) third-quarter 2012 adjusted earnings of 63 cents per ADR failed
to match the Zacks Consensus Estimate of 66 cents. The quarterly
result was also below the year-earlier adjusted earnings of 65
cents per ADR, due to lower revenues and higher operating costs.
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Adjusted net income after tax came in at NOK11.9 billion (US$2.0
billion), higher than the year-earlier level of NOK 11.4 billion
However, total revenue dropped 0.1% year over year to NOK166.7
billion ($28.2 billion), mainly attributable to lower realized
oil prices as well as lower volumes of liquids.
In the reported quarter, equity and entitlement production
increased a respective 3% annually, based on enhanced output from
Gullfaks South Brent, production ramp up at existing fields as
well as higher gas sales. However, natural decline on mature
fields and higher maintenance charges partly offset the increase.
Total oil and gas equity production averaged 1.811 million
barrels of oil equivalent per day (MMBOE/d) in the third quarter
compared with 1.764 MMBOE/d in the year-earlier period. Of the
total quarterly output, 58% was oil and 42% was natural gas.
Total oil and gas entitlement production averaged 1.624 MMBOE/d
during the quarter (55% oil and 45% natural gas) compared with
1.573 MMBOE/d in the year-earlier period.
Total oil and gas liftings were 1.629 MMBOE/d, compared with
1.565 MMBOE/d in the prior-year quarter. The company's realized
oil prices averaged $99.9 per barrel, down 7% year over year,
while natural gas price realization averaged NOK2.16 per standard
cubic meter, up 10% from the year-earlier level.
During the quarter, total capital investment was NOK28.9 billion
and operating cash flow was NOK 84.1 billion. Net
debt-to-capitalization ratio was 12.6% versus 12.5% in the
Management reaffirmed its production guidance for 2012. It had
earlier projected a compound annual equity production growth rate
(CAGR) of around 3% between 2010 and 2012. Statoil aims to
achieve an equity production of above 2.5 million barrels of oil
equivalent in 2020. The growth is expected to come from new
projects between 2014 and 2016, resulting in a CAGR of 2% to 3%
for the period 2012 to 2016.
The second stream of projects is expected within 2016−2020 that
would likely lead to a CAGR of 3% to 4%. 2013 production is
expected to be lower on a year-over-year basis, due to the recent
transaction with Wintershall as well as a cut in gas output by 25
Mboe/d in the U.S. onshore.
The company maintained its organic capital expenditures guidance
of around US$18 billion and exploration activity of about $3.5
billion for 2012.
In the reported quarter, Statoil delivered strong exploration
results, adding significantly to its resource base by making
eight high impact discoveries in total, since the last 18 months.
The company also confirmed the prospects at Peregino South oil by
discovering a new exploration well during the quarter.
Statoil also made additional strategic progress on the agreement
with Russian state-owned oil company OAO Rosneft. They have
entered into an agreement wherein the Norwegian oil giant will
jointly explore and develop Russian offshore deposits in the
Barents Sea and Sea of Okhotsk. The venture is expected to
involve an investment of approximately $100 billion over decades.
Following a surge in global oil demand, we see the Norwegian oil
major benefiting from this cooperation alliance with the world's
largest hydrocarbon-producing nation. The latest deal follows
similar accords that Rosneft struck with Italy's
) and U.S. energy behemoth
) for the exploration of oil in Russia's Arctic.
Although we have a favorable stance on Statoil's long-term
production growth based on its growing upstream presence in the
emerging basins of the Caspian Sea, West Africa and the deepwater
U.S. Gulf of Mexico, we remain cautious about escalating
production cost. Unit production costs jumped 8%-9% from the
year-ago level related to costs from new fields coming online and
improved activity related to well maintenance. Again, exploration
expenses increased significantly to NOK5.2 billion from NOK3.3
billion in the year-earlier quarter. This was mainly due to
higher seismic and field development expense.
Statoil, which recently hired
) for electric wireline logging services on the Norwegian
Continental Shelf, holds a Zacks #2 Rank (short-term Buy rating).
Our long-term Neutral recommendation remains unchanged.