Good morning, welcome to this presentation of the fourth quarter 2019 results for Aker BP. My name is Kjetil Bakken, and I'm Head of Investor Relations in the company. The presentations today will be given by our Chief Executive Officer, Karl Johnny Hersvik, and our Chief Financial Officer, David Tønne. After their prepared remarks, we will open up for questions and answers. Please note that Aker BP will host its annual Capital Markets Update later today. Any questions in the Q&A session, we will primarily focus on Q4-related topics. For questions related to topics covered in the Capital Markets Update, we encourage the participants to send such questions by email to ir@akerbp.com. With that, I hand over to our Chief Executive Officer, Karl Johnny Hersvik.
Thank you, Kjetil. Welcome to this presentation of Aker BP's financial results for the fourth quarter in 2019, this time by a call, I'm looking forward to seeing all of you later today at the Capital Markets Update. My name is, as you know, Karl Hersvik. I'm the CEO of Aker BP, I'm also joined by David Tønne, our CFO, who actually today marks his first year anniversary as CFO of Aker BP. Congratulations, David.
Thank you.
The most important event in the fourth quarter was obviously the startup of Johan Sverdrup in October. This truly amazing asset has delivered excellent productivity so far. Facing the great work undertaken by the operator, Equinor, to develop this giant field in collaboration with a number of partners, we are also very pleased to report that the Valhall Flank West started production in Q4 on schedule and within budget. The project had been delivered with a contribution from four of our strategic alliances with high quality and an impeccable safety record. In fact, this project is more than one year accelerated as we compared to the original case. The operational performance was strong in Q4, with record high production and production regularity, which I will revert to shortly.
On the business development side, I am pleased to report that there now seem to be a really constructive dialogue between the two operators in the NOAKA area. Significant work has been carried out to mature a joint technical concept, developing the entire area and all its resources, combining the two previous concepts that have been proposed for the area. I would like to commend Equinor, who have contributed to such a solution. Their participation in these discussions have made the solution significantly more robust. We have also entered a deal with PGNiG to strengthen our position in the Skarv area, and we are increasing our interest in the recent Shrek discovery, take over as operator for the license, which has significant remaining upside in exploration.
At the same time, PGNiG becomes our partner in the Alvheim discovery, thus enabling us to move forward with exploration activity also in that license. Both these discoveries are located near Skarv, and the transaction will enable an efficient development of these discoveries as tie-backs to the Skarv FPSO. At the same time, we also sell our 3.3% non-operated interest in Gina Krog to PGNiG, and we receive a cash element of $51 million firm and another $11 million in future contingent on a development of the Alvheim field. Moving on to production overview. Our production reached 191,000 bbl of oil equivalents in Q4, which is a new record for Aker BP. This was driven, of course, by the startup of Johan Sverdrup, which contributed nearly 32,000 bbl of oil equivalents.
We also saw encouraging development in production from the rest of our portfolio, in particular from Alvheim and Valhall. At Alvheim, production was restored from Volund following successful repairs of the mid-water arch, at Valhall, we see contribution from new wells being brought downstream. The strong production number were also impacted by generally very strong production efficiency across our portfolio, averaging an amazing 95.8% in Q4. For the full year, production ended at 156,000 bbl oil equivalent, in line with our previous guidance. 2019 was also a very good exploration year for Aker BP. The net discovered volumes are estimated to be around 170 million barrels oil equivalents, or approximately three times our 2019 production for comparison. The discoveries were concentrated around Alvheim and Skarv assets, in addition, of course, to the Liatårnet discovery in the NOAKA area.
At our Capital Markets Update later today, our Head of Exploration, Evy Glørstad, will talk more about our exploration results and our plans going forward. Now I will hand over to David, who will walk you through the Q4 financial statements.
Thank you, Karl, and good morning, everyone. It's a pleasure to summarize our financials for 2019, and with this also take you through the key figures for the last quarter. Q4 2019 was the first quarter ever where our income surpassed $1 billion. This was driven by an increase in production of 31%, as the Johan Sverdrup field started production. We produced 191,000 bpd , and with an underlift, the sold volumes ended at 184.5 bbl in total. Total production for the year ended, as Karl already mentioned, at 155,900 bpd , in line with the guidance set out at the start of the year. Liquid prices increased throughout the quarter, while the price of gas again was stable. The realized average hydrocarbon price was $57.4 per barrel, which is 5.6% higher than in Q3.
