Calgary-based Talisman Energy has said it may suffer writedowns on its UK North Sea assets in Q4 due to battling production efficiency and cost issues on its assets in the basin.
In its third-quarter report, Talisman said its UK North Sea operations have been challenged throughout 2014 when it comes to “asset uptime, declining production and emerging potential increases to development and decommissioning cost estimates.”
Image: The Bleoholm FPSO, operating on Talisman's fields in the North Sea.
“An adverse movement in any of these factors will result in lower estimated future cash flows than previously anticipated, and under these circumstances there is a risk of impairments,” the company said. “The magnitude of potential impairments could result in a material reduction in the carrying value of the company’s investment in (Talisman Sinopec Energy UK/TSEUK).”
Talisman is not alone in suffering uptime problems in the North Sea. Many facilities are operating beyond their design lives and production efficiency, on average across the basin, was 66%. For some, it is as low as 35%. However, those with better production efficiency rates say low rates are not necessarily related to the aging infrastructure. Facilities need to be in the right hands, EnQuest's North Sea president Neil McCulloch told the Offshore Production Optimization conference in Aberdeen only yesterday (4 November).
Talisman's total production averaged 353,000 boe/d in the quarter, down 6% from the previous quarter, largely due to planned turnarounds in the UK North Sea, the firm said.
Talisman's share of UK production averaged 12,000 boe/d, down 37% from the previous quarter and 43% year-over-year. The decrease was largely from planned turnarounds at Claymore, Piper, Buchan and the Bleoholm FPSO. All turnarounds have been completed, except for Bleoholm, which will continue into Q4.
Talisman said it expects to reach its conclusions and book impairments, if any, in Q4 2014. The total value of the company's investment in TSEUK at 30 September 2014 is US$637 million.
In Norway, Talisman's average production was 17,500 boe/d, up 20% from the previous quarter, primarily due to the completion of planned turnarounds.
TSEUK’s principal UK operating areas include Claymore, Piper (including Tweedsmuir), Tartan, Ross/Blake, Buchan/Hannay, Enoch/Blane, Quad 16, Montrose/Arbroath, Fulmar, Auk and Clyde. These principal operating areas encompass a total of 42 fields, 31 of which are operated and 11 of which are non-operated.
TSEUK also has interests in a number of production facilities and pipelines, including a 100% interest in the Flotta Terminal.