Statoil sees 3pc/yr output growth to 2020: Update
Adds detail throughout
London, 7 February (Argus) — Norway's state-controlled Statoil expects its organic production to increase by about 3pc/yr in 2016-20.
Output in the fourth quarter of last year — including production sharing agreements — increased by 1pc year-on-year, to 1.934mn b/d of oil equivalent (boe/d), thanks in part to ramp-ups and start-ups, redeterminations and stronger operational performance.
Liquids production fell by 2pc in the quarter, to 1.048mn boe/d, and gas production grew by 4pc year-on-year.
Statoil's reserve replacement ratio (RRR) was 93pc in 2016, compared with 55pc in 2015. Statoil said it estimates 4-5pc production growth in 2017 from rebased 2016 production.
The company made a loss of $2.8bn in the final quarter of 2016, mainly because of $2.3bn in impairments resulting from reduced long-term price assumptions, "with the largest effect being on unconventional onshore assets in north America".
Exploration expenses capitalised in the fourth quarter were $260mn. The firm's quarterly result was also negatively affected by lower European gas prices, lower refinery runs because of maintenance and $765mn of unrealised losses on derivatives and inventory hedge contracts. But marketing and trading delivered strong results, and higher oil prices and higher US gas prices also helped, Statoil said. The firm made a loss of $1.1bn in the fourth quarter of 2015, which included $1.2bn of net impairment charges.
The company's international operations made another quarterly loss, because of higher exploration write-downs and lower production volumes.
Statoil now assumes 2020 oil prices at $75/bl, NBP gas prices at $6/mn Btu and Henry Hub gas prices at $4/mn Btu. Its previous 2020 assumptions were $83/bl for oil, $8/mn Btu for NBP gas and $4.2/mn Btu for Henry Hub gas. But its 2017 price assumptions have been increased, including oil prices at $55/bl compared with $45/bl before.
Organic capital expenditure (capex) amounted to $10.1bn in 2016, more than 20pc below Statoil's original target. The firm plans its 2017 capex budget at $11bn. Exploration activity will amount to $1.5bn this year.
Statoil gave the green light to five projects last year, and has several more that it could progress in the near-future, including the 450mn-600mn boe Johan Castberg project in the Barents Sea by the end of 2017.
The firm said it delivered a positive cash flow of $900mn in the fourth quarter after tax, dividend and organic capex. Statoil plans to be free cash flow positive at $50/boe in 2017.
It has improved average break even for its "next-generation portfolio" with planned start-up before 2022 — including the 2bn-3bn boe North Sea Johan Sverdrup project and non-operated projects — to $27/boe. The portfolio is 65pc oil. Excluding phase 1 of Johan Sverdrup and only looking at Statoil-operated projects, that number is now about $30/bl, compared with $41/bl last year and $70/bl in 2013.
Annual cost savings were $3.2bn in 2016 compared with the 2013 level, $700mn above the company's target. Statoil targets a further $1bn of annual savings this year, taking the total for 2017 to $4.2bn compared with 2013.
The company's net-debt-to-capital ratio stood at 35.6pc at the end of last year, from 26.8pc a year earlier, with the rise put down to "impairments, currency effects, increase in working capital to capture higher margins, and the acquisition of BM-S-8 licence in Brazil".
Statoil chief executive Eldar Saetre said he is comfortable with the debt ratio in the mid-30s percent, and saud the company will be able to maintain it there with oil prices at $50/bl. Statoil's longer-term ambition is to bring the debt ratio below 30pc, he said.