CONSISTENT DELIVERIES
Statoil's (OSE:STL, NYSE:STO) third quarter 2009 net operating income
was NOK 28.3 billion, compared to NOK 47.0 billion in the third
quarter of 2008. The quarterly result was mainly affected by a 31%
drop in oil prices and a 32% decrease in the average price of natural
gas.
Adjusted earnings in the third quarter 2009 were NOK 31.2 billion.
Net income in the third quarter of 2009 was NOK 6.6 billion and was
mostly influenced by lower crude oil and gas prices and a gain on
financial items.
Adjusted earnings after tax was NOK 9.3 billion in the third quarter
of 2009. Adjusted earnings after tax excludes the effect of tax on
net financial items, and represents an effective adjusted tax rate of
70% in the third quarter of 2009.
"Statoil delivers solid financial and operational results and
continues to maintain a high activity level both in Norway and
internationally. We have increased our equity production to 1,87
million barrels of oil equivalents per day, up eight per cent from
third quarter 2008. Our operations outside of Norway contributed with
more than 500,000 barrels of oil equivalents per day," says Statoil's
chief executive Helge Lund.
"Since the second quarter we have started operations on several new
oil and gas fields such as Tyrihans in the Norwegian Sea, Tune South
in the North Sea and Thunder Hawk in the Gulf of Mexico, and our
exploration programme continues to yield good results."
"Although we see signs of improvement in the global economy, there is
no firm evidence that industry investment, employment and private
consumption have recovered in a sustainable way. This calls for
cautiousness. Statoil is continuing to reduce cost, and we still have
the flexibility to adjust our activity in response to a volatile
business environment," says Lund.
Highlights since second quarter 2009:
* Equity production is up 8% from third quarter 2008 to 1,874
mboe per day. For the first nine months of the year, equity
production is 1,930 mboe per day
* Entitlement production is up 10% from third quarter last
year to 1,712 mboe per day
* Average liquids prices measured in NOK are down 31%, gas
prices down 32%, and refining margins down 59% from third quarter
last year
* Successful maintenance turnarounds on the Norwegian
Continental Shelf (NCS)
* New fields coming on stream were Tyrihans and Tune South on
the NCS and Thunder Hawk in the Gulf of Mexico
* Successful debt capital markets transaction issuing USD 900
million 2.90% Notes due in October 2014
* Guiding for 2009 equity production, capital expenditure and
exploration activity is unchanged
2.1 OPERATIONAL REVIEW
Third quarter
Total liquids and gas entitlement production in the third quarter of
2009 was 1,712 mboe per day, compared to 1,550 mboe per day in the
third quarter of 2008. Total equity [9] production was 1,874 mboe per
day in the third quarter of 2009 compared to 1,733 mboe per day in
the third quarter of 2008.
The 8% increase in total equity production was primarily related to
the start-up of new fields and ramp-up of production from existing
fields, and was only partly reduced by declining production from
mature fields, maintenance activities and various operational issues.
Entitlement production increased by 10% for the same reasons as
stated above and also due to a less adverse effect of product sharing
agreements (PSA effect). The average PSA effect was 163 mboe per day
in the third quarter of 2009 compared to 184 mboe per day in the
third quarter of 2008.
Total liftings of liquids and gas were 1,656 mboe per day in the
third quarter of 2009, a 10% increase from 1,504 mboe per day in the
third quarter of 2008. The increase in lifting is based on the
increase in entitlement production. In the third quarter of 2009
there was an underlift of 42 mboe per day [5], compared to an
underlift of 29 mboe per day in the third quarter of 2008.
Refining margins were USD 3.8 per barrel in the third quarter of
2009, a 59% decline since the third quarter of 2008.
Production cost per boe of entitlement volumes was NOK 37.7 for the
12 months ended 30 September 2009, compared to NOK 47.4 for the 12
months ended 30 September 2008. [8] Based on equity [9] volumes, the
production cost per boe for the two periods was respectively NOK 34.9
and NOK 43.2.
