Norway’s Statoil said on Friday it was halting exploration in Angola after poor drilling results, retreating from an offshore area it had high hopes for and capping a poor year for exploration.
Statoil said it was cancelling a three-year contract with Stena Drilling, handing back a drilling ship two years early and taking a $350 million charge in the fourth quarter related to the contract, the drilling and the value of the Angolan blocks.
Statoil had high hopes for Angola’s offshore pre-salt blocks 38 and 39 because the geology is similar to Brazil’s, where major oil discoveries have been made in similar rocks.
“Statoil’s first well results from the area have been disappointing and although the company still sees remaining prospectivity in the basin and on the Statoil acreage, more time is needed to evaluate the well results and mature new prospects before deciding on future activities,” it said in a statement.
The firm still has commitments to participate in several more wells in Angola, but only as a partner and not an operator.
“This will add to an already bad quarter for them as oil prices have dropped from the third quarter,” said Christian Yggeseth, an analysts at Arctic Securities.
“We might be facing another negative quarter, at least in the upstream international division.”
Statoil is cutting capital expenditure and delaying or cancelling projects to save cash after a 10-year spending spree and a nearly 30 percent fall in crude prices since June.
It has already cancelled or suspended several rig contracts in 2014 — just a year after paying near record rates to secure drilling capacity — because costs have become too high and as it company ran out of prospects to drill.
Statoil, the most successful offshore explorer last year, has had a difficult 2014 with major exploration failures, including in the Norwegian Arctic and the Gulf of Mexico.