Billionaire Roekke's Det Norske Widens Loss Amid Crude Collapseby
Production costs reduced to $6.5/barrel with more to come
Output forecast raised, spending target reduced for 2015
Det Norske Oljeselskap ASA, the oil company controlled by Norwegian billionaire Kjell Inge Roekke, deepened cost cuts and raised output forecasts as quarterly losses widened after the collapse in crude prices. The stock rose in Oslo trading.
Trondheim, Norway-based Det Norske expects production costs to average about $6.5 a barrel this year, down from a previous $8 to $10 range, after realizing cost savings of more than $100 million this year, it said Wednesday in its third-quarter earnings report. The company is working to reduce costs further next year, Chief Executive Officer Karl Johnny Hersvik said in an interview.
“We have to admit the oil industry hasn’t been very good at monitoring its cost level, and now that we’re finally starting to work on it, we see there are big gains to be realized,” he said. “Our ambition is to be able to run a profitable company at $50 a barrel.”
The company produced 62,800 barrels of oil equivalent a day in the third quarter and expects output to average about 62,000 barrels a day in 2015, compared with a previous forecast of 58,000 barrels to 63,000 barrels a day, it said. Production will fall to 55,000 barrels to 60,000 barrels a day in 2016, before rising again in 2017, Hersvik said.
Det Norske rose as much as 4 percent to 57.2 kroner a share and traded 3.1 percent higher as of 11:28 a.m. in the Norwegian capital, boosting two-day gains to 9.1 percent.
Det Norske is one of the owners of Norway’s biggest offshore project in decades, the Johan Sverdrup field, which could hold as much as 3 billion barrels of oil. The company has filed a complaint to the government on the share it has been allocated in the field following a dispute with the other owners, and is still awaiting the outcome, it said.
The company, which also reduced capital expenditure and exploration spending forecasts for 2015, reported its third-quarter net loss widened to $166 million from $17 million a year earlier. The loss was due to a non-cash impairment charge of $186 million related to decreasing forward prices for oil, the company said.
Det Norske doesn’t expect to make any tax payments to Norwegian authorities during the first half of 2016 because of unrealized losses on foreign exchange, low oil prices and the inclusion of tax losses from Svenska Petroleum AB’s Norwegian unit, which the company bought recently, Chief Financial Officer Alexander Krane said during a presentation.