DONG expects US$2.33 billion write down

Jan 27, 2016

Semi-state owned Danish energy company DONG Energy has decided to keep its exploration and production business ahead of floating on the stock market.

But, the firm said its exploration and production business will have to "adapt to the significant decline in oil and gas prices," in line with the rest of the industry.

It was also facing a DKK16 billion (US$2.33 billion) write down in value of its exploration and production assets, across Denmark, Norway and the UK.

DONG says: "The write-down is caused by the continued decline in oil and gas prices, reduced reserve estimates as well as project-specific factors, in particular with regard to the Hejre project which continues to face significant challenges."

DONG has blamed delays from its supplier consortium for the delays on the high-pressure, high=temperature Hejre field in the Danish North Sea.

The field is 292km north west of Esbjerg and is estimated to contain about 170 MMboe, 5000-6000m deep, at 1010 bar and 160°C. It had been due on stream in 2016, but that was delayed to 2017 last year. The jacket for the Hejre platform was installed in 2014, but the topsides are yet to be completed.

First steel cut on the 13,000-tonne topsides was in 2013, at Daewoo Shipbuilding & Marine Engineering in South Korea, with sailaway due last year.

DONG has a large portfolio of operated and non-operated stakes in licenses west of Shetland, on the UK Continental Shelf (22), as well as producing and assets offshore Norway (28) and Denmark (12), which include producing assets. The firm also has interests in three licenses off the Faroe Islands. In addition to Hejre, DONG is a partner in the Laggan-Tormore field, west of Shetland, which was due to come on stream late last year.

The firm, originally the Danish Oil and Gas company, but which has since become a utility and green energy producer, says it wants to build a "world-class clean energy company," with a portfolio based on offshore wind, bioenergy and green distribution and customer solutions.

Cash flows from the exploration and production business are to be part of funding DONG Energy’s investments in renewable energy.

Image: The Hejre jacket before it was installed offshore Denmark in 2014.