liabilities were as follows:
2022
2021
January 1
56.75
54.64
Revenue recognized that was included in the contract liability balance
at the beginning of the year
(46.93)
(54.38)
Increases due to cash received, excluding amounts recognized as
revenue during the year
111.21
56.49
December 31
121.03
56.75
  • 17. DEFERRED TAX
December 31, 2022
Deferred tax
assets total
Deferred tax
assets not
recognized
Deferred tax
assets
recognized
Deferred tax
liabilities
Tangible and intangible assets
579.81
-
579.81
-
Inventories
16.87
-
16.87
-
Receivables and other assets
216.69
(39.86)
176.83
-
Provisions for pensions and
similar obligations
29.64
-
29.64
5.56
Other provisions
1,156.81
-
1,156.81
-
Liabilities
8.59
-
8.59
-
Total
2,008.41
(39.86)
1,968.55
5.56
Netting (same tax jurisdiction/country)
-
-
(5.56)
(5.56)
Deferred tax, net
-
-
1,962.99
-
December 31, 2021
Deferred tax
assets total
Deferred tax
assets not
recognized
Deferred tax
assets
recognized
Deferred tax
liabilities
Tangible and intangible assets
431.86
-
431.86
-
Inventories
15.21
-
15.21
-
Receivables and other assets
165.50
(38.48)
127.02
3.38
Provisions for pensions and
similar obligations
31.05
-
31.05
4.91
Other provisions
853.38
-
853.38
-
Liabilities
13.40
-
13.40
-
Total
1,510.40
(38.48)
1,471.92
8.29
Netting (same tax jurisdiction/country)
-
-
(8.29)
(8.29)
Deferred tax, net
-
-
1,463.63
-
  • 18. SALES REVENUES
2022
2021
Revenues from contracts with customers
46,392.95
21,039.08
Revenues from other sources
9,444.74
446.96
Total sales revenues
55,837.69
21,486.04
Revenues from contracts with customers
In the following tables, revenues recorded in 2022 and 2021 are disaggregated by products and reportable segments.
2022
Exploration and Production
Refining and Marketing
Gas and
Power
Corporate
and Other
Total
Crude Oil, NGL, condensates
-
300.09
-
-
300.09
Natural gas, LNG and power
10.98
5.78
20,507.27
3.35
20,527.38
Fuels and heating oil
-
22,856.94
-
-
22,856.94
Other goods and services*
41.63
2,638.22
10.93
17.76
2,708.54
Total
52.61
25,801.03
20,518.20
21.11
46,392.95
2021
Exploration and Production
Refining and Marketing
Gas and
Power
Corporate
and Other
Total
Crude Oil, NGL, condensates
-
58.53
-
-
58.53
Natural gas, LNG and power
5.48
3.73
6,256.88
2.78
6,268.87
Fuels and heating oil
-
12,554.97
-
-
12,554.97
Other goods and services*
41.51
2,036.98
62.40
15.82
2,156.71
Total
46.99
14,654.21
6,319.28
18.60
21,039.08
*) Mainly in Refining and Marketing related to other petroleum products not included in the categories above.
Revenues from other sources
In 2022, revenues from other sources include mainly power sales within the scope of IFRS 9 Financial Instruments (after net realized losses from power forward contracts) amounting to RON 7,659.73 million (2021: RON 1,397.63 million) and net unrealized gains from fair valuation of power forward contracts amounting to RON 1,837.98 million (2021: net unrealized losses of RON 1,073.93 million).
OMV Petrom acts as a lessor for lease arrangements assessed as operating leases mainly for land, buildings and equipment. Rental and lease revenues in 2022 amount to RON 33.03 million (2021: RON 35.04 million).
  • 19. OTHER OPERATING INCOME
2022
2021
Foreign exchange gains from operating activities
94.43
5.65
Gains on disposal of businesses and non-current assets
24.08
70.32
Other operating income
1,015.06
96.67
Total
1,133.57
172.64
“Other operating income” line in 2022 includes mainly income from Romanian authorities in relation to compensations for the natural gas sales at capped prices to clients allocated to the Company as Supplier of Last Resort and for electricity sales at capped prices, as well as in relation to the subsidies supporting half of the RON 0.50 per liter voluntary price reduction for the sale of diesel and gasoline. These measures were introduced via several Government Emergency Ordinances in order to mitigate the consequences of the energy crisis.
  • 20. NET INCOME FROM CONSOLIDATED SUBSIDIARIES AND INVESTMENTS IN ASSOCIATES
2022
2021
Dividends from subsidiaries and associates
696.68
369.15
Net release/(set up) of impairment related to investments in subsidiaries
(11.25)
(14.64)
Total
685.43
354.51
  • 21. OTHER OPERATING EXPENSES
2022
2021
Foreign exchange losses from operating activities
116.12
18.20
Losses on disposal of businesses and non-current assets
2.96
3.37
Other operating expenses
136.61
217.57
Total
255.69
239.14
“Other operating expenses” line includes an amount RON 14.51 million (2021: RON 68.21 million) representing restructuring expenses and an amount of RON 37.89 million (2021: RON 20.46 million) representing costs with digitalization initiatives.
  • 22. COST INFORMATION
For the years ended December 31, 2022 and December 31, 2021 the income statement includes the following personnel expenses:
2022
2021
Wages and salaries
1,315.70
1,298.26
Other personnel expenses
227.48
202.76
Total personnel expenses
1,543.18
1,501.02
Depreciation, amortization and impairment losses, net of write-ups of intangible assets and property, plant and equipment, consisted of:
2022
2021
Depreciation and amortization
2,600.30
2,751.24
Impairment intangible assets and property, plant and equipment
2,349.85
533.75
Write-ups intangible assets and property, plant and equipment
(48.32)
(2.18)
Total depreciation, amortization and net impairment
4,901.83
3,282.81
Net impairment losses booked during the year ended December 31, 2022 for intangible assets and property, plant and equipment were related mostly to Exploration and Production segment in amount of RON 2,276.43 million, reflecting mainly impairment at CGU level as described in Note 2, write-offs of exploration intangibles, unsuccessful workovers and obsolete or replaced assets. Net impairments in Refining and Marketing segment were in amount of RON 22.86 million, in Gas and Power segment in amount of RON 2.23 million and in Corporate and Other segment in amount of RON 0.01 million.
Net impairment losses booked during the year ended December 31, 2021 for intangible assets and property, plant and equipment (including those classified as held for sale) were related mostly to Exploration and Production segment in amount of RON 529.38 million, reflecting mainly write-offs of exploration intangibles, unsuccessful workovers and obsolete or replaced assets. Net impairments in Refining and Marketing segment were in amount of RON 1.69 million and in Gas and Power segment in amount of RON 0.50 million.
In the income statement for the year ended December 31, 2022 net impairments are included under depreciation, amortization, impairments and write-ups in amount of RON 2,245.80 million (2021: RON 430.77 million) and under exploration expenses in amount of RON 55.73 million (2021: RON 100.80 million).
For the year ended December 31, 2022, the income statement includes increased “Production and operating expenses”, mainly triggered by power overtaxation introduced in 2022.
  • 23. INTEREST INCOME AND INTEREST EXPENSES
2022
2021
Interest income
Interest income related to subsidiaries
6.51
7.45
Interest income from receivables and other
34.96
17.64
Interest income from short term bank deposits
709.02
108.76
Unwinding income for other financial assets and positive effect of changes
in discount rate and timing for Romanian State receivable
18.60
26.18
Total interest income
769.09
160.03
Interest expenses
Interest expenses
(108.07)
(51.49)
Unwinding expenses for retirement benefits provision
(8.52)
(6.87)
Unwinding expenses for decommissioning provision, net of
the unwinding income for related Romanian State receivable
(325.54)
(204.04)
Unwinding expenses and discounting for other items and negative effect
of changes in discount rate and timing for Romanian State receivable
(356.06)
(223.45)
Total interest expenses
(798.19)
(485.85)
Net interest revenues/ (expenses)
(29.10)
(325.82)
“Interest income from short term bank deposits” increased in 2022 mainly due to higher average interest rates on deposits and due to more cash available during 2022.
