The Statoil group had a net income of NOK 30.7 billion in 2005, compared to NOK 24.9 billion in 2004. Net income for the fourth quarter of 2005 was NOK 8.5 billion, compared to NOK 10.0 billion for the same period of 2004. The change in net income from the fourth quarter of 2004 to the fourth quarter of 2005 was influenced by:
• Higher oil and gas prices
• Higher oil and gas liftings
• A gain from the sale of the group’s shares in Borealis
• A write-down on phases 6-7-8 of the Iranian South Pars project
• Increased financial expenses due to currency effects
• Higher tax rate due to positive non-recurring tax effects in the fourth quarter of 2004
“Last year was a prosperous year for the group, with strong results underpinned by increased production and continued strict cost control, as well as high oil and gas prices,” says chief executive Helge Lund.
“During the year we sanctioned 17 new upstream projects, and we have secured a significant number of new production licences, in Norway and internationally, that will support our long-term growth ambitions. Another important achievement is that we have been able to more than replace our production in 2005 with new reserves.“
“In the fourth quarter, production started from the technologically-advanced Kristin field in the Norwegian Sea. In addition to contributing considerably to our Norwegian continental shelf production, this challenging high-temperature and high-pressure field development has broken new ground in technological terms. The Urd satellite near the Norwegian Norne field, and the West Azeri platform on Azerbaijan’s Azeri-Chirag-Gunashli field, also came on stream during this quarter, contributing to a continued growth in our oil and gas production.“
Return on average capital employed after tax (ROACE)* for the 12 months ended 31 December 2005 was 27.6 per cent, compared to 23.5 per cent for the 12 months ended 31 December 2004. This increase was mainly due to higher oil and gas prices and continued production growth. Normalised ROACE* for the 12 months ended 31 December 2005 was 11.7 per cent, compared to 12.4 per cent for the corresponding period in 2004. The reason for the change in normalised ROACE was mainly increased investments. ROACE and normalised ROACE are defined as non-GAAP financial measures*.
In 2005, earnings per share were NOK 14.19 (USD 2.10) compared to NOK 11.50 (USD 1.89) in 2004. In the fourth quarter of 2005, earnings per share were NOK 3.94 (USD 0.59) compared to NOK 4.64 (USD 0.76) in the fourth quarter of 2004.
Statoil’s board of directors will propose to the annual general meeting an ordinary dividend of NOK 3.60 per share for 2005, as well as NOK 4.60 per share in special dividend due to increased results from higher oil and gas prices. In 2004 the ordinary dividend was NOK 3.20 per share, while the special dividend amounted to NOK 2.10 per share.
Income before financial items, income taxes and minority interest in 2005 was NOK 95.1 billion compared to NOK 65.1 billion in 2004. The increase was mainly due to a 34 per cent increase in the average oil price measured in NOK, a 31 per cent increase in gas prices measured in NOK, a 7 per cent increase in oil and gas liftings, and a net increase of NOK 0.9 billion from sale of shares. In addition, increased margins and regularity from the refineries were the main contributors to the increase in results from the downstream business. The increase in cost items was mainly related to increased activity, both in the fourth quarter and for the year 2005, relative to the same periods in the year before. Insurance costs increased by NOK 0.1 billion in the fourth quarter of 2005 compared to the fourth quarter of 2004, and by NOK 0.4 billion for the year 2005 compared to 2004. The reason for this was increased insurance premium commitments in the two mutual insurance companies in which Statoil Forsikring participates, mainly due to the hurricanes Katrina and Rita.
Income before financial items, income taxes and minority interest increased from NOK 18.7 billion in the fourth quarter of 2004 to NOK 27.8 billion in the same period of 2005. This was mainly related to an increase in the average oil and gas prices measured in NOK of 38 per cent and 45 per cent respectively.
The write-down on the South Pars field in Iran in the fourth quarter of 2005 had a negative effect on income before financial items, income taxes and minority interes of NOK 2.2 billion (NOK 1.6 billion after tax). The sale of the group’s shares in the petrochemical company Borealis resulted in a tax-free capital gain of NOK 1.5 billion in the fourth quarter of 2005.
