Norway’s largest company Statoil, battered by the fall in oil and gas prices, saw profits plummet once again during the first three months of this year. They were down by more than two-thirds, but not much worse than analysts had expected and the company is making more moves to diversify into renewable energy.
Statoil reported an operating result of USD 857 million in the first quarter of 2016, down from USD 2.95 billion in the same quarter last year. Newspaper Dagens Næringsliv (DN) had reported that analysts expected operating results of around USD 862 million, so they weren’t too far off.
Statoil’s CEO Eldar Sætre attributed the profit plunge to the low oil and gas prices that have forced the company to slash thousands of jobs as it tries to boost productivity. As he keeps battling a very tough market, Sætre predictably tried to look on the bright side, claiming that the company operated well throughout the quarter with a high level of production efficiency.
The oil branch, he said, still faces major challenges. “I am therefore glad,” he said, to see that Statoil’s progress in meeting those challenges is in line with priorities. “We have a clear plan to increase efficiency and achieve quicker and greater cost reductions,” he stated. He claimed the company’s “break-even” level had “radically improved” and the company was on track in cutting more costs “and therefore influencing the factors we can control.”
More diversification into wind energy
Statoil can’t control the market price of the oil and gas it sells, and that’s one reason why the company is making more moves to diversify. The company announced earlier this week that it was investing NOK 11 billion (USD 1.36 billion) in an offshore German wind energy project, buying a 50 percent stake in the wind park Arkona and partnering with the large German firm E.ON. The project is expected to power as many as 400,000 homes in Germany.
Sætre described the wind project as “in line with our strategy to gradually supplement our oil and gas portfolio with profitable renewable energy and other low-carbon solution.” Statoil is also under political pressure in Norway to do so, and the German project, with 60 turbines to be located in the Baltic Sea between the Danish island of Bornholm and the coast of northern Germany, will boost Statoil’s own wind energy portfolio by around 50 percent.
Statoil’s board seems confident enough in the company’s strategy that it upheld an expected dividend for shareholders of 22 US cents per share. That’s been criticized by employees as they continue to see colleagues lose their jobs, but the board and management want to maintain a dividend to reward investor interest and support. The company also increased production from its oil fields off Norway by around 2 percent during the first quarter
Several other Norwegian companies were also reporting first-quarter results on Wednesday, and they were a mixed bag. Large metals company Hydro, which had been profiting Norway’s weak krone, saw profits cut in half, while Telenor met analysts’ expectations, insurance firm Storebrand exceeded them and the Norwegian division of the Nordic bank Nordea performed better. There was some good news: Sporting goods store XXL reported strong growth and announced plans to open as many as a dozen new stores this year.