Aker ASA: Third-quarter results 2019 – Net Asset Value of NOK 43.1 billion

The Net Asset Value (“NAV”) of Aker ASA and holding companies (“Aker”) ended at NOK 43.1 billion in the third quarter, down from NOK 44.8 billion in the second quarter. Year-to-date, Aker’s NAV has increased by NOK 1.4 billion.   

Per-share NAV amounted to NOK 580 as per 30 September 2019, compared to NOK 603 as per 30 June 2019 and NOK 562 as per 31 December 2018.

“Our portfolio is exposed to volatile industries and performance will fluctuate with capital market sentiment and commodity prices. While these factors are outside of our control, it is gratifying to see that things we can control – namely operational excellence and consistent strategy on maintaining a steady course through market changes – continue to bear fruit,” said Øyvind Eriksen, President and CEO at Aker ASA.

As per 30 September 2019, the Aker share has increased 9.6 per cent year-to-date, including dividend paid. The share price decreased 1.4 per cent in the third quarter, compared to a 2.5 per cent increase for the Oslo Stock Exchange’s benchmark index. The total value of Aker’s Industrial Holdings portfolio declined by NOK 1.9 billion in the third quarter to NOK 47.7 billion. The value of Aker’s Financial Investments portfolio stood at NOK 6.4 billion at the end of the quarter, compared to NOK 7.1 billion at 30 June 2019.  

“Shortly after the closing of the quarter, the Johan Sverdrup field came on stream more than two months ahead of schedule and NOK 40 billion below budget. The field will be a significant value contributor for Aker BP for years to come. It is also a mark of excellent project execution by everyone involved. The field has a record-low break-even price of less than USD 20 per barrel, and operating costs below USD 2 per barrel at plateau. We also see the massive impact of new technology and digitalisation with the record-low CO₂ emissions, well below 1 kg per barrel. This is a result of willingness to develop, supply and invest in products and technologies that are leading the way in efficiency and in tackling the industry’s climate and environmental challenges. Priorities that are setting the stage for the industry at large,” said Eriksen.  

Aker’s liquidity reserves, including undrawn credit facilities, stood at NOK 5.2 billion as per 30 September 2019.

The value-adjusted equity ratio for the third quarter was 80 per cent, compared to 79 per cent at the end of the second quarter and 78 per cent at year-end 2018.

Aker Energy continues to be a priority for Aker. The company’s intention from day one has been to develop a business, including development of local industry and corporate social responsibility beyond minimum requirements, that is attractive both to Aker’s shareholders and to the people of Ghana. In the Plan for Development and Operations (PDO) for the main reservoir, Pecan, Aker Energy has assumed that all resources, including future tie-ins and new discoveries, would be produced as part of an area development similar to best practise in other offshore oil and gas regions. Aker underestimated, however, the complexity of such a holistic approach the entire DWT/CTP block. The strategic direction impacted issues like regulatory framework, technical concepts prepared for increased recovery, and execution models based on alliance contracts with global suppliers.

Due to several significant regulatory differences between the Ghanaian and Norwegian regulatory systems, which have impact business cases, progress and, ultimately, production, Aker Energy proposed amendments to the regulatory framework to make development and operations more predictable.

“Aker Energy genuinely believed that such an approach would be to the benefit of the host country, Ghana, but that it would also enable operators to take a strategic perspective beyond individual fields. Some regulatory changes are likely to be proposed by the government of Ghana, though not to the extent requested in the PDO. Hence, Aker Energy is changing its strategic approach,” said Eriksen.

Going forward, the priority will be to work with Ghanaian authorities to further optimise and de-risk the development of the already discovered 450-550 million barrels of contingent resources in the Pecan reservoir and tie-ins within the applicable regulatory framework and agreements.

“Our sole objective will be to make the Pecan development even more economically robust on a stand-alone basis. Opportunities to simplify the technical concept, reduce the amount of investment and cost reductions will be implemented. Furthermore, execution models including involvement of local industry and commercial terms offered by alliance partners will be benchmarked against proposals from other suppliers,” said Eriksen.

The Petroleum Agreement already approved by the government of Ghana contains a stability provision protecting Aker Energy from adverse consequences of changes in legislation or administrative practices after it was approved by the Ghanaian Parliament in 2006.   

“The change in strategy is likely to trigger delays, but I am confident that it will de-risk the project and, hence, protect significant values in Ghana,” said Eriksen, and continues:

“The next milestones will be to have the Pecan PDO approved under the Petroleum Agreement and regulations from 2006, and ultimately make a Final Investment Decision (FID). Aker Energy will in parallel explore M&A opportunities that may grow and diversify the portfolio beyond the organic approach we have pursued to date.”

The full report and presentation can be downloaded from www.akerasa.com

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Net asset value (NAV) is Aker ASA’s core performance indicator. Aker is an investment company with a majority of listed companies in its portfolio. Therefore, NAV is a more relevant indicator of the development of Aker’s underlying value than the company’s consolidated accounts.

For further information, please contact:

Investors:
Torbjørn Kjus, Chief Economist and Head of Investor Relations
Phone: +47 94 14 77 30

Media:
Atle Kigen, Head of Corporate Communications
Phone: +47 90 78 48 78

This information is subject to the disclosure requirements pursuant to Section 5-12 of the Norwegian Securities Trading Act.