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% compared to previous guidance. For 2021 – 2022 the initial estimate is a reduction in capital spend of US$1 – US$2 billion.
- Exploration spending is reduced by 20% in 2020, with further significant reductions planned for 2021 – 2022.
- Production costs are reduced to US$7 – US$8/boe, down around 20% 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 205 000 – 220 000 boe/d.
“Our industry is currently facing an extremely challenging situation. In Aker BP, we have been working systematically over many years to improve efficiency and reduce costs, to build a significant portfolio of profitable investment opportunities, and to strengthen our financial capacity. With the measures we are now undertaking, Aker BP is well prepared to face the challenging market situation, and we have the financial resources to pursue value accretive growth opportunities ahead” said Karl Johnny Hersvik, CEO in Aker BP.
Aker BP’s original spending plan for 2020 consisted of US$1.5 billion in field developments (CAPEX), US$500 million in exploration activities (EXPEX) and US$200 million related to in abandonment (ABEX). Production costs were estimated to US$10/boe. In response to the current challenging market conditions, Aker BP will 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% 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% to approximately US$1.2 billion. For 2021 – 2022, the company expects CAPEX to drop well below US$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 US$400 million for the year. Further measures are being evaluated, including postponing additional exploration wells.
The company is also targeting a 20% reduction in production costs and is cancelling or postponing activities that are not necessary to maintain safe and stable operations. This includes a significant reduction in the planned maintenance and modification activities. As a material part of Aker BP’s costs are denominated in NOK, the recent weakening of the NOK versus US$ contributes to lowering the company’s cost base measured in US$. The estimated production cost for 2020 has consequently been reduced to US$7 – US$8/boe, compared to the previous guidance of US$10/boe.
The planned measures are not expected to have a material impact on the company’s production capacity in 2020, and the production guidance of 205 000 – 220 000 boe/d remains unchanged.
Updated guidance for 2020 will be provided at the quarterly presentation in May. The company will also in due course provide the market with an updated version of its long-term plan which was last presented at the Capital Markets Update in February this year.
Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/23032020/aker-bp-pauses-non-sanctioned-field-development-projects/