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Published April 6, 2005

Petrom in 2005: significant investment and new targets to 2008

  • Petrom to invest more than EUR 1 billion up to 2008
  • Development targets will make a strong Petrom even stronger
  • Petrom to consolidate its leadership in South Eastern Europe and expand into neighboring markets

Petrom, South Eastern Europe's largest producer of oil and gas, enters 2005 with new goals. Petrom's objectives are to increase profitability and efficiency, and to set new standards in the oil and gas business in Romania. By 2008, the company plans for its profitability to be in line with the standards of the OMV group, with a return of average capital employed (ROACE) of 13%. Petrom plans to deliver a stable production of at least 200,000 to 220,000 barrels of oil equivalent (boe) per day, and hold a market share of at least 35% in Romania's marketing business, as well as a refining capacity of 8 million tons of crude per year.

Petrom CEO, Gheorghe Constantinescu, said: "Petrom is entering a new era. We have set clear targets for 2008, that we are committed to reach. Petrom will invest EUR 400 million this year alone and another EUR 400 million in 2006 to set the pace in reaching these goals."

Wolfgang Ruttenstorfer, CEO of OMV and Head of Petrom Board of Directors, added: "OMV is proud to have Petrom as part of our group, the largest oil and gas group in Central Europe. The new targets for 2008 will set Petrom on the road to profitable growth, and we are sure that Petrom will contribute positively to OMV's results from 2005."
Petrom will lead exploration and production in South Eastern Europe

Petrom will consolidate its position as the leader in the upstream business in South Eastern Europe and will be a business driven organization with the highest HSEQ standards. With currently around 1 billion boe of reserves, the company will stop the decline in production and will level at a daily production of between 200,000 and 220,000 boe, amounting to an annual production of around 80 mn boe in 2008. Until then, Petrom should produce significantly in the Caspian Region and will screen opportunities for further development in the region. By 2008, Petrom should reach a reserve replacement rate of 80%.

In 2005 production will be at the same level as last year, at 220,000 boe per day. In 2005, Petrom will invest EUR 200 million in E&P. These investments will contribute to the implementation of an extensive exploration strategy based on modern technologies such as state of the art 3D-seismic. As part of an extensive exploration program, in 2005 Petrom will undertake several hundred square kilometres of seismic exploration, as well as drill and evaluate new exploration wells. Petrom's experts, supported by international experts from OMV, are using new technologies to enhance exploration activities and the development of oil and gas fields. OMV will contribute to formulating the exploration strategy, based on its vast experience with mature fields.

Downstream operations to expand activities in neighboring countries

Petrom will strengthen its role as leader in the Romanian downstream market, in refining as well as marketing, and will further expand its business activities beyond Romanian borders. With significant investments in the marketing sector, Petrom will prepare to set new standards in quality, safety, reliability and convenience. Product sales in retail and commercial should amount to 6.5 mn t per year by 2008. Petrom will operate an efficient retail network in Romania, and improve products and services. Around 300 gas stations should operate as premium sites, offering innovative convenience shopping. The company is ready to set the pace as it is the responsibility as market leader. By summer 2005, Petrom expects to launch a new premium product. On the marketing side, Petrom plans to hold a total market share of more than 35% in Romania, by 2008.

Petrom's refineries will increase efficiency and production to meet the rising market demand for petroleum products. They plan to assure that Petrom fully controls the refining capacity for its domestic production. Petrom will invest significantly to fully comply with EU quality requirements. In addition, Petrom will develop a competitive export position and supply neighbouring markets.

Natural Gas will be the third base for Petrom

Petrom will have a focus on developing its gas business, as the energy of the future. As the number one producer of domestic gas in Romania, in 2008 Petrom will reach an annual production of 6 bcm. A sales organization is expected to market gas directly to customers and successfully support the forward integration of the gas business.

Full consolidation into OMV results by 2005

In 2005, Petrom will be fully consolidated into OMV's results. Therefore, Petrom will introduce new standards in accounting and controlling. Thus, in 2005, the company has already invested substantially in new IT, covering infrastructure and applications, and organisation services to significantly improve its business and finance processes. At the beginning of this year, Petrom started an in-depth project to analyse the current and future state of Finance, Controlling and IT, to determine the IT needs to enable a strong integration of business, finance and IT.

Health and Safety programs for employees

Petrom has started a far reaching program to introduce international best practices for the protection of the health and safety of its employees, as well as to improve its environmental standards. These programs imply raising the awareness of top and line management as the key for a good HSE performance. Petrom will seek full integration in HSEQ Management Systems and reporting with the OMV Group.

Training for Petrom's employees

At the beginning of 2005, Petrom initiated new programs to ensure a high level of qualification for its employees. In the first three months, around 2,000 Petrom employees attended specialiszedcourses, including technical, legal, IT, financial, and international economic affairs. The Human Resources Departments of Petrom and OMV together introduced a Talent Management Program for Petrom employees in order to identify and develop future Petrom top managers. The program targets young high performing employees from these business units who would like to enter a management career in Petrom.

Making a strong Petrom even stronger

Petrom CEO, Gheorghe Constantinescu, said: "We are determined to make a strong Petrom even stronger. Adding OMV's international know-how to our long-standing Romanian expertise will contribute to Petrom's traditional strengths - availability and reliability. In addition, Petrom will be set to consolidate its position as a leading factor for the Romanian economy and as a leading force on the oil and gas market in South Eastern Europe."

Background Information
Petrom SA
Petrom is the largest Romanian oil and gas group, with activities in the business segments of Exploration and Production, Refining and Petrochemicals, as well as Sales and Marketing. Petrom has estimated oil and gas reserves of 1 billion boe, refining capacity of 8 million metric tons and 600 filling stations. In 2003 the sales revenue of the group was EUR 2,031 million, EBITDA was EUR 342 million. Since December 2004 OMV, the leading oil and gas group in Central Europe holds a 51% share in Petrom. OMV is active in Refining and Marketing, Exploration and Production, Gas as well as Chemicals in 27 countries on five continents. The Romanian state holds 40.74% of Petrom shares, the European Bank for Reconstruction and Development, 2.03% and 6.23% are owned by minority shareholders.