Earnings Release • Jul 14, 2020
Earnings Release
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Aker BP ASA
14 July 2020
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 Aker BP 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 Aker BP 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 Aker BP 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. Aker BP ASA is making no representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the Document, and neither Aker BP ASA nor any of its directors, officers or employees will have any liability to you or any other persons resulting from your use.
Stable operations despite COVID-19 and volatile markets
Tax changes unlocking new profitable investments
PDO submitted for Hod – commercial agreement in place for NOAKA
Protecting our people and maintaining full production
Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20
Frosk test production
Drilling campaign completed
Planned maintenance
Increasing water injection
Maturing Hanz
Flank West drilling completed
Hod PDO submitted
Ærfugl on schedule
Alve NE spud in H2
Plateau production reached
Increased value creation for all stakeholders
Building on the successful Valhall Flank West project
1) Gross reserves including additional production from existing wells due to extension of licence period 2) Oil price required to achieve zero NPV at 10% discount rate on after-tax basis for Aker BP. Tariffs paid to Valhall are eliminated.
NOAKA: Krafla, Fulla and North of Alvheim 9
Financial review
mmbbl
1) Price data sources: Platts (Brent Dated), Bloomberg (Brent active contract) 2) Realised gains on hedging in Q2 adjusted for difference in tax rate to reflect equivalent oil price effect for physical volumes
| Ordinary tax system | Temporary tax system | |
|---|---|---|
| Corporate tax (22%) | Capex depreciated over 6 years |
No change |
| Special tax (56%) | Capex depreciated over 6 years |
Immediate depreciation |
| Uplift on capex | 20.8% over 4 years |
24% in year 1 |
| Time limit | N/A | All capex 2020-21 PDOs by end-2022 2) |
| Tax losses | Carried forward 1) | Cash refund in 2020 and 2021 |
| USD million | Q2 2020 | Q1 2020 | Q2 2019 |
|---|---|---|---|
| Total income | 590 | 872 | 785 |
| Production costs | 196 | 156 | 198 |
| Other operating expenses |
15 | - | 4 |
| EBITDAX | 379 | 716 | 583 |
| Exploration expenses | 50 | 50 | 60 |
| EBITDA | 329 | 666 | 522 |
| Depreciation | 286 | 277 | 168 |
| Impairments | (136) | 654 | - |
| Operating profit (EBIT) | 178 | (266) | 354 |
| Net financial items |
(27) | (149) | (86) |
| Profit/loss before taxes | 151 | (414) | 268 |
| Tax (+) / Tax income ( - ) |
(19) | (80) | 206 |
| Net profit/loss | 170 | (335) | 62 |
| EPS (USD) | 0.47 | (0.93) | 0.17 |
Effective tax Q2-2020
Tax movements in balance sheet
| Assets | 30.06.20 | 31.03.20 | 31.12.19 | Equity and liabilities | 30.06.20 | 31.03.20 | 31.12.19 |
|---|---|---|---|---|---|---|---|
| Goodwill | 1,647 | 1,647 | 1,713 | Equity | 1,912 | 1,813 | 2,368 |
| Other intangible assets |
2,054 | 2,001 | 2,537 | Other provisions for liabilities incl. P&A (long) |
2,655 | 2,699 | 2,645 |
| Property, plant and equipment |
7,175 | 7,061 | 7,023 | Deferred tax |
2,471 | 2,153 | 2,235 |
| Right-of-use asset | 137 | 171 | 194 | Bonds and bank debt | 3,712 | 3,593 | 3,287 |
| Receivables and other assets | 546 | 524 | 652 | Lease debt | 236 | 277 | 313 |
| Calculated tax receivables |
187 | - | - | Other current liabilities incl. P&A | 901 | 931 | 1,017 |
| Cash and cash equivalents |
142 | 323 | 107 | Tax payable | - | 260 | 361 |
| Total Assets |
11,889 | 11,727 | 12,227 | Total Equity and liabilities |
11,889 | 11,727 | 12,227 |
USD million
Recent developments
Debt and liquidity (USD billion)
