U.K. oil giant BP Plc (BP) has stretched a maintenance and modifications contract with Norwegian contractor, Aker Solutions, to 2014. The contract covers five Norwegian fields — Ula, Valhall, Skarv, Hod and Tambar. Aker will derive value between $140 million and $210 million from the contract.
The agreement which was initially signed in 2005 will continue till April 2014. Under the contract, the scope of work comprises maintenance support services and brownfield modification projects including engineering, procurement, fabrication as well as offshore installation.
The fields generate employment for about 200 individuals in Stavanger, 20 in Egersund and 300 in offshore rotation.
Aker’s key goal is to enhance the oil recovery rate for and lengthen the life of BP owned Norwegian fields. Aker had previously worked on the mature Valhall field, which is now placed to go on producing till 2050, regardless of its age. The output of Valhall is around 40,000 barrels per day of crude that feeds into the Ekofisk channel.
BP remains focused on a string of upstream activities. We believe that its new strategy of active portfolio management, higher exploration activity with additional precautionary actions as well as refining and marketing repositioning will create value for shareholders. The company is offloading its non-core upstream properties while creating a portfolio with potentially stronger growth from a smaller base.
However, BP faces headwinds from a number of global macro issues, which include sovereign debt risks, defaults on sovereign credits and changes in U.S. monetary, fiscal and tax policies.
BP holds a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months. Longer term, we maintain a Neutral recommendation on the stock.The company faces competition from ExxonMobil Corporation (XOM).
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