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July 8, 2014 5:22 pm
Danish conglomerate AP Møller-Maersk has announced a $1.7bn hit to its oil assets in Brazil, becoming the latest company to face difficulties in exploiting the country’s deepwater fields.
Maersk Oil purchased stakes in three fields in Brazilian waters for $2.4bn from SK Energy of South Korea in July 2011 following the discovery four years earlier of massive reserves.
The writedown reduces the value of Maersk’s investment to $0.6bn. The group’s guidance for 2014 remains unchanged at an underlying profit of around $4bn, it said in a statement.
“There was significantly less oil than we had expected,” Nils Smedegaard Andersen, group chief executive, said in a conference call. “In addition, the expectation for the price of oil back in 2011 was more optimistic than today.”
Jakob Thomasen, CEO of Maersk Oil, said: “We are not turning our back on Brazil, but taking our foot off the throttle. We don’t have Brazil as a growth location any more.”
The company bought into immature assets with a lot of work needing to be done, he said. Rising costs in the industry had had a significant impact on profitability of ultra-deepwater sites, he added, while many analysts had become bearish on the oil price.
“The natural uncertainty of exploring for oil and gas has to be balanced with the huge potential rewards,” he said. “We bought into these immature assets with a view to the post-2020 production profile, so it doesn’t influence our short-term activities. We have plenty of other strong production projects coming on stream elsewhere around the world.”
Maersk said it had sold its share in the Polvo field to the operator Anadarko but hoped its remaining Wahoo and Itaipu fields “will at a later state be able to present commercially viable development plans”.
The company retains a 20 per cent stake in the Wahoo field, which is operated by Anadarko with a 30 per cent stake; BP has a 25 per cent non-operating stake. Itaipu is operated by BP with a 40 per cent stake, with partners Anadarko (33.3 per cent) and Maersk (26.7 per cent).
BP earlier this year cut staff after poor exploration results, while Eike Batista’s OGX Petroleo & Gas Participacoes went bankrupt when fields failed to perform as expected. Others including Repsol and BG Group have had more success increasing production.
Brazil’s state-owned oil operator Petrobras announced the discovery of massive oil reserves in 2007, known as “pre-salt” because they lie under a 2km layer of the material beneath the Atlantic. The find sparked huge excitement over the potential of the field to catapult Brazil into the ranks of major global oil producers.
Maersk Oil is one of the conglomerate’s five core business divisions, alongside the world’s biggest container shipping company, a port operator, drilling rigs and tankers.
Shares of Maersk closed down 1.4 per cent in Copenhagen, almost 8 per cent below its 52-week peak on June 10.
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