1) By S&P Global and Moody's 2) Cash and undrawn capacity on RCF 3) Represents the DETNOR02 bond which has been redeemed after the end of the quarter
Average break-even oil price for projects with CAPEX in 2020-20221)
Aker BP's 2020 capex guidance, USD million
Illustrative company cumulative cash flow
1) Estimated tax payments/refunds related to fiscal year 2020 assuming different average Brent oil prices for the full year and USDNOK 10. The tax refunds are fixed for H2-20. The amounts for H1-21 to be adjusted after year-end to reflect actual 2020 results. Potential settlements of uncertain tax cases are excluded. 21
COVID-19 and oil price collapse
Flexible portfolio and organisation
Supported by tax changes
Four wells postponed – spend reduced to USD 350 (500) million
| License | Prospect | Operator | Aker BP share |
Pre-drill mmboe |
Status |
|---|---|---|---|---|---|
| PL1008 | Nidhogg 1 |
Aker BP | 60 % | 37 96 - |
Discovery 6-15 mmboe |
| PL719 | Sandia 2 |
Spirit | 20 % | 23 527 - |
Dry |
| PL533 | Bask 3 |
Lundin | 35 % | 14 585 - |
|
| PL127C | Alve NE 4 |
Aker BP | 88 % | 8 25 - |
|
| PL780 | Sørvesten 5 |
Spirit | 40 % | 15 35 - |
|
| PL981 | Mercx Ty 6 |
Lundin | 40 % | 22 92 - |
|
| PL858 | Stangnestind | Aker BP | 40 % | 13 108 - |
Postponed |
| PL722 | Shenzhou | Equinor | 20 % | 191 505 - |
Postponed |
| PL554 | Garantiana W | Equinor | 30 % | 7 28 - |
Postponed |
| PL442 | Liatårnet app. | Aker BP | 90 % | Postponed |
| Elements | Ordinary tax system | Temporary tax system | |
|---|---|---|---|
| s t |
Corporate tax | Tax rate: 22% 6 years straight line depreciation |
Tax rate: 22% 6 years straight line depreciation |
| n e m |
Special tax | Special tax rate: 56% 6 years straight line depreciation |
Tax rate: 56% Immediate deduction in year 1 |
| e el |
Uplift | 20.8% uplift over 4 years (5.2% each year) | 24% uplift deductible in year 1 |
| x a T |
Interest deduction | Interest cost fully deductible against corporate tax (22%) and partly deductible against special tax (56%) based on remaining tax balances |
No additional bases for interest deductions against special tax (56%) as investment is immediately deducted in year 1 for special tax |
| Time limit | Applicable for all investments in 2020 and 2021 | ||
| s s t t n mi e m e li e el m r ti e d h n t |
PDO limit | In addition, applicable for all investments according to PDO/PIO under the following limitations; • PDO/PIO has to be delivered within 31.12.2022 • Application for exception of PDO/PIO delivered within 31.12.2022 • Application for major deviation from previously submitted and approved PDO/PIO delivered within 31.12.2022 • Application has to be approved by the Ministry of Petroleum and Energy after 12 May 2020 and within 31.12.2023 • Applicable for investments made up to and including year of production start for the development as defined in PDO/PIO |
|
| O a |
Loss carry forward | Loss carry forward can be brought forward with an interest compensation (risk free interest) Refund of tax value for exploration costs if company in a tax loss position |
Refund of tax value of all loss carry forward incurred in the period 2020-2021 – not only related to exploration costs Negative tax instalments is implemented |
| 2020 guidance1) | 2020-6M actual | Comments | |
|---|---|---|---|
| Production | 205-220 mboepd | 209 mboepd | Net production excl. over/underlift |
| Capex | USD ~1.35 billion2) (previously USD ~1.2 billion) |
USD 732 million | Excl. capitalized interest Incl. share of lease payments |
| Exploration spend | USD ~350 million | USD 112 million | Incl. share of lease payments |
| Abandonment spend | USD ~200 million | USD 39 million | Incl. share of lease payments |
| Production cost per boe | USD 7-8 | USD 8.9 | Per boe produced |
| Dividends | USD 425 million | USD 283 million |
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