April 26, 2019 / 9:05 AM / a month ago

Aker BP's first-quarter operating profit lags, more impairments may come in second quarter

OSLO (Reuters) - Norway’s Aker BP, an oil firm partly owned by BP, posted on Friday a bigger than expected fall in operating earnings in first quarter, after impairments in the Ula area of the North Sea and higher exploration costs.

Chief Executive Karl Johnny Hersvik also told Reuters there could be more impairments related to “technical goodwill” at the Ula area in the second quarter.

Earnings before interest and taxes (EBIT) for the first three months fell to $286.5 million from $505 million in the same quarter a year ago, compared to $303 million (£234.8 million) expected by analysts in a Reuters poll.

The company said it booked an impairment of $68.9 million in the first quarter due to a change in expected costs and production profiles for future development in the Ula area. It had no impairments in the same quarter a year ago.

Hersvik also said the company was considering adding a new platform at the field in mid-2020s with the concept selection likely to be made by the end of this year.

The drilling of two dry wells out of three led the company to expense $90.4 million in exploration costs in the quarter, up from $54.7 million a year ago, it said.

It plans to drill a total of 15 exploration wells, including partner-operated wells, in 2019.

Aker BP’s revenues were also affected by realised oil and gas prices falling 6 percent from a year ago, while production was almost unchanged at 158,700 barrels of oil equivalents per day (boepd).

Aker BP repeated its full-year production guidance at 155,000 to 160,000 boepd.

Chief Financial Officer David Torvik Toenne said output in the second quarter could fall by about 30,000 boepd due to turnarounds at Valhall and Ula.

Production should rise by a similar volume in the last quarter once Norway’s giant Johan Sverdrup oilfield starts up, he said.

Aker BP has an 11.6 percent stake in the Equinor-operated Johan Sverdrup field, which is expected to start in November. The field’s reserves are estimated at 2.2 billion to 3.2 billion barrels.

“There are no reasons to predict earlier startup. There is still a lot of work to be done in terms of testing and commissioning,” Hersvik told a news conference, seeking to dampen some analysts’ expectations for an earlier startup.

Reporting by Nerijus Adomaitis, editing by Terje Solsvik and Darren Schuettler

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