Danish energy giant Dong will sell its oil and gas business, announces the company in its quarterly report Tuesday morning.
"We have decided to initiate a process with the aim of ultimately exiting from our oil and gas business. This should be seen in the context of DONG Energy’s strategic transformation towards becoming a global leader in renewables and a wish to ensure the best possible long-term development opportunities for our oil and gas business. There can be no assurance as to the outcome or the timing of the completion of the process," writes Dong in the report.
Oil and gas production amounted to 27.6 million boe in the first nine months of 2016 against 29.3 million boe in the first 9 months of 2015. The fall is primarily attributed to lower production from the Ormen Lange field in Norway.
Revenue in oil and gas came to DKK 2.3 billion (USD 341 million) or 35 percent less than in the third quarter 2015. The plunge is mainly due to lower oil and gas prices while production dropped by 25 percent.
"O&G continues the substantial restructuring of the business and delivered a strong operational performance in the first nine months. Cost performance continues to improve, driven by continued renegotiation of supplier contracts, reduced exploration spending and improved operational efficiency, with total cash spend decreasing by 36 pct. compared with the same period last year. We now expect O&G to be cash flow positive in 2016, a year earlier than previously communicated," reads the report.
EBITDA across the entire Dong conglomerate rose by seven percent to DKK 4.8 billion (USD 710 million) in the third quarter of 2016. The improvement was driven by a 19 percent increase in the Wind Power division together with a positive effect from a one-off amount secured through a completed renegotiation of a gas contract. This was, however, countered by the effect of lower gas and oil prices and fewer volumes from the Ormen Lange field.