NAM 2017 Profits Decline
The largest Dutch gas producer Nederlandse Aardolie Maatschappij (NAM) reported April 12 that its 2017 turnover was €3.4bn ($4.2bn) and net profit was €497mn, down 5.5% year on year.
The profit was thanks to earnings from its small gas and oil fields, as earnings from the Groningen field tumbled. NAM reported 2016 turnover of €3.5bn and a profit of €526mn. In former times, Groningen was a cash-cow for NAM and its parent companies: Anglo-Dutch Shell and US ExxonMobil.
One-off gains were generated in 2017 by the sale of a pipeline and a positive price arbitration ruling with respect to its sales to leading Dutch gas marketer GasTerra, plus a one-off tax benefit. (Shell and Exxon each own a 25% interest in GasTerra, with the other 50% being state-owned). GasTerra buys all the Groningen output.
NAM said that production restrictions and the higher production costs arising from measures to reduce earthquakes and compensate affected property-owners affected Groningen, its largest gas field in which NAM has a 60% operating stake and the state's EBN petroleum holding company 40%. "Due to the recent announcement by the minister of economic affairs and climate regarding a further reduction of Groningen production [from 21.6bn m3/yr now to 12bn m3/yr in around 2021/22, and to zero by 2030], the results will come under further pressure," the company said.
NAM said it contributed just over €2.8bn to Dutch central, regional and local governments – chiefly the former. Its workforce declined to 1,482 at end-2017, from 1,598 a year earlier.
In response to press reports earlier this year that Shell and Exxon were looking to limit their financial commitments to NAM, vigorously denied by Shell, NAM said April 12: "In light of the uncertainties and obligations with regard to NAM's business in Groningen, NAM has a strong focus on cash generation and cash position in order to remain financially sound in order to be able to meet the financial obligations. NAM's operating cash flow in 2017 amounted to more than €1.1bn." It also insisted that its small fields are expected to generate a significant positive cash flow in the coming years "and are profitable."