maersk oil - delivery today, growth tomorrow
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DELIVERY TODAY, GROWTH TOMORROW Maersk Oil, Capital Markets Day, 24 September 2014
Legal notice This presentation contains certain forward looking statements (all statements that are not entirely based on historical facts, among others expectations to future financial performance, developments, resources growth and production levels). Those forward looking statements reflect current views on future events and are by their nature subject to significant risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. We consider such forward looking statements reasonable based on the information available to us at this time, but the actual results etc. may differ materially from our expectations because of external factors as well as changes to APMM’s goals and strategy. Thus, no undue reliance should be placed on such statements. Neither APMM, nor any other person, shall assume responsibility for the accuracy or completeness of the forward looking statements and do not undertake any obligation to update such statements except as required by law. This Legal Notice shall be governed by Danish Law. Any dispute arising out of or in relation to this Legal Notice which can not be solved amicably shall be decided by the Danish Courts.
page 2
Jakob Thomasen Chief Executive Officer
Today’s speakers
Graham Talbot Chief Financial Officer
Gretchen H. Watkins Chief Operating Officer
page 3
Production growth has returned
Ambition of value creating production growth to 2020 remains; ROIC >10%
Significant reserves additions over the next 2-3 years as projects are sanctioned
6% 300 mmboe 400,000 boepd
Maersk Oil - On track
page 4
Maersk Oil – A Top 30 oil company
Gross production by operator, 2013 (‘000 boepd)
Note: Data from Wood Mackenzie. National Oil Companies are not included.
Maersk Oil at a glance
• 4,000 employees
• ~350 licences , incl. ~150 operated
• Active in 11 countries
• Entitlement production (2013): 235,000 boepd
• Headquartered in Copenhagen
• Wholly-owned subsidiary of APMM
0
500
1.000
1.500
2.000
2.500
3.000
3.500
4.000
4.500
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Super Majors
Midsize companies
Majors
page 5
The headlines • Maersk Oil delivers solid financial results
• Delivery of major projects in line with expectations
• Positive discussions for next stage development and licence renewal in Qatar
• Exploration performance is challenged
• Impairment against Brazilian oil assets
• Growth strategy rooted in core capabilities
page 6
Changed market dynamics since 2012 present both challenges and opportunities for Maersk Oil
Safe and reliable Operations
Delivering profitable projects
Exploration & Acquisition
Securing value in a challenging market
Maximising near-term business value; optimising production operations and asset integrity
NEAR-TERM BUSINESS VALUE
OUR THREE PILLARS
PROFITABLE GROWTH
MARKET DYNAMICS
page 7
MARKET DYNAMICS
The Al Shaheen field, Qatar
page 8
Industry Response
Market dynamics The fundamental underlying change
• Softening mid-term oil price outlook
• Capital expenditure increasing; returns declining
• Price correction expected for oil field services
• Boom in US unconventionals
• Increasing importance of gas
• Capital discipline
• Portfolio rationalisation
• Focus
• Cancelled or postponed projects
• Continued retreat to US onshore
• Focus on LNG (East Africa, etc.)
