Statoil Profit Returns to Pre-Crash Level After Drastic Cuts

Updated on
  • Highest adjusted net profit since 2014 beats analyst forecast
  • Statoil reduces exploration spending, raises output guidance

Hans Jakob Hegge, chief financial officer at Statoil, discusses second-quarter earnings, plans for investment and capital expenditure and his outlook for the business. He speaks on 'Bloomberg Daybreak: Europe.' (Source: Bloomberg)

Statoil ASA lifted profit back to the highest level since oil prices started collapsing three years ago as the Norwegian company reaped the benefits of drastic cost cuts.

With Brent crude averaging about $50 a barrel in the second quarter, profit reached almost the same level as in the third quarter of 2014, when the benchmark traded at more than double the price.

“We’ve come a long way,” Chief Financial Officer Hans Jakob Hegge told reporters on Thursday. “We’re now able to cover investments and dividends with an oil price at $50 a barrel. Three years ago, we needed $100 a barrel. This is an entirely different situation.”

Statoil and rivals such as Royal Dutch Shell Plc and BP Plc have slashed investments and reduced costs to realign their businesses since oil prices slumped in 2014. The 67 percent state-owned Norwegian company expects to spend $11 billion in 2017, down from $20 billion three years ago. 

Statoil rose as much as 2.3 percent and traded 1.3 percent higher at 144.3 kroner a share as of 9:47 a.m. in Oslo.

Adjusted net earnings were $1.29 billion in the quarter, beating the average $1.03 billion estimate of 17 analysts.

Statoil generated a net positive cash flow of $4 billion in the first half of the year, after bleeding money for two years. 

“Today’s result shows Statoil can deliver strong positive free cash flow at $50 a barrel,” Pareto Securities AS analyst Trond Omdal said in a note to clients.

The company further reduced its 2017 forecast for exploration spending to $1.3 billion from $1.5 billion. Statoil still expects to drill about 30 wells this year, showing how it’s reduced the costs of those operations.

Statoil cut net debt to capital employed to 27.5 percent at the end of the quarter from 30 percent three months earlier and as much as 35.6 percent at the end of last year.

  • Statoil produced 1.996 million barrels of oil equivalent in the second quarter, compared with 1.959 million a year earlier. The company raised its growth forecast for 2017 output to 5 percent from 4 percent to 5 percent earlier
  • The company’s profit was boosted by a reversal of $754 million of provisions in Angola
  • Statoil maintained its dividend at 22 cents a share
(Updates with CFO comment in third paragraph.)
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