4.5!Analysis!of!the!fields!
PDO, Budget
We! have! looked! at! the! operating! costs! without! the! transport! expenses,! as! the! latter! are! more!
directly! tied! to! production! than! the! rest! of! the! operating! costs.! As! we! see! from! table! 29,! the!
operational! costs! are! expected! to! rise! slightly! with! the! change! in! production,! creating! the! flexible!
budget.!Since!the!field!mainly!produces!oil,!most!of!the!transportation!costs!are!in!the!transport!of!
the$ much$ stronger$ oil$ price$ than$ expected$ in$ the$ PDO.$ This$ is$ not$ something$ they$ can$ control,$
contrary$to$operational$and$CAPEX,$and$gives$a$poor$impression$of$the$project$as$a$whole.$
Numbers(in(MNOK'96 Updated Flexible,
Budget
PDO, Budget Revenues
Oil $$$$$43$970$ $$$$$$$$$$$$$27$897$ 174% $$$$$$$16$073$ $$$$$$$2$343$ 17% $$$$$$13$731$
Gas$(199632007) $$$$$$$$$$$229$ $$$$$$$$$$$$$$$$$$229$ $$3$$ $$$$$$$$$$$$$$$$$0$ $$$$$$$$$$$$$$0$ $3$ $$$$$$$$$$$$$$$0$
Gas$(20083$$) $$$$$$$$$$$231$ $$$$$$$$$$$$$$$$$$159$ 221% $$$$$$$$$$$$$$$72$ 3$$$$$$$$$246$ 377% $$$$$$$$$$$318$
Total $$$$$44$429$ $$$$$$$$$$$$$28$284$ 175% $$$$$$$16$145$ $$$$$$$2$096$ 15% $$$$$$14$049$
Costs
Opex $$$$$11$314$ $$$$$$$$$$$$$$$6$197$ 121% $$$$$$$$$$5$117$ $$$$$$$2$437$ 91% $$$$$$$$2$680$
Total$Transport$Opex $$$$$$$$3$206$ $$$$$$$$$$$$$$$$$$588$ 22% $$$$$$$$$$2$619$ $$$$$$$$$$344$ 15% $$$$$$$$2$275$
Total $$$$$14$521$ $$$$$$$$$$$$$$$6$785$ 88% $$$$$$$$$$7$736$ $$$$$$$2$781$ 56% $$$$$$$$4$955$
Flexible,,,,,,,,,,,,,,, Variance
Sales,Volume, Variance
The!IRR!of!the!project!after!taxes!is!also!as!high!as!17.7%.!Even!though!the!initial!capital!costs!were!
higher! than! expected,! this! showed! to! be! a! very! profitable! project.! The! IRR! before! taxes! were! also!
significantly! higher! than! the! IRR! in! the! PDO.! This! implies! that! the! project! has! been! a! success! in!
economic!terms!and!quite!profitable.!If!it!was!not!for!the!increased!production,!and!higher!prices!of!
oil! and! gas,! this! may! not! have! been! the! case.! The! analysis! also! shows! that! the! IRR,! after! cost!
overruns,!were!significantly!lower!than!both!the!updated!IRR,!and!that!estimated!in!the!PDO.!!This!
shows!that!the!IRR!associated!with!the!cost!overruns!was!severely!damaged!by!the!cost!overruns,!
but!that!market!conditions!and!production!has!been!very!favorable!for!the!development!of!the!field.!
Table$30$;$NPV$before$tax$;$Åsgard$(MNOK'95)$
Present$Value$after$unconsolidated$tax$(MNOK´95)! Deviation$from$PDO$after$tax$
Discount!rate!1! 0%! 115!776! 87!358! 307%!
Discount!rate!2! 7%! 34!021! 26!553! 356%!
Discount!rate!3! 10%! 18!901! 15!762! 502%!
!
Table$31$;$NPV$after$tax$;$Åsgard$(MNOK'95)$
Present$Value$before$unconsolidated$tax$(MNOK´95)! Deviation$from$PDO$before$tax$
Discount!rate!1! 0%! 463!445! 357!374! 337%!
Discount!rate!2! 7%! 147!709! 114!746! 348%!
Discount!rate!3! 10%! 92!767! 72!677! 362%!
!
Table$32$;$Internal$rate$of$return$;$Åsgard$
Internal$Rates$of$Return$
! PDO! After!cost!overrun! Updated!
! IRR! IRR! Deviation! IRR! Deviation!
Before!tax! 21.9%! 15.2!%! W!6.7!pp! 28.6%! +6.7!pp!
After!tax! 13.2%! 10.3!%! W2.9!pp! 17.7%! +4.5!pp!
!
Table$33$;$Break;even$prices$;$Åsgard$(USD'95)$
B/E;$Price$(7%$discount$rate)$in$USD’95$
! PDO! After!cost!overrun! Updated!