Trends
page 9
Increasing Capex and declining returns among peers
Annual upstream Capex1) (USD billion, 2005-13)
Annual Return on Invested Capital (ROIC)2) (2005-13)
25
31 31
46
33
56 60
65
58
0
10
20
30
40
50
60
70
80
2005 2006 2007 2008 2009 2010 2011 2012 2013
1) Sum of upstream Capex for Maersk Oil’s Peer Group (Anadarko, Apache, BG, Hess, Marathon, Murphy, Noble, Occidental, Talisman) 2) Average ROIC for Peer Group Source: Evaluate Energy
23 21
18 20
5
10 8 8
7
0%
5%
10%
15%
20%
25%
30%
2005 2006 2007 2008 2009 2010 2011 2012 2013
+11% CAGR 3x lower
page 10
More Capex for less production
Major oil companies production and upstream investment 2002-131) Capex in FY, USD billion
Source: Evaluate Energy 1) Oil companies included: BP, Chevron, ConocoPhillips, ENI, ExxonMobil, Shell, Statoil, Total
0
50
100
150
200
250
19 20 21 22 23 24
FY 2013
12 11
08
09
10
07 06
04
05 03 FY 2002
Cumulative CAPEX FY 2002 - FY 2013 = USD 1.4 trillion
mmboed production
page 11
Significant change as industry responds
Divestments
“Apache has committed to completely exit its two LNG projects, and review its international portfolio”
Wood Mackenzie, September 2014
“Anadarko sells Mozambique gas to reinvest in American oil”
Forbes, August 2013
“Statoil has sold a further tranche of North Sea oil and gas assets to Wintershall for $1.25bn”
Financial Times, September 2014
Capital Discipline
“Statoil became the latest of the western majors to promise greater capital discipline”
Financial Times, February 2014
“Oil majors like Total and Chevron are now prepared to ditch or delay costly megaprojects”
New York Times, June 2013
“Experts say the issue of capital discipline has become pivotal to any assessment of the sector”
Financial Times, November 2013
page 12
Maersk Oil advantaged by:
• Consistent financial performance
• Robust and diverse portfolio
• Dominated by low cost barrels
• Material growth through existing projects
• Technical ability to unlock future potential
• Skilled and demographically advantaged international workforce
Well positioned for growth – focused on value, not just volume
The Dunga field, Kazakhstan
page 13
NEAR-TERM BUSINESS VALUE
Graham Talbot Chief Financial Officer
The Skjold platform, Danish North Sea
page 14
Maersk Oil’s financial ambitions remain intact
Value creating growth to 400,000 boepd by 2020
Reduced exploration expenditures during portfolio rebuild
Development Capex within investment range of USD 3-5 billion annually
Sustain ROIC at a double digit level through the growth cycle
A robust resource base – focus on maturing resources to production
page 15
Value creating growth to 400,000 boepd by 2020 Total production bottomed out at 226,000 boepd in Q2 2013
Entitlement production (´000 boepd)
428 377
333
257 235
400
0
50
100
150
200
250
300
350
400
450
2012 2013 2014E 2020 2009 2010 2011
>240
page 16
Maersk Oil delivers solid financial results Underlying profit stabilising around USD ~1 billion per year during growth phase
Underlying segment result after tax (USD million)
1) H1 2014 adjustments incl. Brazil impairment
1.368 1.561
2.121
1.358
980 1.000
2009 2010 2011 2012 2013 2014E
-204 98 -9 1,086 66 -1,828 1) Impairments & other one-offs
~
2,500
2,000
1,500
1,000
500
0
page 17
Continued strong cash flow Will be utilised to fund Maersk Oil’s portfolio of growth projects
Cash flow from operating activities (USD million)
• 2009-2013 total cash flow from operations after exploration costs of USD ~19 billion
• Total investments of USD ~12 billion – USD ~8.5 billion for development Capex and USD ~3.5 billion for acquisitions
• Generating net cash flow of USD 6.8 billion over the past five years
• Development Capex increasing towards USD 3-5 billion/year with maturing major projects
2,232
1,277 1,326 1,757 1,670
685
2,462 840
1,992
577
1,898 1,446
2009 2010 2011 2012 2013
1) Average Oil price (USD/bbl) 2) Production level (‘000 bpd)
Oil Price1) 62 80 111 112 109
Production2) 428 377 333 257 235
5,000
4,000
3,000
2,000
1,000
0
3,191
3,954 4,365
3,857
3,246
Net Cash Flow Acquisitions Development Capex
page 18
ROIC to remain at a double digit level Continued cost efficient operations will be the driver through the growth cycle
Maersk Oil ROIC (%) Industry ROIC (%, 3 year avg. 2011-2013)
Note: Peer group data based on Evaluate Energy information
-5
0
5
10
15
20
25
30
35
Maers
k O
il
O
ccid
enta
l
H
ess
M
urp
hy
BG
Gro
up
M
ara
thon
Apache
N
oble
Anadark
o
Talism
an
23%
33% 37% 36%
16% 19%
2009 2010 2011 2012 2013 Q22014
20201)
-97%
1) Underlying Q2 2014 ROIC excl. Brazil impairment. 2020 ROIC target based on oil price assumption of USD 100/bbl.
