Norwegian oil company Statoil has reported that its adjusted earnings in the fourth quarter of 2014 were NOK 26.9 billion, compared to NOK 42.3 billion in the fourth quarter of 2013.
The company has explained that the 36% reduction in the quarter is mainly caused by the significant drop in the liquids prices. In addition, lower European gas prices and increased depreciation and operating costs contributed to the decrease in adjusted earnings.
Adjusted earnings after tax in the fourth quarter of 2014 amounted to NOK 4.3 billion, down from NOK 11.0 billion in the same period last year. Adjusted earnings after tax were impacted by an effective tax rate of 84% in the fourth quarter compared to a normal level around 70%. The high effective tax rate in the quarter was mainly due to expensed exploration costs with limited tax protection.
Capex down to $18 billion
Today, the company also presents its Capital Markets Update, reducing organic capital expenditure from USD 20 billion to USD 18 billion in 2015, stepping up its improvement programme by 30% to USD 1.7 billion per year from 2016, and expecting organic production growth of 2% to 2016 and 3% from 2016 to 2018. Statoil proposes to the Annual General Meeting a fourth quarter dividend of NOK 1.80 per share, with the intention to pay a flat dividend in the first three quarters of 2015.
“Statoil’s quarterly earnings were affected by the sharp drop in oil prices. Our net income was also impacted by specific accounting charges. Underlying performance and cash flows were solid in 2014, supported by profitable growth, strong operational improvements, and solid marketing- and trading results. Our financial position is robust, and we maintain a stable dividend. Through our significant flexibility in our investment programme we are well prepared for continuous market weakness and uncertainty,” says Eldar Sætre, president and CEO of Statoil ASA.
On 4 February the Statoil board of directors appointed Eldar Sætre as Statoil’s new president and CEO. Sætre has been acting as president and CEO since October 2014, and assumed the role with immediate effect. He has 35 years of experience from Statoil.
Statoil’s reported net income for the fourth quarter in accordance with IFRS was negative NOK 8.9 billion. This represents a decrease from the reported positive NOK 14.8 billion in the same period in 2013 and was due to net quarter specific accounting charges of NOK 18 billion. These charges were mainly due to impairment losses related to Statoil’s international operations and various exploration assets, partly offset by gains from sale of assets.
“We continue to deliver in accordance with our cost and capital efficiency programmes. Our operational efficiency has been high, our work to improve safety continues to show good progress, and our project development portfolio is progressing as expected,” says Sætre.
Production on the rise
Equity production was 2,103 mboe per day in the fourth quarter of 2014, compared to 1,945 mboe per day in the same period in 2013. The increase was mainly due to start-up and ramp-up of production on various fields and higher production regularity compared to the same period last year. Expected natural decline and reduced ownership shares from divestments partly offset the increase. The annual equity production outside of Norway ended at a record high of 743 mboe per day.
Statoil reported cash flow from operations in 2014 of NOK 209 billion before taxes paid and working capital items. At the end of the year, Statoil’s net debt to capital employed was 20%. Organic capital expenditure was around USD 20 billion in 2014, in line with the guidance for 2014.