Statoil's net income in the first quarter of 2006 amounted to NOK 10.3 billion, compared to NOK 6.8 billion in the first quarter of 2005. This is the group's best quarterly result ever.
"A high level of production and strong oil and gas prices have contributed to this strong quarterly result," says chief executive Helge Lund.
He is pleased that the group is continuing to show solid growth in production:
”Production in the first quarter totalled 1,237,000 barrels of oil equivalent per day, an increase of four per cent compared with the first quarter of 2005. This is in spite of the fact that we in this quarter for the first time have seen a noticeable reduction in entitlement production from our international fields under production sharing agreements due to the high oil and gas prices,” says Mr Lund.
The 52 per cent increase in net income from the first quarter of 2005 to the first quarter of 2006 was mainly due to:
- A 39 per cent increase in the average realised oil price measured in NOK
- A 53 per cent increase in natural gas prices measured in NOK
- A 4 percent increase in lifted volumes of oil and gas
"In this quarter, we have achieved encouraging results on the Norwegian continental shelf," says Mr Lund. "We were awarded five licences in attractive exploration acreage in the 19th offshore licensing round. In February, we could announce that recoverable reserves in the Kvitebjørn field in the North Sea were increased by 50 per cent compared to the field's Plan for development and operation (PDO). In addition, we have made new discoveries. We have also increased our interest in the Luva find and thereby strengthened our strategic position as an operator in the Norwegian Sea.
"At the same time, our international business is set to have record-high exploration activity. In the first quarter, we strengthened our position in the Gulf of Mexico through agreements to participate in three new exploration licences."
Strong return on average capital employed after tax
Return on average capital employed after tax (ROACE)* for the 12 months ended 31 March 2006 was 29.5 per cent, compared to 24.6 per cent for the 12 months ended 31 March 2005. This increase was mainly due to higher oil and gas prices and continued production growth. Normalised ROACE* for the 12 months ended 31 March 2006 was 10.7 per cent, compared to 12.4 per cent for the corresponding period in 2005. The reason for the change in normalised ROACE was mainly increased investments. ROACE and normalised ROACE are defined as non-GAAP financial measures*.
Earnings per share up
In the first quarter of 2006, earnings per share were NOK 4.74 (USD 0.72) compared to NOK 3.13 (USD 0.49) in the first quarter of 2005.
Increased income before financial items, income taxes and minority interest
Income before financial items, income taxes and minority interest in the first quarter of 2006 was NOK 31.0 billion compared to NOK 21.5 billion in the first quarter of 2005. The increase was mainly due to a 39 per cent increase in the average oil price and a 53 per cent increase in gas prices measured in NOK, a 4 per cent increase in oil and gas liftings, and an increase in other income of NOK 0.5 billion, mainly due to proceeds from sales of assets. The increase in income before financial items, income taxes and minority interest was partly offset by increased expenses, mainly related to higher activity.
| US GAAP income | First quarter | Full year | ||
| statement | 2006 | 2005 | 2005 | |
| (in millions) | NOK | NOK | Change | NOK |
| | | | | |
| Sales | 108,397 | 82,648 | 31% | 384,653 |
| Equity in net income of affiliates | 87 | 436 | (80%) | 1,090 |
| Other income | 533 | 38 | 1,303% | 1,668 |
| | | | | |
| Total revenues | 109,017 | 83,122 | 31% | 387,411 |
| | | | | |
| Cost of goods sold | 61,142 | 48,008 | 27% | 230,721 |
| Operating expenses | 8,318 | 7,197 | 16% | 30,243 |
| Selling, general and administrative expenses | 2,123 | 1,434 | 48% | 7,189 |
| Depreciation, depletion and amortisation | 5,391 | 4,471 | 21% | 20,962 |
| Exploration expenses | 1,066 | 524 | 103% | 3,253 |
| | | | | |
| Total expenses before financial items | 78,040 | 61,634 | 27% | 292,368 |
| | | | | |
| Income before financial items, income taxes and minority interest | 30,977 | 21,488 | 44% | 95,043 |
| Net financial items | 1,633 | (1,731) | 194% | (3,512) |
| | | | | |
| Income before income taxes and minority interest | 32,610 | 19,757 | 65% | 91,531 |
| Income taxes | (22,213) | (12,834) | 73% | (60,036) |
| Minority interest | (134) | (150) | (11%) | (765) |
| | | | | |
| Net income | 10,263 | 6,773 | 52% | 30,730 |
| | | | | |
| | | | | |
| | ||||
