Letter to shareholders

Alex Schneiter

“Our key producing asset Edvard Grieg has continued to perform above expectations”


Alex Schneiter
President and Chief Executive Officer

7 November 2018

The third quarter has been another good period of operational and financial delivery, which has benefitted from continued high performance from our quality asset base and higher commodity prices. For the second quarter in a row, we have generated an EBITDA in excess of USD 500 million and also a record high quarterly free cash flow of approximately USD 230 million.

Our key producing asset Edvard Grieg has continued to perform above expectations with capacity from the ten producing wells currently around double the facility’s capacity contractually available. The reservoir performance continues to exceed expectations with no material water production to date, which will see plateau production extended further by around six months to mid-2020.

The third quarter was also about success in moving our appraisal opportunities further towards development and we now have six potential new projects in the pipeline. At Rolvsnes and Alta, we were able to de-risk the commercial potential of these unique discoveries through test production and resource increases. At Luno II we increased our working interest in PL359 to 65 percent to bring commercial and operational alignment with the Edvard Grieg partnership, where the discovery is planned to be tied back to.

We have had another good period of project delivery at Johan Sverdrup Phase 1 development, which is now over 80 percent complete and on schedule. The offshore installation programme continues to progress well with all subsea infrastructure and jackets now in place, as well as two of the four topsides and all pre-drilled production wells completed. The oil export pipeline and power from shore cable have been installed and power supply to the facilities from shore commenced in October 2018, which was a milestone for the project and will make it one of the most carbon efficient fields in the world. We are also pleased to note that the key metrics for the project during the period were upgraded, lowering the total capex guidance, increasing reserves, confirming expected Phase 1 first oil to be in November 2019 and submitting the Phase 2 PDO.

The fourth quarter will again be a busy period for us, as we progress our key projects towards commercialisation, including the Luno II field development where PDO will be submitted in early 2019 and the Rolvsnes extended well test. We will also be drilling three high impact exploration wells in the Froan Basin, Mandal High and southeastern Barents Sea core areas, as well as two important follow on exploration wells in the Alvheim area, significantly de-risked by the successful Frosk discovery earlier in the year. I am pleased with the continued delivery of our organic growth strategy and look forward to further successes as we move into the last quarter of 2018.

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