Average hydrocarbon price for the full year 2019 was $ 57.7, down from $ 65.5 in 2018. In total, petroleum revenues ended at $ 980 million, which is approximately 36% up from the third quarter. Moving on to the income statements. Adjusting petroleum revenues for other income, which includes insurance settlement related to prior years' activity, we get a total income of $ 1,003 million in the quarter, and $3,347 million for the full year. Production cost of sold volumes were $ 154 million, and the production cost related to the produced barrels amounted to $ 160 million, equaling a cost per produced barrel of $9.1. The significant decrease in production cost per barrel in Q4 was mainly driven by the start of production on Johan Sverdrup, as well as partial insurance recovery on the Alvheim mid-water arch repair.
For the full year 2019, production cost ended at 12.4, compared to the market guidance of roughly 12.5. The cost level was positively impacted by strong performance, particularly in the latter part of the year, as well as a weak Norwegian kroner. Exploration expenses amounted to $ 85 million. $ 47 million was related to dry well costs. In addition, we spent roughly $3 8 million on seismic, G&G, and field evaluation. The exploration activity was somewhat lower than originally planned, as spud on the Nidhogg well slipped into 2020 while waiting for the Skogul well to be completed. Total spend on exploration ended at $79 million in the fourth quarter, and in total at $ 501 million for the full year. This was $49 million lower than the updated guidance of $ 550 million given in our second quarter presentation.
Summarizing the items discussed so far gives us an EBITDA of$ 745 million for the quarter, up 55% from Q3. EBITDA for the full year 2019 ended at $2.286 billion. Depreciation was $ 255 million, or $14.50 per barrel in the quarter. For the full year 2019, depreciation per barrel was $14.30. Other operating expenses was $ 19 million in the quarter. The main reason for the increase from previous quarters was related to certain one-off items linked to previous year's cost allocations. Deducting depreciation and other operating expenses, we get an operating profit of $ 491 million for the quarter, and $1.327 billion for the full year. Net financial expenses was $ 67 million, and the main reason for the increase from Q3 is a reduction in capitalization of interest as a result of Johan Sverdrup coming on stream and reducing the capitalization base.
Profit before tax was $ 424 million in the quarter, and $1,084 million for the full year. Taxes amounted to $ 312 million in the quarter. Of these, $ 347 million was the current tax arising in the quarter, $ 45 million was reduction in deferred tax. The effective P&L tax rate in the quarter ended at 74%. The actual tax payments in the quarter amounted to $1 99 million, which is $ 13 million below the forecast provided at Q3. Net results in the fourth quarter ended at $ 112 million, $ 141 million for the full year. Moving on to the balance sheet. Property plant and equipment increased by $ 410 million in the fourth quarter. We had additions of $632 million, where investments at Valhall, Alvheim, and Johan Sverdrup made up roughly 69%. Depreciation of PP&E amounted to $ 223 million.
On the other side of the balance sheet, equity was reduced by $ 76 million, which is the sum of net income and dividends. Bonds and bank debt increased by $ 347 million. Tax payables increased by $ 166 million, giving a balance of $ 361, which can be divided into $155 million related to the income year 2019, net receivables of $ 15 million related to prior years, and $ 221 related to accrual for uncertain tax positions. Other provisions for liabilities, including P&A, increased by $ 103 million, which can be divided into $ 149 million related to increase in long-term abandonment provision. The annual update of the decommissioning liability resulted in a decrease in the cost estimate, but this has been offset by a decreased discount rate, resulting in a higher NPV.
The increase in ARO provision has been offset by $ 45 million decrease related to long-term derivatives, where the main part has been reclassified to short-term. In sum, total equity and liabilities amounted to $ 12.2 billion at the end of the quarter. Moving on to the fourth quarter cash flows. We started the fourth quarter with a cash of $5 million. During the quarter, we drew debt of $ 335 million, cash flows from operations amounted to $724 million, and tax payables was $199 million.
