Q1 2016
DET NORSKE OLJESELSKAP ASA
KARL JOHNNY HERSVIK, CEO ALEXANDER KRANE, CFO 29 APRIL 2016
Disclaimer
This Document includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. These statements and this Document are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for Det norske oljeselskap ASA's lines of business. These expectations, estimates and projections are generally identifiable by statements containing words such as "expects", "believes", "estimates" or similar expressions. Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets for Det norske oljeselskap ASA's businesses, oil prices, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time in the Document. Although Det norske oljeselskap ASA believes that its expectations and the Document are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in the Document. Det norske oljeselskap ASA is making no representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the Document, and neither Det norske oljeselskap ASA nor any of its directors, officers or employees will have any liability to you or any other persons resulting from your use.
DET NORSKE Highlights
Production
• Q1-16 production of 60.6 mboepd, +12% from Q4-15
Finance
- Q1 EBITDA USD 129 million, EPS 0.16 (USD)
- USD 1.23 billion in cash and undrawn debt facilities
Development projects
- Ivar Aasen development on plan and budget
- Johan Sverdrup drilling commenced
- Viper well completed, Kobra ongoing
Exploration
- Drilling program in Krafla/Askja area ongoing
- Business development
- Acquisitions from Noreco and Centrica
FINANCIALS Statement of income
| Income statement (USD mill) |
Q1 2016 |
Q1 2015 |
FY 2015 |
| Revenues |
205 |
329 |
1,222 |
| Production costs |
34 |
39 |
141 |
Other
operating expenses |
5 |
14 |
52 |
| EBITDAX |
165 |
275 |
1,029 |
| Exploration expenses |
36 |
15 |
76 |
| EBITDA |
129 |
261 |
953 |
| Depreciation |
114 |
122 |
481 |
| Impairment losses |
38 |
53 |
430 |
| Operating profit/loss (EBIT) |
(23) |
86 |
41 |
Net financial
items |
8 |
(4) |
(155) |
| Profit/loss before taxes |
(16) |
81 |
(114) |
| Tax (+) / Tax income (-) |
(48) |
79 |
199 |
| Net profit/loss |
32 |
2 |
(313) |
| EPS (USD) |
0.16 |
(0.01) |
(1.54) |
FINANCIALS Statement of financial position
Assets
(USD mill) |
31.03.16 |
31.03.15 |
Equity and liabilities
(USD mill) |
31.03.16 |
31.03.15 |
|
|
|
|
|
|
| Goodwill |
739 |
1,134 |
Equity |
371 |
654 |
Other intangible
assets |
924 |
940 |
Other provisions for liabilities incl.
P&A |
461 |
505 |
|
|
|
(long) |
|
|
Property, plant
and equipment |
3,090 |
2,679 |
Deferred
tax |
1,384 |
1,363 |
|
|
|
|
|
|
| Receivables and other assets |
263 |
314 |
Bonds |
518 |
233 |
Calculated
tax receivables (short) |
215 |
- |
Bank debt |
2,221 |
2,144 |
|
|
|
|
|
|
Cash and
cash equivalents |
155 |
412 |
Tax payable |
- |
110 |
|
|
|
Other current liabilities incl. P&A (short) |
431 |
471 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets |
5,387 |
5,480 |
Total
equity and liabilities |
5,387 |
5,480 |
FINANCIALS Cash flow and liquidity
- Operating cash flow covered ~80 percent of investments in the first quarter 2016 despite lower oil prices
- Net interest-bearing debt (book value) of USD 2.58 billion at the end of Q1-2016
- Cash and undrawn debt facilities of USD 1.23 billion at the end of Q1-2016
- Interim redetermination carried out during Q1-2016
- Borrowing base of USD 2.8 billion through June 2016
- Borrowing base from end June to end 2016 of USD 2.9 billion
- Next redetermination in December 2016
FINANCING Covenant amendment process progressing
- Covenant amendment package accepted by bank consortium with agreement to ease covenant levels to end 2019
- Company working to achieve an amicable solution with bondholders in DETNOR02
- Leverage ratio of 2.5x and interest cover ratio of 7.9x at the end of Q1-2016
PRODUCTION Oil and gas production
- Q1 2016 production of 60.6 mboepd
- Q1 2016 production efficiency of 99.3%
- Realized oil price of USD 37/bbl
- Production guidance reiterated
- 2016 production expected between 55 60 mboepd
Net production (boepd) and production efficiency
GREATER ALVHEIM AREA Further developing the Alvheim area
Alvheim area
- 3 new wells planned to come on stream in 2016
- BoaKamNorth drilling completed in January
- Ahead of schedule and budget
- Well to be tied in to Alvheim infrastructure in Q2-2016
- First oil expected in Q2-2016
- Transocean Arctic contract from December 2016
- Two Volund infill wells
- One Alvheim Attic well
- One exploration well at West Volund
- Secure continuous development to fill the FPSO
- Further maturing opportunities for the area
New projects in the Alvheim area
GREATER ALVHEIM AREA Viper-Kobra development
Drilling program ongoing, first oil in Q4-2016
Viper
- Pilot well confirmed regional drawdown and connection to aquifer
- Drilled and completed Q1 2016, 19 days ahead schedule