| First quarter | Full year | |||
| Income before financial items, income taxes and minority | 2006 | 2005 | 2005 | |
| interest for the segments (in millions) | NOK | NOK | Change | NOK |
| | | | | |
| E&P Norway | 23,250 | 16,472 | 41% | 74,132 |
| International E&P | 3,518 | 1,627 | 116% | 8,364 |
| Natural Gas | 3,355 | 1,555 | 116% | 5,901 |
| Manufacturing & Marketing | 1,227 | 1,937 | (37%) | 7,593 |
| Other | (373) | (103) | (262%) | (947) |
| | | | | |
| Income before financial items, income taxes and minority interest | 30,977 | 21,488 | 44% | 95,043 |
| | | | | |
| Financial data | ||||
| | | | | |
| | ||||
| First quarter | Full year | |||
| 2006 | 2005 | 2005 | ||
| NOK | NOK | Change | NOK | |
| | | | | |
| Weighted average number of ordinary shares outstanding | 2,165,317,480 | 2,166,032,462 | 2,165,740,054 | |
| Earnings per share | 4.74 | 3.13 | 52% | 14.19 |
| ROACE (last 12 months)* | 29.5% | 24.6% | 27.6% | |
| ROACE (last 12 months normalised)* | 10.7% | 12.4% | 11.7% | |
| Cash flows provided by operating activities (billion) | 18.4 | 18.5 | 0% | 56.3 |
| Gross investments (billion) | 9.6 | 6.8 | 41% | 46.2 |
| Net debt to capital employed ratio | 6.2% | 14.8% | 15.1% | |
| | | | | |
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| Operational data | ||||
| | | | | |
| | ||||
| First quarter | Full year | |||
| 2006 | 2005 | Change | 2005 | |
| | | | | |
| Average oil price (USD/bbl) | 60.9 | 46.6 | 31% | 53.6 |
| NOK/USD average daily exchange rate | 6.67 | 6.28 | 6% | 6.45 |
| Average oil price (NOK/bbl)* | 406 | 293 | 39% | 345 |
| Gas prices (NOK/scm) | 2.02 | 1.32 | 53% | 1.45 |
| Refining margin, FCC (USD/boe)* | 5.8 | 5.0 | 16% | 7.9 |
| Total oil and gas production (1,000 boe/day)* | 1,237 | 1,189 | 4% | 1,169 |
| Total oil and gas liftings (1,000 boe/day)* | 1,232 | 1,189 | 4% | 1,166 |
| Production (lifting) cost (NOK/boe, last 12 months) | 22.9 | 22.6 | 1% | 22.2 |
| Production (lifting) cost normalised (NOK/boe, last 12 months)* | 23.0 | 22.7 | 1% | 22.3 |
| | ||||
Higher oil and gas production
Total oil and gas production in the first quarter of 2006 was 1,237,000 barrels of oil equivalent (boe) per day, compared to 1,189,000 boe per day in the first quarter of 2005, an increase of 4 percent. The increase in oil and gas production is mainly due to new fields coming on stream.
Statoil's oil and gas production target for 2007 is based on an oil price of 30 USD per barrel (bbl) in the period 2005-2007. At current oil prices (USD 60 per bbl), the group's estimated loss of entitlement production under production sharing agreements (PSA effects) for the first quarter of 2006 was approximately 15,000 barrels per day*.
Total oil and gas liftings in the first quarter of 2006 were 1,232,000 boe per day, compared to 1,189,000 boe per day in the same period of 2005. This implies a small underlift in the first quarter of 2006.
Increased exploration activity
Exploration expenditure in the first quarter of 2006 was NOK 1.7 billion, compared to NOK 0.7 billion in the first quarter of 2005. The increase in exploration expenditure was mainly due to an increase in the exploration activity and generally more expensive wells.
Exploration expenditure reflects the period's exploration activities. Exploration expenses for the period consist of exploration expenditure adjusted for the period's change in capitalised exploration expenditure. Exploration expenses in the first quarter of 2006 amounted to NOK 1.1 billion, compared to NOK 0.5 billion in the first quarter of 2005. The increase in exploration expenses of NOK 0.5 billion is mainly due to increased exploration expenditure.
| First quarter | Full year | |||
| Exploration | 2006 | 2005 | 2005 | |
| (in millions) | NOK | NOK | Change | NOK |
| | | | | |
| Exploration expenditure (activity) | 1,655 | 730 | 127% | 4,337 |
| Expensed, previously capitalised exploration expenditure | 74 | 26 | 185% | 158 |
| Capitalised share of current period's exploration activity | (663) | (232) | (186%) | (1,242) |
| | | | | |
| Exploration expenses | 1,066 | 524 | 103% | 3,253 |
| |
A total of six exploration and appraisal wells were completed in the first quarter of 2006, three on the Norwegian continental shelf (NCS) and three internationally. Of these wells, four resulted in discoveries. The number of exploration wells completed in the first quarter of 2005 was five. Two exploration extensions on the NCS were also completed in the first quarter of 2006, of which one exploration extension resulted in a discovery.
Production cost per boe was NOK 22.9 for the 12 months ended 31 March 2006, compared to NOK 22.6 for the 12 months ended 31 March 2005*.