| Consolidated statements of income USGAAP | ||||||||
| US GAAP income |
Fourth quarter
|
Year ended 31 December
|
||||||
| statement |
2005
|
2004
|
2005
|
2005
|
2004
|
2005
|
||
| (in millions) |
NOK
|
NOK
|
Change
|
USD[1]
|
NOK
|
NOK
|
Change
|
USD
[1] |
| Sales |
107,604
|
85,092
|
26%
|
15,955
|
390,540
|
303,756
|
29%
|
57,906
|
| Equity in net income of affiliates |
103
|
501
|
(79%)
|
15
|
1,090
|
1,209
|
(10%)
|
162
|
| Other income |
1,592
|
242
|
558%
|
236
|
1,668
|
1,253
|
33%
|
247
|
| Total revenues |
109,299
|
85,835
|
27%
|
16,206
|
393,298
|
306,218
|
28%
|
58,315
|
| Cost of goods sold |
61,674
|
51,322
|
20%
|
9,144
|
235,722
|
188,179
|
25%
|
34,951
|
| Operating expenses |
8,666
|
7,472
|
16%
|
1,285
|
30,327
|
27,350
|
11%
|
4,497
|
| Selling, general and administrative expenses |
2,793
|
2,535
|
10%
|
414
|
7,803
|
6,298
|
24%
|
1,157
|
| Depreciation, depletion and amortisation |
7,625
|
5,171
|
47%
|
1,131
|
21,097
|
17,456
|
21%
|
3,128
|
| Exploration expenses |
738
|
589
|
25%
|
109
|
3,253
|
1,828
|
78%
|
482
|
| Total expenses before financial items |
81,496
|
67,089
|
21%
|
12,084
|
298,202
|
241,111
|
24%
|
44,215
|
| Income before financial items, income taxes and minority interest |
27,803
|
18,746
|
48%
|
4,122
|
95,096
|
65,107
|
46%
|
14,100
|
| Net financial items |
(1,498)
|
5,213
|
(129%)
|
(222)
|
(3,562)
|
5,739
|
(162%)
|
(528)
|
| Income before income taxes and minority interest |
26,305
|
23,959
|
10%
|
3,900
|
91,534
|
70,846
|
29%
|
13,572
|
| Income taxes |
(17,601)
|
(13,703)
|
28%
|
(2,610)
|
(60,039)
|
(45,425)
|
32%
|
(8,902)
|
| Minority interest |
(181)
|
(213)
|
(15%)
|
(27)
|
(765)
|
(505)
|
51%
|
(113)
|
| Net income |
8,523
|
10,043
|
(15%)
|
1,264
|
30,730
|
24,916
|
23%
|
4,556
|
| Income before financial items, income taxes and minority interest for |
Fourth quarter
|
Year ended 31 December
|
||||||
| the segments |
2005
|
2004
|
2005
|
2005
|
2004
|
2005
|
||
| (in million) |
NOK
|
NOK
|
Change
|
USD
[1] |
NOK
|
NOK
|
Change
|
USD
[1] |
| E&P Norway |
22,538
|
15,204
|
48%
|
3,342
|
74,132
|
51,029
|
45%
|
10,992
|
| International E&P |
826
|
1,051
|
(21%)
|
122
|
8,364
|
4,188
|
100%
|
1,240
|
| Natural Gas |
2,435
|
1,747
|
39%
|
361
|
5,901
|
6,784
|
(13%)
|
875
|
| Manufacturing & Marketing |
2,695
|
1,434
|
88%
|
400
|
7,646
|
3,921
|
95%
|
1,134
|
| Other |
(691)
|
(690)
|
0%
|
(102)
|
(947)
|
(815)
|
(16%)
|
(140)
|
| Income before financial items, income taxes and minority interest |
27,803
|
18,746
|
48%
|
4,122
|
95,096
|
65,107
|
46%
|
14,100
|
| [1] Solely for the convenience of the reader, the figures for the fourth quarter of 2005 have been translated into US dollars at the rate of NOK 6.7444 to USD 1.00, the Federal Reserve noon buying rate in the City of New York on 30 December 2005. | ||||||||
| Financial data | ||||||||
|
Fourth quarter
|
Year ended 31 December
|
|||||||
|
2005
|
2004
|
2005
|
2005
|
2004
|
2005
|
|||
|
NOK
|
NOK
|
Change
|
USD
[1] |
NOK
|
NOK
|
Change
|
USD
[1] |
|
| Weighted average number of ordinary shares outstanding |
2,165,464,649
|
2,166,139,433
|
2,165,740,054
|
2,166,142,636
|
||||
| Earnings per share |
3.94
|
4.64
|
(15%)
|
0.58
|
14.19
|
11.50
|
23%
|
2.10
|
| ROACE (last 12 months) |
27.6%
|
23.5%
|
27.6%
|
23.5%
|
||||
| ROACE (last 12 months normalised) |
11.7%
|
12.4%
|
11.7%
|
12.4%
|
||||
| Cash flows provided by operating activities (billion) |
0.0
|
(5.6)
|
n/a
|
0.0
|
56.3
|
38.8
|
45%
|
8.3
|
| Gross investments (billion) |
9.1
|
8.6
|
5%
|
1.3
|
46.2
|
42.8
|
8%
|
6.9
|
| Net debt to capital employed ratio |
15.3%
|
19.0%
|
15.3%
|
19.0%
|
||||
