Statoil tightens 3Q net loss, delays two projects

Norwegian oil and gas giant Statoil has reported a net loss of NOK 2.8 billion ($330.7 million) in the third quarter of 2015, mainly due to net impairment charges and provisions.

Statoil narrowed its losses when compared to the same period last year and a net loss of NOK 4.8 billion ($566,1M), but in the previous quarter, Statoil delivered a profit of NOK 10.1 billion ($1.19B).

Statoil’s revenues for the third quarter of 2015 fell by 23% to NOK 112.6 billion, compared to 146.6 billion a year earlier.

In addition, the company delivered adjusted earnings of NOK 16.7 billion ($1.97B) and adjusted earnings after tax of NOK 3.7 billion ($4.37M) in the third quarter of 2015.

Capex reduction

Eldar Sætre, president and CEO of Statoil ASA, said: “We continue to reduce underlying operational costs and deliver a quarter with strong operational performance and solid results from marketing and trading. In the third quarter, our financial results continued to be affected by low liquids prices.

“The results enable us to increase our guided production growth to above 3% for 2015, as well as reduce the guided capital expenditure level by USD 1 billion to around USD 16.5 billion. We have generated a strong cash flow in the current environment and have a solid balance sheet with a net debt ratio of 24%.”

Adjusted earnings were NOK 16.7 billion in the third quarter compared to NOK 30.9 billion in the same period in 2014. According to Statoil, the reduction was primarily a consequence of lower liquids prices and increased depreciation, partially offset by stronger refining margins, good operational performance and reduced underlying operating costs. Realised average liquids prices in the quarter were down 37% measured in NOK compared to the third quarter last year. Adjusted earnings after tax were NOK 3.7 billion, compared to NOK 9.1 billion in the same period last year.

Statoil’s net operating income according to IFRS for the quarter was NOK 7.3 billion, compared to NOK 17.0 billion in the same period in 2014. Net impairment charges of NOK 4.8 billion related to exploration assets and various other asset impairments and reversals, provisions for disputes of NOK 3.3 billion and net other adjustments of NOK 1.3 billon impacted the IFRS results. Earnings per share were negative NOK 0.89 in the quarter, an improvement compared to negative NOK 1.48 in the same period last year.

Further cost cuts

“We are progressing our efficiency programs according to the plan we communicated in February, and continue to reduce the underlying operational cost. I am pleased with the way we are taking costs down, but the continued low prices in the third quarter demonstrates that we must continue to chase further cost efficiencies,” says Sætre.

Statoil delivered production of 1,909 mboe per day in the third quarter, up 4% compared to the same period in 2014. The underlying production growth, after adjusting for divestments, was 7% compared to the third quarter last year. The production from the Norwegian continental shelf (NCS) grew 10% in the third quarter of 2015 compared to last year, adjusted for divestments. Equity production outside of Norway was 735 mboe per day, a 4% increase compared to the same period last year, adjusted for divestments.

Aasta Hansteen and Mariner delayed

Statoil says that cost estimates for Johan Sverdrup development are coming down by 7%. However, Statoil and its partners have decided to accept a delayed timetable for the start of production from the Aasta Hansteen and Mariner fields from 2017 to the second half of 2018. The updated cost estimate for Aasta Hansteen has been increased by around 9% since the plan for development and operation (PDO). In addition, a currency effect of NOK 2.4 billion brings the total cost estimate to around NOK 37 billion. For Mariner, the cost increase is slightly above 10% as compared to the original plan.

In the third quarter Statoil made two discoveries on the NCS, as well as one on the UK continental shelf. As of 30 September, Statoil had completed 33 wells, with five wells on-going. Adjusted exploration expenses in the quarter were NOK 3.4 billion, marginally down from NOK 3.6 billion in the third quarter of 2014.

Cash flow from operations amounted to NOK 90.2 billion in the first nine months compared to NOK 99.1 billion last year.

Outlook

Organic capital expenditures for 2015 (i.e. excluding acquisitions, capital leases and other investments with significant different cash flow pattern) are estimated at around $16.5 billion, Statoil said in its third quarter results report.

Statoil intends to continue to mature the large portfolio of exploration assets and estimates a total exploration activity level of around $3 billion for 2015, excluding signature bonuses, the company added.

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