  • 24. OTHER FINANCIAL INCOME AND EXPENSES
2022
2021
Net foreign exchange gains/(losses) from financing activities
(21.33)
(1.33)
Net gains/(losses) from investments and financial assets
(5.64)
72.14
Other financial expenses
(7.43)
(3.79)
Other financial income and expenses
(34.40)
67.02
  • 25. TAXES ON INCOME
2022
2021
Current taxes
(2,143.12)
(402.97)
Deferred taxes
503.24
(15.81)
Taxes on income – (expense)/revenue
(1,639.88)
(418.78)
The reconciliation of net deferred tax is as follows:
2022
2021
Deferred tax asset as at January 1
1,463.63
1,464.75
Deferred tax asset as at December 31
1,962.99
1,463.63
Changes in deferred taxes
499.36
(1.12)
thereof deferred taxes revenue/ (expense) in Other Comprehensive Income
(3.88)
14.69
thereof deferred taxes revenue/ (expense) in the Income Statement
503.24
(15.81)
Reconciliation
Profit before tax
11,927.43
3,107.20
Income tax rate applicable
16%
16%
Profit tax expense based on income tax rate
(1,908.39)
(497.15)
Tax credit
234.49
61.97
Change in valuation allowance
(1.37)
(0.46)
Tax effect of items that are (non-deductible)/non-taxable
35.39
16.87
Profits tax expense in the Income Statement
(1,639.88)
(418.78)
  • 26. SEGMENT INFORMATION
OMV Petrom S.A. is organized into three operating business segments: Exploration and Production, Refining and Marketing and Gas and Power, while management, financing activities and certain service functions are concentrated in the Corporate and Other segment.
OMV Petrom’s involvement in the oil and gas industry, by its nature, exposes it to certain risks. These include political stability, economic conditions, changes in legislation or fiscal regimes, as well as other operating risks inherent in the industry such as the high volatility of commodity prices and of the US dollar. A variety of measures are taken to manage these risks.
Apart from the integration of OMV Petrom’s upstream and downstream operations, and the policy of maintaining a balanced portfolio of assets in the Exploration and Production segment, the main instruments used are operational in nature. There is a company-wide environmental risk reporting system in place, designed to identify existing and potential obligations and to enable timely action to be taken. Insurance and taxation are also dealt with on a company-wide basis. Regular surveys are undertaken across OMV Petrom to identify current litigation and pending court and administrative proceedings.
Business decisions of fundamental importance are made by the Executive Board of OMV Petrom S.A. The business segments are independently managed, as each represents a strategic unit with different products and markets.
Exploration and Production activities are engaged in Romania and main outcome products are crude oil and natural gas, which are sold to other operating segments from OMV Petrom S.A..
Refining and Marketing operates Petrobrazi refinery, with an annual capacity of 4.5 million tons, and produces and delivers gasoline, diesel and other petroleum products to its wholesale customers.
Gas business unit, part of Gas and Power segment, has the strategic objective to focus on gas sales, becoming a regional player. Business division Power, part of Gas and Power segment, mainly extends the gas value chain into a gas fired power plant.
The key figure of operating performance for OMV Petrom S.A. is the Operating result. In compiling the segment results, business activities with similar characteristics have been aggregated. Management is of the opinion that the transfer prices of goods and services exchanged between segments correspond to market prices.
Operating segments
December 31, 2022
Exploration and Production
Refining and Marketing
Gas and
Power
Corporate
and Other
Total
Consoli-
dation
Total
Intersegment sales
16,211.77
56.41
391.03
149.56
16,808.77
(16,808.77)
-
Sales with third parties
60.25
25,722.24
30,015.91
39.29
55,837.69
-
55,837.69
Total sales
16,272.02
25,778.65
30,406.94
188.85
72,646.46
(16,808.77)
55,837.69
Operating result
3,626.20
4,002.82
4,681.72
(255.47)
12,055.27
(64.34)
11,990.93
Total assets*
19,994.98
3,854.36
1,326.93
404.26
25,580.53
-
25,580.53
Additions in PPE/IA
3,168.98
591.56
97.09
60.15
3,917.78
-
3,917.78
Depreciation and amortization
1,926.59
512.31
126.61
34.79
2,600.30
-
2,600.30
Impairment losses/ (write-ups), net
2,276.43
22.86
2.23
0.01
2,301.53
-
2,301.53
*) Intangible assets (IA) and property, plant and equipment (PPE)
Information about geographical areas
December 31, 2022
Romania
Rest of Central Eastern Europe
Rest of Europe
Rest of world
Total
Sales with third parties*
49,477.67
6,117.85
242.17
-
55,837.69
Total assets**
25,575.38
-
-
5.15
25,580.53
Additions in PPE/IA
3,917.78
-
-
-
3,917.78
*) Sales to customers are allocated per countries/regions based on the location where the risks and benefits are transferred to the customer; the net revenues from commodity transactions within the scope of IFRS 9 and hedging results are reported in Romania;
**) Intangible assets (IA) and property, plant and equipment (PPE)
Sales with third parties made in Rest of Central Eastern Europe in 2022 include sales made in Hungary amounting to RON 5,199.86 million.
Operating segments
December 31, 2021
Exploration and Production
Refining and Marketing
Gas and
Power
Corporate
and Other
Total
Consoli-
dation
Total
Intersegment sales
9,082.25
25.70
237.25
143.09
9,488.29
(9,488.29)
-
Sales with third parties
54.38
14,749.82
6,642.98
38.86
21,486.04
-
21,486.04
Total sales
9,136.63
14,775.52
6,880.23
181.95
30,974.33
(9,488.29)
21,486.04
Operating result
1,689.33
2,310.36
(307.37)
(101.65)
3,590.67
(224.67)
3,366.00
Total assets*
21,054.97
3,794.03
1,358.69
383.08
26,590.77
-
26,590.77
Additions in PPE/IA
2,123.90
511.40
12.11
16.94
2,664.35
-
2,664.35
Depreciation and amortization
2,027.73
549.38
132.30
41.83
2,751.24
-
2,751.24
Impairment losses/ (write-ups), net
529.38
1.69
0.50
-
531.57
-
531.57
*) Intangible assets (IA) and property, plant and equipment (PPE)
Information about geographical areas
December 31, 2021
Romania
Rest of Central Eastern Europe
Rest of Europe
Rest of world
Total
Sales with third parties*
20,543.33
931.64
10.88
0.19
21,486.04
Total assets**
26,584.64
-
-
6.13
26,590.77
Additions in PPE/IA
2,657.49
-
-
6.86
2,664.35
*) Sales to customers are allocated per countries/regions based on the location where the risks and benefits are transferred to the customer; the net revenues from commodity transactions within the scope of IFRS 9 and hedging results are reported in Romania;
**) Intangible assets (IA) and property, plant and equipment (PPE)
  • 27. AVERAGE NUMBER OF EMPLOYEES
The number of employees calculated as the average of the month’s end number of employees during the year is 7,372 for 2022 and 8,271 for 2021.
  • 28. RELATED PARTIES
The terms of the outstanding balances receivable from/payable to related parties are typically 0 to 60 days. The balances are unsecured and will be settled mainly in cash.
The balances with related parties comprise also loans receivable and payable, included in the Statement of financial position under “Other financial assets” (see also Note 8) and “Interest-bearing debts” respectively (refer to Note 14b).
Dividends receivable are not included in the below balances and revenues.
During 2022, the Company had the following transactions with related parties, including balances as of December 31, 2022:
Nature of transactions
Purchases
Balances
payable
OMV Petrom S.A. subsidiaries
OMV Petrom Marketing S.R.L.
Acquisition of petroleum products
34.64
89.87
OMV Petrom Aviation S.R.L.
Airport sales services
33.77
6.15
Petromed Solutions S.R.L.
Medical services
20.96
0.57
OMV Petrom Georgia LLC
Various services
0.57
0.11
Petrom Moldova S.R.L.
