Maersk Oil sinks to red over low oil price

Danish oil and gas company Maersk Oil posted a net loss for the first quarter of 2016 mainly due to low oil price. 

The company on Wednesday reported a loss of $29 million in the first quarter of 2016, compared to a profit of $208 million in the same period last year. The oil company’s revenues for the quarter amounted to $1.032 billion, versus $1.433 billion in the corresponding period in 2015.

According to the company, the lower result was mainly due to 37% lower average oil price of $34 per barrel versus $54 per barrel in 1Q 2015 with Brent oil price reaching a low in January of $27 per barrel. The market has since then seen a slow but increasing upward trend, Maersk Oil said.

Partly offsetting the lower result was a 15% higher entitlement production of 350,000 boepd, compared to 304,000 boepd, and 65% lower exploration costs of $57m, versus $162m in the prior-year quarter.

Maersk Oil explained that the increased entitlement production came primarily from the UK increase of 39% where Golden Eagle continues to ramp up. Further, Qatar increased by 19% due to the decreased oil price giving more barrels for cost recovery as well as from Jack in the US ramping up during 2015 to an entitlement production of 9,000 boepd. The increases were partly offset by the natural field decline in Denmark by 13%, the company stated.

In addition, Maersk Oil said that 1Q 2015 was positively impacted by a deferred tax income of $170m due to reduction of the UK tax rate.

Maersk Oil reduced operating expenses by 21% excluding exploration costs, to $570m, compared to $724m in the year-before quarter. The first 12% was reached by end 2015 and further initiatives to address cost reductions are being executed, including extensive re-contracting to take advantage of the softening market as well as strengthening of the procurement process, Maersk Oil stated.

Furthermore, the total number of positions removed since the cost transformation process started has now exceeded 1,300 and Maersk Oil has implemented a salary freeze in 2016, reduced travel expenses and initiated the outsourcing of administrative functions to a shared service centre in India.

Maersk Oil said it was striving to secure the lowest possible break-even oil price, previously announced at a level around $45-55.

Offshore Energy Today Staff