Target >10%
40
30
20
10
0
-100
page 19
Building our reserves and resources (million boe) End 2013 End 2012
Proved reserves (1P) 392 410
Probable reserves (2Pincrement) 207 209
Proved and Probable reserves (2P) 599 619
Contingent resources (2C) 874 740
Reserves & resources (2P + 2C) 1,473 1,359
2013 Highlights
• 1P reserves replacement ratio increased to 79% with 86 million barrels entitlement production (2012: 65%)
• 2P + 2C reserves and resources increased 8%
• Post-2017 Qatar reserves and resources not included
3D seismic relief map, North Sea
page 20
Solid financial delivery during the growth phase
• Material growth through existing projects
• Consistent contribution to Group results
• Maintain double digit ROIC
• Increased focus on cost and efficiency
The El Merk facility, Algeria
page 21
OUR THREE PILLARS
Gretchen H. Watkins Chief Operating Officer
page 22
The three pillars of our business
SAFETY – INCIDENT FREE
TECHNOLOGY
PEOPLE AND LEADERSHIP
Short-term delivery:
OPERATIONS EXCELLENCE Medium-term growth:
PROJECT DELIVERY Long-term growth:
EXPLORATION & ACQUISITION
page 23
Our portfolio of assets
Exploration Production Projects
Entitlement Production 2013 (’000 boepd) Total: 235
Algeria 28
Denmark 70
Qatar 99
UK 30
Kazakhstan 3 Brazil 5
page 24
An evolving portfolio - Maersk Oil Entitlement Production, 2013 and 2020
Hydrocarbon type (%) Location (%) Operatorship (%) OECD/non-OECD (%)
0
20
40
60
80
100
2013 2020
0%
20%
40%
60%
80%
100%
2013 2020
0%
20%
40%
60%
80%
100%
2013 2020
0
20
40
60
80
100
2013 2020
Note: Future production excludes contributions from Exploration portfolio
Operations Excellence
Oil Gas
Deepwater Shallow water Onshore
Operated Operated by others
OECD Non-OECD
page 25
Realising untapped value from late life assets
Production gains from Operations Excellence
Danish Business Unit, Gross oil production (‘000 boepd)
Shutdown performance within target range
Entire Portfolio, Performance index (YTD 2014)
Protect the base and improve recovery through production optimisation and well work-over campaigns
Operations Excellence gains in 2013-14
Excellence in execution of planned integrity programs to preserve assets for the future
101 98 95
60
70
80
90
100
110
120
Duration Adherence to Scope
Entitlement production losses
Target range
Operations Excellence
0
50
100
150
200
250
300
Mid 2014
2013
30%
page 26
Safe and reliable operations
Maersk Oil safety performance Lost Time Injury Frequency (LTIF)
- per million working hours
• Reduced personal injuries over the last 5 years, but the journey to incident free continues
• Reducing process safety risks through focused 5-year plans
• Environmental agenda has led to 80% CO2 reduction from flaring since 2007
2.2
1.2 0.9 0.8 0.9 0.9
0,0
0,5
1,0
1,5
2,0
2,5
2009 2010 2011 2012 2013 2014 YTD
Operations Excellence
page 27
Maersk Oil’s project portfolio
1) Based on careful analysis and evaluation, both technical and commercial, Maersk Oil has decided to terminate the Ockley project. 2) Development of oil resources in the Greater Gryphon Area (Quad 9) before initiating the Gas Blowdown project in the area
>100 mmboe 50-100 mmboe <50 mmboe
Bubble size indicates estimate of net resources:
Primarily oil Primarily gas Discoveries and prospects (Size of bubbles do not reflect volumes)
Colour indicates resource type:
Progress of key projects since CMD October 2012
Project Delivery
Initiate & Discoveries Assess Select Define Execute Assets
Project Maturation Process Exploration
75
Prospects in the pipeline
10 33 11 11 16
Production Reserves Resources
Total no. of projects per phase
Total of 75 exploration prospects and leads in the exploration pipeline
Golden Eagle Johan Sverdrup
Swara Tika
Courageous
Flyndre & Cawdor
Greater Gryphon Area 2)
Culzean
Jackdaw
Wahoo
Itaipu
Tyra Future
Tyra SE
Zidane Ockley1)
Valdemar WI
Jack II
Al Shaheen FDP 2012
UK
Algeria
Chissonga
Denmark
Kazakhstan
Qatar
Dunga III
Buckskin
Farsund Jack I
Uncertainty
page 28
Portfolio of projects to deliver growth >10% ROIC
