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Solid production growth in strong markets 

October 31, 2005, 08:30 CET



The Statoil group had a net income of 8.7 billion in the third quarter of 2005, compared to NOK 5.8 billion in the third quarter of 2004. In the first nine months of 2005, net income was NOK 22.2 billion compared to NOK 14.9 billion in the first nine months of 2004.

The increased income in the third quarter of 2005, compared to the third quarter of 2004, was mainly related to:
  • an increase in the average oil price measured in NOK of 35 per cent
  • an increase in natural gas prices measured in NOK of 27 per cent
  • an increase in oil and gas production of 17 per cent, while lifting increased by 11 per cent
  • improved results from refining operations

“The third quarter has been another strong quarter for Statoil, characterised by high oil and gas prices, production growth, and good margins and high regularity in the refineries,” says chief executive Helge Lund. “We can once again present record results from our operations.”

“Oil and gas production has increased by no less than 17 per cent compared with the same quarter last year. We have experienced substantial growth in gas production from the Norwegian continental shelf, and oil and gas production from our international operations continues to show solid progress.”

“I’m pleased to note that since we last published our results, we have secured new building blocks for our international activities,” says Mr Lund. “We have been awarded five new licences in Libya, Brazil and Nigeria. We have further strengthened our position in the Gulf of Mexico through a collaboration with ExxonMobil, and we are on Gazprom’s shortlist of potential partners for the Shtokman development in the Barents Sea. These results underpin our purposeful work for a long-term industrial development of Statoil.”

Return on average capital employed after tax (ROACE)* for the 12 months ended 30 September 2005 was 26.5 per cent, compared to 19.5 per cent for the 12 months ended 30 September 2004. This increase was mainly due to higher oil and gas prices. Normalised ROACE* for the 12 months ended 30 September 2005 was 12.1 per cent, compared to 12.6 per cent for the corresponding period in 2004. The reason for the change in normalised ROACE is mainly increased investments. ROACE and normalised ROACE are defined as non-GAAP financial measures*.

In the third quarter of 2005, earnings per share were NOK 4.01 (USD 0.61) compared to NOK 2.69 (USD 0.40) in the third quarter of 2004. For the first nine months of 2005, earnings per share were NOK 10.25 (USD 1.57) compared to NOK 6.87 (USD 1.02) for the first nine months of 2004.

Income before financial items, income taxes and minority interest increased from NOK 16.1 billion in the third quarter of 2004 to NOK 23.9 billion in the third quarter of 2005. This was mainly related to an increase in the average oil price measured in NOK of 35 per cent and a 27 per cent increase in gas prices measured in NOK. In addition, increased margins from the refineries were the main contributing factor to the NOK 0.4 billion increase in results from the downstream business.

In the first nine months of 2005, income before financial items, income taxes and minority interest was NOK 67.3 billion compared to NOK 46.4 billion in the first nine months of 2004. The increase was mainly due to a 33 per cent increase in the average oil price measured in NOK and a 25 per cent increase in gas prices measured in NOK, as well as a 7 per cent increase in liftings of oil and gas. The positive effect of higher prices in 2005 was partly offset by the gain of NOK 0.6 billion from the sale of the shares in Verbundnetz Gas AG (VNG), which was included in income in the first quarter of 2004. The increase in cost items was mainly related to increased activity, both in the third quarter and in the first nine months of 2005.

USGAAP income statement Statoil group
 
US GAAP income
Third quarter
Nine months ended
30 September
Full
year
statement
2005
2004
2005
2005
2004
2005
2004
(in millions)
NOK
NOK
Change
USD [1]
NOK
NOK
Change
USD [1]
NOK
 
Sales
104,895
81,623
29%
16,056
283,999
218,664
30%
43,471
303,756
Equity in net income of affiliates
233
204
14%
36
987
708
39%
151
1,209
Other income
9
221
(96%)
1
76
1,011
(92%)
12
1,253
 
