Neptune's Earnings Fall, Output up in Q2

UK independent Neptune reported August 27 a halving of its Q2 2020 pretax earnings excluding exploration (Ebitdax), which fell from  $430.9mn in Q2 2019 to $214.7mn. The drop was despite a modest increase in output, from 145,600 barrels of oil equivalent (boe)/day to 149,600 boe/d, as the average price received fell sharply owing to the Covid-19 pandemic. Including the effects of hedging, its average gas sales price fell from $5.0/'000 ft³ to $3.3/'000 ft³.

Executive chairman Sam Laidlaw said: "As the world contends with the Covid-19 pandemic, global economic recovery is unlikely to be smooth or predictable. Concerns about a second wave of the pandemic will restrict the return to normal life and may therefore impact oil demand and price recovery."

But he said that Neptune's strength lay partly in its readiness for the low-carbon future, including its investment in hydrogen, offshore electrification and carbon capture and storage projects. "Our differentiated, long-life, low cost and lower carbon intensity portfolio enables us to generate value, even in a lower price environment, while we retain material opportunities for longer-term growth," he said.

CEO Jim House said the company had also taken "prudent measures to protect our people, maintain our operations and strengthen our balance sheet," with changes to the business in the first half, which will improve its position even at the low prices today. Operating costs have fallen from $10.80/boe to $8.50/boe. And while the focus now is on short term operations, in future, its discoveries in Norway and in the UK "provide us with material, value-creating growth opportunities that will strengthen our portfolio going forward."