Various services
0.16
0.03
Total OMV Petrom S.A. subsidiaries
90.10
96.73
Other related parties
OMV Gas Marketing & Trading GmbH
Acquisition of natural gas and CO2 certificates
1,375.69
6.97
OMV Supply & Trading Limited
Acquisition of crude oil and other
922.95
3.26
OMV Petrom Global Solutions S.R.L.
Financial, bookkeeping, IT support and other services
557.98
127.16
OMV Downstream GmbH
Acquisition of petroleum products, services and other
122.61
56.75
OMV Exploration & Production GmbH
Delegation of personnel and other
109.95
29.16
OMV Aktiengesellschaft
Delegation of personnel and other
29.30
43.35
OMV Deutschland Marketing & Trading GmbH & Co. KG
Acquisition of petroleum products
6.44
-
OMV International Oil & Gas GmbH
Delegation of personnel
1.60
0.25
OMV Abu Dhabi Production GmbH
Various services
1.01
0.24
OMV Austria Exploration & Production GmbH
Various services
0.05
-
OMV - International Services Ges.m.b.H.
Various services
0.02
-
OMV Enerji Ticaret Anonim Şirketi
Various acquisitions
0.01
-
Borealis AG
Various services
0.01
-
Total other related parties
3,127.62
267.14
Total
3,217.72
363.87
Nature of transactions
Revenues
Balances
receivable
Total OMV Petrom S.A. subsidiaries
OMV Petrom Marketing S.R.L.
Sales of petroleum products
18,282.37
1,374.78
OMV Bulgaria OOD
Sales of petroleum products
1,105.67
71.32
Petrom Moldova S.R.L.
Sales of petroleum products
1,018.60
52.31
OMV Srbjia DOO
Sales of petroleum products
209.44
21.93
Petromed Solutions S.R.L.
Various services
2.42
0.37
OMV Offshore Bulgaria GmbH
Various services
1.26
0.19
OMV Petrom Aviation S.R.L.
Various services
0.76
0.18
OMV Petrom Georgia LLC
Various services
0.56
0.11
OMV Petrom Biofuels S.R.L.
Various services
0.46
0.34
OMV Petrom E&P Bulgaria S.R.L. (former OMV Petrom Gas S.R.L.)
Various services
0.19
0.01
Total OMV Petrom S.A. subsidiaries
20,621.73
1,521.54
Other related parties
OMV Gas Marketing & Trading GmbH
Sales of natural gas
1,265.08
38.97
OMV Downstream GmbH
Sales of petroleum products, delegation of personnel and other
589.11
1.75
OMV Hungária Ásványolaj Kft.
Sales of petroleum products
253.03
-
OMV Deutschland Marketing & Trading GmbH & Co. KG
Sales of propylene and petroleum products
252.82
37.23
Borealis AG
Sales of propylene
86.07
4.85
OMV Supply & Trading Limited
Various services
25.14
-
OMV Exploration & Production GmbH
Delegation of personnel and other
22.66
2.18
OMV Petrom Global Solutions S.R.L.
Various services
22.01
1.75
OMV Slovensko s.r.o.
Sales of petroleum products
18.51
-
OMV Aktiengesellschaft
Delegation of personnel and other
10.27
2.73
Borealis L.A.T Romania S.R.L.
Various services
0.20
0.02
OMV - International Services Ges.m.b.H.
Various services
0.02
0.02
Petrom Exploration & Production Limited
Various services
0.02
-
Total other related parties
2,544.94
89.50
Total
23,166.67
1,611.04
The above transactions and balances do not include amounts related to loans given and received by OMV Petrom from related parties.
During 2021, the Company had the following transactions with related parties, including balances as of December 31, 2021:
Nature of transactions
Purchases
Balances payable
OMV Petrom S.A. subsidiaries
OMV Petrom Marketing S.R.L.
Acquisition of petroleum products
28.12
33.11
OMV Petrom Aviation S.R.L.
Airport sales services
24.90
2.77
Petromed Solutions S.R.L.
Medical services
21.70
1.28
OMV Petrom Georgia LLC
Various services
3.41
3.12
Petrom Moldova S.R.L
Various services
0.09
-
Kom Munai LLP
Various services
0.06
-
Total OMV Petrom S.A. subsidiaries
78.28
40.28
Other related parties
OMV Gas Marketing & Trading GmbH
Acquisition of natural gas and other
963.15
175.27
OMV Supply & Trading Limited
Acquisition of crude oil and petroleum products
884.15
1.10
OMV Petrom Global Solutions S.R.L.
Financial, bookkeeping, IT support and other services
470.67
64.16
OMV Exploration & Production GmbH
Delegation of personnel and other
99.56
27.49
OMV Downstream GmbH
Acquisition of petroleum products, other materials and services
63.83
20.55
OMV Aktiengesellschaft
Delegation of personnel and other
32.94
39.68
OMV Enerji Ticaret Anonim Şirketi
Acquisition of liquefied natural gas (LNG)
0.90
0.52
OMV Gas & Power GmbH
Delegation of personnel and other
0.81
0.13
OMV Abu Dhabi Production GmbH
Various services
0.41
0.41
OMV International Oil & Gas GmbH 
Delegation of personnel
0.39
0.39
OMV New Zealand Limited
Various services
0.12
0.18
OMV - International Services Ges.m.b.H.
Various services
0.01
-
Total other related parties
2,516.94
329.88
Total
2,595.22
370.16
Nature of transactions
Revenues
Balances receivable
OMV Petrom S.A. subsidiaries
OMV Petrom Marketing S.R.L.
Sales of petroleum products
10,498.16
750.60
OMV Bulgaria OOD
Sales of petroleum products
823.50
90.84
Petrom Moldova S.R.L
Sales of petroleum products
294.30
14.74
OMV Srbjia DOO
Sales of petroleum products
141.07
25.90
OMV Offshore Bulgaria GmbH
Various services
2.71
-
Petromed Solutions S.R.L.
Various services
2.38
0.36
Kom Munai LLP
Delegation of personnel and other
1.88
-
OMV Petrom Aviation S.R.L.
Various services
0.76
0.28
OMV Petrom Georgia LLC
Various services
0.22
0.20
OMV Petrom Gas S.R.L.
Various services
0.20
(0.05)
Tasbulat Oil Corporation LLP
Delegation of personnel and other
0.06
-
Total OMV Petrom S.A. subsidiaries
11,765.24
882.87
Other related parties
-
-
OMV Gas Marketing & Trading GmbH
Sales of natural gas and other
400.23
143.52
OMV Deutschland Marketing & Trading
GmbH & Co. KG
Sales of propylene and petroleum products
357.28
62.04
OMV Downstream GmbH
Sales of petroleum products, delegation of personnel and other
181.73
14.74
OMV Supply & Trading Limited
Sales of petroleum products
58.97
-
OMV Exploration & Production GmbH
Delegation of personnel and other
26.09
4.08
OMV Petrom Global Solutions S.R.L.
Various services
22.92
2.92
OMV Aktiengesellschaft
Delegation of personnel and other
11.69
2.79
Borealis AG
Sales of propylene
10.88
-
Borealis L.A.T Romania S.R.L.
Various sales and services
0.18
0.01
Petrom Exploration & Production Limited
Various services
0.01
-
Total other related parties
1,069.98
230.10
Total
12,835.22
1,112.97
The above transactions and balances do not include amounts related to loans given and received by OMV Petrom from related parties.
During 2022, there were in place intercompany loans granted by the Company to the following subsidiaries:
a)OMV Offshore Bulgaria GmbH: one intercompany loan with maximum limit of EUR 57.00 million (equivalent of RON 282.00 million) and maturity August 31, 2025.
b)OMV Bulgaria OOD: one intercompany loan with maximum limit of EUR 55.00 million (equivalent of RON 271.92 million) and maturity December 30, 2023.
c)OMV Srbjia DOO: one intercompany loan with maximum limit of EUR 20.00 million (equivalent of RON 98.95 million) and maturity December 30, 2023.
d)Petrom Moldova S.R.L.: one intercompany loan with maximum limit of EUR 25.00 million (equivalent of RON 123.69 million) and maturity August 7, 2024.
e)OMV Petrom Biofuels S.R.L.: one intercompany loan with maximum limit of EUR 15.00 million (equivalent of RON 74.21 million) and maturity May 12, 2027.