Total revenues
105,137
82,048
28%
16,093
285,062
220,383
29%
43,633
306,218
 
Cost of goods sold
66,721
53,245
25%
10,213
175,111
136,857
28%
26,804
188,179
Operating expenses
7,331
6,291
17%
1,122
21,661
19,878
9%
3,316
27,350
Selling, general and administrative expenses
1,652
1,678
(2%)
253
5,010
3,763
33%
767
6,298
Depreciation, depletion and amortisation
4,431
4,224
5%
678
13,472
12,285
10%
2,062
17,456
Exploration expenses
1,130
519
118%
173
2,515
1,239
103%
385
1,828
 
Total expenses before financial items
81,265
65,957
23%
12,439
217,769
174,022
25%
33,333
241,111
 
Income before financial items, income taxes and minority interest
23,872
16,091
48%
3,654
67,293
46,361
45%
10,300
65,107
 
Net financial items
543
1,685
(68%)
83
(2,064)
526
(492%)
(316)
5,739
 
Income before income taxes and minority interest
24,415
17,776
37%
3,737
65,229
46,887
39%
9,984
70,846
 
Income taxes
(15,501)
(11,830)
(31%)
(2,373)
(42,438)
(31,722)
(34%)
(6,496)
(45,425)
Minority interest
(230)
(128)
(80%)
(35)
(584)
(292)
(100%)
(89)
(505)
 
Net income
8,684
5,818
49%
1,329
22,207
14,873
49%
3,399
24,916
 
 
Income before financial items, income
taxes and minority interest for the
Third quarter
Nine months
ended 30 September
Full year
segments (in
2005
2004
2005
2005
2004
2005
2004
millions)
NOK
NOK
Change
USD
[1]
NOK
NOK
Change
USD
[1]
NOK
 
E&P Norway
18,016
12,552
44%
2,758
51,594
35,825
44%
7,897
51,029
International E&P
3,675
1,517
142%
563
7,538
3,137
140%
1,154
4,188
Natural Gas
794
939
(15%)
122
3,466
5,037
(31%)
531
6,784
Manufacturing & Marketing
1,391
995
40%
213
4,951
2,487
99%
758
3,921
Other
(4)
88
(105%)
(1)
(256)
(125)
(105%)
(39)
(815)
 
Income before financial items, income taxes and minority interest
23,872
16,091
48%
3,654
67,293
46,361
45%
10,300
65,107


Financial data
 
Third quarter
Nine months
ended 30 September
Full year
2005
2004
2005
2005
2004
2005
2004
NOK
NOK
Change
USD
[1]
NOK
NOK
Change
USD
[1]
NOK
 
Weighted average number of ordinary shares outstanding
2,165,642,030
2,166,143,715
2,165,832,864
2,166,143,715
2,166,142,636
Earnings per share
4.01
2.69
49%
0.61
10.25
6.87
49%
1.57
11.50
ROACE (last 12 months)
26.5%
19.5%
26.5%
19.5%
23.5%
ROACE (last 12 months normalised)
12.1%
12.6%
12.1%
12.6%
12.4%
Cash flows provided by operating activities (billion)
17.2
18.0
(5%)
2.6
56.3
44.4
27%
8.6
38.8
Gross investments (billion)
8.5
11.2
(24%)
1.3
37.1
34.2
9%
5.7
42.8
Net debt to capital employed ratio
26.2%
25.8%
26.2%
25.8%
19.0%
 
 
Operational data
 
Third quarter
Nine months ended
30 September
Full
year
2005
2004
Change
2005
2004
Change
2004
 
Average oil price (USD/bbl)
60.1
41.8
44%
52.2
36.5
43%
38.1
NOK/USD average daily exchange rate
6.46
6.87
(6%)
6.38
6.88
(7%)
6.74
Average oil price (NOK/bbl)*
389
287
35%
333
251
33%
257
Gas prices (NOK/scm)
1.37
1.08
27%
1.33
1.06
25%
1.10
Refining margin, FCC (USD/boe)*
10.1
6.5
55%
7.8
6.4
22%
6.4
Total oil and gas production (1,000 boe/day)*
1,128
965
17%
1,148
1,073
7%
1,106
Total oil and gas liftings (1,000 boe/day)*
1,081
977
11%
1,137
1,067
7%
1,093
Production (lifting) cost (NOK/boe, last 12 months)
22.0
23.3
(6%)
22.0
23.3
(6%)
23.3
Production (lifting) cost normalised (NOK/boe, last 12 months)*
22.2
23.2
(4%)
22.2
23.2
(4%)
23.3
 
