Øystein Løseth took over as the new leader of Statoil’s board of directors on Wednesday, and he’s no stranger to writedowns and cutting staff. His downsizing experience from his years at Swedish energy firm Vattenfall will likely come in handy as Statoil also goes through a major reduction program.
Løseth joined Statoil’s board two weeks before the company’s former CEO, Helge Lund, quit last fall. Then the price of oil fell by another 10 dollars a barrel and the cost-cutting that Lund had initiated took on a new urgency, not least because the value of investments in shale gas and and oil sands in North America (also initiated during Lund’s tenure) fell by half along with oil prices. It all led to Statoil logging a first-quarter loss, and the cost- and staff cuts have accelerated since as the price of oil remains relatively low.
“We have re-evaluated these values as too high and have chosen to write them down,” Løseth told newspaper Dagens Næringsliv (DN) this week. “Now we have a position in the US that’s good to work from. I choose to look forward. We have what we have.”
No deviation from stated strategy
Løseth came across in his interview with DN as being very careful in choosing his words or announcing any grand plans for Statoil. He was clearly well-briefed, has been on Statoil’s board for around eight months and wouldn’t say anything, according to DN, that wasn’t firmly anchored in the company’s agreed strategy.
“This is not the day for thinking out loud or making any personal evaluations,” Løseth said. “The strategy is firm.”
Asked whether he’s been brought in to clean up after the boom years of Norway’s oil industry, he said the board and management of Statoil would cooperate on developing values in the best possible way. “There will be a long-term view in what we do and no intensive, all-out mentality,” he said.
‘Some parallels’ between Statoil and Vattenfall
Løseth, a graduate of BI Norwegian School of Management in Bergen with a masters degree from NTNU (the Norwegian University of Science and Technology), has also worked for Dutch energy firm NUON and Statkraft. He is perhaps best known for being behind major writedowns at Vattenfall, and staff cuts of around 10,000.
When he left Vattenfall as its chief executive last fall, he had cut the company’s number of employees from 40,000 to 30,000, taken writedowns of SEK 75 billion and cut the company into two. DN reported that he was handsomely rewarded for his efforts, taking around SEK 90 million when he left.
He acknowledges that there are “some parallels” between Vattenfall and Statoil. A dive in prices at both companies made cuts necessary “to ensure good profitability,” he told DN.
He thinks Statoil was “out early” with its own cost-cutting efforts to adjust to lower oil prices. He thinks the entire oil and gas industry in Norway has had a “generally high cost level,” and that he hasn’t seen any signs that Statoil was widely responsible for driving up costs.
He said he thinks Statoil’s employees understand that oil prices can swing widely, and that “they’re used to change and reorganizations.” He conceded that costs cuts and staffing reduction are “always demanding and create uncertainty, but I think management has been good at clarifying and setting them in motion.”
Asked whether Statoil has now made sufficient cuts, he said he thinks it has “but we can’t rule out new cuts. Management has the flexibility necessary in the various scenarios, especially since several field development projects have been postponed.” That includes the Johan Castberg field in the Barents Sea and Snorre 2040, since neither would be profitable given today’s oil price. On Wednesday, Statoil also suspended the use of the Scarabeo 5 drilling rig, because of “overcapacity in its rig portfolio.” The suspension will take effect after the rig completes drilling a well on the Kristin field in mid-August, in another operations slowdown that sending shudders through the offshore industry.