The share price of Austrian oil and gas company OMV AG (OMV.VI) surged in early trade Wednesday, after the company posted second-quarter earnings comfortably above analysts' estimates and announced it has given up its year-long takeover pursuit of Hungarian peer MOL Nyrt. (MOL.BU).
At 0729 GMT, OMV's shares traded up 6.2%, or EUR2.64, at EUR44.96, in an overall Vienna ATX 20 index which was up 2.9%.
Earlier Wednesday, OMV said its second-quarter net profit rose 66% on the year to EUR684 million, from EUR411 million, driven by a higher crude oil price and downstream revaluation gains, which more than offset lower production and a slightly weaker refining margin. This beat the EUR556.2 million average estimate of seven analysts polled by Dow Jones Newswires.
OMV separately also said it has given up its intention to acquire Hungarian peer MOL, due to resistance to the takeover by the European Commission.
OMV said September it would offer shareholders of MOL 32,000 Hungarian Forints per MOL share, provided certain technical impediments were removed.
But MOL's management vehemently fought the takeover attempt through an extensive share buyback program and the offer never materialized.
The merger plan was being tried by the European Commission's competition office, which in its preliminary findings had expressed serious concerns over the proposed merger.
OMV Wednesday said the European Commission "has indicated that it would not accept commitments that OMV had proposed; since other commitments would be unacceptable to OMV, OMV has decided to withdraw the merger notification filed with the European Commission."
It added that: "Further pursuit of proposed combination with MOL under given conditions would be against OMV's economic and strategic rationale."
Erste Bank analyst Jakub Zidon said the cancelled merger plan as well as the better-than-anticipated second-quarter results will be rated positive by investors.
"The MOL-offer retraction could be expected, as the merger wouldn't be possible under the current circumstances. But it is still positive on the share price side," Zidon said.
Zidon said the results were very good, but ultimately driven by the high crude price in the second quarter, which been declining since then.
"OMV is very sensitive on the oil price, so I wouldn't take the second-quarter results only positive," Zidon said, pointing to a revaluation gain of around EUR150 million as a result of the high crude oil price that won't be repeated in coming quarters.
"The next two quarters will be weaker, but 2008 will still be a very good year," Zidon said. He maintains a buy recommendation on the shares, with price target EUR59.7.
OMV's core indicator, adjusted earnings before interest and taxes, or clean EBIT, rose 86% in the second quarter, to EUR1.08 billion, from EUR584 million, and was also above analysts' estimate of EUR915.7 million.
The company provided no specific 2008 guidance, but repeated the crude oil price and the dollar-euro exchange rate will remain highly volatile throughout the year; and the full-year refining margin will be slightly below 2007's level.
OMV's second-quarter refining margin was $6.76 a barrel, up from $4.24 in the first quarter, but down from $7.05 in the year-ago quarter. OMV's production, at 311,000 barrels of oil equivalent a day, fell by 11,000 boe/d in the period, against both the previous quarter and the year-ago quarter.
OMV's sales grew 52% in the quarter to EUR6.97 billion, from EUR4.58 billion a year earlier, helped by the high oil price. Analysts had pegged sales at EUR6.86 billion.