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Aker BP launches comprehensive new strategy

Newly established oil and gas giant Aker BP wants to be the biggest on the Norwegian shelf when it comes to exploring for new oil. Meanwhile, shareholders have been promised annual dividends of USD 250 million, which will be increased when Johan Sverdrup begins production.

Kjell Inge Røkke is in charge of the Aker Group, majority stakeholder of Aker BP. Photo: PR-foto/Aker

Aker BP is well-positioned for further growth, the company writes in a brief to the stock exchange, ahead of the oil and gas company's capital markets day today.

Attending investors will hear more about the plans for the company, which aims to be the largest exploration and production (E&P) player on the Norwegian shelf.

The newly established company is a result of the large-scale merger in 2016 between British BP's Norwegian business and Det norske oljeselskap, in which Aker Group and billionaire Kjell Inge Røkke hold the majority stake.

Aker BP has a total market value of about NOK 53,6 billion (USD 6.3 billion) which makes it one of the largest oil companies in Norway. Monday, the company will reveal its ambitious strategy for the first time.

Production can be doubled

Aker BP plans to increase oil production this year up to the range of 128,000-135,000 per day at an average cost of USD 11 per barrel. This should be compared to a daily production last year of 118, 200 barrels – 80 percent of which were crude oil and 20 percent gas.

Our financial muscles have been strengthened considerably following the merger,"

Karl Johnny Hersvik, CEO, Aker BP
But with the portfolio that the company already boasts, Aker BP predicts a doubling in the long run. In 2023, oil production could reach 270,000 barrels of oil per day, which means annual growth of 12 percent. This would be from sanctioned as well as unsanctioned projects.

Meanwhile, Aker BP wants to be the leading explorer on the Norwegian shelf with a target of discovering a net 250,000 barrels of oil from 2016-2020. Last years exploration activities gave the company 83 barrels of oil, and in 2017, Aker BP will operate four exploration wells, while the company has partners to operate a further three wells.

The total investments in 2017 are expected to be between USD 900 and 950 million. Of this, exploration costs are estimated to make up USD 280-300 million. With these statements, Aker BP also determines that the company is in a strong position and has financial flexibility with USD 2.5 billion in available liquidity. The interest-bearing debt constituted USD 2.5 billion at the end of 2016.

USD 250 billion in dividends

Aker currently owns 40 percent of the newly established company while the other half of the merger, British BP, holds 30 percent. The remainder of Aker BP is owned by other shareholders in Det norske oljeselskap.

"Our financial muscles have been strengthened considerably following the merger," says CEO Karl Johnny Hersvik, in the statements, where he also stresses that the company launched a dividend policy in connection with the establishment of Aker BP which will be continued in 2017.

The ambition is to maintain an annual payment of USD 250 million in dividends over the next year and then increase this level, when heavy-weight field Johan Sverdrup begins production. Aker BP holds a share of 11.57 percent as a partner on the field where Statoil is the operator.

Aker BP is also operator on several fields including Iver Aasen, which recently became operational. The first oil was extracted on Dec. 24 and the company thus met its own deadline for the field.

The portfolio consists of 95 licenses on the Norwegian shelf, of which Aker BP is operator on 47.

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