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Aker BP Reduces Investment Program

Gasoil News - Published on Fri, 03 Apr 2020

Image Source: Aker BP Coronavirus Lockdown
Aker BP has updated its investment program and financial framework in order to secure additional financial optionality in response to the high uncertainty caused by the COVID-19 crisis. The main changes to Aker BP’s plans are:
Non-sanctioned field development projects are put on hold. For 2020, this represents a capex reduction of 20 percent compared to previous guidance. For 2021-22 the initial estimate is a reduction in capital spend of USD 1-2 billion
Exploration spending is reduced by 20 percent in 2020, with further significant reductions planned for 2021-22
Production costs are reduced to USD 7-8/boe, down around 20 percent from previous guidance, as all non-critical activities are being postponed and the weaker NOK favourably impacts the cost level
The production guidance for 2020 remains unchanged at 205-220 mboepd

Aker BP’s original spending plan for 2020 was presented at the company’s Capital Markets Update in February and consisted of USD 1.5 billion in field developments, USD 500 million in exploration activities and USD 200 million related to in abandonment. Production costs were estimated to USD 10/boe. In response to the current challenging market conditions, Aker BP will utilize the high flexibility of its portfolio to reduce spending by postponing all non-sanctioned projects until further notice.

The planned capex in 2020 is mainly related to the projects Johan Sverdrup phase II, Ærfugl phase I and the completion of the Valhall Flank West project. These projects will continue as planned. Approximately 20 percent of the capex is however related to non-sanctioned projects, including the Hod redevelopment project in the Valhall area, and these projects are now put on hold. Consequently, Aker BP expects its 2020 capex to be reduced by 20 percent to approximately USD 1.2 billion. For 2021-22, the company expects capex to drop well below USD 1 billion.

Aker BP’s original exploration plan for 2020 consisted of 10 exploration wells. In cooperation with its partners, Aker BP has already resolved to postpone two of these wells, and together with other cost reducing measures, the company now forecasts exploration spend of approximately USD 400 million for the year. Further measures are being evaluated, including postponing additional exploration wells.

The company is also targeting a 20 percent reduction in production costs and is cancelling or postponing activities that are not necessary to maintain safe and stable operations. This includes a significant reduction in the planned maintenance and modification activities. As a material part of Aker BP’s costs are denominated in NOK, the recent weakening of the NOK versus USD contributes to lowering the company’s cost base measured in USD. The estimated production cost for 2020 has consequently been reduced to USD 7-8/boe, compared to the previous guidance of USD 10/boe.

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Posted By : Yogender Pancholi on Fri, 03 Apr 2020
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