| Operational data | ||||||||
|
Fourth quarter
|
Year ended 31 December
|
|||||||
|
2005
|
2004
|
Change
|
2005
|
2004
|
Change
|
|||
| Average oil price (USD/bbl) |
57.3
|
43.6
|
31%
|
53.6
|
38.1
|
40%
|
||
| NOK/USD average daily exchange rate |
6.63
|
6.33
|
5%
|
6.45
|
6.74
|
(4%)
|
||
| Average oil price (NOK/bbl)* |
380
|
276
|
38%
|
345
|
257
|
34%
|
||
| Gas prices (NOK/scm) |
1.74
|
1.20
|
45%
|
1.45
|
1.10
|
31%
|
||
| Refining margin, FCC (USD/boe)* |
8.3
|
6.6
|
26%
|
7.9
|
6.4
|
23%
|
||
| Total oil and gas production (1,000 boe/day)* |
1,232
|
1,202
|
3%
|
1,169
|
1,106
|
6%
|
||
| Total oil liftings and sold natural gas volumes (1,000 boe/day)* |
1,252
|
1,172
|
7%
|
1,166
|
1,093
|
7%
|
||
| Reserve replacement rate (annual) |
102%
|
106%
|
(4%)
|
|||||
| Reserve replacement rate, 3-year average* |
102%
|
101%
|
1%
|
|||||
| Proved reserves (mboe) |
4,295
|
4,289
|
0%
|
|||||
| Production (lifting) cost (NOK/boe, last 12 months) |
22.2
|
23.3
|
(5%)
|
22.2
|
23.3
|
(5%)
|
||
| Production (lifting) cost normalised (NOK/boe, last 12 months)* |
22.3
|
23.3
|
(4%)
|
22.3
|
23.3
|
(4%)
|
||
Total oil and gas production in 2005 was 1,169,000 barrels of oil equivalent (boe) per day, compared to 1,106,000 boe per day in the same period in 2004. In the fourth quarter of 2005 total oil and gas production amounted to 1,232,000 boe per day, compared to 1,202,000 boe per day in the fourth quarter of 2004.
Total oil and gas liftings in 2005 were 1,166,000 boe per day compared to 1,093,000 boe per day in the corresponding period of 2004. This implies a small underlift in 2005, compared to an average underlifting of 12,000 boe per day in 2004.
In the fourth quarter of 2005 total oil and gas liftings were 1,252,000 boe per day compared to 1,172,000 boe per day in the fourth quarter of 2004. This implies an average overlifting of 20,000 boe per day in the fourth quarter of 2005 compared to an average underlifting of 30,000 boe per day in the fourth quarter of 2004.
Exploration expenditure in 2005 was NOK 4.3 billion, compared to NOK 2.5 billion in 2004. Exploration expenditure in the fourth quarter of 2005 amounted to NOK 1.1 billion, compared to NOK 0.8 billion in the fourth quarter of 2004. The increase in exploration expenditure was mainly due to an increase in the exploration activity in 2005 compared to 2004.
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 2005 amounted to NOK 3.3 billion, compared to NOK 1.8 billion in 2004. In the fourth quarter of 2005 exploration expenses amounted to NOK 0.7 billion, compared with NOK 0.6 billion in the fourth quarter of 2004.
The increase in exploration expenses of NOK 0.1 billion is mainly due to increased exploration expenditure.
|
Fourth quarter
|
Year ended 31 December
|
|||||||
| Exploration |
2005
|
2004
|
2005
|
2005
|
2004
|
2005
|
||
| (in millions) |
NOK
|
NOK
|
Change
|
USD
[1] |
NOK
|
NOK
|
Change
|
USD
[1] |
| Exploration expenditure (activity) |
1,093
|
779
|
40%
|
162
|
4,337
|
2,466
|
76%
|
643
|
| Expensed, previously capitalised | ||||||||
| exploration expenditure |
3
|
42
|
(93%)
|
0
|
158
|
110
|
44%
|
23
|
| Capitalised share of current | ||||||||
| period's exploration activity |
(358)
|
(232)
|
(54%)
|
(53)
|
(1,242)
|
(748)
|
(66%)
|
(184)
|
| Exploration expenses |
738
|
589
|
25%
|
109
|
3,253
|
1,828
|
78%
|
482
|
A total of 20 exploration and appraisal wells were completed in 2005, nine on the Norwegian continental shelf (NCS) and 11 internationally. Of these wells, 14 resulted in discoveries, while one well awaits final evaluation. The number of exploration wells completed in 2004 was 12.