The 12 month rolling average production cost per boe decreased mainly
due to non-recurring restructuring cost relating to the merger of
Statoil ASA and Hydro Petroleum in 2007, and partial reversal of the
restructuring cost in the fourth quarter of 2008.
Adjusted for restructuring costs and other costs arising from the
merger recorded in the fourth quarter of 2007, and partially reversed
in the fourth quarter of 2008, and gas injection costs, the
production cost per boe of equity production for the 12 months ended
30 September 2009 was NOK 35.3 The comparable figure for the 12
months ended 30 September 2008 was NOK 33.2. The increase is partly
due to currency effects from the strengthening of USD versus NOK in
the most recent 12 month period compared to the 12 months ended 30
September 2008, and partly due to relatively high cost per barrel
when new fields come on stream.
In the third quarter of 2009, a total of nine exploration wells were
completed before 30 September 2009, five on the NCS and four
internationally. Five wells were announced as discoveries, of which
one are located outside the NCS.
In the third quarter of 2009, Statoil started production from
Tyrihans (July) and Tune South (July) on the NCS, and first oil and
gas was received from the Murphy Oil operated Thunder Hawk field
(July) in the Gulf of Mexico.
First nine months
Total liquids and gas entitlement production in the first nine months
of 2009 was 1,791 mboe per day, compared to 1,716 mboe per day in the
first nine months of 2008. Total equity production was 1,930 mboe per
day in the first nine months of 2009 compared to 1,892 mboe per day
in the first nine months of 2008.
The 2% increase in total equity production in the first nine months
of 2009 compared to same period in 2008 was primarily due to
increased production from start up of new fields and ramp up on
existing fields, partly offset by declining production from mature
fields, various operational issues and maintenance activities.
Entitlement production increased by 4% for the same reasons as stated
above and also due to a less adverse effect of product sharing
agreements (PSA effect). The average PSA effect was 139 mboe per day
in the first nine months of 2009 compared to 177 mboe per day in the
first nine months of of 2008.
Total liquids and gas liftings in the first nine months of 2009 were
1,760 mboe per day, compared to 1,691 mboe per day in the first nine
months of 2008. The 4% increase in lifting is based on the increase
in entitlement production. There was an underlift in the first nine
months of 2009 of 16 mboe per day [5] compared to an underlift of 9
mboe per day in the first nine months of 2008.
Refining margins were USD 4.7 per barrel in the first nine months of
2009, a 45% decline since the first nine months of 2008.
In the first nine months of 2009 Statoil completed 53 exploration
wells, 32 on the NCS and 21 internationally. A total of 32 wells were
announced as discoveries in the period, 27 on the NCS and five
internationally.
In the first nine months of 2009 Statoil started production from
Yttergryta (January), Alve (March), Tyrihans (July) and Tune South
(July) on the NCS and received first oil and gas from Tahiti (May)
and Thunder Hawk (July) in the Gulf of Mexico.
2.2 FINANCIAL REVIEW
Third quarter
In the third quarter of 2009, net operating income was NOK 28.3
billion, compared to NOK 47.0 billion in the third quarter of 2008.
The decrease is mainly attributable to lower prices for both liquids
and gas and to a lesser extent increased depreciation and impairment
expense.
Net operating income includes certain items that management does not
consider to be reflective of Statoil's underlying operational
performance. Management adjusts for these items to arrive at adjusted
earnings. Adjusted earnings is a supplemental non-GAAP measure to
Statoil's IFRS measure of net operating income which management
believes provides an indication of Statoil's underlying operational
performance in the period and facilitates a better evaluation of
operational developments between periods.
