Statoil Records Loss; Energy Prices Impact Profits

Shares fall as much as 2.5 percent; takes impairment on Canada, Angola, U.S.

Norway's Statoil (STO) reported an unexpected third-quarter net loss on Wednesday, weighed down by impairments, and said its underlying profit fell by a quarter on low oil and gas prices.

State-controlled Statoil said it took $2 billion worth of charges on a halted Canadian oil sands project and exploration assets in the United States and Angola, while its underlying operations were hurt by a 21 percent drop in gas prices and a plunge in oil price.

Still, the firm said it was maintaining its dividend and targets for both spending and production as its operations were in line with its own forecasts and the one-off charges, taken just weeks after the resignation of its chief executive, do not affect its overall course.

Oil majors around the globe have cut back on spending plans this year and a 25 percent fall in oil prices since June is expected to accelerate cutbacks with firms abandoning expensive future projects and postponing work on existing operations.

Statoil abandoned this year its long-term production targets and cut back capital spending plans, arguing it needed to return more cash to shareholders and had to become more selective about its investments after a decade-long spending boom.

Its shares fell as much as 2.5 percent in early trade, underperforming a 0.5 percent rise in the European oil and gas index.

Analysts said consensus forecasts could drop on weak oil and gas prices but the impairment charges do not change the fundamental operations, which still performed broadly in line with expectations in the quarter.

UNCONCERNED

"There were some higher costs especially in the international business where the start up of new projects can typically lead to some lumpy costs for a quarter or two as production ramps up," brokerage Bernstein said in a note.

"Hence we are unconcerned about this; Otherwise, all is going to plan."

Statoil's realised oil price fell by 8 percent and its European gas price dropped by a fifth, forcing the firm to defer some production, awaiting an improved market.

"We had expected an oil price drop but it's gone more quickly than we had believed it would," acting chief executive Eldar Saetre said. "The current oil price is another reminder to continue to improve our operations and cost level."

For the quarter, Statoil reported a net loss of 4.8 billion crowns ($726 million) against a 13.7 billion crown profit a year ago and well below expectations for a 9.5 billion crown net profit. Its adjusted operating profit of 30.9 billion was in line with forecasts.

Analysts said market reaction was relatively muted for an unexpected loss because the firm had taken decisive measures to cut costs through asset sales in places like Norway and Azerbaijan, project delays, layoffs and renegotiated contracts.

"Over the past months, Statoil has carried out a number of strategic moves which demonstrates that the company puts its money where its mouth is," Swedbank analysts Teodor Sveen-Nilsen said.

"We believe the company's cost cutting and capital discipline strategy is credible and will yield results over the next quarters," Sveen-Nilsen added.

But the firm's outlook will remain clouded over the coming months as it searches for a new chief executive after the unexpected departure of Helge Lund this month to take the reins at BG Group (BRGXF).

Reporting by Balazs Koranyi