Statoil’s Surprise $1.9 Billion Q4 Loss

Norway’s Statoil (NYSE:STO) booked an unexpected net operating loss of US$1.897 billion for the fourth quarter, after taking US$2.3 billion net impairment charges mostly due to reduced long-term price assumptions.

The Norwegian oil major booked an adjusted loss after tax of US$40 million for the fourth quarter, down from adjusted earnings of US$185 million for the fourth quarter of 2015, and well below consensus estimates for US$614 million adjusted earnings after tax provided by Statoil itself.

Adjusted earnings came in at US$1.664 billion, down by 6 percent annually, chiefly due to expensed exploration wells and lower European gas prices.

The fourth quarter was the third consecutive quarter in which Statoil has posted losses, after an unexpected adjusted loss after tax of US$261 million for the third quarter, and a US$300-million loss for the second quarter of 2016.

The oil major continued to cut expenditure, with organic capital expenditure at US$10.1 billion in 2016, on the back of improvement program and strict capital discipline.

On the upside, Statoil’s 2016 production was slightly higher than in 2015, and cash flow did not drop much. Cash flow from operations after taxes stood at US$10.7 billion for 2016 compared to US$12.3 billion for the previous year.

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Another bright point in Statoil’s earnings release was the lowered average break even for planned start-up projects before 2022: to US$27/boe with an average internal rate of return (IRR) of 25 percent, assuming US$70/boe. As of the Q4 2015 results release, Statoil’s average break-even for the project portfolio was US$4 billion.

Looking ahead, Statoil will slightly raise investments, to around US$11 billion organically in 2017. The company also estimates its 2017 production would grow by 4-5 percent compared to rebased 2016 production. The oil major also sees organic annual production growth of around 3 percent between 2016 and 2020.

By Tsvetana Paraskova for Oilprice.com

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