Statoil Net Rises as Reserves Replaced for First Year in Six

Statoil ASA (STL), Norway’s largest oil producer, said fourth-quarter profit more than doubled as the explorer found more oil and gas than it produced for the first time since 2005.

New resources from exploration climbed above 1.1 billion barrels of oil equivalent in 2011, a so-called reserve replacement ratio of 117 percent compared with about 300,000 barrels in 2010, Chief Executive Officer Helge Lund said at a press conference today.

“We’re putting more resources in the bank than we’re using,” Lund said, adding that the company drilled 41 exploration wells and made 22 discoveries in 2011. Exploration expenditure will be around $3 billion to drill around 40 wells in 2012, he said.

The state-controlled company has plans to raise output to 2.5 million barrels of oil equivalent a day in 2020 as it expands abroad and seeks to maintain production at home. Its ambitions were bolstered last year by the discovery of the Johan Sverdrup deposit in the North Sea, which may hold 3.3 billion barrels of oil equivalent, as well as finds in the Barents Sea.

Net income rose to 25.5 billion kroner ($4.4 billion) from 9.5 billion kroner a year earlier, the Stavanger-based company said today. That beat the 13.3 billion-krone average estimate of nine analysts surveyed by Bloomberg. Sales rose 22 percent to 174 billion kroner.

‘Improving Trend’

Reserve replacement “shows an improving trend over the last few years,” Citigroup Inc. analyst Michael Alsford said in a note to investors today. “Despite the improvement in reserve replacement, we continue to see a re-investment risk as the company looks to deepen its resource base further for longer- term growth.”

Statoil shares gained 1.3 percent to 152 kroner in Oslo trading, valuing the company at 484.7 million kroner.

The company, which operates about 80 percent of Norway’s oil and gas production, is seeking to keep up output from maturing fields at home as it expands abroad. Norway’s oil output has halved since 2000 and Statoil has struggled to replace reserves. This year’s replacement ratio climbed from a low of 0.34 in 2008. It was last above 100 percent in 2005.

“The oil and gas industry on a global basis is at full capacity,” Lund said in an interview. “We as a company need to work with our own cost base to make it more efficient.” Measures being employed by the company include standardizing equipment, using the same suppliers to drive economies of scale and having teams focus on a series of projects, he said.

Pipeline Sale

Average liquid prices rose 19 percent while gas prices increased 22 percent, the company said. Profit was also boosted by the sale of a stake in Norwegian pipeline owner Gassled for 17.4 billion kroner.

The explorer expanded its stake in U.S. unconventional assets last year with the $4.4 billion acquisition of Brigham Exploration Co., becoming one of the top 10 holders of Bakken shale acreage. Statoil entered U.S. shale gas resources in 2008 by buying $3.38 billion in assets from Chesapeake Energy Corp. (CHK) In June it bought Eagle Ford shale acreage from SM Energy Co. (SM)

“Unconventional resources will play an increasingly important part in global energy supply. We want to play there,” Lund said. The break-even level for the Bakken field is around $55 a barrel, he added. “Our key focus is now on the U.S., but of course we have deep knowledge about the European markets and if we saw some interesting opportunities we could always evaluate that.”

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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