[1] Solely for the convenience of the reader, the figures for the third quarter of 2005 have been translated into US dollars at the rate of NOK 6.5331 to USD 1.00, the Federal Reserve noon buying rate in the City of New York on 30 September 2005.


Total oil and gas production in the third quarter of 2005 amounted to 1,128,000 barrels of oil equivalent (boe) per day compared to 965,000 boe per day in the third quarter of 2004. In the first nine months of 2005 total oil and gas production was 1,148,000 boe per day, compared to 1,073,000 boe per day in the same period in 2004.


Total oil and gas liftings in the third quarter of 2005 were 1,081,000 boe per day compared to 977,000 boe per day in the third quarter of 2004. This implies an underlifting of 47,000 boe per day in the third quarter of 2005 compared to an overlifting of 12,000 boe per day in the third quarter of 2004. In the first nine months of 2005, total oil and gas liftings were 1,137,000 boe per day compared to 1,067,000 boe per day in the corresponding period of 2004.

Exploration expenditure in the third quarter of 2005 was NOK 1.2 billion, compared to NOK 0.6 billion in the third quarter of 2004. Exploration expenses in the third quarter of 2005 amounted to NOK 1.1 billion, compared to NOK 0.5 billion in the third quarter of 2004. The increase in exploration expenditure of NOK 0.6 billion was mainly due to an increase in the period’s exploration activity.

Third quarter
Nine months ended
30 September
Full
year
Exploration
2005
2004
2005
2005
2004
2005
2004
(in millions)
NOK
NOK
Change
USD
[1]
NOK
NOK
Change
USD
[1]
NOK
 
Exploration expenditure (activity)
1,230
555
122%
188
3,244
1,687
92%
497
2,466
Expensed, previously capitalised exploration expenditure
24
40
(40%)
4
155
68
128%
24
110
Capitalised share of current period's exploration activity
(124)
(76)
(63%)
(19)
(884)
(516)
(71%)
(135)
(748)
 
Exploration expenses
1,130
519
118%
173
2,515
1,239
103%
385
1,828


A total of six exploration wells were completed in the third quarter of 2005, three on the Norwegian continental shelf (NCS) and three internationally. All wells resulted in discoveries. One exploration well was completed in the third quarter of 2004.

In the first nine months of 2005 a total of 15 exploration and appraisal wells were completed, eight on the NCS and seven internationally. Eleven of these wells resulted in discoveries. The number of exploration wells completed in the first nine months of 2004 was seven.

Production cost per boe was NOK 22.0 for the 12 months ended 30 September 2005, compared to NOK 23.3 for the 12 months ended 30 September 2004*.

Normalised at a NOK/USD exchange rate of 6.75, the production cost for the 12 months ended 30 September 2005 was NOK 22.2 per boe, compared to NOK 23.2 per boe for the 12 months ended 30 September 2004*. The reason for the reduction in production unit cost, both real and normalised, is mainly increased lifting of oil and gas.

Net financial items amounted to an income of NOK 0.5 billion in the third quarter of 2005, compared to an income of NOK 1.7 billion in the third quarter of 2004. Net financial items in the first nine months of 2005 were a cost of NOK 2.1 billion, compared to an income of NOK 0.5 billion in the same period in 2004.

The increased cost in the first nine months of 2005 was caused by increased currency losses. Most of the currency losses relate to realised losses on short balances in USD created by liquidity management and unrealised losses on long-term debt. The increased cost was partly offset by increased dividends received and increased income from investments in securities.

