Maersk Group expects oil price of USD 80-90

Maersk Group CEO Nils Smedegaard Andersen expects that the oil price will remain at USD 80-90, also on the long term. The moderate growth in the global economy will continue in 2015, he says.
Photo: Maersk Group
Photo: Maersk Group

The current and extremely low level of the oil price, at USD 85 per barrel, is here to stay, also on the long term, says Maersk Group CEO Nils Smedegaard Andersen. This will help boost Maersk Line's savings, which did not benefit from the low oil prices in the 3rd quarter.

"The price drop came late, so it didn't affect us this quarter, but a price of around USD 80-90 per barrel will be reasonable and that's also where we expect the price to be for some time," said Smedegaard at a teleconference following the presentation of the Group's 3rd quarter interim report.

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A low oil price has a positive impact on the the price of bunker for the Maersk fleet, though it has a negative effect on the Group's oil businesses in Maersk Oil and Maersk Drilling, but the development represents an overall gain for the company.

Nils Smedegaard described the Maersk Group's combined profit of USD 1.5 billion as "extremely satisfying," not least very positive that the company achieved a 25 percent improvement.

Even though the low oil price is not reflected in Maersk Line's USD 685 million profit, the liner carrier has once again been the driving force. The result represented a 24 percent improvement and return on invested capital (ROIC) increased to 13.5 percent.

"Maersk Line grew its volume by 3.7 percent, and we believe that this is slightly above the market. This development must continue, it's important that we maintain our competitive lead compared to our competitors," said Nils Smedegaard Andersen.

Four alliances on the market

In a matter of weeks the international container industry will become fixed around four alliances when Maersk Line's collaboration with 2M is launched at the turn of the year. Maersk Line will take delivery of the final ships from the Triple-E series next year, but with an investment framework of USD 15 billion, the carrier is prepared to expand its fleet with container as well as reefer ships, he said. The Group will "invest in the tonnage necessary to service the customers," he said.

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But Nils Smedegaard did not try to hide the fact that cost reductions, increased efficiency and cheaper fuel will create the results in 2015.

"Right now there is nothing to indicate that 2015 will be significantly different than this year, where global growth will end up around 2.5 percent. Chine is slowing down a bit, Europe is at a low level and there are positive signs in the US" said the Maersk Group CEO.

The Group's other business units performed more or less as expected, though he pointed out that Maersk Oil did surprisingly well. However, there is still a lot of work ahead for the fifth core business unit, APM Shipping Services, he said, where Damco's result was particularly disappointing.

Acquiring fields

The declining oil prices do bring opportunities for acquiring new fields, said Nils Smedegaard, explaining that the current price level is more apt for investing in new fields than betting on exploration.

"The pressure on the competition brings acquisition opportunities," said Smedegaard.

In Drilling, investments in new traditional deep water drillings are not on the table, but the possibility of betting more on specialized rigs remains intact.

Find the complete interim report here

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Get a full overview of the Maersk result here

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