By Stephen Treloar
July 8 (Bloomberg) — A.P. Moeller-Maersk A/S said its oil and gas business will take a $1.7 billion writedown on its oil assets in Brazil and no longer push for an expansion in the South American country.
Maersk in 2011 purchased stakes in three oil blocks in Brazil for $2.4 billion, which it has now written down to $600 million, the Copenhagen-based company said in a statement. The company kept its 2014 guidance for an “underlying profit” of about $4 billion and for a result that is “significantly above last year.”
The investment “was made at a time when the outlook for the oil industry and oil prices were more positive than today and we had growth ambitions for our Brazilian oil business,” Chief Executive Officer Nils S. Andersen said. “We have now adapted our strategy to the situation we see today, but it’s of course clearly unsatisfactory that the oil volumes in the acquired fields Itaipu and Wahoo after appraisal drilling has proved to be in the low end of our original expectations.”
Maersk Oil will no longer pursue growth or operatorship for its business in Brazil. It sold a stake in the producing field Polvo to the operator, HRT O&G Exploracao e Producao de Petroleo Ltda., and is writing down the value in the other two fields, Wahoo and Itaipu, which are being planned for development.
“Maersk Oil now expects that these plans will result in a lower value than originally anticipated as the appraisal drillings performed have come out at the low end of the original expectations and additional adverse impacts from increased development costs and lower oil price also must be expected,” Maersk said.
Shares of Maersk, the world’s biggest container line, fell 1.1 percent to 13,460 kroner as of 10 a.m. in Copenhagen.
(c) 2014 Bloomberg.