Normalised at a NOK/USD exchange rate of 6.75 and adjusted for the estimated volume reduction due to PSA effects, the production cost for the 12 months ended 31 March 2006 was NOK 23.0 per boe, compared to NOK 22.7 per boe for the 12 months ended 31 March 2005*.
Our 2007 target for production cost per boe is based on an oil price of 30 USD per bbl in the period 2005-2007. At current oil prices (USD 60 per bbl), the PSA effect on production unit cost for the first quarter of 2006 was approximately NOK 0.1*.
The production unit cost, both actual and normalised, has increased slightly, mainly due to a relatively higher international production, which on average has a higher production cost per boe than our production at the NCS.
Net financial items amounted to an income of NOK 1.6 billion in the first quarter of 2006 compared to an expense of NOK 1.7 billion in the first quarter of 2005.
The increase was mainly caused by currency gains, due to a strengthening of the NOK in relation to the USD in the first quarter of 2006, compared to currency losses due to weakening of the NOK in relation to the USD in the first quarter of 2005. Most of the currency effects relate to Statoil's short-term NOK hedging policy and unrealised effects on long-term USD debt.
| Exchange rates | 31.03.2006 | 31.12.2005 | 31.03.2005 | 31.12.2004 |
| NOK/USD | 6.58 | 6.77 | 6.33 | 6.04 |
Income taxes in the first quarter of 2006 were NOK 22.2 billion, with a corresponding tax rate of 68.1 per cent. Income taxes in the first quarter of 2005 were NOK 12.8 billion, equivalent to a tax rate of 65.0 per cent.
The tax rate increased in the first quarter of 2006 compared with the first quarter of 2005, mainly due to relatively lower effect of income generated outside the Norwegian Continental Shelf (NCS) and uplift. The tax rate on the income generated on the NCS is generally higher than the tax rate on income generated in other tax regimes. The uplift reduces the basis on which the tax on the NCS is calculated, but at high income generated by high oil prices the relative effect of the uplift is reduced. The effect of these factors was somewhat offset by the positive impact from changes in net financial items.
Positive development of HSE indicators
The frequency of serious incidents was reduced in the first quarter of 2006 compared to the first quarter of 2005. Overall Statoil's HSE-indicators are on the same level as in the corresponding period in 2005.
"Our goal for health, safety and the environment is zero harm. We strive to achieve this through the safe behaviour programme, a large-scale safety training programme, and through cooperation with our suppliers and strong involvement by management. Only continuous and long-term efforts will bring us closer to our goal," says Mr Lund.
First quarter | Year | ||
| HSE | 2006 | 2005 | 2005 |
| Total recordable injury frequency | 5.6 | 5.4 | 5.1 |
| Serious incident frequency | 2.1 | 3.1 | 2.3 |
| Unintentional oil spills (number) | 78 | 97 | 534 |
| Unintentional oil spills (volume, scm) | 11 | 22 | 442 |
* See end notes in the complete quarterly report.
Important events
Recent important events include the following:
- Estimated recoverable reserves in the Statoil-operated Kvitebjørn field in the North Sea have been increased by 50 per cent compared to the estimate in the plan for development and operation (PDO).
- On 16 February the Norwegian Storting (Parliament) approved the plan for development and operation (PDO) of the Statoil-operated Tyrihans field in the Norwegian Sea.
- Statoil was awarded holdings in five licences and supplementary acreage, including three operatorships, in the 19th licensing round published 31 March. Four of the awards are in the Barents Sea and one in the Norwegian Sea.
- On 8 March Statoil signed an agreement to purchase BP's 25 per cent interest in licence 218 in blocks 6706/10 and 6706/12 in the Norwegian Sea, bringing its total equity share in the license up to 75 per cent. This acquisition includes the Luva gas find. Norwegian authorities have approved Statoil as the new operator for the licence.
- Statoil has signed participation agreements for exploration drilling on three new prospects in the Gulf of Mexico. The signing of these agreements was announced during the first quarter of 2006.
- A settlement has been reached with the Venezuelan state oil company PetrÛleos de Venezuela SA (PdVSA) for Statoil's 27 per cent share in the LL652 oil field in Lake Maracaibo. The agreement with PdVSA means that Statoil will no longer have a holding in this field. In 2005 Statoil's entitlement production from LL652 was 900 boe per day.
- On 31 January Statoil announced its decision to evaluate strategic options for its Irish downstream Retail and Commercial & Industrial business ("Statoil Ireland"), including a possible sale.
- In the first quarter Statoil and Shell launched a joint initiative to work towards developing the world's largest project using carbon dioxide (CO2) for enhanced oil recovery in the Halten-Nordland area on the NCS.
Further information from:
Investor relations
Lars Troen Sørensen, senior vice president investor relations,
+ 47 90 64 91 44 (mobile), +47 51 99 77 90 (office)
Press
Ola Morten Aanestad, vice president media relations,
+47 48 08 02 12 (mobile) +47 51 99 13 77 (office)
Financial statements and review - first quarter 2006
MD&A
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