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Statoil: 2014 Third quarter results

Statoil's third quarter 2014 net operating income was NOK 17.0 billion, a decrease from NOK 39.3 billion in the third quarter of 2013. Net income was negative NOK 4.8 billion mainly due to impairments. Adjusted earnings were NOK 30.9 billion, a decrease from NOK 40.4 billion in the third quarter of 2013.

"Statoil's quarterly earnings were negatively impacted by lower oil and gas prices and our decision to defer gas sales to enhance value. Our negative net income in accordance with IFRS relates to quarter-specific items. We delivered strong operational performance and cash generation in the quarter," says Eldar Sætre, Statoil's acting president and CEO.

"We are progressing well on our efficiency improvement program. We continued to produce with high regularity on the Norwegian continental shelf and execute our projects as planned, remaining on track for our 2014 production guiding," says Sætre.

Statoil's adjusted earnings were NOK 30.9 billion in the third quarter. The decrease from the third quarter of 2013 was mainly a result of lower oil and gas prices, reduced ownership share from divestments, higher depreciation due to investments in producing assets, new fields coming on stream and a larger share of oil in the production mix.

Statoil's reported net income for the third quarter in accordance with IFRS was negative NOK 4.8 billion due to quarter specific accounting charges of NOK 13.5 billion. These charges were mainly related to an impairment of the Kai Kos Dehseh asset in Canada, triggered by the postponement of the Corner field development, as well as impairments of exploration assets in the Gulf of Mexico and Angola. In line with practice to reflect the underlying performance, certain quarter-specific items are not included in the adjusted earnings.

"Our cash flow from operations so far this year is NOK 168 billion before tax. We have a strong balance sheet, and will pay a dividend of NOK 1.80 per share for the quarter," says Sætre. At the end of the quarter, Statoil's net debt to capital employed was 19%. Organic capital expenditure was around USD 15 billion year-to-date, and the guidance of around USD 20 billion for 2014 remains.

Statoil delivered production of 1,829 mboe per day in the third quarter. This is around the same level as in the third quarter of 2013, despite expected natural decline, reduced ownership share from divestments and lower gas off-take on the Norwegian continental shelf (NCS). High production efficiency, as well as start-up and ramp-up of production, contributed positively to the production. Production guidance for the year is re-iterated, despite a deliberate choice to produce less gas during the summer.

The board of directors appointed Eldar Sætre as acting president and CEO on 15 October. "Statoil's strategy remains firm. Safe and efficient operations are our top priorities, and we continue developing the business according to plan," says Sætre. Statoil's board of directors has established a sub-committee which has started the search for Statoil's next CEO.

Statoil made strong progress on project development and execution. The company started production on the two North Sea fast-track projects Fram H-North and Svalin C; successfully installed the Valemon platform in the North Sea; put a new compressor in operation on the Kvitebjørn field in the North Sea, to increase recovery by 220 mmboe; and started the Kristin low pressure production, yielding 160 additional mmboe.

Statoil also delivered on strategic portfolio management to realise value and strengthen flexibility. Statoil announced transactions of more than USD 3.5 billion in the quarter, including divestment of NCS assets and a sale of Shah Deniz in Azerbaijan. Since 2010, Statoil has announced more than USD 23 billion in proceeds from transactions and delivered around USD 12 billion in gains.

Also, in October Statoil continued its exploration progress, announcing its seventh natural gas discovery offshore Tanzania. This brings the total of in-place volumes up to approximately 21 tcf in block 2, adding gas volumes for a future large-scale gas infrastructure development. Statoil also recently proved new high-value oil resources of 30-80 mmboe in the Grane area in the North Sea.

The serious incident frequency (SIF) was 0.8 in the third quarter of 2014, unchanged from the third quarter 2013.

Key events since second quarter 2014:

  • On 15 October, Statoil's board of directors appointed Eldar Sætre as acting president and CEO, following the resignation of Helge Lund.
  • Gudrun platform in North Sea officially opened, topsides installed on steel jacket on Valemon field.
  • Production start on two North Sea fast-track projects: Fram H-North and Svalin C.
  • Ordinary operations resumed at In Amenas in Algeria.
  • Decision to postpone Corner field development at Kai Kos Dehseh oil sands project in Canada.
  • Announced farm-down in Aasta Hansteen, Asterix and Polarled and exit from two NCS assets.
  • Announced exit from Shah Deniz and South Caucasus Pipeline in Azerbaijan.
  • New acreage awarded in Algeria, farm-in to acreage offshore Colombia, assessing opportunities in Nicaragua.
  • Discovery of 1.2 trillion cubic feet of natural gas in Giligiliani-1 exploration well offshore Tanzania.
  • New sanctions towards Russia relating to the situation in Ukraine have been imposed by Norway, the EU and the US, targeting i.a. certain oil exploration and production activities and Russian energy companies. We are currently reviewing the implications on our business and in particular with respect to our relationship with Rosneft.

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