Entitlement Production (´000 boepd)
1) Operated by Maersk Oil Note: Existing fields decline is net of work programmes to increase well potential
0
50
100
150
200
250
300
350
400
450
2013 ChissongaAngola
CulzeanUK
Johan SverdrupNorway
Golden EagleUK
JackUSA
Tyra SE OtherProjects
Existingfields
decline
20201) 1)
1)
235
400
Project Delivery
page 29
Projects in Execute - First Oil 2014/2015
Tyra Southeast, Denmark
• Operated by Maersk Oil (31.2%)
• Co-venturers are Shell (36.8%),
Nordsoefonden (20%) and
Chevron (12%)
• Net plateau production is estimated
at 4,000 boepd
• Net Capex USD 0.3 billion
Jack, USA
• Operated by Chevron (50%)
• Co-venturers are Maersk Oil (25%)
and Statoil (25%)
• Net plateau production is estimated
at 8,000 boepd
• Net Capex USD 0.7 billion 1)
Golden Eagle, United Kingdom • Operated by Nexen (36.54%)
• Co-venturers are Maersk Oil
(31.56%), Suncor Energy (26.69%)
and Edinburgh Oil & Gas (5.21%)
• Net plateau production is
estimated at 20,000 boepd
• Net Capex USD 1.1 billion
Project Delivery
1) Phase 1 Maersk Oil estimate
page 30
Projects in Define - Sanction in 2014/2015
Johan Sverdrup, Norway • Operated by Statoil (pre-unit operator
for all three licenses covering PL265,
PL501 and PL502)
• PL501 operator is Lundin (40%), with
co-venturers Maersk Oil (20%) and
Statoil (40%)
• Net plateau production is estimated at
50-70,000 boepd
• Net Capex (phase 1): USD 2.0 billion1)
Culzean, United Kingdom
• Operated by Maersk Oil (49.99%)
• Co-venturers are JP Nippon
(34.01%) and BP (16%)
• Net plateau production is
estimated at 30-45,000 boepd
• Net Capex USD 3.0 billion
Chissonga, Angola
• Operated by Maersk Oil (65%)
• Co-venturers are Sonangol P&P
(20%) and Odebrecht (15%)
• Development plan submitted to the
authorities, awaiting approval and
project sanction
• Tender process ongoing
1) Estimates based on concept selection in Q1 2014 for phase 1
Project Delivery
page 31
Exploration & Acquisition Building long-term value
Increased costs and fewer commercial discoveries have led to:
• Full review of exploration portfolio
• Reduced 2014 exploration spend while in review
• Rebuilding portfolio for long-term growth through exploration and acquisitions
Exploration & Acquisition
3D salt bodies, Angola
page 32
The three pillars of our business
• An evolving portfolio
• Production gains of 30% in the Danish North Sea
• Shutdown performance with in target range
• Material growth through existing projects
• Projects progressing on schedule
• Sharp focus on value delivery
• Exploration performance is challenged
• Unit finding costs have increased
• Exploration excellence programme launched
Short-term delivery:
OPERATIONS EXCELLENCE Medium-term growth:
PROJECT DELIVERY Long-term growth:
EXPLORATION & ACQUISITION
page 33
PROFITABLE GROWTH
Jakob Thomasen Chief Executive Officer
page 34
LEVERAGE CAPABILITIES FOR GROWTH
• Subsurface resolution
• Well solutions
• Technology deployment
• Solid project delivery
STRENGTHEN EXISTING POSITIONS
• Sustained materiality
• Organic and inorganic growth
• Preference to operate
MAXIMISE VALUE FROM HERITAGE ASSETS
• Top quartile operational performance
• Qatar renewal
• Maximise value - short and long-term value
A strategy built on Maersk Oil’s capabilities
page 35
Maersk Oil’s portfolio priorities
MAXIMISE VALUE FROM HERITAGE ASSETS
• Denmark
• Qatar
• UK
• Algeria
STRENGTHEN EXISTING POSITIONS
• Norway
• Kazakhstan
• Iraqi Kurdistan
• Angola
MANAGE FOR VALUE
• Brazil
• US Gulf of Mexico
• Greenland
page 36
Near-term strategic actions
• Focus
• Capital discipline
• De-risking ultra-deep water
• Capital risk management
• Positioning for long-term growth The Al Shaheen field, Qatar
page 37
Production growth has returned
Ambition of value creating production growth to 2020 remains; ROIC >10%
Significant reserves additions over the next 2-3 years as projects are sanctioned
6% 300 mmboe 400,000 boepd
A great deal achieved, much more to do page 38
Thank you
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