Statoil AG (STO)
Q4 2010 Earnings Conference Call
February 9, 2011 07:30 AM ET
Hilde Nafstad – SVP, IR
Helge Lund – President and CEO
Torgrim Reitan – CFO
Paul Spedding – HSBC
Brendan Warn – Jefferies International
John Olaisen – Carnegie
Trond Omdal – Arctic Securities
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Please note the emergency exits on both sides of this room, one in the back of the room and one right behind me. Today’s event can be followed by webcast. The webcast and transcript of the event will both be made available later. Today’s program is split in two. First, Statoil’s Chief Executive Officer, Helge Lund and Chief Financial Officer, Torgrim Reitan will give a short Fourth Quarter and 2010 Earnings presentation. At 1:30, London Time, we will start our Strategy Update with our CEO, CFO and our Executive Vice President for Development and Production Norway, Øystein Michelsen.
Each of the two blocks of presentations, first, the Fourth Quarter 2010 and then later the Strategy Update will be followed by a Q&A session. Our web audience should observe the phone number on the page where you’ve accessed the webcast. This is the number to use for the Q&A. The first Q&A session is devoted exclusively to questions related to the fourth quarter and to the full-year 2010. At 6:30 London Time, Statoil published results for the fourth quarter of 2010. We also published all the presentations you are going to see today.
Go to our website statoil.com and follow the link from the front page if you want to open or download these now. Can I ask you both here in London and all who download presentations to carefully study the forward-looking statements at the end of the presentation. And now, it is my privilege to introduce our CEO and President, Helge Lund.
Thank you Hilde, and welcome to all of you. It’s good to be here. It’s also good to be finally able to talk about 2010, but maybe even more importantly to later talk about the future for Statoil. As Hilde said, the focus of this session is primarily fourth quarter and we look at our plans moving forward in the session later. 2010 has been a very active strategic year with good strategic progress for Statoil. And we have also been active in terms of portfolio management. We have matured our portfolio. Five new fields have been set in production, and we have sanctioned another nine projects.
We are now also accessing high potential exploration acreage through now the nomination of Statoil by Sonangol as a partner and operator at several pre-salt opportunities in offshore Angola. We have also throughout 2010 been strengthening our unconventional US gas position by accessing yet another low breaking breakeven field or area in the US. I think also in terms of strategic significance, it is important that we through this year have been able to list successfully the Statoil Fuel and Retail and thereby clarified even further the strategic profile of Statoil as an technology driven upstream company.
I think also that you have noted that we have been active with our international portfolio by the farm down to two industrial partners of 40% on the oil sands assets in Canada and also in our offshore asset in Brazil on Peregrino and created I think very good value for Statoil and our shareholders. As a consequence of the active management or the portfolio over the last few years, we are now improving on our reserve replacement ratio and for the year 2010, it is now up to 87% for the year in total.
During 2010, we have also maintained a very high activity level at Norwegian [ph] continental shelf, and I think securing the foundation for sustained high-level value creation at our home – in our home market. Production has been very strong and stable in the first part of the year, but during the second half of the year we produced less than expected and I will come back to the reasons for that later in my presentation. I think although significant aspects are 2010 results has been that we continue to improve on safety and on HSE, we demonstrate good cost control in our operations particularly in Norway. We delivered strong cash flow and continued to show that we care about also the direct dividend to our shareholders and a proposal for the Board of Directors is to pay NOK 6.25 per share for 2010.
As I said, we produced at a high-level during the first half of 2010, demonstrating the capacity of our portfolio. And I was especially pleased with our operational performance and the stability of our performance in that period. And we were able therefore to utilize most of our capacity. But during the second half of the year, we experienced specific operational issues taking the annual production to a lower-level than we expected earlier in the year.
As we told you at the third quarter presentation in Oslo, the Q3 was impacted by planned maintenance especially also this year impacting our gas delivery system. This combined with specific operational issues at our Gullfaks field, lower than expected production permit on Ormen Lange going into Q4, we also talked about your Q3 presentation, that we decided to temporary shutdown some production wells on the Gullfaks south field and on the Kvitebjørn field. And that was to make sure that we preserve the reservoir and the production capacity for the longer run.