Maersk Oil, a Danish oil company, part of the Maersk Group, reported a profitable second quarter of 2015 and a 30% hike in production.
In the quarter, the oil company’s profit was $137 million, compared to a net loss of $1.4 billion in the corresponding quarter of 2014. Worth noting, last year’s second quarter was negatively impacted by $1.7 billion impairment on Brazilian assets. The company’s underlying profit fell to $217 million from $315 million a year ago.
The company has explained that this year’s result was positively impacted by increased production, lower costs due to the cost transformation programme and lower exploration costs but negatively impacted mainly by the lower oil price and USD 80m impairment from relinquishing Iraqi (Kurdistan) licenses.
The entitlement production increased by 30% to 306,000 boepd (235,000 boepd) at a 44% lower average oil price of USD 62 per barrel. The increased production was a result of a higher share of production from Qatar due to the lower oil price as well as improved operational performance and production from new projects, in particular in the UK. The company shared on Twitter that the production grew to the highest level since 2011.
— Maersk Oil (@maerskoil) August 13, 2015
As a response to the lower oil price, Maersk Oil has initiated activities to improve profitability and position Maersk Oil for growth, the company said in a statement on Thursday.
The company has said that the current asset portfolio is being evaluated and costs are being reviewed across all categories, both internal and from subcontractors.
Maersk Oil expects that the net operating costs excluding exploration will be reduced with 10% by the end of 2015 compared to the 2014 baseline. This is in line with the targeted 20% reduction by the end of 2016,“ the company said.
Cash flow from operating activities was USD 611m (USD 718m last year); lower than last year mainly due to the lower oil price. Cash flow used for capital expenditure was USD 502m (USD 546m)
Full year guidance
Maersk Oil now expects a positive underlying result for 2015 significantly below 2014 (USD 1.0bn) at oil prices in the range 55-60 USD per barrel, the company said on Thursday. The previous expectation was a small positive underlying result. The low oil price is somewhat offset by the effect of cost savings, strong production performance and deferred tax income in the UK.
The company’s entitlement production is now expected at around 285,000 boepd (251,000 boepd last year) from previous guidance of above 265,000 boepd. The exploration expenses are unchanged expected to be approximately USD 0.7bn (USD 765m last year) for the year.