Norway's state-controlled Statoil today posted its fourth quarterly loss since oil prices started falling in mid-2014. And in a further blow, the firm announced a delay to the start-up of two key projects in the UK and Norway. But it has reassured shareholders that its cost-cutting plans are on track and that capital expenditure (capex) this year will be lower than previous guidance.
A rise in production, strong refining margins and a fall in underlying operating costs in July-September were offset by sharply lower oil prices and impairment charges. Statoil took 12.7bn Norwegian kroner ($1.5bn) of impairments in the quarter, mainly related to exploration assets. It took an additional Nkr3.3bn provision for "disputes". But these charges were partially offset by a reversal of Nkr7.9bn of impairments previously booked on a refinery asset and offshore assets in the US Gulf of Mexico.
The impairments drove Statoil to a Nkr2.8bn loss in the third quarter. But it was an improvement on the third quarter last year when even heavier impairments pushed the company to Nkr4.8bn loss. Excluding the impairments and other one-off items, Statoil made a profit of Nkr3.7bn, compared with Nkr9.1bn a year earlier.
Statoil's operational performance was strong in the quarter. Production increased by 7pc on the year to 1.74mn b/d of oil equivalent (boe/d), driven by a rise in Norwegian gas output and higher liquids production outside Norway. Output excluding production sharing agreement (PSA) effects was up by 4pc on the year to 1.91mn boe/d. This has given the firm the confidence to raise its 2015 production guidance slightly — Statoil now expects output, excluding PSA effects, to be more than 3pc higher this year than in 2014, compared with previous guidance of around 2pc growth. The 2014 level is rebased to take into account the impact of divestments. Statoil's downstream operations benefited from higher refining margins, robust trading results and lower operating costs.
The firm has made headway on its cost-cutting and efficiency programmes in response to lower oil prices this year, including hundreds of job cuts. It is sticking to previous guidance to deliver a $1.7bn/yr pre-tax boost to cash flow through efficiency improvements from 2016 but sees room for further reductions.
"Continued low prices in the third quarter demonstrates that we must continue to chase further cost efficiencies," chief executive Eldar Saetre said.
Statoil has reduced its organic capex budget for this year by $1bn from previous guidance, to around $16.5bn, helped by a 7pc reduction in the estimated development costs for the giant Johan Sverdrup field in the Norwegian North Sea. But Statoil has had less success in controlling costs at the Mariner heavy oil project in the UK North Sea and the Aasta Hansteen gas development in the Norwegian Sea.
The cost estimate for Mariner is now 10pc above the original plan of $7bn, and the estimate for Aasta Hansteen has increased to Nkr37bn from Nkr32bn when the development plan was submitted in 2013. Statoil and its partners have decided to delay the start-up of both projects to the second half of 2018 from 2017.
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