Statoil Jumps After Profit Beats Estimates on U.S. Gas Price

Statoil ASA, Norway’s biggest energy company, climbed in Oslo after first-quarter profit beat estimates, helped by higher natural gas prices in the U.S., where record-low temperatures raised demand in markets such as New York, and lower taxes.

Adjusted net income rose to 15.8 billion kroner ($2.6 billion) from 12 billion kroner a year earlier, the Stavanger-based company said today. That beat the 12.4 billion-krone average of 14 analysts surveyed by Bloomberg. Sales rose 6 percent to 169.6 billion kroner as oil and gas prices measured in kroner climbed after the currency weakened.

“Gas prices are significantly higher in the U.S., with higher volumes,” Chief Executive Officer Helge Lund said at a presentation in Oslo. “We can’t promise this kind of result every quarter -- this has been an especially cold winter.”

Statoil in February cut planned investments, joining competitors such as Exxon Mobil Corp. and Royal Dutch Shell Plc in reducing or slowing spending amid rising costs and stagnant energy prices. The company, which is expanding its share of international oil and gas production to compensate for falling output from aging North Sea deposits, said it would focus on shareholder returns at the expense of production-growth targets.

Shares Climb

Statoil rose as much as 4.8 percent to 182 kroner, the highest level since July 2008, and traded 4 percent higher as of 11:40 a.m. in Oslo. That’s the biggest intraday advance since Statoil updated its strategy on Feb. 7.

Net income rose to 23.6 billion kroner from 6.4 billion kroner a year ago, when results were hurt by write-downs. Statoil’s profit was boosted by proceeds from the sale of its stake in the Shah Deniz project in Azerbaijan and an award payment following a commercial dispute, it said.

“These are a solid set of numbers from Statoil with strong performance from the gas business,” Oswald Clint, a Sanford C. Bernstein & Co. analyst in London, said in a note. “Statoil is a multi-year stock, which will become more interesting still when the company starts talking about the returns in the outer years.”

The board proposed a dividend of 1.8 krone a share for the first three months of the year as the company starts quarterly payouts to shareholders. Statoil plans to keep the dividend at the same level for the next two quarter, Lund said.

U.S. Gas

Production fell to 1.978 million barrels of oil equivalent a day in the quarter from 1.998 million barrels a year earlier following the sale of assets from the North Sea to Azerbaijan of more than 5.5 billion kroner since October 2012.

Lower production and falling prices for oil measured in dollars were offset by higher prices for natural gas. While Statoil got an average of $99.2 a barrel for liquids in the first quarter, down from $103.5 a year earlier, it got 2.57 kroner a cubic meter for gas in Europe, compared with 2.39 kroner a year earlier.

North American gas prices jumped to 1.49 kroner per cubic meter from 0.77 krone a year earlier because of the record-cold winter in the region where Statoil delivers gas to the “premium markets” of Toronto and Manhattan, it said.

Statoil’s marketing, processing and renewable energy unit increased adjusted profit more than fourfold to 3.5 billion kroner, helped by higher margins on liquefied natural gas trading, it said.

Lower Taxes

“Natural gas sales volumes amounted to 13.8 billion standard cubic meters, down 7 percent compared to the first quarter of 2013,” the company said. “Lower entitlement production on the NCS and lower third party volumes sold were partly offset by higher entitlement production in the U.S.”

The effective rate on adjusted earnings fell to 65.6 percent from 71.8 percent as the proportion of income from “high-tax” countries decreased, Statoil said.

The company reiterated plans to invest about $20 billion in 2014, of which $3.5 billion will be spent on exploration. In February, Statoil pared its planned capital spending by 8 percent through 2016. It postponed a goal of boosting daily production to 2.5 million barrels of oil equivalent a day in 2020 by three to four years. Output is expected to grow by 2 percent this year from a re-based level of 1.85 million barrels of oil equivalent a day last year, the company repeated today.

‘Improved Credibility’

“The strong results improve the credibility of the guidance,” Swedbank First Securities analyst Teodor Sveen Nilsen wrote in a note. “The strong first quarter results imply a 12-month return on average capital employed of 15.3 percent, which is well above the guided level for 2014-2016 of 11.8 percent.”

While Statoil’s shares have reached their highest level in six years after the company updated its strategy, Norwegian authorities have warned the company and its competitors operating in the country against delaying projects as a means of increasing returns.

“There should be no doubt Statoil gives high priority to resource management,” Lund said in an interview today. “But oil companies need to think about financials, we need to protect our balance, we need to handle risk, so we also need to make commercial assessments.”

Before it's here, it's on the Bloomberg Terminal.