Maersk Oil profits from cost cuts. Eyes North Sea merger options

Danish oil company Maersk Oil, set to separate from the Maersk Group, will narrow its focus on the North Sea and continue cutting costs and exploration activities in 2017.

In the financial report posted on Wednesday, Maersk Oil reported a $230 million profit for the fourth quarter of 2016, an improvement from a net loss of $2.5 billion a year ago, caused by post-tax impairments.

The company, which is the part of the Maersk Group’s Energy Division consisting of Maersk Oil, Maersk Drilling, Maersk Supply Service and Maersk Tankers, said the increase in profit was mainly due to lower operating costs, higher production efficiency, reduction of abandonment provision of $93m and a higher oil price.

Entitlement production decreased to 276,000 boepd (333,000 boepd in 4Q 2015) due to planned and unplanned shutdowns, fewer cost recovery barrels from Qatar as well as lower production from mature fields mainly in the UK and Denmark.

Operating costs excluding exploration were reduced by 19%, and exploration costs decreased by 13% compared to Q4 2015.

Investments decreased by 53% in Q4 mainly due to reductions in Qatar following the end of the FDP 2012 and reductions in the UK.

Also, Maersk Oil signed agreements to divest its interests in the non-operated UK assets Wytch Farm, Scott, Telford and Boa and the non-operated interests in the Norwegian assets Zidane and the Polarled Pipeline. The divestments are pending approval from authorities.

Outlook

Looking ahead, Maersk Oil said it would look to build on its strong position in the North Sea and work on the delivery of projects like Culzean, UK, and Johan Sverdrup, Norway. Maersk Oil has already sold its fields in Brazil and is set to leave Qatar soon, after losing the operatorship over the Al Shaheen field to France’s Total.

As for exploration, the company said it would keep it at a low level, while the focus will be on continuous cost reductions and improved production efficiencies. Portfolio management will focus on the North Sea and be based on optimal capability fit.

Furthermore, the Danish player said it would continue its strategy implementation to solidify its position “as a leading North Sea operator with international step-outs.”

The company said it would build the future business through mergers and joint ventures in the North Sea. Maersk Oil will also evaluate its portfolio outside the North Sea and focus in locations with high profitability and strong capability fit. In line with the new strategy, Maersk Oil will prepare for separation from A.P. Moller – Maersk.

According to the parent company Maersk Group, the Energy Division will continue to be operated and managed individually with the aim of finding sustainable structural solutions before the end of 2018.

As previously reported, Maersk in September 2016 confirmed it was working to split the company into two separate entities: one focused on shipping and logistics, the other on oil and gas sector, with its growth plan to focus on transportation and logistics services as an integrated Transport & Logistics company.

Offshore Energy Today Staff