Norway’s Statoil beat profits forecasts thanks to an increase in production and better refining margins but it further reduced its planned capex as oil prices remain low.
The firm, which saw net income fall to US$882 million (7.2 billion NOK) from 9.8 billion NOK a year earlier, amid the low oil prices, said it would reduce 2015 capex further to $17.5 billion, from $20 billion, with $3.2 billion to be spent on exploration.
The company is also still focused on cost reduction, with targets to reduce costs across the business, including -30% per onshore US well, -10% for new facility capex, -30% for modification capex, -20% for field cost on the Norwegian Continental Shelf (NCS). It also wants to reduce the time it takes to drill an offshore well by 25%.
The firm has been canceling rig contracts and making 1100-1500 job cuts as it looks to right size itself for a $50-60/bbl oil price, compared to more than $100/bbl just over a year ago.
“In the second quarter, Statoil delivered encouraging operational performance with good production growth and high regularity, whilst continuing to reduce cost. Our financial results were characterized by gains from divestments and lower prices," says president and CEO of Statoil ASA, Eldar Sætre. “We continue to progress our effort to improve operational and capital efficiency, and reduce cost. Reduced underlying operational expenses both on the NCS and in our international operations, as well as reduced capital expenditures, demonstrate that our initiatives are effective. In June we announced adjustments to the company’s structure and operating model to further strengthen our competitiveness.”
Despite divestments, Statoil delivered production of 1.873 MMboe/d in 2Q, up 4% compared to the same period in 2014. The underlying production growth, after adjusting for divestments, was 7% compared to 2Q last year. The firm is targeting 2% annual organic production growth.
NCS production grew 7% in 2Q, compared to 2Q 2014, mostly due to ramp-up of production on various fields, including Gudrun and Valemon, higher gas sales from the NCS and lower maintenance compared to 2Q 2014. Expected natural decline and reduced ownership shares from divestments partially offset the increase.
In the quarter, Statoil made two discoveries on the NCS. In July, Statoil announced a discovery in the Julius prospect in the King Lear area in the North Sea. Three wells are on-going, one on the UK Continental Shelf, one in the Gulf of Mexico and one in Canada. In addition, Statoil has secured access to frontier acreages offshore Nicaragua and Myanmar.
The construction of the Johan Sverdrup began and so far contracts worth more than NOK40 billion have been awarded.
Image: Gudrun production ramp up has contributed to the increase in production. Photo from Statoil.
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