Aker BP outpaces Norway rivals with growth beyond Johan Sverdrup

London — Norway's Aker-BP, the country's third-largest oil and gas producer, is one of the few Norwegian upstream companies forecasting production growth this year without relying entirely on the giant Johan Sverdrup field.

The joint venture, created in a 2016 merger of BP's Norwegian assets with those of engineering company Aker, increased its upstream production in the fourth quarter of 2019 by 22.6% year on year to 191,000 b/d of oil equivalent, and expects further growth this year, to between 205,000 and 220,000 boe/d, it said in a statement Tuesday.

The 2.7 billion-barrel Johan Sverdrup field, in which Aker BP holds a relatively modest 11.6% stake, has transformed Norwegian oil production since it came on stream in October, after several years of decline at the country's oil fields. Norway is now considered a plank of non-OPEC production prospects in the next few years, alongside the US and Brazil.

But corporate results for the fourth quarter suggest state-controlled Equinor, which has long boasted of its ability to extend the life of mature fields, is still relying on Johan Sverdrup to support its Norwegian production, even as it gets some relief elsewhere, for example in Brazil. Equinor's Norwegian oil and gas production in the fourth quarter was down 6.5% year on year if Johan Sverdrup is excluded, and taking oil alone, its Norwegian production was down nearly 12% excluding Johan Sverdrup.

Similarly, Lundin Petroleum would also have reported declining oil and gas output, of about 3%, were it not for Johan Svedrup.

Announcing its results, Aker BP highlighted not only Johan Sverdrup, where production is now over 350,000 b/d and a ninth production well is being drilled, but also a 15% output increase at its Valhall field, to 45,400 boe/d in the fourth quarter. This was achieved in part through a new technology it dubbed "single-trip-multi-frac," as well as production from a satellite field, Valhall Flank West, which started producing in mid-December, it said. Aker BP holds 90% of the Valhall license.

The technological boost "represents a world-first for a new method of well stimulation offshore, with significant time and cost savings potential," Aker BP said. It is also looking at another "redevelopment" project in the Valhall area, targeting a formation known as Hod, it said.

The company also said it was having "constructive dialogue" with Equinor in a disagreement over how to develop a clutch of oil and gas discoveries that Aker BP refers to as NOAKA (North of Alvheim and Krafla-Askja), which the smaller company thinks should be developed as a stand-alone hub.

One reservation voiced by investors has been Aker BP's debts; its net debt rose by nearly 80% last year to almost $3.5 billion. Rival Lundin also has substantial debt, but Aker BP's operating costs are much higher, at $9.10/boe in the fourth quarter, compared with $2.91/boe for Lundin.

The Johan Sverdrup field is due to reach its first-phase production peak of 440,000 b/d this summer, with a second phase due on stream in 2022 which is expected to lift output to 660,000 b/d.