Statoil’s results for the second quarter of 2014 revealed adjusted earnings were lower than expected, but the net profit was better than anticipated. Chief Executive Helge Lund said the potential for more political and economic sanctions against Russia posed a challenged for Norway’s biggest company, and he also confirmed Statoil had taken steps to protect itself in light of the new terror threat against Norway.
The majority state-owned oil giant reported adjusted operating earnings of NOK 32.3 billion (USD 5.2 billion), lower than the NOK 36.45 billion expected by analysts, reported newspaper Dagens Næringsliv (DN). For the same quarter last year, the company recorded NOK 38 billion. However, the net profit was NOK 12 billion, when NOK 11.45 was expected. In the second quarter of 2013, the net profit was NOK 4.3 billion.
Statoil produced 1.799 million barrels of oil equivalent in the quarter, down from the expected production of 1.821 million and down 9 percent compared to the same quarter last year.
“Statoil delivered solid operational performance in the quarter, with continued high production regularity on the Norwegian continental shelf and project execution according to plan,” Lund said in a statement on Thursday. “We have deferred gas production to enhance value, but remain on track for delivering on our production guiding for 2014.” Exploration expenditure was down NOK 1.4 billion on the second quarter of 2013 to NOK 2.7 billion this year.
“Our quarterly earnings were impacted by divestments, seasonal effects and lower gas prices. For the first half of the year, earnings were around the same level as in the same period last year,” he said. A dividend of NOK 1.80 per share would be paid this quarter.
The company said it had “good cost control,” had cut 1,000 positions and had further potential to reduce the workforce by up to 1,400 positions.
Sanctions and security
Lund said Statoil was working to understand the implications EU and US sanctions against Russia would have for its dealings with Russian oil company Rosneft. The EU has implemented phases one and two of the sanctions regime agreed upon at a summit during spring, and is preparing to increase sanctions. The US adopted new enhanced sanctions against Russia 10 days ago in response to the escalating unrest in Ukraine.
“So far we have managed to handle this situation well, and we have managed to protect the operational development of the partnership,” Lund said. “We are now trying to understand what the sanctions from the US mean and what implications that will have on us. We hope to find other solutions than sanctions. It takes decades to develop good relationships and find good projects.”
The chief executive also announced on Friday that Statoil had stepped up its security preparedness in response to a terror threat directed at Norway. “We are following the situation very closely,” Lund told news bureau NTB. “We are in close contact with the Norwegian authorities and are implementing the measures we believe are necessary, based on their threat assessments.”
It has been 18 months since Statoil was involved in the worst terror attack ever directed at a Norwegian company, when militants struck its joinly-owned gas plant at In Amenas in Algeria. Five Norwegian Statoil employees were among the 40 killed. Staff recently returned to the site for the first time.
“After the In Amenas events we have built up a strong security program which applies to all parts of the company,” Lund said. “In Amenas has meant that we have extra awareness of this type of problem.” He would not reveal specifically what was being done to protect Statoil’s onshore and offshore assets.