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Charles Kennedy

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Statoil Posts $300M Loss In Q2, Blames Wavering Upstream Revenue

Statoil reported its second quarter figures on Wednesday, revealing a second-quarter loss that disappointed analysts’ expectations.

The Norwegian oil company lost just over $300 million on the quarter, meaning that Statoil has now posted a net loss in six out of the last eight quarters. Statoil’s debt ratio climbed from 28.1 percent at the end of the first quarter to 31.2 percent at the end of the second. The company previously said that it would want to avoid going above 30 percent, but now says that it can manage the situation. A year earlier Statoil’s debt ratio – also known as gearing – stood at just 22.4 percent.

“We are comfortable with a debt ratio well above 30% because we have a big toolbox, including significant flexibility in our investment portfolio,” said CEO Eldar Saetre. “We expect to be cash flow neutral at $60 a barrel in 2017 and $50 a barrel in 2018.”

Net operating income for the quarter stood at $180 million, compared to $3.6 billion in the second quarter of 2015.

The loss and the increase in debt prompted the company to slash capital expenditures. Statoil said that it will cut spending by 8 percent to $12 billion. That will allow it to avoid cuts to its dividend, which like most of the other oil majors, is a high priority. Related: Oil Tanks After EIA Reports 1.7M Barrel Crude Build

"We think it is very important to sustain our dividend," Statoil's Sætre told CNBC on Wednesday. "We see a cost reduction of 80 percent year-on-year.”

Just as BP saw earnings suffer from lower refining margins, so too did the Norwegian oil company. Explaining the slump in earnings this quarter, Statoil pointed to poor market conditions both upstream and downstream. “The reduction was primarily due to the drop in prices for oil and gas and lower refinery margins,” the company wrote in a statement. Refining margins have plunged in 2016 on a glut of refined products. Unfortunately for the oil majors, that was one of the few sources of strong revenues over the past two years, but downstream profits have soured across the industry more recently.

By Charles Kennedy of Oilprice.com

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