Maersk Oil makes ‘unsettling’ changes
Danish oil firm Maersk Oil on Thursday outlined plans to review the scope and scale of its headquarters organization over the next three months. The to-be CEO Gretchen Watkins said the changes could be unsettling for the employees.
The move is a response to the recent outcome of the Maersk Group’s strategic business review and Maersk Oil’s exit from Qatar in 2017.
To remind, the Copenhagen-based Maersk Group last week said it would split the company into two separate entities: one focused on shipping and logistics, the other on oil and gas sector.
In a statement on Thursday, Maersk Oil said that despite a solid operational business performance, which saw the company return to positive earnings in the second quarter of 2016, Maersk Oil needs to continue to adjust the business to the continued low oil price, changes to both the portfolio and to long-term growth plans.
The review will be completed during the remainder of 2016. However, an initial phase to reconfigure the company’s Growth organization and reduce the Technology and Projects group will be delivered by the end of October, subject to statutory works council consultation and local labor laws.
As a result of the changes, Ebbie Haan, Chief Growth Officer, will leave Maersk Oil on October 7, 2016.
Also, to remind, Maersk Oil’s production in the second quarter rose due to the contribution from its Al Shaheen field in Qatar. However, the company is set to lose the field once its license there expires in July 2017.
Al-Shaheen oil field is among the world’s largest oil fields. It has been producing oil for 22 years, yet holds the potential to produce a few-fold of the oil it has produced so far, Qatar Petroleum recently said. It currently produces around 40% of Qatar’s crude oil, at around 300,000 barrels per day.
However, Maersk Oil will not be there to see the field produce all of the available resources as its bid to extend the license was inferior to the one placed by the French oil giant Total, which will take over the operations there next year.
The Danish company has said the financial impact of not continuing in Qatar is limited as a new contract would have been on less attractive terms compared to the existing terms. However, Maersk Oil said it would lose 40% of its entitlement production and revenue at the current oil price.
Unsettling, but necessary
Commenting on the decision to make organizational changes , Maersk Oil CEO-designate, Gretchen Watkins, said on Thursday: “We fully recognize this announcement will be unsettling for our employees. By taking swift action, we hope to minimize uncertainty and ensure focus continues, near term, on safe and efficient operations and continued execution of our world-class project portfolio in the North Sea. We are performing well in spite of the market, and we want that to continue.”
Watkins, to take over as CEO on October 1, continued: “Maersk Oil’s commitment to growing in the next few years is underscored by $1-2 billion in annual capex to deliver the exciting Culzean and Johan Sverdrup projects. They will deliver 100,000 barrels of new production to Maersk Oil. We have a bright future as the cornerstone business in the new Maersk Energy.”
Maersk Oil did not say how many employees would be affected by these changes.
To remind, announcing the split last week, Maersk Group said its focus would be put on building on the Group’s unique position within container transport and port operations, and significant position in supply chain management and freight forwarding.
“Transport & Logistics will leverage its leading position through new product offerings, digitalised services and individualized customer solutions,” Maersk said in a statement last Thursday.
The oil business, however, is a different story. The company expects the energy part of the business, covering oil and gas production, drilling and supply services, will need different solutions for future development including separation of entities individually or in combination from A.P. Møller – Mærsk A/S in the form of joint-ventures, mergers or listing. Depending on market development and structural opportunities, the objective is to find solutions for the oil and oil related businesses within two years, Maersk said.
Transport & Logistics will consist of Maersk Line, APM Terminals, Damco, Svitzer and Maersk Container Industry based on a one company structure with multiple brands.
As for the Energy Division, it will consist of Maersk Oil, Maersk Drilling, Maersk Supply Service and Maersk Tankers.
Long term growth in energy demand and sharp reductions in investments in the global E&P industry in recent years, leading to an expected reduction in oil supply in the coming years provide opportunities to grow Maersk Oil based on the company’s key technical competencies, Maersk said.
Sharper focus for oil, limited offshore investments
The company said last week that Maersk Oil oil would adjust its current strategy to focus its portfolio in fewer geographies to gain scale in basins, particularly in the North Sea, where it can leverage its strong capabilities within subsurface modeling, well technology and efficient operations. Maersk Oil will aim to strengthen its portfolio through acquisitions or mergers.
Following this announcement, several reports have emerged claiming that Maersk Oil is looking to buy Shell’s North Sea assets. However, this has yet to be confirmed.
Further, the plan is for Maersk Oil to mature existing key development projects, while keeping exploration activities and expenses at a low level. While the strategic focus will be reflected in a disciplined capital allocation, investments in strategic projects already sanctioned or under development will continue as planned, the parent company said.
“Maersk Drilling, Maersk Supply Services, and Maersk Tankers will continue to optimize their market position and operation with the existing fleet and order book. Additional investments in the Group’s offshore service businesses and Maersk Tankers will be limited,” Maersk said.
Maersk Group will in fourth quarter 2016 be hosting a Capital Markets Day, where Group Management and the management teams for Transport & Logistics and Energy will provide further insights into the reorganization and future strategy.
Offshore Energy Today Staff