In the third quarter of 2009, impairment losses net of reversals (NOK
5.3 billion), underlift (NOK 0.9 billion), lower values of products
in operational storage (NOK 0.2 billion) negatively impacted net
operating income, while higher fair value of derivatives (NOK 3.0
billion) and other accruals (NOK 0.1 billion) had a positive impact
on net operating income. Adjusted for these items and the effects of
eliminations (NOK 0.4 billion), adjusted earnings were NOK 31.2
billion in the third quarter of 2009.
In the third quarter of 2008, impairment losses net of reversals (NOK
3.1 billion), other accruals (NOK 1.7 billion), underlift (NOK 1.2
billion) and lower values of products in operational storage (NOK 0.9
billion) all had a negative impact on net operating income, while
higher fair value of derivatives (NOK 0.6 billion) had a positive
impact on net operating income. Adjusted for these items and the
effects of eliminations (NOK 0.9 billion), adjusted earnings were NOK
52.4 billion in the third quarter 2008.
The 41% decrease in adjusted earnings from third quarter 2008 to
third quarter 2009 was primarily caused by the reduction in prices
for both liquids and gas, and was only partly compensated by
increased sales volumes of liquids and gas. Adjusted depreciation,
amortisation and impairment also increased by NOK 2.8 billion mainly
due to higher production volumes, while adjusted exploration expenses
decreased by NOK 1.0 billion. Adjusted operating expenses decreased
by NOK 0.8 billion and adjusted selling and administrative expenses
decreased by NOK 0.1 billion.
Net financial items amounted to a gain of NOK 3.2 billion in the
third quarter of 2009, compared to a loss of NOK 9.7 billion in the
third quarter of 2008. The NOK 3.2 billion gain in the third quarter
of 2009 was primarily due to fair value gains on interest rate swap
positions of NOK 1.8 billion and net foreign exchange gains of NOK
2.0 billion.
The fair value gains on interest rate swaps relate to decreasing USD
interest rates on the payable leg of the swaps during the three month
period ended 30 September 2009. The net foreign exchange gains
include fair value gains on currency swap positions related to
liquidity and currency risk management and are due to a 9% weakening
of the USD versus the NOK in the third quarter of 2009.
Adjusted for these factors and foreign exchange effects on the
financial income, net financial items would amount to approximately
zero for the period.
Income taxes were NOK 24.9 billion in the third quarter of 2009,
equivalent to a tax rate of 79%, compared to NOK 31.0 billion in the
third quarter of 2008, equivalent to a tax rate of 83%. The decrease
in the tax rate was mainly due to deferred tax income caused by
currency effects in companies that are taxable in other currencies
than the functional currency. This was partly offset by relatively
higher income from the NCS and impairment losses with lower than
average tax rate.
In the third quarter of 2009, income before tax amounted to NOK 31.5
billion, while taxable income was estimated to be NOK 10.9 billion
higher. The estimated difference of NOK 10.9 billion arose in
companies that changed their functional currency as from January 1,
2009.
Introducing the USD as functional currency in the parent company as
from 2009 has led to reduced currency effects on net financial
income. While taxes payable are unaffected by this change, taxable
income exceeded consolidated accounting income before tax by
approximately NOK 10.9 billion in the third quarter of 2009, thus
contributing to a tax rate of 79%. Management does not consider this
tax rate to be reflective of the underlying tax exposure. Adjusted
earnings after tax excludes net financial items and tax on net
financial items and is an alternative measure which provides an
indication of Statoil's tax exposure to its underlying operational
performance in the period, and therefore better facilitates a
comparison between periods.
Adjusted earnings after tax in the third quarter of 2009 was NOK 9.3
billion, down from NOK 15.4 billion in the third quarter of 2008. The
tax rate on adjusted earnings was 70% and 71% in the third quarter of
2009 and 2008, respectively.
In the third quarter of 2009, net income was NOK 6.6 billion compared
to NOK 6.3 billion in the third quarter of 2008. The 6% increase is
mainly due to the net gain on net financial items and a lower
effective tax rate, only partly offset by the reduction in net
operating income caused mainly by reduced prices.