The balances receivable in respect to these loans, as at December 31, 2022 and December 31, 2021 are presented below:
Gross balance
at December 31,
2022
Impairment
at December 31,
2022
Net balance
at December 31,
2022
Net balance
at December 31,
2021
OMV Bulgaria OOD
204.17
-
204.17
94.08
OMV Offshore Bulgaria GmbH
183.22
-
183.22
168.19
Petrom Moldova S.R.L.
54.51
5.64
48.87
49.52
Total
441.90
5.64
436.26
311.79
Interest income and interest expenses as well as balances receivable and balances payable related to interest income and interest expenses in respect to related parties are presented below:
Interest
income
2022
Balances receivable at December 31, 2022
Interest
income
2021
Balances receivable at December 31, 2021
OMV Petrom S.A. subsidiaries
OMV Offshore Bulgaria GmbH
2.66
0.31
2.10
0.10
OMV Bulgaria OOD
2.42
0.34
1.55
0.07
Petrom Moldova S.R.L.
1.12
0.09
0.76
0.03
OMV Srbija DOO
0.31
-
0.98
-
Tasbulat Oil Corporation LLP
-
-
0.79
-
Kom Munai LLP
-
-
1.27
-
Total OMV Petrom S.A. subsidiaries 
6.51
0.74
7.45
0.20
Other related parties
-
-
-
-
Total
6.51
0.74
7.45
0.20
Interest
expenses
2022
Balances
payable at
December 31,
2022
Interest
expenses
2021
Balances
payable at
December 31,
2021
OMV Petrom S.A. subsidiaries
OMV Petrom Marketing S.R.L.
82.96
9.02
28.64
3.73
OMV Petrom E&P Bulgaria S.R.L.
(former OMV Petrom Gas S.R.L.)
0.76
0.05
0.47
0.05
Petromed Solutions S.R.L.
0.46
0.05
0.17
0.02
OMV Petrom Aviation S.R.L.
0.14
0.01
0.06
0.01
Total OMV Petrom S.A. subsidiaries 
84.32
9.13
29.34
3.81
Other related parties
OMV Petrom Global Solutions S.R.L.
8.02
0.64
2.00
0.28
Total other related parties
8.02
0.64
2.00
0.28
Total
92.34
9.77
31.34
4.09
The balances payable to related parties in relation to cash pooling agreements are presented in Note 14 b).
Ultimate parent
As disclosed in Note 1, OMV Petrom S.A.’s major shareholder is OMV Aktiengesellschaft, being the ultimate parent of the Group, with its office based at Trabrennstraße 6-8, 1020 Vienna, Austria. The main shareholders of OMV Aktiengesellschaft are Österreichische Beteiligungs AG (ÖBAG, Vienna, which is in turn wholly owned by the Republic of Austria – 31.5%) and Mubadala Petroleum and Petrochemicals Holding Company L.L.C (MPPH, Abu Dhabi – 24.9%). There is a consortium agreement in place between MPPH and ÖBAG providing for coordinated behavior and certain restrictions on transfers of shareholdings.
The consolidated financial statements of OMV Aktiengesellschaft are prepared in accordance with IFRS as adopted by the EU and in accordance with the supplementary accounting regulations pursuant to Sec. 245a, Para. 1 of the Austrian Company Code (UGB) and are available on OMV’s website:
https://www.omv.com/en/investor-relations/publications
Government-related entities
Based on the OMV Petrom ownership structure, the Romanian State via the Ministry of Energy has significant influence over OMV Petrom and therefore there are companies controlled or jointly controlled by the Romanian State which are related parties for OMV Petrom. In the normal course of business, OMV Petrom has transactions with some of these related parties, at arm’s length, unless otherwise specified in the legislation. The cumulative values of the transactions with each of these related parties are not significant.
In May 2022, S.N.G.N. Romgaz S.A. (“Romgaz”) signed a share sale and purchase agreement for the acquisition of ExxonMobil Exploration and Production Romania Limited, which had a farm out arrangement with OMV Petrom and a 50% participating interest in the Neptun Deepwater block in Black Sea. On 1 August 2022, the deal was finalized and on the same date OMV Petrom took over the operatorship for the Neptun Deep block.
In October 2022, OMV Petrom S.A. and Complexul Energetic Oltenia S.A. have signed a partnership agreement to build four photovoltaic parks in Romania, with a total capacity of ~450 MW. For more details on these joint arrangements see Note 32.
Key management remuneration
For 2022, the General Meeting of Shareholders of OMV Petrom S.A. approved an annual gross remuneration corresponding to a net remuneration for each member of the Supervisory Board amounting to EUR 20,000 per year (2021: EUR 20,000 per year), an additional gross remuneration per meeting corresponding to a net remuneration of EUR 4,000 for each member for the Audit Committee (2021: EUR 4,000 per meeting) and an additional gross remuneration per meeting corresponding to a net remuneration of EUR 2,000 for each member for the Presidential and Nomination Committee (2021: EUR 2,000 per meeting).
As at December 31, 2022 and 2021, there were no loans or advances granted by the Company to the members of the Supervisory Board. As at December 31, 2022 and 2021, the Company did not have any obligations regarding pension payments to former members of the Supervisory Board.
The aggregate amount of remuneration and other benefits, including benefits in-kind, paid in 2022 to the members of the Executive Board and the directors reporting to Executive Board members, collectively as a group, for their activities performed in all capacities, amounted to RON 67.86 million (2021: RON 66.69 million).
The remuneration paid to members of the Executive Board and to the directors reporting to Executive Board members aims to be at competitive levels and consists of:
  • fixed remuneration based on contractual arrangements;
  • performance-related remuneration assessed against financial and non-financial metrics (including OMV Petrom S.A. share price evolution, HSSE and sustainability metrics) in line with company strategy, to align the interests of management and shareholders, including both short and long term plans:
  • ▸ performance bonus program of 1 year;
  • ▸ long term incentive as multi-year performance plan of 3 years;
  • benefits in kind (non-cash benefits) as support to properly carry out job related activities, including car company, accident and liability insurance.
  • 29. CASH FLOW STATEMENT INFORMATION
    • a) Drawings and repayments of borrowings
The following tables show the reconciliation of the changes in liabilities arising from financing activities:
Interest-
bearing debts
Lease liabilities
Total
January 1, 2022
1,887.53
433.48
2,321.01
Repayments of interest bearing debts and
principal portion of lease liabilities
(133.29)
(153.85)
(287.14)
Net increase/(decrease) in loans with subsidiaries
132.50
-
132.50
Total cash flows relating to financing activities
(0.79)
(153.85)
(154.64)
Lease liabilities recognized during the year
-
155.98
155.98
Net other changes
4.94
(1.28)
3.66
Total non-cash changes
4.94
154.70
159.64
December 31, 2022
1,891.68
434.33
2,326.01
thereof short-term
1,891.68
138.79
2,030.47
thereof long-term
-
295.54
295.54
Interest-
bearing debts
Lease liabilities
Total
January 1, 2021
1,618.09
460.84
2,078.93
Repayments of interest bearing debts and
principal portion of lease liabilities
(93.49)
(136.30)
(229.79)
Increase in interest bearing debts
78.86
-
78.86
Net increase/(decrease) in loans with subsidiaries
280.25
-
280.25
Total cash flows relating to financing activities
265.62
(136.30)
129.32
Lease liabilities recognized during the year
-
104.59
104.59
Net other changes
3.82
4.35
8.17
Total non-cash changes
3.82
108.94
112.76
December 31, 2021
1,887.53
433.48
2,321.01
thereof short-term
1,871.04
138.05
2,009.09
thereof long-term
16.49
295.43
311.92
  • b) Investments in subsidiaries and financial assets
During 2022, OMV Petrom paid an amount of RON 54.42 million to OMV Offshore Bulgaria GmbH as capital contribution and an amount of RON 0.12 million for the increase in the share capital of OMV Petrom E&P Bulgaria S.R.L. (previously named OMV Petrom Gas S.R.L.).
