Maersk oil unit cuts $1bn off budget for capital expenditure

AP Moeller-Maersk’s oil unit cut $1 billion off its annual budget for capital expenditure after petroleum prices plunged.

Maersk Oil plans long-term capital expenditure 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 per cent over the past 12 months. The company says it has lowered unit costs by about 33 per cent 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.

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”, Mr 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.

The company is still on track to meet a goal of lowering operating expenses by 20 per cent 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.

Global demand growth for Maersk's container line unit will be 3 to 5 per cent in 2016, up from 2 to 4 per cent this year, CEO Soeren Skou said. – Bloomberg