Aker BP announced an update to its investment programme in response to the high uncertainty caused by the COVID-19 crisis that sees the company cut its 2020 capex by 20 per cent.
In a statement, Aker BP said that all non-sanctioned field development projects will be put on hold. For 2020, this represents a capex reduction of 20 per cent compared to previous guidance. For 2021-22 the initial estimate is a reduction in capital spend of US$ 1-2 billion.
The firm will also cut exploration spending by 20 per cent in 2020, with further significant reductions planned for 2021-22. Production costs are to be reduced to US$7-8/boe, down around 20 per cent from previous guidance.
Aker BP’s production guidance for 2020 remains unchanged at 205-220 mboepd.
“Our industry is currently facing an extremely challenging situation. In Aker BP, we have been working systematically over many years to improve efficiency and reduce costs, to build a significant portfolio of profitable investment opportunities, and to strengthen our financial capacity. With the measures we are now undertaking, Aker BP is well prepared to face the challenging market situation, and we have the financial resources to pursue value accretive growth opportunities ahead,” said Karl Johnny Hersvik, CEO in Aker BP.
Aker BP’s original spending plan for 2020 consisted of US$ 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 utilise 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 per cent 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.
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 firm said that it will continue to look for opportunities to reduce cost and improve efficiency across all its activities. It will provide updated guidance for 2020 at the quarterly presentation in May.
“The key priorities for Aker BP are the safety of our personnel, the integrity of our operations and the financial robustness of the company, and we are doing what we can to support the society’s efforts to combat the spread of COVID-19,” added Hersvik.
The firm stated that no cases of COVID-19 infection have been reported from the company’s offshore facilities, and so far in 2020, Aker BP’s oil and gas production has progressed as planned.