In the fourth quarter of 2005, a total of four exploration and appraisal wells were completed, all of them internationally. Two wells resulted in discoveries, while one well awaits final evaluation. Five exploration wells were completed in the fourth quarter of 2004.
Proved reserves at the end of 2005 were 4,295 million boe, compared to 4,289 million boe at the end of 2004, an increase of 7 million boe. In 2005, 453 million boe were added, mostly through revisions, extensions and discoveries, compared to 455 million boe in 2004. About half of the added reserves in 2004 came from purchases of proved reserves. Production in 2005 was 427 million boe compared to 402 million boe in 2004.
The reserve replacement ratio* was 102 per cent in 2005, compared to 106 per cent in 2004, while the average three-year replacement ratio was 102 per cent in 2005, compared to 101 per cent in 2004.
Production cost per boe was NOK 22.2 for the 12 months ended 31 December 2005, compared to NOK 23.3 for the 12 months ended 31 December 2004*.
Normalised at a NOK/USD exchange rate of 6.75, the production cost for the 12 months ended 31 December 2005 was NOK 22.3 per boe, compared to NOK 23.3 per boe for the 12 months ended 31 December 2004*. The reason for the reduction in production unit cost, both actual and normalised, is mainly a continued focus on cost control, as well as increased lifting of oil and gas.
Net financial items amounted to an expense of NOK 3.6 billion in 2005 compared to an income of NOK 5.7 billion in 2004. In the fourth quarter of 2005 net financial items were an expense of NOK 1.5 billion, compared to an income of NOK 5.2 billion in the fourth quarter of 2004.
The increased cost in 2005 was mainly caused by increased currency losses, due to a weakening of the NOK in relation to the USD in 2005. Most of the currency losses relate to Statoil’s short-term NOK hedging policy and unrealised losses on long-term USD debt. The increased cost was partly offset by increased dividends received and increased income from investments in securities.
| Exchange rates |
31.12.2005
|
30.09.2005
|
31.12.2004
|
30.09.2004
|
31.12.2003
|
| NOK/USD |
6.77
|
6.54
|
6.04
|
6.72
|
6.68
|
Income taxes in 2005 were NOK 60.0 billion, with a corresponding tax rate of 65.6 per cent. Adjusted for the effect of the tax-free capital gain on the sale of shares in Borealis, the tax rate was 66.7 per cent.
Income taxes in 2004 were NOK 45.4 billion with a corresponding tax rate of 64.1 per cent. Adjusted for the positive effects of changes in the tax legislation introducing the exemption method reducing the deferred tax liabilities related to retained earnings, and with the acceptance of Statoil’s method of allocating office costs against revenue from the NCS, the tax rate was 66.7 per cent.
The adjusted tax rate in 2005 was unchanged compared with 2004. The tax rate was reduced due to somewhat higher income generated outside the NCS but the reduction was offset by the reduced impact of financial items and the relative effect of uplift.
In the fourth quarter of 2005 income taxes were NOK 17.6 billion, equivalent to a tax rate of 66.9 per cent. Income taxes in the fourth quarter of 2004 were NOK 13.7 billion, equivalent to a tax rate of 57.2 per cent. Adjusted for the special tax effects described above, the tax rate for the fourth quarter of 2005 was 71.0 per cent, compared to 64.7 per cent in the fourth quarter of 2004. The adjusted tax rate was increased in the fourth quarter of 2005 compared with the fourth quarter of 2004 mainly due to the reduced impact of financial items. This was partly offset by higher income outside the NCS and the relative effect of uplift.
Health, safety and the environment (HSE). In 2005 two contractor employees lost their lives while working for Statoil. On 31 January 2005, a fatal accident occurred on the Kristin platform at Aker Stord when a contractor employee was caught in a hydraulic door. On 2 October 2005 a fatality occured 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. Both accidents have been investigated and improvement measures have been implemented.
