Restructuring gives results – industry on the right track

[16.03.2016] - Press release, Petoro annual results 2015
Despite a challenging year, cash flow from the State’s Direct Financial Interest (SDFI) in the Norwegian oil and gas sector came to a substantial NOK 94 billion for 2015. Restructuring has so far yielded promising results in the necessary transformation of the industry.
This sector faces challenges driven by low oil prices, and great uncertainty prevails about developments over the next few years. A sharp decline in revenues has reduced investment through postponements, cutbacks in work and activity, and pressure on rates.
  
On the positive side, efficiency gains have also been made and Petoro saw results from these during 2015. Well costs on selected fields were halved, for example, and the pace of drilling doubled. Operating costs which can be influenced have been cut by almost 20 per cent from 2013.
  
Grethe Moen, CEO of Petoro, has been surprised positively both by the big impact of the initiatives launched and by the speed at which the effect has been felt.
  
“That creates optimism about what can be achieved,” she says. “More gains stand to be made here. This is when the really demanding job starts in creating a competitive Norwegian continental shelf and profitable projects."
  
“The industry needs to be transformed. That means not only changing the way we work, but also developing a new mindset .”

Petoro has seen that good work is being done in the companies, and is optimistic about further innovation and efficiency gains. However, this will demand a more open and trusting collaboration between the players and take several years to implement.
  
Strong financial results have been reported for the SDFI in 2015 despite a significant decline in commodity prices from 2014. At NOK 94 billion, cash flow to the government was down by 15 per cent.
  
A weakened exchange rate against the US dollar for the Norwegian krone helped to sustain revenues measured in that currency.
  
Total production averaged 1 068 000 barrels of oil equivalent per day (boe/d), up by about seven per cent from the year before. That primarily reflected higher performance efficiency and the completion of more wells.
  
Gas sales represent an increasingly important source of SDFI revenues. Relatively stable prices for gas compared with those for oil, combined with an increase in volume, maintained good earnings from this commodity.
  
Investment totalled NOK 28 billion, down by NOK 8 billion from 2014. This anticipated decline primarily reflected lower capital spending on development and operation as a result of reduced project activity.
  
The decision to develop Johan Sverdrup produced an overall addition of no less than NOK 520 million boe to the SDFI portfolio’s reserves during 2015.
  
While the general improvement in health, safety and environmental results continued, it was overshadowed by the fatal accident of 30 December 2015 on the COSL Innovator drilling rig during work on Troll. The serious incident frequency fell from 0.7 per million hours worked in 2014 to 0.5 in 2015.

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