Maersk Suffers from Oil Market Downturn

Published at 01:55PM - 12/08/16

The Danish Maersk Group reported a profit of US$118 million (£91 million) over the second quarter of the year, negatively impacted by the average container freight rates and low oil prices.

The Group’s revenue fell by US$1.7 billion (16%) over the period, compared to the second quarter of 2015, which was partly offset by higher container volumes and higher oil entitlement production.

“Cost reductions are progressing ahead of plan with closure of the offices in Brazil and the US as well as headcount reductions primarily in Headquarters, Kazakhstan, Norway, US and Angola,” the company reported in its Q2-results dedicated to the Maersk Oil division.

Maersk Suffers from Oil Market Downturn

In the end of June, Maersk had announced it had not been selected by Qatar Petroleum (QP) to take part in the joint venture (JV) operating the Al-Shaheen field when the production sharing agreement expires in July 2017.

As a result, “the company will be redeploying a number of its employees who today are based in Qatar elsewhere in its global organisation,” the statement reads.

Maersk Suffers from Oil Market Downturn
The production sharing agreement on QP’s Al-Shaheen field expires in July 2017

Additionally, Maersk Oil reported that the development of the Johan Sverdrup oil field is progressing “according to plans and within budget towards its first production in 2019”.

In the UK, the development of the Culzean gas field is also progressing according to plans, with production expected to start in 2019.

Maersk Oil and Maersk Drilling Cut Jobs

Over the period, Maersk Drilling acquired a new-build harsh environment jack-up rig from Hercules Offshore, which will start a new five-year contract with Maersk Oil and partners BP and JX Nippon on the Culzean gas field in the UK North Sea.

“In response to the challenging business environment, Maersk Drilling continues to identify and drive cost savings to increase profitability and cash flows”, the company informed.

During the second quarter of the year, the division managed to cut costs by 8% compared to the same period in 2015.

The company explained that cost savings have been mainly achieved through a focus on operational and maintenance costs, “but also by optimising yard stays, vendor re-negotiations, reduction of staff onshore, layoff of rig crews as well as salary reductions and salary freeze and general optimisation to the operations”.