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Tuesday, May 21, 2024

Statoil’s loss sends its shares tumbling

Norway’s largest company, state-controlled oil firm Statoil, released results Wednesday morning that were “much, much worse than expected,” sending chills throughout the market and the country’s entire oil and offshore industry. A second-quarter net loss sent Statoil’s shares tumbling on the Oslo Stock Exchange, while more cuts in the company’s investment program are another blow to an industry already struggling with low oil prices.

Statoil’s chief executive, Eldar Sætre, insisted that the company “delivered solid operational performance,” highlighting “strong production growth and progress on project development and execution.” He conceded, however, that the company’s financial results were “affected by low oil and gas prices in the quarter.”

It all boiled down to second-quarter net operating income of just USD 180 million, an enormous reduction from the USD 3.6 billion logged in the same quarter last year. After-tax earnings were negative, leaving Statoil with a loss of USD 28 million in the second quarter, down from USD 929 million in the same three months ending June 30 in 2015.

For Statoil’s own account of its latest financial results, click here (external link). 

There had widespread expectations that Statoil’s results would worsen, with average estimates from nine analysts following the company indicating hat second-quarter profits would be cut in half. Those expectations, compiled by SME Direkt for news service TDN Finans, called for adjusted operating results of USD 1.46 billion, compared to the the USD 2.88 billion logged last year. Instead, Statoil delivered just USD 913 million, a third of what the company generated last year.

Statoil’s shares fell nearly 4 percent on the news and Sætre himself said the disappointing results and challenging outlook for the oil industry would lead to even “more uncertainty in our markets.” Statoil is by far the most dominant player on the Norwegian Continental Shelf, and its fortunes influence those of many others.

Sætre cited various “geo-political events” that were adding to the uncertainty in recent weeks without mentioning any specific, but later told newspaper Dagens Næringsliv (DN) that he was referring to “all the uncertainty of a more militant and terrorist character” along with Britain’s decision to leave the EU and political uncertainty in the US in the run-up to the November presidential election.

“All of this influences the markets,” he noted, and, by extension, demand for oil and gas. While there’s little a company like Statoil can do about tensions and conflicts in the world, Sætre claimed the company is continuing to boost its efficiency and cut costs. With the price of its major commodity currently less than half what it was two years ago, there’s been a major decline in revenues coming into the company.

Statoil also announced Wednesday that it will cut its investment prognosis for this year by another billion dollars, from USD 13 billion to USD 12 billion. Exploration costs will be cut 10 percent, from USD 2 billion to USD 1.8 billion. Those cuts will likely add to the gloom in Norway’s oil service and supply industry.

DN noted that since oil prices dove in the 2014, there have been few bright spots in the oil branch. While some analysts have predicted the worst effects on the Norwegian economy are already over, Statoil’s poor results are more bad news for the country’s biggest and most important industry.

Statoil was maintaining its dividend, however. DN reported that Statoil’s board was expected to propose that it be kept at USD 0.22 per share. Berglund



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