In the third quarter of 2009, earnings per share based on net income
were NOK 2.33 compared to NOK 2.04 in the third quarter of 2008.
First nine months
In the first nine months of 2009, the net operating income was NOK
88.1 billion, compared to NOK 161.1 billion in the first nine months
of 2008. The decrease is mainly attributable to lower prices of oil
and gas and increased depreciation, amortisation and impairment
losses, partly offset by income from higher volumes.
In the first nine months of 2009, both impairment losses net of
reversals (NOK 11.0 billion) and underlift (NOK 1.4 billion)
negatively impacted net operating income, while higher fair value of
derivatives (NOK 2.4 billion), higher values of products in
operational storage (NOK 1.5 billion), other accruals (NOK 1.5
billion) and gain on sale of assets (NOK 0.5 billion) all had a
positive impact on net operating income. Adjusted for these items and
effects of inter-company eliminations (NOK 1.8 billion), adjusted
earnings were NOK 96.4 billion in the first nine months of 2009.
In the first nine months of 2008 impairment losses net of reversals
(NOK 3.5 billion), underlift (NOK 1.1 billion), other accruals (NOK
2.0 billion) and reversal of restructuring cost accrual (NOK 0.2
billion) negatively impacted net operating income, while the higher
value of derivatives (NOK 4.7 billion), gain on sale of assets (NOK
1.2 billion) and higher values of products in operational storage
(NOK 0.8 billion) all had a positive impact on net operating income.
Adjusted for these items and effects of inter-company eliminations
(NOK 0.9 billion), adjusted earnings were NOK 160.3 billion in the
first nine months of 2008.
The 40% decrease in adjusted earnings from the first nine months of
2008 to the first nine months of 2009 was primarily due to the drop
in both liquids and gas prices, and was only partly offset by higher
income from sales of liquids and natural gas. Other contributing
factors include a NOK 6.7 billion increase in adjusted depreciation,
amortisation and impairment expense caused by higher production
volumes, a NOK 0.8 billion increase in adjusted operating expenses
and a NOK 0.5 billion increase in adjusted selling, general and
administrative expense. Lower adjusted exploration expenses made a
positive contribution of NOK 0.7 billion.
Net financial items amounted to a loss of NOK 5.5 billion in the
first nine months of 2009, compared to a loss of NOK 6.3 billion in
first nine months of 2008. The NOK 5.5 billion loss in the first nine
months of 2009 was primarily due to fair value losses on interest
rate swap positions of NOK 4.2 billion, net foreign exchange gains of
NOK 0.3 billion and an impairment loss of NOK 1.1 billion related to
an investment in the Pernis refinery company.
The fair value losses on interest rate swaps relate to increasing USD
interest rates on the payable leg of the swaps during the nine month
period ended 30 September 2009. The net foreign exchange gains
include fair value gains on currency swap positions related to
liquidity and currency risk management and are due to a 17% weakening
of the USD versus the NOK in the first nine months of 2009.
Adjusted for these factors, the impairment of the investment in
Pernis and for foreign exchange effects on financial income, net
financial items would amount to approximately zero for the period.
Income taxes were NOK 72.0 billion in the first nine months of 2009,
equivalent to a tax rate of 87%, compared to NOK 113.5 billion in the
first nine months of 2008, equivalent to a tax rate of 73%. The
increase in the tax rate was mainly due to currency effects related
to the change of functional currency for certain companies. In the
first nine months of 2009 the taxable income is higher than income
before tax, which increases the tax rate in the first nine months. In
addition, the tax rate was increased by relatively higher income from
the NCS and impairments with lower than average tax rates.
In the first nine months of 2009, income before tax amounted to NOK
82.6 billion, while taxable income was estimated to be NOK 24.6
billion higher than income before tax. The estimated difference of
NOK 24.6 billion arose in companies that changed their functional
currency as from January 1, 2009.
