Higher oil prices push Maersk Oil back to black in 1Q

Danish oil company Maersk Oil has recorded a profit in the first quarter of 2017, stating higher oil prices as one of the main reasons. 

Maersk Oil said that the company’s underlying profit was $328 million opposed to a loss of $29 million for the 1Q 2016. This is understandable as an average oil price in the first quarter this year was around $54 a barrel – compared to $34 a barrel a year ago – boosted by the OPEC output cuts agreed in late 2016.

Revenue for the first quarter of 2017 saw a rise of over $300 million from $1.03 billion in the first quarter of 2016 to $1.37 billion in this year’s first quarter.

Maersk’s reduced operating expenses by 31 percent, excluding exploration costs and costs related to purchasing oil and gas for resale, to $389 million compared to the $560 million for the same period last year.

Cash flow from operating activities was a positive $551 million with CAPEX for the quarter being $282 million, primarily directed at the Culzean in the UK and Johan Sverdrup in Norway.

The reduced entitlement production of 275,000 boepd, compared to 350,000 boepd in 1Q 2016 was primarily due to Qatar, where higher oil price and lower operating costs led to fewer entitlement barrels for cost recovery.

Also, the cessation of production in 2Q 2016 from the Janice field in the UK and natural decline from mature assets contributed to a decline in production.

Developments

Maersk Oil highlighted the deal with the Danish Government for the full redevelopment plan for the Tyra facilities heading towards project sanction by the end of 2017. The company believes that Tyra redevelopment would lead to an increase of the resources in Denmark and extend production for decades to come.

Culzean gas field in the UK operated by Maersk Oil is progressing with drilling activities and facilities installation work as planned and has a 40 percent completion rate. It remains on budget, with first oil expected in 2019.

Also in the UK, the Flyndre development started production on March 26 and is ramping up towards a production of 10,000 boepd.

As far as its Norwegian developments are concerned, Maersk Oil is participating in the development of the Johan Sverdrup oil field. Like Culzean, it is at 40 percent of completion and within budget with first oil expected in 2019.

Furthermore, the Johan Sverdrup Phase 2 facilities concept, which will increase production from the field from 440,000 boepd to 660,000 boepd, passed through the select decision gate into the define phase in late March.

Adapting to lower oil prices

Providing its insight into the current market situation, Maersk Oil said that the global demand and supply appeared to be re-balancing but warned that significant uncertainty remains in the oil price outlook.

The company added that its portfolio, organization and cost level had been adapted to a lower oil price environment. This allowed Maersk to improve the break-even oil price from $55-60 per barrel in 2014 to below $40 per barrel in 2016 and with a target of $40-45 per barrel excluding Qatar for 2017 and beyond.

As Offshore Energy Today reported in June last year, Maersk Oil will leave Qatar as the operatorship over the giant Al Shaheen offshore oil field will be taken over by France’s Total, starting July 2017.

Offshore Energy Today Staff