Cash flows to investments was $ 541 million, of which the main contributors were $ 490 million in investments in fixed assets, including $ 15 million in capitalized interest, $ 42 million in exploration, and $ 9 million in decom and P&A. Lease payments amounted to $ 30 million, of which $ 25 million was related to CapEx activities. Dividends amounted to $ 187.5 million. At the end of the quarter, our cash balance was $ 107 million.
The book value of net interest-bearing debt, excluding lease debt, was roughly $ 3.2 billion. We had $ 2.6 billion of committed undrawn capacity on our $4 billion bank facility. Our leverage ratio, net debt over EBITDAX, was 1.2. Worth noting is also that we, after the quarter, in January 2020, issued a new bond in two tranches of total $1.5 billion, which was used to further reduce drawings on our RCF. Currently, we therefore have in total $4 billion of committed and undrawn capacity on the bank facility. As we have now closed the full year for 2019, we have a more precise estimate of the remaining 2019 tax installments to be paid in the first half of 2020. As previously mentioned, tax payments for Q4 was $ 199 million, resulting in the total tax payments for 2019 of $ 619 million.
We have now fixed the first three installments for the first half of 2020 based on our 2019 actuals. Each installment would be approximately $ 50 million, whereof one installment will be paid in Q1 and two installments in Q2. This represents a reduction of approximately 50% compared to the first three installments we paid in the second half of 2019, and in line with my guidance on our Q3 presentation. To sum up 2019, I will revisit our guidance for 2019 and the associated delivery. In the first nine months, we produced 144,000 bbl of oil equivalents on average. In the fourth quarter, we produced 191.1 bbl. Consequently, production ended at 155.9 bbl for the full year and within the original guiding of 155,000 bpd-160,000 bpd . In my second quarter presentation, I adjusted the CapEx guidance slightly as we shifted scope from P&A to production drilling.
Q4 CapEx came in as expected, we ended the year with a total of $1.670 billion. With the discoveries at Froskelår and Liatårnet and the addition of the Nipa and Nidhogg wells to the program, we updated the expected exploration spend to $ 550 million in my Q2 presentation in July. Q3 was another successful quarter with high activity and discoveries at Ørn and Kark. In Q4, we finished the Kark well, but the Nidhogg well slipped into 2020. Total spend was therefore a bit lower than planned, we ended at $ 501 million for the full year, which is in line with the original guiding of $ 500 million. There has been limited activity in Q4 related decommissioning and P&A, total spend ended at $ 109 million, in line with the reduced guiding of roughly $100 million. Production cost per produced barrel.
We guided production cost per barrel at roughly $12.5 for 2019. First half was, as expected, higher than the yearly average due to the maintenance work at Valhall and Ula, including the turnarounds in June. In the third quarter, we saw costs trending down with less maintenance work and improved productivity. In the fourth quarter, the positive trend continued. We also received insurance recovery for the mid-water arch incident at Alvheim, and low-cost production from Johan Sverdrup ramped up. Total cost of produced barrels ended at $ 706 million for the full year or $12.4 per barrel, in line with the original guiding. Lastly, we planned and paid a total of $ 750 million in dividends for the full year. As already mentioned, we will hold a Capital Markets Update later today. We will come back with much more details on 2020 and the longer-term outlook.
To close off my presentation, I will summarize the main guiding parameters for 2020. We expect to increase production with roughly 36%, and the guiding for the full year is 205,000 bpd-220,000 bpd . Worth noting here is that we do expect some intra-year fluctuations. Production in the first and third quarter is expected to be within the guiding range. In the second quarter, we expect production to be roughly 20,000 bbl-30,000 bbl lower than the midpoint in the guiding range due to summer maintenance work. In the fourth quarter, we expect to be above the guiding range, as we are gradually increasing production from new wells at Valhall, and Ærfugl Phase I will come on stream.
We are reducing capital spend with roughly 4% in 2020 compared to 2019. We expect spend of $1.5 billion in CapEx, $500 million in ExpEx, and $200 million in AbEx. Capital spend will be somewhat front-end loaded with roughly 60% spent in the first six months of the year. We expect production costs to go down with almost 20% versus 2019, down to an average of $10 per barrel. Also here, there will be fluctuations throughout the year, mainly driven by fluctuations in production, also amplified by the fact that extra maintenance is typically conducted in the periods when the production is the lowest. Dividends are increasing by 13%, up to a proposed $850 million for the full year. I will now hand the word over to Karl for some closing remarks.
