BP Plc (BP) has restarted oil production and exports from its Valhall field in the North Sea. All operation at the field was suspended in July when a fire broke out. The company plans to upgrade its Valhall system and expects exports from the production and compression plant to increase in the days to follow.
The fire was first spotted at a vent pipe in the Norwegian belt of the North Sea that is used to vacate gases. This could have ignited the Valhall installation. It was extinguished after an hour of its occurrence.
Though Valhall fire was considered as a minor incident, the subsequent modifications that the company made to the seal assembly of the well’s cement casing led to further production delays.
Valhall had a production capacity of 42,000 barrels per day before the temporary stay on operations. It produces Ekofisk crude, which is the second largest component of the global benchmark Brent.
The output from Valhall field is transported to the offshore Ekofisk Centre and then on to Teeside, England. Hess Corporation (HES) holds a 64% stake in Valhall while BP, the operator holds the remaining 36% stake. Valhall is located 290 kilometers off Norway’s southern coast.
We believe BP’s current strategy of active portfolio management, which includes creating a portfolio with potentially stronger growth from a smaller base will be value accretive. The company is concentrating on active exploration, which is vital for its growth. Valhall came online in 2011 and is expected to produce till 2050.
BP has a Zacks #3 Rank which is equivalent to a Hold rating for a period of one to three months. For the long term, we maintain a Neutral recommendation on the stock.
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