Maersk Oil in Profit, Group Has 'Tough' 2016

Denmark’s AP Moeller-Maersk February 8 described 2016 as a “difficult year, with headwinds in all our markets." The company announced last September it will split off its energy division. The group reported a loss of $1.9bn negatively impacted by 2016 impairments of $2.7bn in Maersk Supply Service and Maersk Drilling as a result of an expected weaker outlook, but said its underlying profit was in line with its guidance at $711mn.

The $1.9bn loss however contrasted with a 2015 profit of $925mn. Among group priorities for 2017 are “finding structural solutions for each of our oil and oil-related businesses.”

Maersk Oil recorded a profit of $477mn, compared with a 2015 loss of $2.1bn). Underlying profit was $497mn (up from $435mn in 2015), helped by operating cost reductions of 36% – so ahead of its targeted 20% for the period 2014-2016 – as well as lower exploration costs, higher production efficiency and reduction of abandonment provision of $93mn. This was partly offset by the effect of the lower average oil price realised of $44/b in 2016 versus $52/b in 2015.

Maersk-operated Tyra East platform in the Danish North Sea (Photo credit: Maersk Oil)

The group’s guidance is for an underlying profit at AP Moller- Maersk above 2016, namely $711mn this year; the energy division is expected to contribute underlying profit of $0.5bn, with Maersk Oil the main contributor.

Entitlement production is expected at a level of 215,000-225,000 boe/d (2016: 313,000 boe/d) for FY2017 and some 150,000-160,000 boe/d for 2H 2017 after its involuntary exit from Qatar's al Shaheen oil field in mid-July. Maersk's 30% stake in the offshore concession was formally allocated in mid-2016 to Total for 25 years beginning July 14, 2017. The Danish firm, which invested in the largest carbon mitigation project in the Mideast (UN CDM) by injecting gas in the oil reservoir, rather than flaring the gas, had earlier learned from Doha it would have to compete to retain the concession.

Maersk Oil's exploration costs are expected to be around the 2016 level of $223mn.

Maersk Oil recently said it expects to axe 160 jobs and is still working on the basis that it will close its Tyra offshore gas field and hub, which is of strategic importance to Denmark, in October 2018. But it is working hard to develop the $4.5bn major UK Culzean field development for first gas in 2019.

Mark Smedley