Thank you, David. As already mentioned, we will come back with more details on the priorities ahead, both on the short and long term at our capital market update. I'll only do a few remarks here. In terms of execution, we are continuing the start-up of new wells on Valhall in particular, and have had significant progress with the single-trip multi-frac the last few months. We also have a significant project portfolio ahead of us, even if the activity in 2020 is expected to be somewhat lower than in 2019. Imminent is the start-up of the Skogul project on Alvheim, and also the decision to progress on Hod. In terms of improvement, we're keeping momentum on the improvement agenda. As you will see later today, we are progressing the value outtake on our digital projects.
A milestone in 2020 will be the implementation of our One Team operating model, which are now under development. We are also, in terms of growth, mobilizing for the NOAKA area development, which we will also come back to later today. We are spending significant amounts and resources maturing the recent discoveries, particularly in 2019. All in all, I'm sure that 2020 will be as exciting as 2019. With that, we'll close the Q4 presentation and open up for questions.
Thank you. Ladies and gentlemen, to ask a question over the telephone, please press star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that is star one for your questions. We will pause for just one moment. Our first question today comes from Teodor Nilsen from SB1 Markets. Please go ahead.
Good morning. Thanks for taking my questions. Two questions from me. First, the deal in the Skarv area. How will that impact the 2P reserves? Second question that's on 2020 OpEx guidance. That's down year-over-year. Is the key reason for that lower volumes, or are there any other reasons for the expected decline in OpEx per barrel? Thank you.
Thank you, Teodor, and good morning. I hope we'll see you later today. When it comes to the deal in the Skarv area, this is predominantly a deal where we have done two key elements. The first one is the farm down of the 100% equity in the Alvheim area, allowing us to progress with exploration activities in that area. We plan to drill a well in the Alvheim license a bit later this year. We have also taken over operatorship of the Shrek discovery, and increased our ownership in that area by approximately 5%. Importantly, this means that we now see a maturation of a sequence of tiebacks to Skarv, which can all be operated under the alliance model with high efficiency. First, of course, it's Ærfugl, then it's Gråsputnik.
We may be looking at Shrek or Alvheim, and then there are other developments also in the area. It's also probably worth noting when talking about Skarv, that we are currently drilling an exploration well called Nidhogg, and expect results on that in a couple of weeks. In terms of the OpEx guidance, David.
Yeah. Of course, getting low-cost barrels from Johan Sverdrup into the portfolio is an important part of the reduction. We're also conducting less maintenance work at Valhall and Ula. Remember back to the start of 2019, where we had floatels at both locations also conducting extra surface maintenance work. In addition, we're also increasing production at Valhall, which is then driving down the average cost per barrel. There are several elements into the mix, both volumes, but also driving down costs.
Specifically, you asked about 2P resources and reserves, or 2P reserves and resources. I think if you do the math, you will discover that the amount of reserves we carry on Gina Krog is roughly 5 million barrels. In terms of Alvheim, the reduction is in the range of 4 million barrels, and then we are adding about 2 million barrels in Shrek.
Thank you. That's fair.
Thank you. We now move on to our next question from Alwyn Thomas, from Exane BNP Paribas. Please go ahead.
Hi. Good morning, gentlemen. Couple of quick ones from me. I just wanted to get your thoughts on the Valhall drilling. Obviously, it looks like things are being quite good in the fourth quarter on the multi-frac technology. I just wondered if you could sort of review the performance of the year, what worked and what didn't, and perhaps, what the learnings are for the rest of the portfolio, whether there's other technological sort of improvements you can make on the portfolio that you'll put into action this year and next.
Yeah. Thank you, Alwyn. Yes, you're right. Just to remind everybody, we are currently drilling on Valhall on two locations. The first one is the Maersk Invincible, continuing their drilling campaign on the Valhall West Flank . We just completed well number six. It's actually quite interesting to look at the results. We've drilled one producer and completed approximately every 30 days, which is significantly better performance than we assumed in the PDO. Also, the wells are significantly longer, and we've added about 19% to the reserve base as a result of that well extension in the horizontals. Also on the Valhall field center, we are still drilling. Now we are drilling sidetracks from existing producers. That means that. Well, ahead of that activity is the P&A activity.
