BUCHAREST - Romanian oil group Petrom (SNPP.BX), which is 51 percent-owned by Austria's OMV, plans a share issue which might be worth 1 billion euros ($1.44 billion), a government source said on Friday.

(Petrom's) capital hike might amount to some 1 billion euros, one government source told Reuters, adding the government was willing to participate.

The economy ministry owns 20.6 percent of Petrom and a 20.1 percent stake is owned by Fondul Proprietatea, a fund set up by the state to compensate Romanians whose properties were seized under communism. The rest is listed on the Bucharest bourse.

Contacted by Reuters, Petrom declined to comment.

Earlier in the day, OMV's chief executive, Wolfgang Ruttenstorfer, said in Vienna the Austrian company would support such a move, needed to address Petrom's growth potential.

Market watchers have said a share capital hike was to be preferred over other funding alternatives and that it would be positive from the perspective of a bigger free float.

Petrom shares were up roughly 2 percent on the day after the announcement, trading at 0.2590 lei at 1530 GMT, outperforming the blue chip .BETI, which rose 0.36 percent.

By raising the share capital they would ensure cheap funding for investment since it would be more expensive to seek funds from banks, said a trader in Bucharest.

On the other hand ... given the good nine-month results they reported I would have thought their need for external funding isn't that big.

Earlier this week Petrom said it would not rule out the possibility of seeking access to fresh equity or other financing options.

The company reported a 2 percent fall in its third-quarter net profit to 615 million lei, beating market expectations with the help of oil price hedging gains. ($1=.6949 euros) (Reporting by Luiza Ilie; Writing by Marius Zaharia; Editing by Greg Mahlich)