Adjusted earnings after tax excludes the effects of tax on financial
items, and in the first nine months of 2009, adjusted earnings after
tax were NOK 28.5 billion, down from NOK 46.0 billion in the same
period last year. The decrease is mainly due to lower liquid prices,
partly offset by higher income from natural gas sales and a lower
effective tax rate on adjusted earnings. The tax rate on adjusted
earnings was 70% and 71% in the first nine months of 2009 and 2008,
respectively.
In the first nine months of 2009, net income was NOK 10.6 billion
compared to NOK 41.2 billion. The 74% decrease is mainly due to
reduced operating income caused by lower revenues from liquids and
gas sales and a higher effective tax rate, only partly offset by
reduced loss on net financial items.
In the first nine months of 2009 earnings per share based on net
income amounted to NOK 3.50, compared to NOK 12.95 in the first nine
months of 2008.
In the first nine months of 2009, cash flows were adversely affected
by a 37% decrease in liquids prices and an 8% decrease in natural gas
prices, both measured in NOK, but cash flows provided by operations
still exceeded cash flows to investments with NOK 5.7 billion.
Cash flows provided by operations amounted to NOK 61.2 billion, while
cash flows to investments amounted to NOK 56.4 billion. Cash flows
provided by operations decreased by NOK 22.0 billion from the same
period last year, mainly due to lower operating income, but partly
compensated by changes in working capital and lower income tax
payments. Cash flows to investments increased by NOK 15.2 billion
compared to the same period last year, mainly due to increased
investments in property, plant and equipment and less proceeds from
sales of assets.
2.3 OUTLOOK
Statoil's guiding for equity production is 1,950 mboe per day in 2009
and 2,200 mboe per day in 2012. [13] The estimate for 2009 excludes
any adverse effects of potential Opec quotas. Going forward,
operational regularity, gas offtake and commercial considerations
related to gas sales activities represent the most significant risks
to the production guidance.
Maintenance activity is not expected to materially influence our
equity production in the fourth quarter of 2009, and is expected to
be approximately 30 mboe per day for the full year.
Capital expenditures for 2009, excluding acquisitions and capital
leases, are estimated at around USD 13.5 billion.
Unit production cost for equity volumes is estimated in the range of
NOK 33 to 36 per barrel in the period from 2009 to 2012, excluding
purchases of fuel and gas for injection. For 2009, the unit
production cost is expected to be in the upper end of this range.
Exploration drilling is the primary tool for growing our business.
The company will continue to high-grade the large portfolio of
exploration assets and expects to maintain a high level of
exploration activity for the remainder of 2009, although slightly
lower than in 2008. Statoil expects to complete around 70 exploration
and appraisal wells in 2009 and exploration expenditures is estimated
at approximately USD 2.7 billion.
We anticipate that commodity prices will continue to be volatile, at
least in the near term.
Refining margins have been declining for more than a year, and we
anticipate that they will remain low, at least in the near term.
These forward-looking statements reflect current views about future
events and are, by their nature, subject to significant risks and
uncertainties because they relate to events and depend on
circumstances that will occur in the future. See "Forward-Looking
Statements" below.
2.4 RISK UPDATE
Risk factors
The results of operations largely depend on a number of factors, most
significantly those that affect the price received in NOK for
products sold. Specifically, such factors include the level of
liquids and natural gas prices, trends in the exchange rates, liquids
and natural gas production volumes, which in turn depend on
entitlement volumes under profit sharing agreements and available
petroleum reserves, Statoil's, as well as our partners' expertise and
co-operation in recovering oil and natural gas from those reserves,
and changes in Statoil's portfolio of assets due to acquisitions and
disposals.
The illustration shows how certain changes in crude oil prices (a
substitute for liquids prices), natural gas contract prices and the
USDNOK exchange rate, if sustained for a full year, could impact our
net operating income in 2009. Changes in commodity prices, currency
and interest rates may result in income or expense for the period as
well as changes in the fair value of derivatives in the balance
sheet.
