Statoil Posts Surprise Loss on Low Oil Prices, Cuts Spending

  • Capital-expenditure goal for 2016 trimmed by about $1 billion
  • Shares react positively to investment curbs, strong cash flow

Statoil ASA, the first of the major oil producers to report third-quarter earnings, posted an unexpected loss for a second quarter in a row as maintenance and exploration expenses compounded the impact of lower crude and gas prices. The company also deepened spending cuts.

The adjusted loss, which excludes financial and other items, was $261 million, compared with a profit of $445 million a year earlier, Norway’s biggest oil company said Thursday. That missed the $136 million average profit estimate of 18 analysts surveyed by Bloomberg.

“The financial results were affected by low oil and gas prices, extensive planned maintenance and expensed exploration wells from previous periods,” Chief Executive Officer Eldar Saetre said in a statement. “Strict prioritization and continued good results from our improvement program” allow further cuts to 2016 capital expenditure and exploration guidance, he said.

Statoil CEO Eldar Saetre talks to Bloomberg TV

Bloomberg

Statoil, 67 percent owned by the government, and rivals such as BP Plc have slashed investments and reduced costs to protect cash flow and preserve dividends. Saetre now plans to lower capital expenditure to about $11 billion this year from an earlier target of $12 billion; in 2014 it was a record $20 billion. Exploration spending will be $1.5 billion, down from $1.8 billion.

The third-quarter result was the company’s second consecutive adjusted loss. Yet investors reacted positively to the reduction in investment and strong cash flow.

The shares reversed early losses to trade up 1.6 percent at 137.1 kroner as of 10:27 a.m. in Oslo, extending their advance this year to 11 percent.

For a quick wrap of the analyst commentary today, click here.

“Ignore the earnings miss,” Oswald Clint, an analyst at Sanford C. Bernstein & Co., said in a note. Investors should instead focus on cash and the potential for further expansion with lower spending and costs, he said.

‘Expensed’ Wells

Adjusted profit in Statoil’s Norwegian unit fell to $317 million from $618 million a year earlier, while the loss from the international division widened to $717 million from $542 million. The company “expensed” exploration wells capitalized in previous periods for $324 million, mostly in the Gulf of Mexico.

Statoil, like many of its peers, has benefited from a boost in its shares since the Organization of Petroleum Exporting Countries made a surprise decision last month to cut output, driving up oil prices. OPEC has yet to reach a final accord with members on individual quotas.

“At some point during 2017 I think we will reach a rebalancing” of the market, Saetre said in an interview with Bloomberg Television. “Any potential conclusion from OPEC to cut and reduce production will bring that point forward in time. I consider it to be more likely than not.”

Click here to set a reminder to watch Statoil’s presentation at 1.30 p.m. CET.

European producers including Total SA and Eni SpA plus U.S. peers Exxon Mobil Corp. and Chevron Corp. are scheduled to announce third-quarter earnings on Friday. Royal Dutch Shell Plc and BP report results on Nov. 1.

Statoil decided to pay a dividend of 22 cents a share for the third quarter, and extended its offer to make payouts in stock with a 5 percent discount.

The company reduced its net-debt-to-capital-employed ratio to 30.3 percent at the end of September from 31.2 percent three months earlier. It’s seeking to get back below 30 percent.

Statoil produced 1.805 million barrels a day of oil and natural gas in the third quarter, just missing a 1.874 million average estimate in a poll of 27 analysts conducted by the company. Statoil kept its target of annual organic production growth of 1 percent from 2014 to 2017.

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