Growing our business (vedlegg)

May 30, 2007, 09:00 CEST

Statoil’s net income in the first quarter of 2007 amounted to NOK 7.8 billion, compared to NOK 10.8 billion in the first quarter of 2006.

Financial statements and review - first quarter 2007
MD&A
Presentation (PDF file, 6 Mb)
Webcast was held at 13.30 CET, no longer available


Statoil’s net income in the first quarter of 2007 amounted to NOK 7.8 billion, compared to NOK 10.8 billion in the first quarter of 2006.

The 27% decrease in net income from the first quarter of 2006 to the first quarter of 2007 was mainly due to an 11% decrease in the average realised oil price and a 14% decrease in gas prices, both measured in NOK.

“We are delivering strong results despite lower oil- and gas prices,” says Statoil’s chief executive officer Helge Lund.

”We are facing some technical challenges, mainly related to the pioneering high temperature and high pressure fields Kvitebjørn and Kristin. While addressing these short term challenges, we are continuing to build positions for future growth.”

“Statoil has made an important strategic move internationally with an offer to acquire all shares of North American Oil Sands Corporation in Canada. This transaction will strengthen the group’s North America position with a substantial operatorship and a large, long-term resource base. In addition, Statoil has secured new exploration acreage in Indonesia and Tanzania,” says Mr Lund.

The CEO also expresses satisfaction with the progress achieved in the planned merger between Statoil and Norsk Hydro’s oil and gas activities.

“The merger process is on track. In May the merger was cleared by the European Commission. Recently, the merger was also decleared effective by the US Securities and Exchange Commission.” Mr Lund notes.




Return on average capital employed after tax (ROACE) (*) for the 12 months ended 31 March 2007 was 24.3%, compared to 26.4% for the 12 months ended 31 December 2006. The decrease was mainly due to lower oil and gas prices. ROACE is defined as a non-GAAP financial measure (*).

In the first quarter of 2007, earnings per share were NOK 3.58 (USD 0.59) compared to NOK 4.92 (USD 0.75) in the first quarter of 2006.

Net operating income in the first quarter of 2007 was NOK 23.8 billion compared to NOK 33.0 billion in the first quarter of 2006. The decrease was mainly due to an 11% decrease in the average oil price measured in NOK, negative changes in fair value of derivatives amounting to NOK 2.7 billion, higher operating expenses of NOK 1.4 billion, mainly due to increased operating facility cost and higher activity in International E&P, and reduced results from Manufacturing & Marketing mainly due to deferred gains on inventories amounting to NOK 0.8 billion. The decrease in net operating income was partly offset by an increase in lifted volumes, contributing positively with NOK 0.9 billion and a decrease in selling, general and administrative expenses of NOK 0.8 billion. The first quarter of 2006 included infrequent insurance premiums and accruals related to liabilities in the two mutual insurance companies in which Statoil Forsikring participates.

Consolidated statements of income - IFRS
First quarter
Full year
Consolidated statements of income - IFRS
(in millions)
2007
NOK
2006
NOK
Change
2006
NOK
 
Revenues and other income
Revenues
100,170
111,732
(10%)
431,757
Net income/(loss) from equity accounted investments
244
87
180%
408
Other income
85
533
(84%)
1,801
 
Total revenues and other income
100,499
112,352
(11%)
433,966
 
Operating expenses
Cost of goods sold
58,984
62,450
(6%)
245,492
Operating expenses
9,526
8,088
18%
33,653
Selling, general and administrative expenses
1,587
2,338
(32%)
8,486
Depreciation, amortisation and impairment
5,438
5,418
0%
21,714
Exploration expenses
1,177
1,066
10%
5,664
 
Total operating expenses
76,712
79,360
(3%)
315,009
 
Net operating income
23,787
32,992
(28%)
118,957
 
Financial items
Net foreign exchange gains and losses
1,571
1 547
2%
3,285
Interest income and other financial items
281
454
(38%)
2,882
Interest and other finance expenses
(849)
(649)
(31%)
(2,370)
 
Net financial items
1,003
1,352
(26%)
3,797
 
Income before tax
24,790
34,344
(28%)
122,754
 
Income tax
(16,956)
(23,565)
(28%)
(81,889)
 
Net income
7,834
10,779
(27%)
40,865
 
Attributable to:
Equity holders of the company
7,680
10,643
(28%)
40,135
Minority interest
154
136
13%
730
7,834
10,779
(27%)
40,865
 
First quarter
Full year
Net operating income for the segments (in millions)
2007
NOK
2006
NOK
Change
2006
NOK
 
