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Aker BP reports profit in 2Q20

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Oilfield Technology,

Aker BP has announced its 2Q20 operational and financial results.

The company’s net production in 2Q20 was 209.8 (208.1) 000 boe/d. Net sold volume was 232.0 (207.5) 000 boe/d. Production efficiency remained high and was not significantly impacted by COVID-19. The production curtailments imposed by the Norwegian government have been mitigated by strong operational performance and increased capacity at Johan Sverdrup, hence the company maintains its full-year production estimate of 205 - 220 000 boe/d.

Total income for the second quarter amounted to US$590 (872) million, negatively impacted by low oil prices following the COVID-19 pandemic. Average realised liquids price was US$29.9 (44.7) per barrel, while the realised price for natural gas averaged US$0.08 (0.14) per standard cubic metre (scm).

Production costs for the oil and gas sold in the quarter amounted to US$196 (156) million. Production cost per produced barrel oil equivalents (boe) increased slightly to US$9.1 (8.7), impacted by well maintenance costs which are expected to be reduced in the coming quarters. The company maintains its guidance of US$7-8/boe on average for the full year.

Exploration expenses amounted to US$50 (50) million and included costs of the Sandia well which was dry. Total cash spend on exploration was US$59 (53) million. The company’s expected exploration spend is around US$350 million for the full year, in line with previous guidance.

Depreciation was US$286 (277) million, equivalent to US$15 (14.6)/boe. The sharp drop in oil prices caused an impairment charge of US$654 million in the first quarter. Due to recovering oil prices, reversal of prior period impairments amounted to US$136 million in the second quarter.

Net financial expenses were US$27 (149) million in the quarter. Profit before taxes amounted to US$151 million, compared to a loss before taxes of US$414 million in the first quarter. Tax credit was US$19 (80) million due to a catch-up effect from the first quarter of the increased uplift introduced as part of the recently implemented temporary changes to the Petroleum Tax Law and by a positive currency effect on the value of the company’s tax balances.

Overall, the company reported a net profit of US$170 million for the quarter, compared to a net loss of US$335 million in the previous quarter.

Investments in fixed assets amounted to US$360 (343) million in the second quarter. All field development projects progressed according to plan. Abandonment expenditures were US$16 (22) million.

Changes to Norwegian petroleum tax unlock new investments

Certain temporary changes in the Petroleum Tax Law were enacted on 19 June 2020. These changes included a temporary ruling for depreciation and uplift, whereas all investments incurred for income years 2020 and 2021 including 24% uplift can be deducted from the basis for special tax in the year of investment. These changes also apply for all investments according to Plans for Development and Operation delivered by the end of 2022. In addition, the tax value of any losses incurred in 2020 and 2021 can be refunded from the state.

Following these changes Aker BP has submitted the Plan for Development and Operation for Hod. The Hod field will be developed as a copy of the Valhall Flank West development, with a normally unmanned installation remotely controlled from the Valhall field centre. Total investments for the development are estimated at around US$600 million and the recoverable reserves are estimated at around 40 million boe. Work is already well underway at the yard at Kvaerner Verdal.

During the quarter, Aker BP and Equinor entered into an agreement in principle on commercial terms for a coordinated development of the NOAKA area. The companies have started preparations for submitting Plans for Development and Operation in 2022.

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