Statoil ASA has responded to weaker oil prices by reducing its capital spending for 2015 by 10 percent, the Norwegian oil and gas major revealed as it announced its results Friday. However, analysts who follow the company are concerned that Statoil may be being overly optimistic about its outlook.
Statoil said it was reducing its organic capital expenditure from $20 billion to $18 billion this year. But in a research note, investment bank Jefferies said: “In our view, the outlook could disappoint with planned capital spending in 2015 only expected to reduce circa 10 percent year-on-year to $18 billion. Thus far [international oil companies] have signaled year-on-year cuts of circa 19 percent.”
Statoil’s revenue for 2014 was 4-percent lower than that for the previous year at NOK 607.1 billion ($78.9 billion). The firm’s adjusted profit for the year was smaller by 17 percent at NOK 136.1 billion ($17.7 billion).
During the fourth quarter of 2014, adjusted profit was down 36 percent on the previous year at NOK 26.9 billion ($3.5 billion).
“Statoil’s quarterly earnings were affected by the sharp drop in oil prices,” Statoil President and CEO Eldar Sætre said in a company statement.
“Our net income was also impacted by specific accounting charges. Underlying performance and cash flows were solid in 2014, supported by profitable growth, strong operational improvements, and solid marketing and trading results. Our financial position is robust, and we maintain a stable dividend. Through our significant flexibility in our investment program we are well prepared for continuous market weakness and uncertainty.”
The firm’s net production during the fourth quarter of 2014 was 2,103 million barrels of oil equivalent per day (MMboepd) – up 8.1 percent from the 1,945 MMboepd that Statoil produced during 4Q 2013.
Statoil highlighted its “strong project execution” throughout 2014, with the Gudrum development and three fast-track projects coming on stream on the Norwegian Continental Shelf as well as production starting from its partner-operated Jack/St. Malo project in the U.S. Gulf of Mexico during the fourth quarter. The firm also noted that the coming on stream of the Valemon field in the North Sea earlier this month.
Statoil pointed out that it was among the leading explorers last year, with 540 million barrels of oil equivalent added to its resource base from exploration in 2014 and the firm achieving a reserve replacement ratio of 62 percent last year.
Looking ahead, Statoil said it expects to grow its organic production annually by around 2 percent between 2014 and 2016, and by 3 percent between 2016 and 2018.
“Based on our sanctioned portfolio of projects, we will continue to deliver high value production growth towards 2018. We maintain significant flexibility in our broad portfolio of operated assets, and we are prepared to use this flexibility to deliver on our priorities. Most of this flexibility will be maintained through 2015, however, Statoil will continue to invest in high quality assets, and plans to submit the Plan for Development and Operations (PDO) for Johan Sverdrup in February 2015,” Sætre added.