Also, on March 28, 2022, OMV Petrom set up a new subsidiary, OMV Petrom Biofuels S.R.L., wherein OMV Petrom S.A. holds 75% and OMV Downstream GmbH holds 25% of the shares. The Company’s contribution to the share capital of the new subsidiary amounted to RON 18.55 million.
On January 17, 2022, OMV Petrom S.A. acquired the remaining 0.003% interest in the subsidiary Petromed Solutions S.R.L., reaching 100% ownership in this subsidiary, with no significant impact in the cash flow from investing activities.
In 2022 OMV Petrom invested an amount of RON 51.57 million in Romanian Government bonds, which were kept until maturity.
During 2021, OMV Petrom set up a new subsidiary, OMV Petrom Georgia LLC, and acquired the remaining 0.01% interest in the subsidiary OMV Petrom E&P Bulgaria S.R.L. (previously named OMV Petrom Gas S.R.L.). These investments did not have a significant impact in the cash flow from investing activities.
  • c) Net loans reimbursed by/(given to) subsidiaries
During 2022 OMV Petrom S.A. granted loans amounting to RON 450.08 million (2021: RON 212.02 million) and was reimbursed loans amounting to RON 320.62 million (2021: RON 247.25 million).
  • d) Proceeds in relation to non-current assets and financial assets
In 2022, proceeds in relation to non-current assets and financial assets include the amount of RON 52.00 million representing the redemption value of the Romanian Government bonds acquired during the year. For details please see Note 29 b).
In 2021, proceeds in relation to non-current assets and financial assets included the amount of RON 37.61 million representing encashment from the last two tranches of the government grant for Brazi power plant.
  • e) Transfer of business
On December 1, 2021, OMV Petrom S.A. closed the transfer of 40 marginal onshore oil and gas fields to Dacian Petroleum S.R.L.. The cash inflows for this transfer of business were RON 43.00 million in 2021 and RON 0.99 million in 2022.
Net assets at the date of transfer
2021
Intangible assets and property, plant and equipment
219.12
Provisions for decommissioning and restoration obligations
(156.86)
Other adjustments related to items transferred
1.81
Net assets
64.07
Gain/(Loss) on transfer of business
2021
Proceeds on transfer of business
66.68
Net assets disposed of
(64.07)
Gain on transfer of business
2.61
Net cash flow from transfer of business
2021
Proceeds on transfer of business
66.68
Deferred consideration
(23.68)
Net cash inflow on transfer of business
43.00
In 2022 OMV Petrom did not transfer any business.
  • f) Disposal of investments
On May 14, 2021, OMV Petrom S.A. completed the sale of its 100% owned subsidiaries in Kazakhstan, Kom-Munai LLP and Tasbulat Oil Corporation LLP, including loans given to them, to Magnetic Oil Limited. The result of the transaction was a gain of RON 72.89 million and the proceeds from sale of investments and loans in 2021 are amounting to RON 488.63 million.
During 2022, OMV Petrom did not dispose of any investment.
  • g) Exploration cash-flows
The amount of cash outflows in relation to exploration activities incurred by OMV Petrom S.A. for the year ended December 31, 2022 is of RON 325.90 million (2021: RON 222.47 million), out of which the amount of RON 198.88 million is related to operating activities (2021: RON 92.41 million) and the amount of RON 127.02 million represents cash outflows for exploration investing activities (2021: RON 130.06 million).
  • h) Other non-monetary adjustments
Other non-monetary adjustments include mainly the change in the fair value of derivatives through income statement and impact from reassessment of long-term receivables.
  • i) Cash and cash equivalents
December 31, 2022
December 31, 2021
Cash at banks and on hand
317.58
106.81
Short-term deposits
13,535.20
9,947.12
Cash and cash equivalents
13,852.78
10,053.93
  • 30. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
The following overview presents the measurement of assets and liabilities recognized at fair value.
In accordance with IFRS 13, the individual levels are defined as follows:
Level 1: Using quoted prices in active markets for identical assets or liabilities.
Level 2: Using inputs for the asset or liability, other than quoted prices, that are observable either directly (i.e. as prices) or indirectly (i.e. derived from prices). In order to determine the fair value for financial instruments, usually forward prices of commodities, as obtained from the market, and foreign exchange rates are used as inputs to the valuation model. Trade receivables from sales contracts with provisional pricing are measured at fair value.
Level 3: Using inputs for the asset or liability that are not based on observable market data such as prices, but on internal models or other valuation methods.
Fair value hierarchy of financial assets as at December 31, 2022
Level 1
Level 2
Level 3
Total
Trade receivables
-
9.04
-
9.04
Other derivatives
-
1,502.05
-
1,502.05
Total
-
1,511.09
-
1,511.09
Fair value hierarchy of financial liabilities as at December 31, 2022
Level 1
Level 2
Level 3
Total
Derivatives designated and effective as hedging instruments
-
(1.20)
-
(1.20)
Other derivatives
-
(650.80)
-
(650.80)
Total
-
(652.00)
-
(652.00)
Fair value hierarchy of financial assets as at December 31, 2021
Level 1
Level 2
Level 3
Total
Derivatives designated and effective as hedging instruments
-
21.10
-
21.10
Other derivatives
-
1,534.94
-
1,534.94
Total
-
1,556.04
-
1,556.04
Fair value hierarchy of financial liabilities as at December 31, 2021
Level 1
Level 2
Level 3
Total
Derivatives designated and effective as hedging instruments
-
(42.56)
-
(42.56)
Other derivatives
-
(2,364.20)
-
(2,364.20)
Total
-
(2,406.76)
-
(2,406.76)
There were no transfers between levels of the fair value hierarchy. There were no changes in the fair value measurement techniques for assets and liabilities that are measured at fair value.
The financial assets and financial liabilities whose fair values differ from their carrying amounts as at December 31, 2022 and December 31, 2021, as well as the respective differences are presented in the tables below. The fair values of these financial assets and liabilities were determined by discounting future contractual cash flows using interest rates prevailing at the reporting date for similar assets and liabilities with similar maturities, obtained from the market for similar transactions (Level 2 – observable inputs).
The management assessed that the fair values of other financial assets and financial liabilities that were measured at amortized cost approximate their carrying amounts.
December 31, 2022
Fair value
Carrying amount
Difference
Loans to subisdiaries
453.46
436.26
17.20
Financial assets
453.46
436.26
17.20
Interest-bearing debts
1,891.66
1,891.68
(0.02)
Financial liabilities
1,891.66
1,891.68
(0.02)
December 31, 2021
Fair value
Carrying amount
Difference
Loans to subisdiaries
321.92
311.79
10.13
Financial assets
321.92
311.79
10.13
Interest-bearing debts
1,888.39
1,887.53
0.86
Financial liabilities
1,888.39
1,887.53
0.86
Offsetting of financial assets and liabilities
According to IAS 32, financial assets and liabilities are offset and the net amounts are reported in the statement of financial position when OMV Petrom has a current legally enforceable right to set-off the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. OMV Petrom enters in the normal course of business into various master netting arrangements in the form of International Swaps and Derivatives Association (ISDA) agreements or European Federation of Energy Traders (EFET) agreements or other similar arrangements. When the offsetting criteria mentioned in IAS 32 are met, corresponding financial assets and liabilities are presented net in the statement of the financial position.
During 2021 OMV Petrom has updated its assessment of IAS 32 netting criteria further to a legal assessment of the major agreements in place.
The following tables present the carrying amounts of recognized financial assets and financial liabilities that are subject to various netting arrangements. The values in the net column would be on the Company’s statement of financial position, if all set-off rights were exercised.
Offsetting of financial assets 2022
Gross amounts
Amounts set-off in the statement of financial position
Net amounts presented in the statement of financial position*
Assets available to set-off** (not offset)
Net amounts
Derivative financial instruments
1,594.28
(92.23)
1,502.05
(181.85)
1,320.20
Trade receivables
4,883.27
(913.28)
3,969.99
(23.53)
3,946.46
Other financial assets
1,325.79
(25.02)
1,300.77
(3.74)
1,297.03
Total
7,803.34
(1,030.53)
6,772.81
(209.12)
6,563.69
*) Net amounts presented in the statement of financial position are detailed in Note 8.
