The fight against COVID-19 by closing borders and business comes at a cost. Oil
consumption dropped significantly, and the oil price decreased 65.5 per cent in
the first quarter. Consequently, the Net Asset Value ("NAV") of Aker ASA
("Aker") decreased by 52 per cent to NOK 24.1 billion (NOK 325 per share).
Aker's liquidity reserve, including cash deposits and undrawn credit facilities,
stood at NOK 6.1 at the end of the first quarter. During the second quarter, it
increased to NOK 7.2 billion.
The Aker share decreased 57 per cent in the first quarter, compared to a 65.5
per cent drop in oil price and a 24 per cent decrease in the Oslo Stock
Exchange's benchmark index ("OSEBX"). So far in Q2, our NAV is up 24 per cent to
NOK 30 billion and the Aker share is up 20 per cent to NOK 283.
"A microscopic enemy has had significant adverse effects on global economy, and
especially the oil market, unlike anything we can remember. Plunging oil demand
coupled with supply increases, created a perfect storm. Aker is exposed to
industries that have been hit especially hard, but we have managed through
challenging times before. We have learned from past experiences the importance
of a strong balance sheet and liquidity position to not just weather the storm,
but also to pursue opportunities and regain shareholder value. That is why we
have increased our liquidity reserve to NOK 7.2 billion," said Aker's President
and CEO, Øyvind Eriksen.
While the ultimate impact of the pandemic and market situation is still unknown,
Aker is bracing itself for long-term effects of the crisis. The oil service
industry has been hit especially hard. Projects in progress are slowing down due
to lockdown of countries and businesses, and oil companies are canceling or
postponing a large proportion of new projects and other activities. Some
temporary changes to the Norwegian petroleum tax regime have been proposed by
the industry itself (NOROG) to stimulate activity and avoid significant and
permanent reductions in capacity and competency for the supplier industry,
safeguard tax revenues, and avoid large social expenditures for the country.
The counter proposal by the Government last week does not have the intended
effects on activity, employment, and tax revenue. The practical and anticipated
differences between the NOROG proposal and Government proposal for Aker
Solutions, Kvaerner and MHWirth, measured by activity and employment, are
outlined in the document attached hereto. The short version is that the
Government proposal will most likely have no effect on activity in Kvaerner and
only marginal positive effects on activity for parts of Aker Solutions. The
analysis explains how serious the current situation is both for the oil services
industry and for a large number of local municipalities hosting the industry.
The material constitutes the basis for some hard decisions that we have to make
in the time ahead.
"The value of our oil service activities only accounts for 4 per cent of our
gross assets, but measured by employment, competency and technology, Aker
Solutions, Kvaerner and MHWirth are punching above their weight. These are
companies with employees and capabilities of vital importance both for future
oil and gas activities and for the transition to 'green solutions' like offshore
wind, carbon capture and storage, and electrification. Without efficient
governmental initiatives to stimulate new activity, a significant part of the
capacity and competency in the oil service industry in Norway is likely to be
dramatically reduced. Hence, the proposal from NOROG is of utmost importance,
not only to Aker, but also to the future of industry in Norway and our country
at large," said Eriksen.
"I'm grateful for how the industry has come together in this time of crisis and
stands united behind a proposal which will facilitate a base activity needed to
maintain capacity and competency. I sincerely hope that our elected officials
will also be able to put ideological differences aside and support an industry
which has been impacted brutally by the current lockdown. In reality, there are
no alternative projects for thousands of highly skilled white- and blue-collar
workers unless activity is stimulated as suggested. The resources and
capabilities of the oil and gas industry have been instrumental in building
Norway as the unique society we are all enjoying. The industry acknowledges the
need for changes, but it will still be of vital importance for existing and new
industrial activities," Eriksen adds.
"In times like this, it's important to keep in mind that Aker is about more than
oil and gas. Through fast-growing portfolio companies, we are a part of global
trend lines that have amplified and accelerated during the COVID-19 pandemic.
The shift to 'green industries' and renewable energy is expected to maintain
momentum as focus is shifting to governmental initiatives designed to stimulate
new activity and to transform national economies. New software solutions and
automatization are not just making it possible to work from home, but are also
making industries more efficient and less exposed to human risk factors like
COVID-19. The focus on health and healthy living also continues to accelerate.
All these global trend lines fit well with our strategies to build offshore wind
and carbon capture capabilities in Aker Solutions and Kvaerner and to further
strengthening the successes of Cognite and Aker BioMarine in the industrial
software and Marine biotech industry segments, respectively," said Eriksen.
For further information, please contact:
Torbjørn Kjus, Chief Economist & Head of Investor Relations
Phone: +47 94 14 77 30
Atle Kigen, Head of Corporate Communications
Phone: +47 90 78 48 78
This information is subject of the disclosure requirements pursuant to section 5
-12 of the Norwegian Securities Trading Act.