Maersk Oil Cuts $1 Billion From Capex Budget as Prices Fall

Maersk Viking drillship. File Photo: Maersk Drilling

By Christian Wienberg

(Bloomberg) — A.P. Moeller-Maersk A/S’s oil unit cut $1 billion off its annual budget for capital expenditure after petroleum prices plunged.

Maersk Oil plans long-term capex in the range of $2 billion to $4 billion a year compared with a previous range of $3 billion to $5 billion, according to an investor presentation in Copenhagen on Wednesday. The new forecast doesn’t include funds to be spent on acquisitions, which the company says it’s still pursuing.

Maersk Oil is following the rest of the industry in cutting jobs and lowering investments after crude prices dropped about 50 percent over the past 12 months. The company says it has lowered unit costs by about 33 percent over the past year and completed 600 job cuts by the end of June.

Maersk Oil will focus on acquisitions in 2015 and 2016, it said. In the “long term” exploration will be “critical” to replace reserves, it said.

“We believe this is an opportune time for inorganic moves,” Jakob Thomasen, chief executive officer of the oil division, said at the presentation. “If we can, in northwestern Europe. We’re working on it and are optimistic we can make the right move.”

Maersk Oil is working on its bid to extend its deal with Qatar on the Al Shaheen field, one of its largest. If those talks should fail, the company would have more acquisition “shooting power elsewhere,” Thomasen said.

He declined to say in what price range an acquisition would be, but said it would need to be “transformational” for Maersk Oil.

Oil Price

The company is still on track to meet a goal of lowering operating expenses by 20 percent by the end of 2016 compared with 2014 levels.

The oil price will stay at about its current level in the “short term,” and then rise, helped by Chinese demand and responses from OPEC, Maersk said.

Maersk’s container line unit said at the same event Wednesday that global demand growth for its industry will be 3 percent to 5 percent in 2016, up from 2 percent to 4 percent this year. Growth rates will still not exceed capacity expansion as Maersk Line estimates the global container fleet will grow by 9 percent this year and by 5 percent in 2016.

The unit plans to grow without the help of acquisitions and will continue to cut costs, CEO Soeren Skou said. Maersk Line still plans to grow “at least” as fast as the market, he said.