Maersk Oil, a subsidiary of AP Moller-Maersk, has decided to book a $1.7bn impairment on its Brazilian assets as the company revises strategy in the region.
In July 2011, the company acquired stakes in three fields in Brazilian waters for $2.4bn from SK Energy.
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The company decided to take the impairment after appraisal drilling saw results at the lower end of expectations, as well as increased development costs with potential for a lower oil price.
Maersk Oil said it will no longer pursue growth for its business in Brazil and as a result has sold its ownership share in the Polvo field to the operator, HRT O&G Exploracao e Producao de Petroleo.
The rest of the fields, Wahoo and Itaipu, have significant potential resources and Maersk Oil expects that the operating partners of the fields will be able to present commercially viable development plans at a later stage.
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The impairment reduces the value of Maersk’s investment to $0.6bn and the group’s guidance for 2014 remains unchanged at an underlying profit of approximately $4bn.
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By GlobalDataMaersk Group CEO Nils Andersen said: "The SK Energy investment was made at a time when the outlook for the oil industry and oil prices were more positive than today.
"We have now adapted our strategy to the situation we see today but it is of course clearly unsatisfactory that the oil volumes in the acquired fields Itaipu and Wahoo after appraisal drilling have proven to be in the low end of our original expectations.
"Going forward, the strategy adjustment and value impairment allow Maersk Oil to fully focus on its growth strategy."
Image: Maersk Oil BM-C-8 FPSO. Photo: courtesy of AP Moller-Maersk.
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