That means that these wells take a bit longer than the previous wells, which were drilled on already P&A-ed templates. Now in terms of single-trip multi-frac, I think the last few wells that we have done has showed amazing and encouraging results. The last well we did, we typically run four fracs a day compared to one frac every second day with a conventional technology. The effect that has is twofold.
First of all, we're able to utilize smaller weather windows, which means that we can be more efficient in total, particularly in the winter season. It also, of course, gives us an ability to clear out a number of wells in terms of drilled and uncompleted or not put in production. We actually assume that by the end of 2020, we will have stimulated all the backlog on the Valhall field. Indeed, you are right. It's been a very encouraging development the last few months.
Okay, thanks very much.
Thank you. We are now moving on to Sasikanth Chilukuru from Morgan Stanley for our next question. Please go ahead.
Hi. Good morning. I had a question on your production guidance. Essentially, I just wanted to understand the conditions behind this range of 205,000 bpd-220,000 bpd . Just wanted to see what your upside case included. Also, just wanted to check whether there was any major turnaround activity in 2020, like in the case of 2019. Just trying to see the phasing of the production increase itself. Thanks.
We've guided a range of 205,000 bpd- 220,000 bpd . We don't want to talk too much about an upside or a downside case scenario. I think that's a bit early to say. When it comes to turnaround activity in 2020 compared to 2019, there will be less, but we do expect some shutdowns at particularly Alvheim related to maintenance at the pipelines. No major shutdowns are expected. As mentioned, there will be lower production in the second quarter due to the maintenance work.
Thank you.
Thank you. We now move on to Yoann Charenton from Société Générale . Please go ahead.
Yes, good morning, gentlemen. I'm looking forward to the CMD later this morning, and I will just have question which are very sort of focused on numbers. I'm not sure you said how much more of insurance recovery related to repair at Alvheim you expect to show in product cost in 2020. In addition, on separate topic, are you able to guide on a DD&A level for 2020 for your portfolio overall? Maybe on CapEx, I'm just looking at understanding how much was spent in Valhall and Skarv in 2019. Thank you.
Yeah. On the insurance first. We booked roughly $17 million in the fourth quarter of insurance recovery. When it comes to further insurance recovery in 2020, I don't want to speculate on that. We have some costs related to other mid-water arches that we've done preventive maintenance work on, which it's too early to say if there will be insurance recovery related to. I didn't catch your second question. Your third question was related to CapEx on Skarv and Valhall during the year, if I understood correctly.
This is correct, and for the second question, it was just about guidance on the level of depreciation for the year 2020, 18 P&L. Thank you.
Okay. Yes. All right. In terms of guidance on depreciation, I think the thing to do is to look at the average for 2019 and don't expect too big changes for 2020. Per barrel, of course. Per barrel. When it comes to specific CapEx-
Thank you. As a reminder, ladies and gentlemen, to ask a question today, please press star one on your telephone keypad. We now have a question from Al Stanton from RBC Capital Markets. Please go ahead.
Hi. Yes, good morning, guys. CapEx guidance for 2020 of $ 1.5 billion is a bit ahead of what I was expecting. Looking at what some of the rating agencies said in the fourth quarter, it seems to be ahead of what they were expecting as well. I was wondering what's changed, and also when you did the bond issue in January, what sort of CapEx guidance was expressed to bond investors at that time?
Yeah. When it comes to our CapEx guidance of $ 1.5 billion, I think that's very much in line with what we showed in our capital markets day update in 2019. Very much in line with that. I think it's important when you think about how the rating agencies view this, I don't want to speculate on their analysis, of course, of course, they typically also refer to what we call the sanctioned portfolio, the CapEx that's already been sanctioned. From our side, the NOK 1.5 billion is spot on what we showed last year and what we plan to spend.
Fair enough.
Thank you. At this time, there appear to be no further questions.
I think we round off this Q4 and say thank you for your participation and welcome to the Capital Markets Day, which will open at 10:00 A.M. here in Oslo. Thank you guys, and have a good day.