Disciplined operational performance underpinned Maersk Oil’s second quarter profit of
USD 191m (USD 131m), positively impacted by one-off income of USD 66m. Return on Invested Capital was 18.5% (12.1%). Ongoing cost reduction, lower exploration costs and the higher average oil price (USD 50 compared to USD 46) also supported the business.
Maersk Oil’s entitlement production during the period was 284,000 boepd compared to 331,000 boepd in Q2 2016, but ahead of Q1 2017 (275,000 boepd). Production was ahead of the same period last year in Denmark, Kazakhstan, the US, Algeria and Kurdistan. In Qatar, cost reduction and higher oil prices led to fewer entitlement barrels for cost recovery. Unplanned shutdowns in Qatar and lower year on year production rates from mature fields in the UK also contributed to the reduction, with UK production being stable following well intervention campaigns. Maersk Oil’s exit from Qatar on 13 July progressed as planned.
“We continue to show quarter after quarter that our base business performs cost effectively and safely with production efficiency across our operations of more than 90% and low operating costs. Combined with the first quarter, Maersk Oil has delivered a financial performance of more than half a billion dollars’ profit over the first six months of 2017,” says Gretchen Watkins, CEO.
Maersk Oil’s major North Sea capital projects, Culzean in the UK and Johan Sverdrup in Norway, continue their strong progress. By the end of Q2, the Maersk Oil operated Culzean project’s completion rate was 55%, ahead of the expected rate of 48%. Major milestones are now complete, with the gas export and condensate pipelines laid and all three jackets installed on the field. High pressure, high temperature drilling also began in July. In Norway, fabrication, construction and drilling activities for the Johan Sverdrup oil field continue to progress in line with expectations.
Maersk Oil continues to progress the full redevelopment project for the Tyra field towards final investment decision by the end of 2017. The Danish Government’s new terms for the oil and gas industry, which helped unlock the Tyra project, is subject to Danish parliamentary approval later this year. In Kenya, Maersk Oil participated in the successful Emekuya-1 discovery, further de-risking the project. In the US, drilling of the first Jack Phase 2 well was completed, proving up additional reserves on an already strong project.
Entitlement production is expected at a level of 215,000–225,000 boepd (313,000 boepd) for the full year and around 150,000-160,000 boepd for the second half of 2017, due to Qatar exiting the portfolio in July 2017. Operational efficiency, portfolio and organisational optimisation have enabled Maersk Oil to target a breakeven oil price for 2017 onwards, excluding Qatar, of USD 40-45 per barrel.
“Execution performance on our North Sea projects provides confidence that we will deliver these key drivers of growth safely, within budget and on schedule,” says Watkins. “When Culzean and Johan Sverdrup Phase 1 reach plateau production, these developments provide growth of 60, 000 – 75,000 boepd, underpinning strong cash generation over the cycle. To date, progress on Culzean and Johan Sverdrup has been world class, but, together with our partners, we remain focused on executing the remainder of the project scopes safely and efficiently.”