E&P Norway
20,760
24,934
(17%)
89,910
International E&P
3,481
3,677
(5%)
10,757
Natural Gas
(33)
3,806
(101%)
12,003
Manufacturing & Marketing
1,139
1,558
(27%)
6,569
Other
(173)
(402)
57%
(597)
Eliminations of internal unrealised profit on inventories
(1,387)
(581)
n/a
315
 
Financial data
First quarter
Full year
2007
NOK
2006
NOK
Change
2006
NOK
 
Weighted average number of ordinary shares outstanding
2,144,883,282
2,165,317,480
2,161,028,202
Earnings per share
3.58
4.92
(27%)
18.57
ROACE (last 12 months)
24.3%
n/a
26.4%
Cash flows provided by operating activities (billion)
25.2
18.4
37%
60.6
Gross investments (billion)
13.8
9.6
44%
46.2
Net debt to capital employed ratio
12.5%
5.7%
16.3%
 
Operational data
First quarter
Full year
2007
2006
Change
2006
 
Average oil price (USD/bbl)
57.6
60.9
(5%)
64.4
USDNOK average daily exchange rate
6.23
6.67
(7%)
6.42
Average oil price (NOK/bbl) [*]
359
406
(11%)
413
Gas prices (NOK/scm)
1.74
2.02
(14%)
1.91
Refining margin, FCC (USD/boe) [*]
6.8
5.8
17%
7.1
Total oil prodction (1,000 boe/day)
682
713
(4%)
670
Total gas production (1,000 boe/day)
517
524
(1%)
465
Total oil and gas production (1,000 boe/day) [*]
1,199
1,237
(3%)
1,135
Total oil liftings (1,000 boe/day)
736
708
4%
668
Total gas liftings (1,000 boe/day)
517
524
(1%)
465
Total oil and gas liftings (1,000 boe/day) [*]
1,253
1,232
2%
1,133
Production cost (NOK/boe, last 12 months) [*]
28.4
n/a
n/a
27.4
Production cost normalised (NOK/boe, last 12 months) [*]
27.9
n/a
n/a
26.2


Total oil and gas production in the first quarter of 2007 was 1,199,000 barrels of oil equivalents (boe) per day, compared to 1,237,000 boe per day in the first quarter of 2006, a decrease of 3%. The decrease in oil and gas production was mainly related to lower production at the Kvitebjørn and Gullfaks fields. This was partly offset by increased production on the Visund and Kristin fields. The decrease in oil and gas production from the Norwegian continental shelf (NCS) was partly offset by increased production from International E&P.

Total oil and gas liftings in the first quarter of 2007 were 1,253,000 boe per day, compared to 1,232,000 boe per day in the same period of 2006. This implies an increase of 2%. In the first quarter of 2007 there was an overlift of 54,000 boe per day, compared to a marginal underlift in the same period last year.

Exploration expenditure in the first quarter of 2007 was NOK 1.9 billion, compared to NOK 1.7 billion in the first quarter of 2006. The increase in exploration expenditure was mainly due to an increase in the number of wells drilled. Exploration expenditure reflects the period’s total 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 2007 amounted to NOK 1.2 billion, compared to NOK 1.1 billion in the first quarter of 2006. The increase in exploration expenses of NOK 0.1 billion was mainly due to increased exploration expenditure in the first quarter of 2007, partly offset by an increase in capitalised share of the current period’s exploration activity.

First quarter
Full year
Exploration
(in millions)
2007
NOK
2006
NOK
Change
2006
NOK
 
Exploration expenditure (activity)
1,869
1,655
13%
7,451
Expensed, previously capitalised exploration expenditure
199
74
169%
667
Capitalised share of current period’s exploration activity
(891)
(663)
(34%)
(2,454)
 
Exploration expenses
1,177
1,066
10%
5,664


A total of 13 exploration and appraisal wells were completed in the first quarter of 2007, six on the NCS and seven internationally. Six wells resulted in discoveries, while four wells await final evaluation. Six exploration wells were completed in the first quarter of 2006.

Production cost per boe was NOK 28.4 for the 12 months ended 31 March 2007, compared to NOK 27.4 for the 12 months ended 31 December 2006 (*).

Normalised at a USDNOK exchange rate of 6.00 and adjusted for the estimated volume reduction due to production sharing agreement (PSA) effects, the production cost for the 12 months ended 31 March 2007 was NOK 27.9 per boe, compared to NOK 26.2 per boe for the 12 months ended 31 December 2006 (*). Based on realised oil and gas prices, the estimated PSA effect on the production unit cost for the twelve months ended 31 March 2007 was NOK 0.1 per boe. Normalised production cost is defined as a non-GAAP financial measure (*).

The production unit cost, both actual and normalised, have increased, mainly due to a relatively higher international production, which on average has a higher production cost per boe than our production on the NCS, and increasing industry cost pressure.