**) Assets not offset as the criteria from IAS 32 is not fulfilled.
Offsetting of financial liabilities 2022
Gross amounts
Amounts set-off in the statement of financial position
Net amounts presented in the statement of financial position*
Liabilities available to set-off** (not offset)
Net amounts
Derivative financial instruments
744.23
(92.23)
652.00
(181.85)
470.15
Trade payables
4,373.67
(913.28)
3,460.39
(23.53)
3,436.86
Other financial liabilities
425.91
(25.02)
400.89
(3.74)
397.15
Total
5,543.81
(1,030.53)
4,513.28
(209.12)
4,304.16
*) Net amounts presented in the statement of financial position are detailed in Note 15.
**) Liabilities not offset as the criteria from IAS 32 is not fulfilled.
Offsetting of financial assets 2021
Gross amounts
Amounts set-off in the statement of financial position
Net amounts presented in the statement of financial position*
Assets available to set-off** (not offset)
Net amounts
Derivative financial instruments
1,945.26
(389.22)
1,556.04
(349.31)
1,206.73
Trade receivables
2,861.36
(225.67)
2,635.69
(6.81)
2,628.88
Other financial assets
334.54
(6.15)
328.39
(78.18)
250.21
Total
5,141.16
(621.04)
4,520.12
(434.30)
4,085.82
*) Net amounts presented in the statement of financial position are detailed in Note 8.
**) Assets not offset as the criteria from IAS 32 is not fulfilled.
Offsetting of financial liabilities 2021
Gross amounts
Amounts set-off in the statement of financial position
Net amounts presented in the statement of financial position*
Liabilities available to set-off** (not offset)
Net amounts
Derivative financial instruments
2,795.98
(389.22)
2,406.76
(349.31)
2,057.45
Trade payables
2,726.47
(225.67)
2,500.80
(6.81)
2,493.99
Other financial liabilities
314.41
(6.15)
308.26
(78.18)
230.08
Total
5,836.86
(621.04)
5,215.82
(434.30)
4,781.52
*) Net amounts presented in the statement of financial position are detailed in Note 15.
**) Liabilities not offset as the criteria from IAS 32 is not fulfilled.
  • 31. COMMITMENTS AND CONTINGENCIES
Commitments
As at December 31, 2022 the commitments engaged by the Company for acquisitions of fixed assets (except those in relation to joint arrangements) are in amount of RON 1,823.32 million (2021: RON 976.35 million), out of which RON 1,686.82 million related to property, plant and equipment (2021: RON 789.60  million) and RON 136.50 million for intangible assets (2021: RON 186.75 million).
The Company has additional commitments in relation to joint arrangements - for details please refer to Note 32.
Leases not yet commenced in 2022 but committed are disclosed separately in Note 6.
Litigations
We face a variety of litigations, arbitrations, proceedings and disputes referring to a wide range of subjects, such as, but without being limited to, real estate matters, fiscal matters, intellectual property, environmental, competition, administrative matters, commercial matters, labour related litigation, debt recovery, insolvency of contractors, criminal deeds, and contraventional matters. It is possible that unanticipated judicial outcomes might occur.
The Company provides for litigations that are more likely than not to result in obligations. Management is of the opinion that litigations, to the extent not covered by provisions or insurance, will not materially affect the Company’s financial position.
Contingent liabilities
The production facilities and properties of the Company are subject to a variety of environmental protection laws and regulations; provisions are made for obligations arising from environmental protection measures in accordance with the Company’s accounting policies.
In December 2019, OMV Petrom S.A. signed a contract to acquire OMV Offshore Bulgaria GmbH, which holds a stake in the Han Asparuh exploration license in Bulgaria. The transaction was completed at the end of August 2020, by means of acquisition of 100% shares in OMV Offshore Bulgaria GmbH from OMV Exploration & Production GmbH.
The contract between OMV Petrom S.A. and the seller OMV Exploration & Production GmbH includes contingent variable payments to be made by OMV Petrom S.A. which are dependent on reserves determinations at final investment decision milestone and at reserves revision milestone. The reserves determinations will have to be certified by a jointly appointed suitable qualified and experienced third party reserves auditor.
At the date of these financial statements, a reliable estimate of the potential variable payments and timing, if any, cannot be made. Therefore, no provision has been recognized in this respect in OMV Petrom’s Financial Statements as at December 31, 2022 and December 31, 2021.
OMV Petrom S.A. entered into guarantees as part of the ordinary course of the Company’s business, mainly under credit facilities granted by banks, without cash collateral (please see Note 14). No material losses are likely to arise from such guarantees.
  • 32. INTERESTS IN JOINT ARRANGEMENTS
In 2008 OMV Petrom S.A. entered into a farm out arrangement with ExxonMobil Exploration and Production Romania Limited (“Exxon”) with the purpose to explore and develop the Neptun Deepwater block in Black Sea and has a participating interest of 50%. Starting August 2011, Exxon has been appointed as operator (previously OMV Petrom S.A. was operator). In May 2022, S.N.G.N. Romgaz S.A. (“Romgaz”) signed a share sale and purchase agreement for the acquisition of Exxon, and thus its participating interest in the block. On 1 August 2022, the deal was finalized and on the same date OMV Petrom took over the operatorship for the Neptun Deep block.
In 2010 OMV Petrom S.A. entered into a farm out arrangement with Hunt Oil Company of Romania S.R.L. (“Hunt”) with the purpose to explore and develop Adjud and Urziceni East onshore blocks and has a participating interest of 50%. Starting October 2013, Hunt has been appointed as operator (previously OMV Petrom S.A. was operator).
In 2022, OMV Petrom entered into a partnership with Complexul Energetic Oltenia to build four photovoitaic parls with a total capacity of approximately 450 MW. The parks will be developed through four separate legal entities, in a 50% - 50% equity interest structure. The intention is to sell the produced electricity by these entities to the two partners in equal shares.
Joint activities described above were classified as joint operations according with IFRS 11.
OMV Petrom S.A.’s share of the aggregate commitments for acquisitions of fixed assets in relation with these joint arrangements as at December 31, 2022 amounts to RON 76.14 million (2021: RON 45.55 million), mainly for offshore activities.
  • 33. RISK MANAGEMENT
Capital risk management
OMV Petrom S.A. continuously manages its capital adequacy to ensure that it is optimally capitalized, in accordance with its risks exposure, in order to maximize the return to shareholders. The capital structure of OMV Petrom S.A. consists of stockholders’ equity (comprising share capital, reserves and revenue reserves as disclosed in the “Statement of Changes in Equity”) and debt (which includes the short and long term Interest-bearing debts and Lease liabilities). Capital risk management at OMV Petrom S.A. is part of the value management and it is based on permanent review of the gearing ratio of the Company.
Net debt is calculated as interest-bearing debts and lease liabilities, less cash and cash equivalents. Due to the significant cash balance, OMV Petrom S.A. reported a net cash position of RON 11,526.77 million at December 31, 2022 (2021: RON 7,732.92 million).
Risk management objectives and policies
The objective of OMV Petrom Risk Management function is to provide assurance that the risks are well managed and kept under control by the risk owners. Low probability high potential impact risks are assessed and monitored individually, with a dedicated set of mitigating measures put in place.
To ensure that management takes risk-informed decisions, with adequate consideration of actual and prospective information/data, OMV Petrom Executive Board has empowered a dedicated Risk Management function with the objective to centrally lead and coordinate the Company’s risk management-related processes. This department ensures that well-defined and consistent risk management processes, tools, and techniques are applied across the entire organization. Risk ownership is assigned to the managers who are best suited to oversee and manage the respective risk. OMV Petrom’s consolidated risk profile is reported twice a year to the Executive Board and to Supervisory Board’s Audit Committee.
