Statoil Posts Surprise Profit as Lower Costs Offset Oil Drop

Statoil CEO Sees Indications Oil Might Be Rebalancing
  • Operational expenses were 20% lower than a year earlier
  • Production of 2.05 million barrels a day beat forecasts

Statoil ASA, Norway’s biggest oil company, unexpectedly posted a profit in the first quarter as cost cutting helped offset the lowest crude prices in almost 12 years.

Adjusted earnings after tax fell to $122 million from $902 million a year earlier, the Stavanger-based producer said in a statement Wednesday. The average forecast of 12 analysts surveyed by Bloomberg was for a $125 million loss. 

Statoil joined BP Plc and Total SA in reporting better-than-expected first-quarter results as the company 67 percent owned by the Norwegian government cut operational costs per barrel by a fifth. Following the collapse in crude prices, oil majors have cut spending, delayed projects and eliminated jobs to protect cash flow and pay dividends.

“Operating costs and capex are falling faster than expected,” Trond Omdal, an analyst at Pareto Securities AS, said in a note to clients.

Statoil rose as much as 3.9 percent in Oslo trading and traded 3.7 percent higher at 141.5 kroner as of 10:32 a.m., the highest level since Nov. 5.

Statoil in February deepened cuts to capital expenditure to about $13 billion in 2016, a target it reiterated Wednesday. Operational and administrative expenses per barrel fell the most in Norway, with a 25 percent drop, the company said in presentation material.

Resetting Costs

“We delivered strong operational performance across all business areas, high production efficiency and results in line with expectations from liquids trading and refining,” Chief Executive Officer Eldar Saetre said in the statement. “We have a firm plan to improve efficiency and make faster and deeper cost reductions. We are radically improving our project break evens and we are on track to re-set costs and thereby impact the parameters that we can control.”

The company will pay a dividend of 22 cents for the first quarter, in line with the board’s intention to keep payouts unchanged for the first three quarters. Statoil introduced a scrip dividend program in February, letting shareholders opt for new shares at a discount instead of cash. 

Statoil’s adjusted net-debt-to-capital-employed ratio rose to 28.1 percent at the end of the first quarter from 26.8 percent at the end of 2015. With oil prices around $40, we will cross the 30 percent boundary this year, said Chief Financial Officer Jakob Hegge.

“We’re comfortable with a level in the mid-30s,” Hegge said in an interview. “We’ve been there before. We will then have a plan to get back within” a 15 percent to 30 percent range, he said.

Production Target

The company produced 2.05 million barrels of oil equivalent in the first quarter, little changed from 2.06 million barrels a year earlier and beating a 2.03 million barrel estimate in a survey of 26 analysts conducted by Statoil. It reiterated a production-growth target of about 1 percent a year from 2014 to 2017, adjusted for asset sales.

Higher production than expected in Norway, especially gas, helped profit beat expectations, according to a note from Jefferies Group LLC.

Adjusted net earnings were crimped as the loss from Statoil’s international operations widened to $647 million, while profit at its Norwegian unit fell to $463 million from $730 million a year earlier. The trading and refining business posted an adjusted profit of $355 million, down from $628 million.

Market Volatility

Total reported first-quarter profit of $1.64 billion on Wednesday, beating the average analyst estimate of $1.25 billion, as the French company cut costs, boosted production and benefited from resilient refining earnings. BP posted a surprise profit on Tuesday as a stronger-than-expected refining and trading performance offset the lowest crude prices in more than a decade.

While Statoil expects “volatility” in the oil market to continue, it sees signs of a gradual rebalancing, CEO Saetre said in an interview with Bloomberg TV.

“There’s still too much physical capacity out there compared to the demand side, so it’s a market that is not balanced -- there’s still a downward pressure on the oil price,” he said. “But there’s more support, seemingly, than we’ve seen before.”

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