The illustration is not intended to be exhaustive with respect to
risks that have or may have a material impact on the cash flows and
results of operation. See the annual report for 2008 for a more
detailed discussion of the risks to which Statoil is exposed.
Financial risk management
Statoil has policies in place to manage acceptable risk for
commercial and financial counterparties and the use of derivatives
and market activities in general. Statoil has so far had only limited
exposure towards distressed parties and instruments. The turmoil in
the financial markets has not caused us to make any changes in our
risk management policies, but we have tightened our practices with
respect to credit risk and liquidity management. Only insignificant
counterparty losses have been incurred so far. The group's exposure
towards financial counterparties is still considered to have an
acceptable risk profile, but it is anticipated that the risk may
increase if the financial crisis worsens. This may be somewhat
reduced by the effects of national and international actions by
nations and national banks.
The markets for short- and long-term financing are currently
considered to function comfortably for borrowers with Statoil's
credit standing and general characteristics. However, under the
current circumstances uncertainty still exists. Funding costs for
short maturities are generally at historically low levels. Long-term
funding costs are at attractive absolute levels although the credit
spread element for corporate issuers is still higher compared to
levels existing before the financial crisis. With regard to liquidity
management, the focus is on finding the right balance between risk
and reward and most funds are currently placed in short term AA- and
AAA-rated non-Norwegian government certificates, or with banks with
AA-rating.
In accordance with our internal credit rating policy, we reassess
counterparty credit risk at least annually and assess counterparties
that we identify as high risk more frequently. The internal credit
ratings reflect our assessment of the counterparties' credit risk and
are similar to the rating categories used by well known credit rating
agencies, such as Standard & Poor's and Moody's.
2.5 HEALTH, SAFETY AND THE ENVIRONMENT (HSE)
Third quarter
The total recordable injury frequency was 4.0 in the third quarter of
2009 compared to 5.9 in the third quarter of 2008. The serious
incident frequency decreased from 2.1 in the third quarter of 2008 to
1.6 in the third quarter of 2009. There was one fatality in the third
quarter of 2009 when a merchant seaman drowned in the river Seine in
Normandy, France, and one fatality in October at the Leismer
development south of Alberta, Canada.
The number of accidental oil spills in the third quarter of 2009
decreased compared to the third quarter of 2008, and the volume
decreased from 42 to 3 cubic metres in the third quarter of 2009.
First nine months
The total recordable injury frequency was 4.2 in first nine months of
2009 compared to 5.7 in first nine months of 2008. The serious
incident frequency rate decreased from 2.3 in first nine months of
2008 to 2.0 in first nine months of 2009. There were five fatalities
in the first nine months of 2009 (six year to date). One fatality
occurred when a contractor fell down while dismantling scaffolding,
three Statoil employees were on board the Air France flight 447 that
disappeared over the Atlantic, and one fatality occurred on the
vessel Lady Shana when the shore gangway collapsed and fell into the
river Seine while a crew member was crossing it.
The number of accidental oil spills in the first nine months of 2009
decreased compared to the first nine months of 2008, and the volume
decreased from 318 to 49 cubic metres in the first nine months of
2009.
3
To see end notes referenced in main table and text please download
our complete report from our website -
http://www.statoil.com/en/InvestorCentre/QuarterlyResults/Pages/default.aspx
*See end notes in the complete quarterely report
Attachments:
- Press release
- Financial statement and review
Further information from:
Investor relations
Lars Troen Sørensen, senior vice president investor relations, + 47
90 64 91 44 (mobile)
Geir Bjørnstad, vice president, US investor relations, + 1 203 978
6950
Press
Ola Morten Aanestad, vice president for media relations, + 47 480 80
212 (mobile)
Kai Nielsen, public affairs manager , +44 (0) 78 2432 6893 (mobile)
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