Risk exposures and responses
OMV Petrom’s Risk Management function performs a central coordination of a mid-term Enterprise Wide Risk Management (EWRM) and a long-term Strategic Risk Management processes in which it actively pursues the identification, analysis, evaluation and treatment of significant risks (market and financial, operational and strategic) in order to assess their effects on planned cash flows, to engage management in planning and implementing mitigating actions and to provide to the Executive Board and Supervisory Board’s Audit Committee members the assurance that risks are under control
The main purpose of the OMV Petrom’s EWRM process is to deliver value through risk-based management and decision-making. OMV Petrom is constantly enhancing the EWRM process based on internal and external requirements. The process is facilitated by OMV Petrom IT system supporting the established individual process steps (risk identification, risk analysis, risk evaluation, risk treatment, reporting, and risk review through continuous monitoring of changes to the risk profile), guided by the ISO 31000 risk management framework.
Beside the business operational and strategic category of exposures, the market and financial risk category plays an important role in the Company’s risk profile and it is managed with dedicated diligence – market and financial risks include, market price risk, foreign exchange risk, interest rate risk, counterparty credit risk, and liquidity risk.
Response wise, any risk which increases near to its significance level or which is sensitive to the risk appetite level is monitored and specific treatment plans are proposed, approved and implemented accordingly in order to decrease the risk exposure.
Market Risk
In regard to the market price risk, OMV Petrom is naturally exposed to the price-driven volatility of cash flows generated by production, refining and marketing activities associated with crude oil, oil products, natural gas and electricity. Market risk has core strategic importance within OMV Petrom’s risk profile and liquidity. The market price risks of OMV Petrom commodities are closely analysed, quantified and evaluated.
Derivative financial instruments are used where appropriate to manage market price risks resulting from changes in commodity prices and foreign exchange rates, which could have a negative effect on assets, liabilities or expected future cash flows.
For the purpose of mitigating market price risks the Company enters into derivative financial instruments such as OTC swaps and forwards. Swaps do not involve an investment at the time the contracts are concluded; settlement normally takes place at the end of the quarter or month.
Hedges are generally placed where the underlying exposure exists. When certain conditions are met, the Company may elect to apply IFRS 9 hedge accounting principles in order to recognize in the income statement the offsetting effects of changes in the fair value of the hedging instruments at the same time with the hedged items.
Derivatives are only used for economic hedging purposes and not as speculative investments. However, where derivatives are not designated as hedging instruments (i.e. hedge accounting is not applied), they are classified as fair value through profit or loss in accordance with IFRS 9.
The tables hereafter show the fair values of derivative financial instruments together with their nominal amounts. The nominal amount, recorded gross, is the amount of a derivative’s underlying asset or reference rate (as absolute amount for both sales and purchases contracts) and is the basis upon which changes in the value of derivatives are measured. The nominal amounts indicate the volume of the transactions outstanding at the year-end and are not indicative of either the market risk or the credit risk. Fair values are presented in lines “Other financial assets” and “Other financial liabilities” in the statement of financial position.
Nominal and fair values of derivative financial instruments
December 31, 2022
Nominal
value
Fair value
assets
Fair value
liabilities
Commodity price risk
Oil incl. oil products swaps*)
83.67
-
(1.20)
Commodity hedges (designated in hedge relationship)
83.67
-
(1.20)
Oil incl. oil products swaps*)
1,086.55
-
(3.39)
Power forward sales and acquisition contracts
3,855.01
1,397.49
(636.42)
European Emission Allowances forward acquisition contracts
568.35
104.56
(9.23)
Commodity hedges (valued at fair value through profit or loss)
5,509.91
1,502.05
(649.04)
Foreign currency risk
USD
251.96
-
(1.76)
EUR
0.82
-
-
Foreign currency hedges (valued at fair value through profit or loss)
252.78
-
(1.76)
December 31, 2021
Nominal
value
Fair value
assets
Fair value
liabilities
Commodity price risk
Oil incl. oil products swaps*)
631.84
21.10
(42.56)
Commodity hedges (designated in hedge relationship)
631.84
21.10
(42.56)
Oil incl. oil products swaps*)
405.26
-
(0.16)
Power forward sales and acquisition contracts
4,203.49
1,285.69
(2,362.60)
European Emission Allowances forward acquisition contracts
629.82
248.60
(0.31)
Commodity hedges (valued at fair value through profit or loss)
5,238.57
1,534.29
(2,363.07)
Foreign currency risk
USD
202.65
0.65
(1.11)
EUR
3.10
-
(0.02)
Foreign currency hedges (valued at fair value through profit or loss)
205.75
0.65
(1.13)
*) Only purchased crude oil is used as underlying, not equity crude oil.
Cash flow hedge accounting
In Refining and Marketing business, OMV Petrom is exposed to inventory risks and refining margins volatility. In order to mitigate those risks the Company enters into corresponding hedging activities, which include stock hedges and limited margin hedges.
The risk management strategy is to harmonize the pricing of product sales and purchases in order to remain within an approved range of priced stocks at all times, by means of undertaking stock hedges so as to mitigate the price exposure. In respect of refinery margin hedges, crude oil and products are hedged with the aim to protect future margins.
During 2022, OMV Petrom S.A. concluded mainly stock hedges in relation to crude oil inventory purchases, using swaps instruments. During 2021, OMV Petrom S.A. concluded margin hedges in relation to highly probable sales of gasoline, with maturities until December 2022, and stock hedges in relation to crude oil inventory purchases, using also swaps instruments.
Stock hedges are used to mitigate price exposure whenever actual priced stock levels deviate from target levels. Forecast purchase and sales transactions for crude oil and oil products are designated as the hedged items.
In case of refinery margin hedges, the product crack spread is designated as the hedged item, buying Brent crude oil on a fixed basis and selling the product on a fixed basis. The crack spread is a separately identifiable component and can therefore represent the specific risk component designated as hedged item.
Hedge ineffectiveness can arise from timing differential between derivative and hedged item delivery and pricing differentials (derivatives are valued on the future monthly - or other periods - average quotations and sales/purchases are valued on prices at the date of transaction/delivery).
Nominal and fair values of derivatives designated and effective as hedging instruments
2022
Forecast
purchases
Forecast
sales
Total
Nominal value
-
83.67
83.67
Below one year
-
83.67
83.67
More than one year
-
-
-
Fair value - assets
-
-
-
Fair value - liabilities
-
1.20
1.20
Cash flow hedge reserve (before tax)
-
(1.20)
(1.20)
2021
Forecast
purchases
Forecast
sales
Total
Nominal value
-
631.84
631.84
Below one year
-
631.84
631.84
More than one year
-
-
-
Fair value - assets
-
21.10
21.10
Fair value - liabilities
-
42.56
42.56
Cash flow hedge reserve (before tax)
-
(21.46)
(21.46)
Cash flow hedging - Impact of hedge accounting
2022
Forecast
purchases
Forecast
sales
Total
Cash flow hedge reserve as of January 1, 2022 (net of tax)
-
(18.03)
(18.03)
Gains/(losses) recognized in OCI
(84.45)
57.15
(27.30)
Amounts reclassified to income statement
-
(36.89)
(36.89)
Amounts transferred to cost of non-financial item
84.45
-
84.45
Tax effects
-
(3.24)
(3.24)
Cash flow hedge reserve as of December 31, 2022 (net of tax)
-
(1.01)
(1.01)
Hedge ineffectiveness recognized in income statement
(8.36)
-
(8.36)
2021
Forecast
purchases
Forecast
sales
Total
Cash flow hedge reserve as of January 1, 2021 (net of tax)
(11.91)
86.27
74.36
Gains/(losses) recognized in OCI
57.22
(131.60)
(74.38)
Amounts reclassified to income statement
-
7.43
7.43
Amounts transferred to cost of non-financial item
(43.04)
-
(43.04)
Tax effects
(2.27)
19.87
17.60
Cash flow hedge reserve as of December 31, 2021 (net of tax)
-
(18.03)
(18.03)
Hedge ineffectiveness recognized in income statement
-
(2.78)
(2.78)
For “Forecast purchases” the hedge ineffectiveness is included in line item “Purchases (net of inventory variation)” in the income statement. The hedge ineffectiveness and recycling of “Forecast sales” for hedges where a risk component of the non-financial item is designated as the hedged item in the hedging relationship are shown in line item “Sales revenues” in the income statement.