Exchange rate
30.09.2005
30.06.2005
31.12.2004
30.09.2004
30.06.2004
31.12.2003
 
NOK/USD
6.54
6.55
6.04
6.72
6.94
6.68


Income taxes in the third quarter of 2005 were NOK 15.5 billion, equivalent to a tax rate of 63.5 per cent. Income taxes in the third quarter of 2004 were NOK 11.8 billion, equivalent to a tax rate of 66.6 per cent.

For the first nine months of 2005 income taxes were NOK 42.4 billion, with a corresponding tax rate of 65.1 per cent. In comparison, income taxes in the same period in 2004 were NOK 31.7 billion with a corresponding tax rate of 67.7 per cent. The reduced tax rate, both in the third quarter and for the first nine months of 2005, is mainly due to relatively higher income generated outside the NCS.

Health, safety and the environment (HSE). A fatality occurred on 2 October 2005 as a result of an accident on the shuttle tanker Sally Knutsen, while it was berthed at Statoil's Mongstad crude oil terminal near Bergen. The tanker was loading provisions from a supply boat. An investigation is under way to find the cause of the accident and to identify improvement measures.

However, in general, the HSE indicators have shown a positive development during this quarter, and for the first nine months, compared with the same periods last year. Our objective for HSE is zero harm. Sustained top management involvement, measures for upgrading skills, and cooperation with our contractors to improve HSE results will continue with undiminished strength.

Third quarter
Nine months ended
30 September
Full
year
HSE
2005
2004
2005
2004
2004
 
Total recordable injury frequency
4.3
5.5
5.0
6.1
5.9
Serious incident frequency
2.1
3.3
2.4
3.2
3.2
Unintentional oil spills (number)
126
107
359
372
487
Unintentional oil spills (volume, scm)
29
13
88
157
186

*See footnotes in the complete quarterly report.




Important events since the beginning of the third quarter of 2005 are summarised below.

  • Statoil added new production capacity on the NCS with the Åsgard Q-frame, new compressors on the Troll A platform, and the commencement of gas exports from the Visund field.
  • On behalf of a group of licence operators, including Eni Norge, Hydro and Norske Shell, Statoil has signed contracts with Smedvig and Transocean covering charters for three rigs for a total of ten rig-years.
  • Following a new review of the Snøhvit project, it has been necessary to raise the investment estimate and spend more time on completing construction.
  • On 4 August 2005, Statoil signed a memorandum of understanding (MoU) with the Algerian national energy company Sonatrach covering increased cooperation between the two companies.
  • Statoil has entered into exploration arrangements with ExxonMobil in the deepwater Gulf of Mexico, which represents a further strengthening of the group’s presence in this area.
  • On 26 August 2005, an exploration licence for the deepwater block 315 off Nigeria was awarded to Statoil and the Brazilian oil company Petrobras.
  • On 16 September 2005, the Russian oil and gas company Gazprom announced that Statoil is one of five companies with which it will negotiate on potential participation in the Shtokman gas field in the Barents Sea.
  • On 2 October 2005, Statoil was awarded operatorship for two licences in a bidding round for exploration and production sharing agreements in Libya.
  • On 17 October 2005, Statoil was awarded interests in two deepwater blocks off Brazil in the seventh licensing round.
  • The Kårstø expansion project (KEP 2005) was completed on time and below budget, and the plant is now ready to process gas from the Statoil-operated Kristin field in the Norwegian Sea.
  • Statoil has once again been ranked as the best oil and gas company in the world for sustainability by the Dow Jones Sustainability World Index (DJSI World).




Further information from:

Investor relations
Ragnar Bulie, acting senior vice president investor relations,
+47 99 57 39 13 (mobile), +47 51 99 42 01 (office)
Geir Bjørnstad, vice president investor relations North America,
tel: +1 (203) 97 86 950 (office), +1 (203) 570 57 57

Press
Ola Morten Aanestad, vice president media relations,
tel: +47 48 08 02 12 (mobile), +47 51 99 13 77 (office)
Kjersti T Morstøl, public affairs manager,
tel: +47 91 78 28 14 (mobile), +47 51 99 26 71 (office)


Financial statements and review - third quarter 2005
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