! B/EWPrice! B/EWPrice! Deviation! B/EWPrice! Deviation!
Before!tax! $10.90! $12.61! 15.7%! $13.31! 22.1%!
After!tax! $12.37! $14.69! 18.8%! $15.83! 28.0%!
!
Net+Present+Value+Breakdown+Analysis+
!As!we!see!from!the!chart,!with!a!7%!discount!rate!the!updated!value!of!the!project!is!much!higher!
than!the!PDO!value.!This!is!mainly!due!to!higher!revenues.!!
As!was!mentioned!in!the!report!“Analyse)av)investeringsutviklingen)på)kontinentalsokkelen”!from!the!
Ministry!of!Petroleum!and!Energy,!there!have!been!cost!overruns!in!the!CAPEX,!but!these!are!more!
than! outweighed! by! the! extra! earnings.! The! CAPEX! cost! overruns! are! primarily! due! to!
underestimating!costs,!but!also!to!changes!in!production!capacity!and!recovery!strategy.!As!of!2013,!
the!total!number!of!wells!that!were!planned!in!the!PDO!are!still!not!completed!(Statoil,!2013), but!
more! opportunities! in! the! existing! field! are! being! sought.! The! change! in! production! capacity! can!
somewhat!be!seen!in!the!higher!net!present!value!given!by!this!section.!
There!has!not!been!more!drilling!than!originally!planned,!but!higher!investments!subsea!and!on!the!
rig,! as! well! as! high! cost! overruns! on! the! drilling! sections,! has! resulted! in! much! higher! CAPEX.! The!
negative!effect!of!OPEX!is!only!1%,!which!can!be!split!into!the!sales!volume!variance!of!12.2%!higher!
costs!and!the!flexible!variance!of!almost!the!same!in!negative!numbers.!This!is!given!the!assumption!
that!the!OPEX!is!dependent!on!production,!and!is!highly!correlated!with!this.!Since!the!production!is!
not!far!from!what!was!expected!in!the!PDO,!this!makes!sense.!
The! much! higher! revenues! are! somewhat! due! to! more! investments,! which! resulted! in! somewhat!
higher!URR,!but!are!mainly!due!to!much!higher!sales!prices!than!anticipated.!As!can!be!seen!from!
figure!26,!the!production!volume!has!also!had!a!positive!net!effect!to!some!extent;!however,!for!gas!
0"
20000"
40000"
60000"
80000"
100000"
120000"
140000"
160000"
180000"
200000"
PDO$Value$ Prices$ Produc0on$
Volumes$ Other$
Income$ Opex$ CapEx$ Updated$
Value$
Millions$
Figure$25$–NPV$break$down$analysis$pretax$–$Åsgard$(NOK’95)$
and!condensate!this!is!actually!negative.!Considering!price!on!the!other!hand,!this!has!been!much!
higher!than!was!expected!in!1995,!so!the!revenue!effect!is!significant.!
!
Figure$26$–$NPV$break$down$analysis$at$7$%$discount$rate$pretax$–$Åsgard$(95’NOK)$
When!considering!the!development!as!a!whole,!the!project!is!very!profitable,!and!gives!a!net!present!
value! much! higher! than! was! expected! in! the! PDO.! Once! again,! this! is! mainly! due! to! higher! sales!
prices.! If! this! were! not! the! case,! the! updated! value! would! have! been! lower! than! in! the! PDO.! This!
shows!that!the!extra!CAPEX!during!the!development!period!have!not!been!matched!with!higher!URR!
PDO$Value$ Price$ Produc/on$
Volumes$ Other$
Income$ Opex$ CapEx$ Updated$
Value$
Millions$
Figure$27$–$NPV$break$down$analysis$isolating$the$price$effect$pretax$–$Åsgard$(NOK’95)$
or!lower!OPEX.!Without!the!higher!gas!and!oil!prices,!this!project!would!have!been!far!worse!off!than!
shown!in!the!PDO.!
Variance+analysis+
Static!Budget!Variance!
The! static! budget! variance! shows! what! we! already! know,! the! revenues! are! much! higher! than! the!
PDO,!the!OPEX!slightly!lower!and!the!CAPEX!higher!than!in!the!PDO,!but!the!total!effect!is!a!very!high!
positive! difference! between! the! numbers! of! today! compared! with! the! PDO.! Here! we! have! also!
looked!at!the!transport!cost!by!itself,!which!shows!that!this!actually!lowers!the!OPEX!somewhat.!
!
Flexible!Budget!Variance!
Looking! more! into! the! details! of! the! variances,! we! look! at! the! results! from! the! flexible! budget!
variance.!
Table$35$;$Flexible$budget$variance$analysis$;$Åsgard$
!
Numbers(in(MNOK'95 Real Flexible)