Aker BP cuts 2020 capex 20%, suspends non-sanctioned development projects

Aker BP will put on hold until further notice all non-sanctioned field development projects, representing a capex reduction of 20% from previous guidance to $1.2 billion, as part of an update to the company’s investment program and financial framework in response to uncertainty caused by the COVID-19 crisis. For 2021-22, the company expects capex to drop well below $1 billion.

Planned capex in 2020 is mainly related to Johan Sverdrup Phase 2, Aerfugl Phase 1, and the completion of the Valhall Flank West project (OGJ Online, May 15, 2019; June 4, 2019; Dec. 17, 2019). These projects will continue as planned. Some 20% of the capex is however related to non-sanctioned projects, including the Hod redevelopment project in the Valhall area, and these projects are now on hold.

The company’s original 2020 spending plan, reported in February, consisted of $1.5 billion in field developments (capex), $500 million in exploration activities (expex) and $200 million related to in abandonment (abex).

Aker BP, in cooperation with its partners, will postpone two of its 10 planned exploration wells this year. Together with other cost reducing measures, the company now forecasts exploration spend of $400 million for the year. Further measures are being evaluated, including postponing additional exploration wells.

The company is also targeting a 20% reduction in production costs and is cancelling or postponing activities that are not necessary to maintain safe and stable operations including a significant reduction in the planned maintenance and modification activities.

Production guidance of 205,000-220,000 boe/d for the year remains unchanged. Updated guidance for 2020 will be provided at the quarterly presentation in May.

Following the issuance of $1.5 billion in new bonds in January, Aker BP’s available cash and undrawn credit facilities amounted to $3.9 billion as of Mar. 20. The company has no major debt maturities in 2020 and 2021.

To minimize the risks related to COVID-19, the company is reducing the activity level and the number of offshore personnel to a minimum and has established additional measures to prevent the COVID-19 infection from reaching its offshore facilities. No cases of COVID-19 infection have been reported from the company’s offshore facilities, and so far in 2020, Aker BP’s oil and gas production has progressed as planned.