Statoil Profit Beats Estimates as Production Increases

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Statoil and BP Release Reports Amid Oil Declines

Statoil ASA, Norway’s biggest oil and gas producer, posted second-quarter profit that beat estimates as higher production, lower costs and refining margins helped it to weather a plunge in crude prices.

Net income excluding financial and other items fell to 7.2 billion kroner ($878 million) from 9.9 billion kroner a year earlier, the Stavanger-based company said Tuesday. That beat the average 5.5 billion-krone estimate in a Bloomberg survey of 20 analysts.

Statoil shares rose as much as 4.2 percent in Oslo trading, the most since April 7, and were up 2.9 percent at 134.2 kroner as of 11:28 a.m. in Oslo, making it the biggest gainer on the Stoxx Europe 600 Oil & Gas Price Index.

“Statoil is sailing through with strong operating performance and visible management response on costs,” Oswald Clint, an analyst at Sanford C. Bernstein & Co. Inc., said in a note. “Statoil’s results prove once again just how resilient its business model actually is,” said the analyst, who has an outperform rating on the stock.

Statoil and competitors such as Royal Dutch Shell Plc and Total SA are cutting investments and operational costs after oil prices fell by about 50 percent over the last 12 months. Statoil, which reiterated that it intends to maintain dividend payments through the year, further lowered planned spending for 2015 to $17.5 billion compared with $20 billion last year, deepening cuts by $500 million.

Investment Flexibility

That comes after the company, which operates more than 70 percent of Norway’s oil and gas production, set in motion a sweeping efficiency program that includes thousands of job cuts in the three years through 2016. Statoil’s savings program is on track and the company has further flexibility on investments in 2016 and 2017, Chief Executive Officer Eldar Saetre said at a press conference.

“We’re seeing the very clear and positive effect of the improvement work we’re realizing through higher production efficiency, lower costs and lower investments,” Saetre said.

Statoil’s results contrast with those of BP Plc, which reported its lowest quarterly profit in at least 10 years after its trading performance faded and it booked writedowns on Libyan assets.

Statoil’s output in the quarter rose 4 percent from a year earlier to 1.87 million barrels of oil equivalent a day. That beat the average estimate of 1.85 million barrels in a survey of 33 analysts published by the company.

Refining Margins

While Statoil’s average liquids price fell to $55 a barrel from $99.7 a year earlier, refining margins improved to $9.6 a barrel from $3.9, it said. Net operating income for its marketing and processing unit almost doubled to 5.1 billion kroner in the quarter from a year earlier.

Statoil, of which the Norwegian state owns a 67 percent stake, will pay a second-quarter dividend of 22 cents a share, equivalent to 1.8 kroner. It expects to pay the same for the third quarter, Saetre said, declining to comment on the payout level beyond that.

The company has been raising debt and selling assets to afford dividends and investments over the past years. Adjusted net debt to capital employed fell to 22 percent from 24 percent at the end of the first quarter. While it’s “possible” to maintain that ratio at 30 percent or less even with oil prices at $60 a barrel, that can’t be guaranteed, Saetre said.

The oil producer will report in U.S. dollars instead of kroner from the first quarter next year to reflect its exposure to the currency and be better aligned with rivals’ reporting, it said.

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