Norway's state-controlled Statoil made a loss in October-December — its fifth quarterly loss since oil prices began to fall 18 months ago — as it took further impairment charges because of lower short-term price assumptions. Statoil is cutting its capital expenditure (capex) budget and deepening cost savings.
The company made a loss of 9.2bn Norwegian kroner ($1.1bn) in the fourth quarter, compared with losses of NKr8.9bn a year earlier. Net impairment charges for the period were NKr10.1bn, "mainly related to producing and development assets as a result of reduced oil and gas forward prices", Statoil said.
Losses for 2015 amounted to NKr37.3bn, compared with a profit of NKr22bn in 2014. This was Statoil's first annual loss "in modern times", according to chief executive Eldar Saetre.
"The full year of 2015 is negatively impacted by net impairment charges of NKr63.3bn, of which NKr46.1bn was recognised in the first quarter of 2015 triggered by reduced price forecast," the company said.
For 2016, Statoil plans capex at $13bn, after spending $14.7bn in 2015 and around $20bn a year earlier, and it could go further down in 2017. The company has also "substantially improved its portfolio of non-sanctioned projects, with planned start-up by 2022, reducing the average break-even oil price from $70/bl of oil equivalent (boe) in 2013 to $41/boe in 2016", it said. The company plans its 2016 exploration budget at NKr2bn, down by a third compared with last year.
Statoil has no plans to make final investment decisions on any major projects in the next 18 months, Saetre told Argus. The company also has no firm plans to buy assets, although potential acquisitions are something Statoil is constantly reviewing, looking for opportunities and assets that would fit into its portfolio, Saetre added.
Breakeven levels for its 400mn-650mn bl Johan Castberg project in the Barents Sea have come down to below $45/bl from more than $80/bl previously, and, for the first phase of the giant 1.7bn-3bn boe Johan Sverdrup field in the North Sea, to below $30/bl.
Statoil now plans to deliver a $2.5bn/yr pre-tax boost to cash flow through efficiency improvements this year, compared with its previous guidance of $1.7bn/yr. "One year ahead of plan, Statoil delivers annual cost improvements of $1.9bn," the company said, referring to 2015.
Statoil decided to maintain its dividend, but introduced a two-year scrip dividend programme starting from the fourth quarter 2015, to take some pressure off its balance sheet.
The company's net debt to capital ratio increased to 27pc at the end of 2015 from 20pc a year earlier, and could jump above 30pc in 2016-17 if oil prices are at $50/bl and towards 40pc with prices at $40/bl.
Production declined by 1pc to 1.921mn boe/d in the fourth quarter compared with a year earlier because of "expected natural decline on mature fields and lower ownership shares from redetermination and divestments", Statoil said. Production sharing agreement (PSA) effects, field ramp-ups and output from new projects helped to partially offset the decrease. Liquids production increased by 3pc to 1.073mn boe/d year-on-year.
Total output excluding PSA effects was down by 3pc to 2.046mn boe/d in the fourth quarter compared with a year earlier. Excluding divestments, output was little changed.
"From 2014 to 2017, Statoil estimates an annual organic production growth of around 1pc from a rebased equity production level," the company said, compared with a 2pc/yr growth guidance for 2014-16. It expects its output excluding PSA effects to be "somewhat lower than the 2015 level due to value over volume approach".
The company's reserve replacement ratio — including asset sales and purchases — declined to 55pc last year from 62pc in 2014, mainly because of high output at producing fields, lower oil and gas prices and the divestment of its stake in the Shah Deniz gas field in the Caspian Sea. "The decrease was partially compensated for by sanctioning of Johan Sverdrup phase 1 and positive revisions on several of our producing fields due to good production performance and increased efficiency," Statoil said.
