Statoil ASA, the Norwegian oil and gas producer expanding abroad to make up for falling output at home, dropped to a one-month low in Oslo as rising costs and a declining return on capital curb its earnings outlook.
The company, based in Stavanger on Norway’s west coast, fell as much as 1.8 percent to 125.5 kroner, the lowest intraday level since July 3. It was 1.4 percent lower at 126 kroner by 12 p.m., making Statoil the worst performer on the Bloomberg EMEA Oil and Gas Index after Royal Dutch Shell Plc.
Statoil, in which the Norwegian government owns a 67 percent stake, is seeking to increase production by an average 3 percent a year to 2.5 million barrels of oil equivalent a day by 2020. It’s expanding abroad and into unconventional resources such as shale oil and gas to help meet its target.
“Although Statoil’s long-term growth story is credible, the next few years’ earnings per share will probably show no growth,” Swedbank First Securities analyst Teodor Sveen Nilsen wrote in a note dated yesterday. “On the basis of rising unit costs, we estimate a declining return on equity over the next years, which is an area of concern.”
Statoil, which operates about 80 percent of Norway’s oil and gas output, on July 25 reported second-quarter profit that unexpectedly fell 2 percent, hurt by falling production and lower prices. The company also said output would drop in 2013 after it sold some Norwegian fields and on lower output growth from its U.S. shale gas assets.
“We think the unit cost issue will get increasingly more attention over the next few weeks and guess there could be some 5 percent to 10 percent downside risk to consensus 2014 estimates,” Sveen Nilsen wrote. The broker maintained its neutral recommendation, while lowering its 2014 EPS estimate 2 percent, in addition to a 6 percent cut made a week earlier.
Statoil is expected to report net income of 53.1 billion kroner in 2014, according to the average of 19 analyst estimates compiled by Bloomberg. That compares with net income of 68.9 billion kroner in 2012.
Statoil has dropped 9.3 percent in Oslo since May 14, when it said European authorities opened a probe into the explorer and other producers over possible manipulation of oil prices.