Net financial items amounted to an income of NOK 1.0 billion in the first quarter of 2007 compared to an income of NOK 1.4 billion in the first quarter of 2006. The decrease was mainly caused by reduced gains on securities in the first quarter of 2007, compared to the first quarter of 2006.

Exchange rates
31.03.2007
31.12.2006
31.03.2006
31.12.2005
 
USDNOK
6.10
6.26
6.58
6.77


Income taxes in the first quarter of 2007 were NOK 17.0 billion, with a corresponding tax rate of 68.4%. Income taxes in the first quarter of 2006 were NOK 23.6 billion, equivalent to a tax rate of 68.6%.

The tax rate was somewhat reduced in the first quarter of 2007 compared with the first quarter of 2006. This was mainly due to a relatively higher impact from the uplift tax deduction on the NCS and net financial items, which are taxed at a lower rate than income from the NCS. On the other hand, these factors were mostly offset by lower effect of income generated outside the NCS.

Health, safety and the environment (HSE)
The frequency of serious incidents in the first quarter of 2007 is on par with the same quarter last year, while total recordable injury frequency has improved slightly.

First quarter
Year
HSE
2007
2006
2006
 
Total recordable injury frequency
4.7
5.6
5.7
Serious incident frequency
2.2
2.2
2.1
Unintentional oil spills (number)
69
81
292
Unintentional oil spills (volume, scm)
26
11
157


A sailor died 27 May following an accident on liquefied petroleum gas carrier Goowood as the vessel was preparing to enter the Port of Mongstad north of Bergen. Another sailor was seriously injured in the accident. The Singapore-registered carrier is on charter with Statoil.

Implementation of International Financial Reporting Standards (IFRS)
Statoil has adopted International Financial Reporting Standards (IFRS) as its primary accounting principles as from 1 January 2007. Statoil’s first quarter 2007 interim consolidated financial statements have been prepared in accordance with IFRS. Comparative financial statements for previous periods presented have also been prepared in accordance with IFRS.

IFRS requires that an entity develop accounting policies based on the standards and related interpretations effective at the reporting date of its first annual IFRS financial statements (e.g., 31 December 2007). IFRS also requires that those policies will be applied as of the date of transition to IFRS (e.g., 1 January 2006) and throughout all periods presented in the first IFRS financial statements. As a result, the accounting policies used to prepare these financial statements are subject to change up to the reporting date of Statoil’s first IFRS financial statements.

New production guiding
Statoil ASA provided at 10 May 2007 a forecast for oil and gas production in 2007 at 1,150,000-1,200,000 boe per day based on an oil price of USD 60 per barrel. Previously, the target was 1,300,000 boe per day.

The shortfall is largely due to delayed ramp up of new fields and delays in projects and activities. As a direct consequence of reduced production, production cost per boe is expected to increase to above NOK 30 per boe for 2007.

* See end notes in the complete quarterly report.


Recent important events include the following:

  • On 27 April 2007, Statoil announced that it had entered into an acquisition agreement whereby Statoil will make an all-cash offer to acquire all shares of North American Oil Sands Corporation (NAOSC). The total transaction value is approximately CAD 2.2 billion, equivalent to about USD 2.0 billion.
  • On 18 April 2007, Statoil signed a PSA for deep water Block 2 off Tanzania in the Indian Ocean. This is the first time Statoil has been awarded exploration acreage in Tanzania.
  • The 14th oil find in deepwater block 31 off Angola has been made, according to operator BP and the Angolan state oil company, Sonangol. Statoil has a 13.33% share in the block.
  • On 2 March 2007, Statoil and Pertamina (Persero) were awarded the Karama deepwater block in the Makassar Strait in Indonesia.
  • On 1 May 2007, the control of operation of the Sincor project in Venezuela was transferred to the state-owned company PDVSA.
  • Statoil, as operator, together with its partners in the Kvitebjørn field in the North Sea, has decided to temporarily cease gas and oil production. The field was shut down on 1 May 2007. It is expected that production will resume during the fourth quarter of 2007.
  • The plan for development and operation (PDO) of the Alve gas and condensate field in the Norwegian Sea received government approval on 16 March 2007.
  • On 29 May 2007, Statoil, as operator, announced that a promising oil discovery has been made in the Ermintrude prospect on the NCS.
  • On 3 May 2007, Statoil and Hydro received clearance from the European Commission for the announced merger between Norsk Hydro ASA’s petroleum activities and Statoil ASA.
  • On 25 May 2007, the prospectus relating to the planned merger of Norsk Hydro’s petroleum business with Statoil, was declared effective by the US Securities and Exchange Commission (SEC).


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)

Geir Bjørnstad, vice president, US investor relations
+ 1 203 978 6950

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 2007
MD&A
Presentation (PDF file, 89 pages)