Denmark: Maersk Drilling Positively Affected by Delivery of New Rigs

Revenue for the period increased by 17% to USD 41.4 billion, primarily as a result of higher freight rates for the Group’s container shipping activities and higher oil prices. The net result for the period was a profit of USD 4.2 billion (a loss of USD 0.7 billion).

“The result is exceptional, and we are very satisfied. Markets have been favourable, but first of all, our businesses are in excellent shape. Especially our container business has improved and is ahead of competition on profitability. We are ready to seize opportunities, especially in emerging markets.”  says Group CEO Nils S. Andersen.

• The segment result for the Group’s container shipping and related activities was a profit of USD 2,254 million (a loss of USD 1,590 million). The result was positively affected by an increase in average freight rates of 34%, an increase in transported volumes of 7% and substantial savings per unit.

• APM Terminals’ segment result was USD 668 million (USD 340 million), positively affected by gains on sale of an ownership interest in Sigma Enterprises Ltd. The number of containers handled increased by 3% despite discontinued activities at six terminals. The remaining terminals had an 8% increase in volumes.

• The segment result for the Group’s oil and gas activities was USD 1,339 million (USD 958 million), primarily due to a 35% increase in oil prices to an average of USD 77 per barrel. The increase more than compensated for a 17% decline in the Group’s share of oil and gas production to 103 million barrels. The Group’s exploration costs were USD 346 million (USD 466 million). Exploration activities led to two new discoveries in Norway in the third quarter. Planned maintenance of platforms in the North Sea was completed in the third quarter.

• Maersk Tankers’ segment result was a loss of USD 103 million in the first nine months of 2010 (a loss of USD 193 million). Maersk Tankers incurred impairment losses of USD 107 million in the third quarter of 2010.

• Maersk Drilling’s segment result increased to USD 300 million (USD 168 million), positively affected by delivery of new rigs and a continued high level of contract coverage at attractive rates.

• The Group’s free cash flow was USD 4.1 billion and increased by USD 6.3 billion in the first nine months of 2010 compared to the same period of 2009. Cash flow from operating activities was USD 7.4 billion (USD 4.1 billion), while cash flow used for capital expenditure was negative by USD 3.2 billion (negative by USD 6.3 billion). Net interest bearing debt was reduced by USD 4.4 billion to USD 13.7 billion.

• The Group’s competitiveness was enhanced by further cost reductions and activity adjustments with an expected full-year effect of between USD 500 million and USD 1 billion. Outlook for the full year 2010

The Group is now expecting a result for the full year in the order of USD 5 billion (Interim Report of 18 August 2010 stated an expected result for 2010 to exceed USD 4 billion). The improvement is first and foremost due to higher freight rates for the Group’s container business and additional efficiency improvements. The Group’s expectation of the full year result is excluding expected gain from Dansk Supermarked A/S’ sale of Netto Foodstores Limited, UK. The transaction is not expected to be completed until the first half of 2011. The Group expects a seasonal decline in both volumes and freight rates for the container activities towards the end of the year and consequently a somewhat lower result in the fourth quarter compared to previous quarters. The Group expects its share of the total oil and gas production in the fourth quarter to be at the level of the average production year to date. Increased exploration activity is planned for the fourth quarter and the Group still expects that the total exploration costs will be at the level of 2009. The Group expects that the result for the oil and gas activities for the fourth quarter will be considerably below the first three quarters of the year primarily due to increased exploration costs. The outlook for 2010 is subject to uncertainty. Specific uncertainties relate to container freight rates, transported volumes, oil prices and the USD exchange rate.

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Source: Maersk, November  11, 2010;