By Kjetil Malkenes Hovland
OSLO-- Statoil ASA's ambitious expansion in oil production
beyond Norwegian shores is increasingly yielding an unwanted
byproduct: losses.
The state-run oil and gas company posted a 16% drop in
second-quarter profit on Tuesday, hit by the continuous slide in
oil prices as well as further losses from overseas operations.
Net profit, boosted by gains from disposals, stood at 10 billion
Norwegian kroner ($1.22bn) in the three months to June 30, compared
with 11.9 billion kroner in the same period a year earlier. Revenue
fell 13% to 124 billion kroner, beating expectations of 122 billion
kroner.
Statoil said that while its Norwegian business generated
diminished operating profit of 17.9 billion kroner, foreign
businesses had an operating loss of 0.1 billion kroner, its third
consecutive quarter of red ink.
"A marginally negative result isn't satisfactory," Chief
Executive Eldar Saetre said in an interview. "We are working quite
actively on this now."
The steady erosion in oil prices could jeopardize Statoil's
15-year drive to offset declining output in Norway by investing in
foreign fields.
Statoil's foreign output reached 744,000 barrels a day last
year, from under 100,000 barrels a day at the turn of the
Millennium. The company now pumps oil in 11 foreign countries,
including Angola, Canada, the U.S. and Brazil.
But much of that expansion was conducted when oil prices
exceeded $80 or even $100 per barrel. As a result, many of
Statoil's foreign fields require higher prices than the current $53
per barrel for Brent crude to be profitable.
In contrast, many of Statoil's Norwegian fields were developed
decades ago in a $20-per-barrel environment, and can produce
cheaper oil.
Statoil said it booked a one-off gain of 12.3 billion kroner in
the second quarter on the sale of its interest in Azerbaijan's Shah
Deniz gas field.
Pareto Securities analyst Trond Omdal said he expected Statoil
to continue selling or slimming down assets, notably in Algeria and
Norway, to fund future dividends and capital expenditure, and avoid
taking on too much debt.
"At current prices, Statoil's international operations aren't
profitable, especially in North America," Mr. Omdal said.
Formed in 1972, Statoil is the second-biggest exporter of
natural gas to Europe after Russia's Gazprom. The company grew
significantly during the 1980s on the back of vast field
developments off Norway, including Statfjord, Gullfaks and Troll,
and was listed in 2001.
Write to Kjetil Malkenes Hovland at
kjetilmalkenes.hovland@wsj.com
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