London — London-based Neptune Energy announced Wednesday several delays to upstream oil and natural gas projects it is involved in in the North Sea, including with BP and Norway's Equinor, along with more spending cuts intended to weather the fall in commodity markets.
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In a statement, Neptune said state-controlled Equinor was no longer planning to start production this year from a major project to redevelop the Njord oil field, which would instead come on stream in the second half of 2021, resulting in a knock-on delay to a satellite project Neptune is working on known as Fenja.
Njord was taken offline in 2016 due to structural problems with the production platform and is one of the largest redevelopments underway in the North Sea, with resources totaling 240 million barrels of oil equivalent, including from another satellite project known as Bauge, also operated by Equinor.
Equinor has reduced its capital spending plans this year by 20%, but has not provided a breakdown of the affected projects.
For Neptune, the delay to Njord means its Fenja project will now come on stream in 2022, it said.
Neptune was created in 2015 with private equity and Chinese state backing and has a predominantly gas-focused portfolio spanning Indonesia, North Africa and the North Sea. It is a minority partner in Njord.
Neptune also expects a delay starting up another project it is developing, Duva, which is intended to feed into the Troll crude oil stream, and will now start up in the second half of next year, it said. Troll is a constituent in the Dated Brent benchmark.
It also said the start of production from its UK Seagull field, a partnership with BP and Japan's JAPEX, was likely to be delayed from next year until late 2022. BP has described Seagull as a "rapid tie-back," intended to boost production from its ETAP facility in the North Sea, which feeds into the Forties pipeline.
Neptune said it was scaling back its planned development spending this year to $700 million-$800 million, from a previous figure at the end of March of $750-$800 million, although it said it would still spend $125 million on exploration this year. Last year, the company's development spending was $826 million.
Neptune said May 19 it was pulling out of a $250 million deal with Mediterranean-focused Energean to buy Norwegian assets that Energean was due to acquire with its proposed purchase of Italian company Edison.
"We have taken decisive action across the business to increase liquidity and reduce cost, while preserving long-term value," CEO James House said. "We continue to review our business to identify opportunities to reduce operating expenditure further and focus on value over volume."
In the first quarter of 2020, Neptune produced 162,000 b/d of oil equivalent, up from full-year output last year of 144,000 boe/d, boosted by the newly producing Touat gas field in Algeria, which reached its production plateau in April.
However, the company stuck with its previous guidance for 2020 production of 145,000-160,000 boe/d, noting it expected maintenance and development-related reductions in the second quarter, and full-year production would be limited by government-mandated cuts in Norway and the cancellation of the Energean deal.
It said it had lowered its operating costs in Q1 to $8.90/boe of production, compared with $10.30/boe in full-year 2019, and expected to keep its operating costs under $10/boe on average this year.
The company, which is owned by Carlyle Group, CVC Capital Partners and China Investment Corp., added it had increased the size of its reserve-based lending facility and had net debt of $1.5 billion at the end of Q1, with its gearing expected to increase by the end of the year, due to lower commodity prices.