Page 7 - AfrOil Week 19 2020

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Most Norwegian operators have scaled back exploration spending significantly, but Equinor, OMV and Neptune Energy have scored approval for drilling at three offshore sites
European profit pain
Norway’s Equinor has become the latest Euro- pean major to post a loss for the first quarter, of $705mn. This marks its third quarterly loss in a row and was the result of hefty impairments.
Even with one-off items excluded, the state producer saw its operating income plunge by 98%, as its margins took a hammering from low oil and gas prices.
As with Royal Dutch Shell, however, Equinor has prudently reduced its dividend by two thirds to save cash, on top of a series of other cost-cutting measures. Its output also surged to an all-time high of 2.23mn boepd on the back of continuing growth at the giant Johan Sverdrup oil project. Still, its production will be restricted starting next month as a result of OPEC-style cuts imposed by the Norwegian government.
While Norwegian operators have scaled back exploration spending significantly, Equinor, Austria’s OMV and the UK’s Neptune Energy have secured approvals this month to spin the drill bit at three sites. UK energy services firm Petrofac also had some good news last week, scoring over $100mn in North Sea contract renewals. This hardly makes up for the $1.5bn in contracts it had won in the UAE that were can- celled in April, however.
Germany may be reeling in excess gas follow- ing a lengthy COVID-19 lockdown. But its grid operators have drawn up a $9.2bn investment plan to prepare the country for rising imports over the next decade. Meanwhile, Bulgaria’s par- liament has backed increased tax controls over the country’s top fuel supplier, owned by Russia’s Lukoil, in the hope of boosting budget revenues.
The company has threatened to shut down its depots if the measures are introduced.
If you’d like to read more about the key events shaping Europe’s oil and gas sector then please click here for NewsBase’s EurOil Monitor.
FSU production pressures
In the former Soviet Union, eyes are on Russia and its OPEC+ partners Azerbaijan and Kazakh- stan to see how agreed cuts to production will be implemented.
Russian oil and condensate production surged 5% m/m in April to 11.35mn bpd, according to initial energy ministry data. But under the new OPEC+ deal, oil output needs to fall to 8.5mn bpd this month. The cuts do not apply to condensate and the energy ministry does not provide a break- down on liquids. NewsBase understands that Rus- sia is close to reaching its oil target, however, with flows averaging just 8.75mn bpd in the first five days of May.
Russian oil firms boast considerably low pro- duction costs, albeit not quite as low as those in Saudi Arabia. Even so, like their international peers, they too are seeing their free cash flow plummet as a result of the oil price collapse. Goldman Sachs expects them to cut their divi- dends by 25% this year. Russian oil firms typi- cally set their dividends as a percentage of IFRS profit. Therefore the decline will be the result of diminished earnings rather than changes in div- idend policy.
Russia’s Gazprom marked the 75th anniver- sary of World War 2 with news of a new 200 bcm gas discovery in the Arctic Kara Sea.
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