Norway's Aker BP boosts Q2 oil and gas output by 65% on Sverdrup, efficiency gains

London — Norway-focused Aker BP increased its upstream production by 65% in the second quarter compared with a year earlier, to 210,000 b/d of oil equivalent, helping it partially reverse financial losses in the first quarter and a capital expenditure cut announced in response to the oil market crisis, a July 14 results statement showed.

The company, which was created in 2016 when BP merged its Norwegian business with a subsidiary of engineering company Aker, has a mainly oil-focused portfolio, including an 11.6% stake in the giant Johan Sverdrup field, which came on stream in October and is operated by state-controlled Equinor.

About 60% of the increase in its Q2 production derived from Johan Sverdrup, but Aker BP also increased production at most of the fields it operates, thanks, it said, to high efficiency levels, and a new field it brought on stream in the Alvheim area in March, known as Skogul.

It offset production cuts mandated by the government by maintaining high production efficiency across its operations, as well as carrying out planned maintenance at the Valhall field in June, when Norway's production cuts came into force and were at their sharpest, at 250,000 b/d overall.

The production cuts Norway announced in April alongside cuts by the OPEC+ producer group eased to just 134,000 b/d in July, through the rest of the year. The "reference" level from which they are measured, 1,859,000 b/d, is higher than the country's actual Q1 production, to take account of rising Johan Sverdrup volumes. Norway is not formally part of the OPEC+ coalition, which introduced a 9.7 million b/d cut a month earlier, in May.

"Production efficiency remained high and was not significantly impacted by COVID-19. The production curtailments imposed by the Norwegian government have been mitigated by strong operational performance and increased capacity at Johan Sverdrup," Aker BP said. It added that: "Four months into the COVID-19 situation, the financial position continues to be very robust, and the company remains well prepared for future value creation."

Looking ahead, Aker BP suggested production could fall at its Ivar Aasen field, a constituent in the Grane crude blend, with maintenance rescheduled from June to August, and an effort underway to offset reservoir "voidage" with increased water injection, "which implies higher water injection than production," it said.

It also noted plans for a two-well 'improved oil recovery' drilling campaign at Ivar Aasen, starting in August and to be completed by year-end.

At Skarv, the one field in Aker BP's portfolio where production declined year-on-year, it said this was being offset by the startup in April of a nearby field tied in to the floating production, storage and offloading vessel Aerfugl. A further phase to the Aerfugl project is due on stream in the fourth quarter.

Total Skarv area production in the quarter was 86,000 b/d, with Aker BP holding a stake of just 23.8%, despite being the operator.

Financial boost

On the financial side, Aker BP said higher oil prices had enabled it to partially reverse a $654 million impairment booked in its first quarter results, with that sum reduced by $136 million.

It noted it was benefiting from a temporary tax break introduced to help weather the collapse in oil markets, which enabled it to approve a redevelopment of the Hod oil field in June, and partially reverse a 20% capex cut announced in March.

The new project, in the Valhall area, should boost volumes of the Ekofisk crude blend, and is due on stream in Q1 2022.

The company said its production costs had slightly increased in the second quarter, to $9.1/boe produced, due to well maintenance costs, but these were expected to fall again.

The company made a net profit of $170 million, up from $62 million a year earlier, and up from a $335 million loss in the first quarter.

However, the company's net debt increased to $3.8 billion at the end of the quarter, from $2.9 billion a year earlier.