European Emission Allowances
All OMV Petrom’s business segments are exposed to fluctuation in the price of carbon under the EU Emission Trading Scheme (ETS). European Emission Allowance purchases are always executed in due time and it is OMV Petrom’s highest priority to fulfill all legal obligations under the ETS. OMV Petrom monitors price risks from emission allowances and manages it using derivative instruments traded bilaterally on the secondary market (so-called over-the-counter or OTC transactions).
Foreign exchange risk management
Because OMV Petrom operates in many currencies, the corresponding exchange risks are analyzed. OMV Petrom is mostly exposed to the movement of the US dollar and Euro against Romanian Leu. Other currencies have only limited impact on cash flows and operating result.
Derivative financial instruments may be used where appropriate to hedge the risk associated with foreign currency transactions, in case the fluctuation in USD/RON or EUR/RON currency rates might negatively impact the Company’s cash flows.
Foreign currency sensitivity analysis
The carrying amounts at the reporting date of foreign currency denominated monetary assets and liabilities of OMV Petrom, which induce sensitivity to RON/EUR and RON/USD exchange rates in the financial statements, are as follows:
RON equivalent of EUR denominated balances (million)
RON equivalent of USD denominated balances (million)
December 31, 2022
December 31, 2021
December 31, 2022
December 31, 2021
Assets
1,946.90
1,514.77
248.04
214.71
Liabilities
1,142.89
1,196.08
518.42
376.64
Net assets/(liabilities) in the statement of financial position
804.01
318.69
(270.38)
(161.93)
Adjustments for foreign currency derivatives
(0.82)
3.10
251.96
181.92
Net currency exposure
803.19
321.79
(18.42)
19.99
The following table details the Company’s sensitivity to a 10% increase and decrease in the USD and EUR against RON. The sensitivity analysis includes outstanding foreign currency denominated monetary items and adjusts their translation at the year-end for a 10% change in foreign currency rates. A positive number below indicates an increase in total comprehensive income before tax generated by a 10% currency fluctuation and a negative number below indicates a decrease in total comprehensive income before tax with the same value.
+10% increase in the foreign currencies rates
Impact for EUR denominated items, in million RON (i)
Impact for USD denominated items, in million RON (ii)
2022
2021
2022
2021
Profit/ (Loss)
80.32
32.18
(1.72)
4.15
Other comprehensive income
-
-
(0.12)
(2.15)
-10% decrease in the foreign currencies rates
Impact for EUR denominated items, in million RON (i)
Impact for USD denominated items, in million RON (ii)
2022
2021
2022
2021
Profit/ (Loss)
(80.32)
(32.18)
1.72
(4.15)
Other comprehensive income
-
-
0.12
2.15
(i) This is mainly attributable to the exposure to EUR of derivative financial assets, loans to subsidiaries, trade receivables, trade payables, lease liabilities and derivative financial liabilities at the year-end.
(ii) This is mainly attributable to the exposure to USD of trade receivables, cash and cash equivalents, other financial assets, trade payables and other financial liabilities at the year end.
The effect in equity is the effect in profit or loss before tax and other comprehensive income, net of income tax (16%).
The above sensitivity analysis of the inherent foreign exchange risk shows the translation exposure at the end of the year; however, the cash flow exposure during the year is continuously monitored and managed by the Company.
Interest rate risk management
To facilitate management of interest rate risk, the Company’s liabilities are analyzed in terms of fixed and variable rate borrowings, currencies and maturities. Currently, OMV Petrom has limited exposure to this risk.
The sensitivity analysis below has been determined based on the exposure to interest rates for borrowings at the reporting date. For floating rate liabilities, the analysis is prepared assuming the the amount of liability outstanding at the reporting date was outstanding for the whole year. A 1% increase or decrease represents management’s assessment of the reasonably possible change in interest rates (with all other variables held constant).
Analysis for change in interest rate risk
Balance as at
Effect of 1% change in
interest rate, before tax
December 31, 2022
December 31, 2021
December 31, 2022
December 31, 2021
Short term borrowings
1,881.79
1,866.51
18.82
18.67
Long term borrowings
-
16.49
-
0.16
In 2022 and 2021, there was no need for hedging the interest rate risk, hence no financial instruments were used for such purpose.
Counterparty Credit Risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations or on its financial standing resulting in financial loss to the Company. The main counterparty credit risks are assessed, monitored and managed using predetermined limits for specific countries, banks and business partners. On the basis of creditworthiness, all counterparties are assigned maximum permitted exposures in terms of credit limits (amounts and maturities), and the creditworthiness assessments and granted limits are reviewed on a regular basis. For all counterparties, depending on their liquidity class, parts of their credit limits are secured via liquid contractual securities such as bank guarantee letters, credit insurance and other similar instruments. The credit limit monitoring procedures are governed by internal guidelines.
The Company does not have any significant credit risk concentration exposure to any single counterparty or any group of counterparties having similar characteristics, besides the members of its Group. The Company’s cash and cash equivalent is primarily invested in banks with rating at least BBB- (S&P and Fitch) and Baa3 (Moody’s).
Liquidity risk management
For the purpose of assessing liquidity risk, budgeted operating and financial cash inflows and outflows are monitored and analyzed on a monthly basis in order to establish the expected net change in liquidity. This analysis provides the basis for financing decisions and capital commitments. To ensure that the Company remains solvent at all times and retains the necessary financial flexibility, liquidity reserves in form of deposits and committed credit lines are maintained. The maturity profile of the Company’s financial liabilities is presented in Note 15.
Impact of Ukraine conflict
The geopolitical context driven by the ongoing conflict in Ukraine had no significant negative impact on the financial statements as of December 31, 2022, in the context of exceptionally high commodity prices and supported by our equity position across the value chain, with the Petrobrazi refinery on the oil value chain and the Brazi power plant on the gas value chain.
  • 34. REMUNERATION GROUP AUDITOR
In 2022, the statutory auditor Ernst & Young Assurance Services SRL had a contractual audit fee of EUR 576,534 (2021: EUR 537,535) for the statutory audit of the standalone and consolidated annual financial statements of the Company and of its Romanian subsidiaries and associates. Services contracted with the statutory auditor other than audit services were of EUR 442,390 , representing mainly services in relation to the simplified prospectus prepared by the OMV Petrom S.A. for the issuance of new shares in the context of the share capital increase carried out during 2022, as well as other assurance services in relation to certain reports issued by the Company and its subsidiaries that are not prohibited by Article 5(1) of Regulation (EU) No. 537/2014 of the European Parliament and of the Council (2021: EUR 112,510).
Other Ernst & Young network firms performed audit services for the OMV Petrom subsidiaries in amount of EUR 68,167 (2021: EUR 68,167) and non-audit services for the Company and its subsidiaries that are not prohibited by Article 5(1) of Regulation (EU) No. 537/2014 of the European Parliament and of the Council in amount of EUR 33,000 (2021: EUR 28,942).
  • 35. SUBSEQUENT EVENTS
There are no significant events subsequent to the reporting date.
These financial statements, comprising statement of financial position, income statement, statement of comprehensive income, statement of changes in equity, statement of cash flows and notes, were approved on March 16, 2023
Christina Verchere
Chief Executive Officer
President of the EB
Alina Popa
Chief Financial Officer
Member of the EB
Christopher Veit
Member of the EB
Exploration and Production
Franck Neel
Member of the EB
Gas and Power
Radu Căprău
Member of the EB
Refining and Marketing
Gabriela Mardare
Vice President Finance
Nicoleta Drumea
Head of Financial Reporting
1 The base for the emission reduction targets are the Group’s emissions in 2019.
2 Based on World Energy Outlook 2021 report published by International Energy Agency (IEA). The sustainable development scenario (SDS) which was not included in the IEA World Energy Outlook 2022 report is a normative scenario used to model a “well below 2°C” pathway as well as the achievement of other sustainable development goals and its outcomes are close to the “announced pledges scenario” (APS).
3 Based on the World Energy Outlook 2022 report published by International Energy Agency (IEA)