Aker BP expects oil output to surge as Sverdrup field gets into swing

Norway’s Aker BP beat fourth-quarter profit forecasts on Tuesday and said it expects its oil and gas output to jump 36% in 2020, the first full year of production from the giant Johan Sverdrup oilfield.

Chief Executive Karl Johnny Hersvik said the company planned to continue to grow both via acquisitions and by discovering and developing new oil and gas finds off Norway.

However, he said it was losing faith in the prospects of the Barents Sea in the Arctic, once seen as the most promising area for new oil and gas finds off Norway.

“Data shows it’s not as prolific as we thought before. We see better return on capital employed towards exploration elsewhere on the Norwegian continental shelf,” Hersvik told Reuters on the sidelines of an earnings presentation during the company’s capital markets day.

Shares in Aker BP were up 1.5% at 1417 GMT, outperforming a 1.4% rise in European oil stocks .SXEP, after the company reported a 13% rise in profit for the final quarter of 2019.

Earnings before interest, tax, depreciation and amortisation (EBITDA) rose to $745 million in the quarter, from $658 million a year earlier and beating analysts’ forecast for $740.6 million, according to Refinitiv Eikon data.

Aker BP said it would cut capital expenditure to $1.5 billion this year, from $1.67 billion in 2019 when investments in Johan Sverdrup were high.

The company, jointly controlled by oil major BP and Norwegian investment firm Aker, sees its production rising to 205,000-220,000 barrels of oil equivalent per day (boed) in 2020 from 155,900 boed last year.

It still plans to drill four wells in the Barents Sea this year, including one operated well in a block bordering Russia.

The company said it was in “a good and constructive” dialogue with its partners, including Equinor, on how to develop a number of discoveries in the so-called NOAKA area, estimated to hold more than 500 million boe in recoverable resources.

Hersvik said he hoped to reach an agreement by the end of this year.

Aker BP has an 11.6% stake in Sverdrup, Western Europe’s biggest oilfield, which began production in October. The company said the field could ramp up its output to the Phase 1 capacity of 440,000 barrels before this summer.

“I believe we can improve Johan Sverdrup further as we did with our other assets,” said Kjetil Digre, Aker BP’s head of operations.

The company also said it plans to reduce its carbon dioxide emissions’ intensity this year to less than five kilograms of CO2 per barrel of oil equivalent (boe), from 7 kg in the fourth quarter of last year.

Energy firms are under pressure from investors and environmental groups to curb greenhouse gas emissions as part of global efforts to curb climate change.

Source: Reuters