Statoil Isn’t Wedded to Output Target as Seeks to Secure Value

Statoil ASA isn’t wedded to a target for production that it affirmed today as Norway’s biggest energy company seeks to balance the need to replace dwindling North Sea reserves with its obligation to create value for shareholders.

“Our investors make their living not from volumes but from value,” Chief Executive Officer Helge Lund said in an interview in Oslo after the company posted higher output in the third quarter that topped analyst estimates. “We’re in a privileged position where we can choose between good projects.”

Statoil, 67 percent-held by the state, has been expanding abroad to compensate for shrinking North Sea reserves. Today it reiterated a goal of increasing production by a quarter to more than 2.5 million barrels of oil equivalent a day by 2020, with the U.S. expected to contribute more than half of that gain.

Third-quarter output rose to 1.852 million barrels a day from 1.811 million a year earlier, beating the 1.844 million average of 28 estimates compiled by Statoil. Production outside Norway expanded by 13 percent to a record 728,000 barrels on increased output from U.S. onshore assets, Angola and Brazil.

At the same time, earnings were little changed.

Adjusted net income, which excludes financial items, rose to 12.1 billion kroner ($2.1 billion) from 11.9 billion kroner a year before, Stavanger-based Statoil said today in a statement.

The result compared with the 11.9 billion kroner average of 20 analyst estimates compiled by Bloomberg. Net income slid to 14.3 billion kroner in the quarter from 14.4 billion kroner.

Terrorist Attack

“We will continuously consider what creates most value,” Chief Financial Officer Torgrim Reitan said. “We’re not married to” the current 2020 production forecast, Reitan said.

Statoil says output will fall in 2013 from an average 2.004 million barrels of oil equivalent a day last year because of the sale of Norwegian offshore assets, lower than anticipated growth in U.S. shale gas, reduced Norwegian gas sales within Europe and maintenance. Capacity has also been reduced following a January terrorist attack on the In Amenas facility in Algeria.

Production in 2014 will be curbed by as much as 120,000 barrels a day because of asset sales to OMV AG and Wintershall AG and a redistribution of ownership at the Ormen Lange field, Lund said, declining to say whether total output would expand or shrink. Growth from so-called unconventional U.S. assets will be “relatively low” in 2014 compared with now, he said.

Maintenance will reduce output about 30,000 barrels a day this quarter, Statoil said. For the full year, such work will cut “equity production” about 45,000 barrels a day, it said.

Brent Crude

The company earned an average $102.9 a barrel for oil in the quarter, up from $99.9 a year earlier, and 1.97 kroner a cubic meter for natural gas, down from 2.16 kroner.

The price for Brent oil averaged $109.7 a barrel in the third quarter, compared with $109.2 a year earlier.

Statoil booked a 4.2 billion-kroner impairment loss on its Mongstad and Kalundborg refineries, with “lower margins and a challenging outlook.” Total impairment losses of 6 billion kroner were countered by a gain on sale of assets.

The company reiterated that it will keep spending at about $19 billion in 2013, while raising exploration expenditure to $3.75 billion from $3.5 billion. Statoil plans to complete 60 wells this year, up from an earlier forecast of 50.

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