Overall, Statoil’s safety indicators have shown a positive development during both the fourth quarter and the year 2005, compared with the same periods in 2004. The safety indicators have never been better and there is a considerable reduction in serious injuries and other serious incidents in 2005 compared with 2004. However, oil spills increased in 2005 compared to 2004, mainly due to a sizeable spill of 340 cubic metres on the Norne field in the Norwegian Sea on
23 November.
Our objective for HSE is zero harm. Sustained top management involvement, measures for upgrading skills, and cooperation with our contractors to further improve HSE results will continue with undiminished strength.
|
Fourth quarter
|
Year ended 31 December
|
|||
| HSE |
2005
|
2004
|
2005
|
2004
|
| Total recordable injury frequency |
5.3
|
5.4
|
5.1
|
5.9
|
| Serious incident frequency |
1.8
|
3.2
|
2.3
|
3.2
|
| Unintentional oil spills (number) |
144
|
115
|
534
|
487
|
| Unintentional oil spills (volume, scm) |
350
|
27
|
442
|
186
|
* See end notes in the complete quarterly report.
PSA effects
High oil prices contribute to considerably higher earnings and profitability in international projects with production sharing agreements (PSA) than was anticipated in 2004, when Statoil set its targets for 2007.
This means that these projects, earlier than assumed, move from a phase where earnings cover development costs to a phase where profits are generated. In PSA contracts, the higher the oil price as soon as the field is profitable, the smaller the share of production that goes to the partners. The concrete effect varies between different agreements and countries.
If today’s price level (USD 60 per barrel) is maintained throughout 2006, Statoil’s production in 2006 is expected to be about 1,200,000 boe per day. With the oil price assumption for 2004, production would be about 25,000 boe per day higher. The production target for 2007 of 1,400,000 boe per day stands firm. This target is based on an average oil price of about USD 30 per barrel in the period 2005-07 which is in line with the original assumption from 2004. If the oil price remains at today’s level throughout the whole of 2006 and 2007, the PSA effect in 2007 will be in the order of 50,000 to 60,000 boe per day. Statoil will therefore make adjustments for PSA effects when reporting on production and production unit costs up to 2007.
The PSA effect, and in part increased exploration activity and higher investments, are factors which are related to a high oil price. These will have a negative effect on the ROACE, while the effect of a high oil price will become normalised. It is therefore probable that, given the assumptions for normalisation which were set in 2004, the normalised ROACE in 2007 will under-shoot the target of 13 per cent.
Important events since the beginning of the fourth quarter of 2005 are summarised below.
- Production from the Kristin gas and condensate field in the Norwegian Sea started on 3 November, while the Urd field in the Norne area came on stream on 8 November.
- Ten operatorships as well as holdings in six production licences were allocated to Statoil in the annual round of awards in predefined areas (APA) for 2005 on the NCS.
- In November 2005, construction work began on the floating platform which will produce oil from the Tahiti field in the Gulf of Mexico, where Statoil has a 25 per cent holding.
- On 30 December, oil production commenced from the West Azeri platform on Azerbaijan’s Azeri-Chirag-Gunashli (ACG) field in the Caspian Sea, where Statoil has an 8.56 per cent interest.
- Due to considerable cost increases and delays in the development of phases 6-7-8 in the Iranian South Pars gas project, Statoil has written down the book value of its investment in the project by NOK 2.2 billion before tax (USD 329 million), corresponding to NOK 1.6 billion (USD 237 million) after tax.
- Statoil concluded a 10-year agreement with the gas and electricity supplier Scottish Power in the UK to deliver 500 million cubic metres of gas each year for Statoil and the Norwegian State’s Direct Financial Interest (SDFI), commencing in October 2007. A six-year extension of the gas sales contract between Germany’s Verbundnetz Gas (VNG) and Statoil, corresponding to total additional deliveries of 12 billion cubic metres up to 2022 for Statoil and SDFI, was also concluded.
- Statoil and its partners in the Etzel gas storage facility in northern Germany reached agreement with IVG, the owner and technical operator, on extending the lease for existing gas storage and also expanding capacity.
- On 30 January 2006, Statoil sold its 30 per cent interest in the Ringsend gas power plant in Dublin, Ireland to Royal Bank of Scotland (RBS) Power Investments.
- The sale of the group’s shares in Borealis was finalised on 13 October 2005. Statoil received EUR 1 billion (NOK 7.8 billion) for the shares, which resulted in a tax-free capital gain of NOK 1.5 billion in the fourth quarter.
Further information from:
Investor relations
Lars Troen Sørensen, senior vice president investor relations,
+ 47 90 64 91 44 (mobil), +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 - fourth quarter 2005
MD&A
Presentation set
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