- Preliminary post-drill assessment indicate 4 7 mmboe (gross) vs the P50 pre-drill estimate of 4 mmboe (gross)
Kobra
- Pre-drill P50 estimate of 4 mmboe (gross)
- Pilot well confirmed net sand penetration and confirmed pressure drawdown and connection with aquifer
- Pilot proved additional gross mean resources of 1.6 mmboe in shallower formation
- Horizontal producer landed in reservoir, 6 days ahead of schedule
Kobra East
- Prospect east of Kobra to be tested with toe of Kobra producer
- Targeting gross mean resources of 9.3 mmboe (67% C.O.S)
IVAR AASEN (~35%1 ) Ivar Aasen project on plan and budget
Recent events
- Construction of topside has reached 98% completion in Singapore
- Handover of sub-systems for commissioning and testing for topside and living quarters during the quarter
- Cosco's heavy-transport vessel «Xiang Rui Kou» to transport topside to the North Sea
- Production drilling continued ahead of schedule with top quartile performance, five producers and one water injector finished
- Two geo-pilot wells at West Cable East finished
- Results are being evaluated
- Power cable between Edvard Grieg and Ivar Aasen installed
Detailed timeline
IVAR AASEN Upcoming milestones
Load out of topside and sail away from Singapore – Q2 2016
Hook-up, commissioning, testing and preparation for first oil – Q3/Q4 2016
Topside installation – July 2016
First oil – December 2016
Subsea scope finished – Q3 2016
IVAR AASEN Offshore hook-up and commissioning
- Handover of subsystem to operations before sail-away to minimize offshore work scope
- Det norske and Aibel working as one integrated team with common KPIs and incentives to minimize offshore work hours
- Proactive planning and coordination of all offshore activities to secure 1st oil in December 2016
- Safe Zephyrus mobilized from inshore location with personnel and equipment onboard to reduce logistics demand in mobilization phase
- Strong integrated onshore support-team to facilitate efficient work processes offshore
JOHAN SVERDRUP (11.5733%) Progressing according to plan
EXPLORATION Drilling campaign in Krafla/Askja area ongoing
2016 drilling campaign
- Gross proven resources of 140 220 mmboe in PL035/272 prior to 2016 drilling campaign
- Minor oil discovery at Madam Felle (1-3 mmboe gross)
- Viti side-track dry
- Askja SE spudded in April 2016
| License |
Prospect |
Operator |
DETNOR
Share |
Pre-drill
mmboe* |
Rig |
Time |
|
| PL554B&C |
Uptonia |
Total |
30% |
11 -
38 |
Leiv Eriksson |
Q1 |
|
|
Madam Felle |
Statoil |
|
20 -
49 |
|
|
|
|
Askja SE |
|
|
|
24 -
79 |
|
|
| PL272/035 |
Beerenberg |
|
50% |
13 -
46 |
Songa
Delta |
Q2 |
|
|
Slemmestad |
|
|
29 -
86 |
|
|
|
| PL626 |
Rovarkula |
DETNOR |
50% |
8 -
79 |
Maersk
Interceptor |
Q3 |
|
| PL533 |
Filicudi |
Lundin |
20% |
24 -
146 |
Leiv Eriksson |
Q3 |
|
Map of Krafla/Askja area
GROWTH Strengthened position in the North of Alvheim area
- North of Alvheim* area holds gross mean contingent resouces of 160-170 mmboe
- Further volume upside from exploration prospects in the area
- Acquisition of licenses from Centrica Resouces Norge AS**
- 30% in PL 442 + operatorship Frigg Gamma Delta
- 30% in PL026 Rind
- 30% in PL026B Langfjellet
- Licenses add about 32 mmboe net to Det norske
- Det norske to cover expenses from 1. jan 2016
- Det norske has established an early-phase project to assess possible area development concepts
IMPROVEMENT "Forward" improvement program progressing well
Exploration Effectiveness
Project Delivery
Operations Excellence
Drilling Performance
Supply Chain Management
Organizational Effectiveness
- A large number of improvement initiatives are being implemented to reduce expenditures and increase quality
- Covering all disciplines program sponsored by the CEO
- Initiatives aim to reduce run-rate costs
- Ambition to sanction new stand-alone projects at break-even prices below 40 USD/boe
- New project delivery model being piloted on new subsea tiein projects on Alvheim
- Starting to see results from improvement initiatives
- Exceptional drilling performance on Alvheim and Ivar Aasen
- Lean implementation on Alvheim operations showing both cultural and quantifiable results
- Entire organization being trained in Lean methodologies and thinking to enhance the continuous improvement culture
OUTLOOK 2016 guidance
| Item |
Guidance |
|
| 2016 CAPEX |
USD 925 –
975
million |
|
| 2016 EXPEX |
USD 160 –
170 million |
|
| 2016 Production cost |
USD 8
–
9 per boe* |
|
| 2016 production |
55 –
60 mboepd |
|
Based on USD/NOK 8.8
OUTLOOK Summary and outlook
Development projects
- Aasen topside heavy lift in July, first oil in December
- Johan Sverdrup drilling and construction
- First oil at BoaKamNorth in Q2, drilling of Kobra well
Financing
- Available liquidity of USD 1.23 billion
- Finalize discussions with bondholders
Improvement
• New project delivery model being piloted on new subsea tiein projects on Alvheim