Maersk takes $1.7 bn hit on Brazil oil assets

After operations in Brazil go worse than planned, the Danish company will no longer operate three blocks it purchased there in 2011.

Maersk takes $1.7 bn hit on Brazil oil assets
Brazilian operations prove a disappointment for Maersk. Photo: Claus Fisker/Scanpix
Danish shipping and oil conglomerate A.P. Moeller-Maersk said on Tuesday its Brazilian oil and gas business will take a $1.7 billion (9.3 billion kroner) writedown over disappointing drilling results and low oil prices.
The book value of three Brazilian blocks Maersk bought in 2011 from South Korea's SK Energy for $2.4 billion has been written down to $600 million, it said.
Another $100 million was written down over items including the divestment of a small oil field.
"Appraisal drillings performed have come out at the low end of the original expectations and additional adverse impacts from increased development costs and lower oil price also must be expected," it said.
The Copenhagen-based group however left its underlying profit forecast for the full year at $4.0 billion.
"The SK Energy investment was made at a time when the outlook for the oil industry and oil prices were more positive than today," chief executive Nils S. Andersen said in a statement.
Consequently, the company said Maersk oil would no longer seek to grow or operate the three Brazilian blocks.
The writedown will have no impact on Maersk Oil's long term production plans "since no volumes concerning the Brazilian assets have been included in these plans," it said.
In the short term, it would instead lead to lower than planned exploration spending, Maersk Oil chief executive Jakob Thomasen said.

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Maersk profits up as global supply chain disrupted

Danish shipping giant, AP Møller-Maersk, said Tuesday that profits were up sixfold in the third quarter as the coronavirus pandemic and global supply chain problems caused container prices to soar. 

Maersk headquarters in Copenhagen. The Danish shipping company posted hefty profits in the third quarter of 2021.
Maersk headquarters in Copenhagen. The Danish shipping company posted hefty profits in the third quarter of 2021. Photo: Niels Christian Vilmann/Ritzau Scanpix

“Maersk delivered record earnings” in the third quarter, chief executive Soren Skou said.

“In the ongoing exceptional market situation, with high demand in the US and global disruptions to the supply chains, we continued to increase capacity and expand our offerings to keep cargo moving for our customers.” 

Maersk said that its bottom-line net profit amounted to $5.438 billion in the period from July to September, compared with $947 million a year earlier.

Underlying, or operating, profit increased nearly fivefold to $5.859 billion and revenues jumped by 67 percent to $16.612 billion.

“Results in Q3 were driven by high freight rates in an exceptional market situation,” the group said.

Looking ahead, Maersk said it is sticking to its full year forecast for operating profit of 18-19 billion dollars. 

However, the ocean shipping division “is now expected to grow below” projected global container demand of between seven and nine percent this year, “subject to high uncertainties related to the current congestion and network disruption,” Maersk said.

“The current trading conditions are still subject to a higher-than-normal uncertainty due to the temporary nature of current demand patterns, disruptions in the supply chains,” it cautioned.

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