Solid cash flow – impacted by weaker gas market

[06.03.2020] - Press Release Petoro 2019 results
Photo: Petoro
Petoro delivered 96 billion kroner to the state in 2019. That is 24 billion kroner less than the previous year, a fact which is mainly due to lower gas production and lower gas prices. Even with this decline, the cash flow remains solid.
“The major highlight for Petoro and its partners in 2019 was the start-up of the Johan Sverdrup field in the North Sea. This is a world-class field with enormous reserves, extremely low carbon footprint and impressive profitability. When it produces at plateau, it will deliver nearly 20 per cent of total oil production in the SDFI portfolio,” says Petoro President and CEO Grethe K. Moen, who notes that the investments for Phase One will be repaid as early as in 2020.

Johan Sverdrup has proven that a mature Norwegian Shelf still has a long horizon. While we can be enthusiastic about this fantastic field, the oil and gas industry both Norway and in global terms, is facing growing challenges as regards our role in contributing to solve the climate challenge. In many ways, 2019 was the year when climate and sustainability became preconditions for further development of the oil and gas industry.

“Ever since the beginning 50 years ago, Norway has led the way when it comes to introducing strict climate and environmental requirements, much of this thanks to the initiative shown by the Norwegian authorities. The focus on climate issues has been further reinforced in 2019 and in January, the industry launched a new climate roadmap with extremely ambitious goals,” says Grethe K. Moen. Petoro supports the ambitions set out in the Paris Agreement and has taken an active role over the past year in the work on the industry’s climate roadmap.

“I am very pleased with the fact that we have broad-based agreement on a 40 per cent reduction in greenhouse gas emissions as early as by 2030, and that the goal for 2050 is near zero emissions. Given the SDFI’s considerable portfolio on the Norwegian Shelf, Petoro bears significant responsibility for ensuring that the sector achieves its goals. Concrete targets are essential in order for the industry to be competitive,” says Grethe Moen, who emphasises that close and open cooperation are the key in the climate work.

Electrification of fields is a key measure in achieving the industry’s goals. 40 per cent of production from Petoro’s portfolio is already run by electricity, which means that the climate footprint for our share of production is low compared with the global average. This figure will rise to 50 per cent when Martin Linge and Johan Sverdrup Phase 2 come on stream. There are plans to electrify several mature fields in the years to come and Petoro holds major ownership interests in several of these fields. “We will be a driving force in the projects and we look forward to realising these plans in the best way possible,” says Moen.

Drilling efficiency is declining
Mature fields are the very backbone in Petoro’s portfolio, where drilling is a key element needed to realise the values. Drilling efficiency is one of Petoro’s strategic priorities, and the drilling of new wells continues to be the single most important input factor to sustain production and revenue levels. “The effect of the improvement efforts from 2014 to 2015 was considerable, but no further improvement has been made for drilling on fixed installations in recent years,” says Moen. “In fact, in 2019 we actually see a clear negative development as regards time and cost per well. More than 50 per cent of all wells that are drilled on the Norwegian Shelf are in Petoro’s portfolio, and we spent a total of 14 billion kroner on drilling in 2019. The greatest potential lies in the use of digital technology, new forms of cooperation and closer integration between the operator and service and supply industry.”

Rising serious incident frequency
The HSE results for 2019 are not satisfactory. The serious incident frequency in the SDFI portfolio increased from 0.7 to 0.9 in 2019. None of the incidents had major accident potential. “We are not satisfied that the results show an increasing trend,” says Moen, and emphasises that Petoro will continue to set clear demands in relation to the operating companies and will be a driving force for lessons learned both within and across the licences.

Financial results
Petoro delivered 96 billion kroner to the state in 2019. This is 24 billion kroner less than the previous year, a fact which is mainly due to lower gas production and lower gas prices. Total production was 964 thousand barrels of oil equivalent (boe) per day, more than 11 per cent lower than in 2018.

Gas production was 98 million scm per day; 14 per cent lower than in 2018. The reduction in gas production was mainly related to the use of flexible gas production for price optimization at Troll, as well as operational challenges related to compression at Ormen Lange.

Liquids production ended 6 per cent lower, mainly due to natural production decline as well as lower production due to riser problems on the Snorre field. The decline was partly offset by the start-up of Johan Sverdrup in October 2019.

Investments in the SDFI portfolio increased by about 4 billion kroner compared with 2018 and are mainly the result of higher activity within field development associated with Johan Castberg, Troll Phase 3, Snøhvit and Martin Linge, as well as increased costs for production drilling on several fields.


Press contact
Head of Communications
Christian Buch Hansen
926 24 255

 

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