Prices and production down. Rig decision key to increased recovery

SDFI first half and second quarter of 2013:
Decline in prices and production, combined with increased investment and costs, reduced income from the State’s Direct Financial Interest (SDFI) in Norwegian petroleum operations during the first half of 2013. Net cash flow to the government was NOK 67.8 billion, down by NOK 16.7 billion from the same period of last year. On the positive side, Petoro chief executive Grethe Moen points to the decision made during the second quarter to acquire two drilling rigs for Gullfaks and Oseberg. This will contribute to improved recovery from these important fields.
Cash flow in the second quarter totalled NOK 30.5 billion, compared with NOK 41,6 billion in the same period of 2012.
Total oil and gas production for the first half averaged 1 058 000 barrels of oil equivalent per day (boe/d), compared with 1 161 000 for the same period of 2012. This decline partly reflects operating problems on the Troll field and in the Snøhvit facility at Melkøya. Total oil and gas production for the second quarter averaged 995 000 boe/d, compared with
1 004 000 for the same period of last year.
Total investment in the first half rose by 22 per cent from the same period of last year to NOK 16 billion.
A positive trend for health, safety and the environment (HSE) was maintained during the second quarter.
Moen notes that, despite a reduction of almost 20 per cent in net cash flow compared with the first half of 2012, government revenues from the SDFI have so far this year remained at a historically high level.
Where operations in the second quarter are concerned, she is particularly gratified about the decision by the Gullfaks and Oseberg licences to acquire two Category J drilling rigs, which will be owned directly by the license group.

“This is something we’ve taken the initiative on, and have collaborated closely over three years with Statoil to achieve,” she says. “Since these licences have a long-term need to drill production wells, it pays to own the rigs ourselves rather than chartering them in a market with high rig rates. In this way, we can reduce drilling costs and thereby increase the number of profitable wells. It’s by far the most effective way to improve recovery from mature fields.”

Moen, who took over as Petoro’s president and CEO recently, also points out that the company has been further strengthened as an important player in the Barents Sea by the 22nd licensing round. “We’re involved in most of the exploration wells this year and next, and holdings in eight new licences give us a long-term opportunity to contribute to a coherent development of this key area for the Norwegian oil and gas industry,” she says.

As a licensee, Petoro participated during the second quarter in postponing a decision on developing the Johan Castberg discovery in the Barents Sea. This was done because the partners need more time to study the impact of cost increases, slightly amended volume estimates and changes to petroleum tax. Petoro is still concerned to achieve an offshore development concept with landing of oil onshore which provides flexibility for further development of the Johan Castberg area and the rest of the Barents Sea.
The choice of concept for further development of the Snorre field has been postponed until the autumn. Petoro expects the work now being done will strengthen the basis for a new wellhead platform in the area.
For key figures and further information, see the interim report of the board of directors

Sveinung Sletten
Head of communications, Petoro AS

+47 51 50 20 24
+47 950 75 554

The partners in Oseberg (top picture) and Gullfaks decided during the second quarter to acquire Category J rigs to drill more production wells and thereby contribute to improved recovery from the fields. (Photo: Øyvind Hagen, Statoil)

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