Denmark: Maersk Group 1st Quarter 2010 Report


Maersk Drilling, Maersk FPSOs and Maersk lng

Demand for drilling rigs grew throughout the first quarter.Despite rising demand, the market for jack-up rigs remained negatively affected by the addition of new rigs, while the market for deepwater semi-submersibles was good. Three of the Group’s drilling rigs were unemployed in thefirst quarter of 2010. Maersk Drilling has entered into contracts or received letters of intent for all three rigs, startingin the second and third quarters, respectively, and therefore expects the whole fleet to be employed during most of 2010. Maersk Drilling took delivery of a semi-submersible rig in April. Its employment remains the subject of negotiations with several parties.

Maersk Supply Service

The market for anchor handling and supply vessels stabilised during the first quarter with slightly increasing activity and rates. The addition of new vessels led to continued pressure on rates, however. Maersk Supply Service has considerable contract coverage in 2010, although a number of vessels are employed in the spot market. In the first quarter, Maersk Supply Service took delivery of an anchor handling vessel, while another three vessels are expected to be delivered in 2010. The segment result was USD 60 million in the first quarter of 2010, compared to USD 68 million in the same period of 2009.

In the first quarter of 2010, Svitzer remained negatively affected by low activity in the port towage market, while Svitzer’s other markets saw slightly increasing demand. Norfolkline achieved a positive segment result of USD 19 million in the first quarter 2010, compared to a negative result of USD 9 million in the same period of 2009. The 2010 result was positively affected by a reversal of impairment losses of USD 25 million. As planned, the sale of Norfolk Holdings B.V. against payment in liquid funds and an approximately 31% share holding interest in DFDS A/S is awaiting approval by the competition authorities. It is still expected to be carried out in the second quarter of 2010, making DFDS A/S an associated company of A.P. Mřller – Mćrsk A/S.


Production

The Group’s share of oil and gas production was 35 million barrels of oil equivalents in the first three months of the year, compared to 43 million barrels in the same period of 2009. The 20% decline was mainly due to a lower share of production in Qatar. In Qatar, the expansion of the Al Shaheen Field, including new platforms, is largely complete. Production is still affected by the authorities’ production restrictions, and total oil production in the first quarter was slightly lower than in the same period of 2009, while the Group’s share of production, at 15 million barrels, was 37% lower. The decline in the Group’s share is primarily attributable to a lower share to cover investments and costs as well as higher average oil prices. The future production level is being discussed with Qatar Petroleum in view of the current production results and the authorities’ production restrictions, etc.

In the Danish part of the North Sea, development activities at the Halfdan Field are more than 80% completed. At 7 million barrels in the first quarter, the Group’s share of the total oil production was 15% lower than in the same period of 2009, primarily due to distribution of oil liftings across periods. Gas production was approximately 20% higher than in the same period of 2009, reflecting higher customer take.

In Great Britain, development activities are still in progress at the Dumbarton and Gryphon Fields, among others. The Group’s share of production was 5 million barrels in the first quarter or 43% more than in the same period of 2009, mainly due to higher production at the Dumbarton, Gryphon and Janice Fields.

In Algeria, production is still subject to the authorities’ production restrictions, and at 2 million barrels the Group’s share of production in the first quarter was 25% lower than in the same period of 2009, mainly due to distribution of oil liftings across periods. Development of the El Merk Fields will continue in 2010.

In Kazakhstan, the share of oil production amounted to 0.3 million barrels in the first quarter of 2010, somewhat more than in the same period of 2009, primarily due to further expansion of the Dunga Field.


Exploration and new business areas

In the first quarter of 2010, drilling of four exploration and appraisal wells in which the Group has a share was completed. During the period the Group concluded agreements for 63 new exploration licences in the USA (Gulf of Mexico), subject to authority approval and bought a 25% stake in the Jack development project. Furthermore, an agreement was concluded, subject to approval by the authorities, for the acquisition of a 20% stake in a Brazilian licence including drilling of four planned exploration wells in 2010-2011. The Group announced a number of discoveries in 2009 and 2010, most recently a gas discovery (Luke) in the Danish sector of the North Sea. The commercial potential is being assessed. In Great Britain, further appraisal drillings have been conducted regarding the Hobby discovery, and the work of establishing a combined development plan for the Golden Eagle, Hobby and Pink discoveries is expected to be completed around the end of the year. Appraisal drilling of the Culzean gas discovery is expected to be launched in mid-2010. In Angola, drilling of the second well (Chissonga-2) was completed at the end of April. The drilling showed positive results, and assessments are being carried out to clarify its commercial potential. Appraisal drilling is expected to commence in the USA (the Buckskin discovery in the Gulf of Mexico) in the second quarter of 2010. Overall, Maersk Oil is involved in drilling of 12 exploration or appraisal wells that are either in progress or planned for 2010 in Angola, Brazil, Norway, Oman, Great Britain and the USA. In addition, drilling of an as yet unspecified number of wells is expected to be launched in 2010. Total exploration costs in the first quarter of 2010 amounted to USD 143 million compared to USD 171 million in the same period of 2009.

[mappress]