Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Aker BP ASA (AKRBF, Financial) achieved excellent operational performance with high production efficiency of 95% in Q2 2024.
- The company maintained strong cost discipline, with production costs at $6.4 per barrel, well within the full-year guidance of $7 per barrel.
- Aker BP ASA (AKRBF) reported robust cash flow from operations, with operating cash flow before tax increasing to over $3.2 billion.
- The company continues to lead in low emissions, with greenhouse gas emissions below three kilograms of CO2 equivalent per barrel.
- Aker BP ASA (AKRBF) is on track with its large project portfolio, aiming to grow production to over 500,000 barrels per day by 2028.
Negative Points
- Post-tax cash flow decreased due to two tax installments in Q2 2024 compared to one in the previous quarter.
- Production at Edvard Grieg saw a reduction due to natural decline, planned maintenance, and a shutdown linked to the startup of Hans.
- Exploration expenses were high at $108 million for the quarter, driven by increased exploration activity.
- The company recognized an impairment of technical goodwill on Valhall and Edvard Grieg, indicating potential future noncash impairments.
- Aker BP ASA (AKRBF) reported a negative free cash flow of $283 million for the quarter.
Q & A Highlights
Q: A question on Johan Sverdrup. You currently have -- you add four new wells in production in the first half. So tell us a little bit on the impact of the production level of the new wells and also if you have toned down the production from the other deck existing wells in order to give space for the new production from new wells and how have the old wells reacted. Could you tell us a little bit about that, please?
A: On the I think I got your question. First of all, I think it's important to say that your own server base, a really remarkable feat. It's a pretty interesting story, very low production cost, very low emissions intensity and exceptional uptime. And yes, you're right, we have added four wells so far in the quarter, we just added another well now in July and there are four more wells to be added for the rest of the year. And this is essentially a question about optimization. So of course, you are distributing as you're pretty much utilizing the entire process capacity, distributing the available processing capacity across the world stock and that means that you're optimizing such things as well, potential water production, water handling, water injections. And this is a this is a process that is continually ongoing. So of course, when you add new wells, you tune down the volumes from the other wells to manage that flow of oil and gas up to the platforms and the whole idea and I think I've been over this quite a few times in these presentations before is as you're adding new well stock, you're reducing the total exposure on the existing well stock that is taking down the average production rate, you have more wells, I think we'll end up at 41 wells when we finish this year and you're distributing the production volumes across 41 wells 231. So that means, of course, a slight reduction. The whole idea is, of course, to limit the water coning that I've been discussing on you on startup and so far, the wells have been reacting quite positively and as a result of that, we're also saying that we expect the current production rates at Johan Sverdrup to extend into very late '24, early '25.
Q: And for '25, you're saying you're planning for retrofit multilaterals next year. Could elaborate a little bit of that and could you also comment, will you be drilling more new production wells as well next year for will be these retrofits?
A: So the whole idea with a retrofit multilateral is that you use the existing casing and the existing wellhead and Christmas Day, of course. And then you drill basically a new lateral. In this case, you just pacing at a bit higher in the restaurant and therefore, further away from the water less oil above the well, so to speak, which means less residual oil. So it's again, it's an optimization. And yes, we plan to do quite the full a few of those. And then, of course, the phase after that will be Phase 3, where we're planning gearing up to I would say a concept select towards back end of this year and production start late '27. And there as there are no new well slots available on the dry side. So any new wells lots will have to be subsea.
Q: The first one relates to Yggdrasil resources. It seems like in this quarter you brought back out reduce the net reserves, but the 413 million barrels of oil equivalent up from 450, and this is essentially going back to your original guidance I was just wondering if you could comment on this move. The second one was again, a clarification on Johan Sverdrup, you highlighted 10 new production wells have been brought on stream neither in this year bringing the total number of wells to 41. I was just wondering what were these 10 wells and a figure of 41, the part of your initial development plan? Or has this figure actually increased more recently?
A: Thank you. Sasi, I don't -- I didn't actually get your first question. Could you repeat that?
Q: Yes. So the Yggdrasil resources in this quarter in the end slide, by just 413 million BOE net to Aker BP, last quarter it was 450, but the 413 was your original guidance as well. So just wondering what if you could comment on this move?
A: I think the difference between 450 and for 414 is East Frigg, whether we -- So what you're saying is that it actually reduced from the previous quarter.
Q: In your slide you had it 415. (inaudible)
A: So that's a matter of East Frigg not is included in that slide or not. So I think that's just the difference between the two. So I think it's just a matter of how we represent the numbers, but there's no fundamental change in the resources are reserves there.
Karl Hersvik: So I think that the number you should assume on a wholesale in total, including East Frigg is still 450. Just for being absolutely clear. And then Johan Sverdrup when you asked whether we have added wells and we didn't plan, we always plan to use the entire capacity in terms of production wells. So it's their support for the initial development scope.
Q: It is actually very impressive to see the projects are on time on budget and the video showed us one area that has been better than expected. Because where else are you excited about the work that you're doing warehouse is that [Frigg] side? And the flip side of that is where the things to work it perfectly as it sounds like the others? Or is there anything that hasn't gone as you expected within the plus right the project process? And then secondly, on the cost base side, I inside completely what you're saying about the prediction of the second half year and cost side, but it's really about being conservative now on the cost guidance, and I'll leave it there.
A: Thank you, Lydia. It's all about the good and the bad and ugliest. Well, I think you're absolutely right. I think that there has been, of course, many successes. And I think the overall message is, as we pointed out, it is about keeping the project on track. And of course, we're spending quite a lot of resources to do just that. There are quite a lot of successes and just to mention a few, we've been able to place all contracts. We've been able to actually now start-up both prefabrication and ultimately component fabrication as well on most of these yards. Some in Norway, some abroad and the ramp up of that activity is actually going as expected. This was I think I discussed this last quarter that could be one of the focus areas for at least me as a CEO of this company. And then, of course, we've had challenges, I mean, which project haven't had challenges and certainly this kind of complexity. And most of this has been centered around deliveries from lenders where we
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
