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Statoil keeps afloat due to asset sales

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World Pipelines,

Statoil delivered adjusted earnings of NOK22.4 billion and adjusted earnings after tax of NOK7.2 billion in the second quarter.

CEO Eldar Sætre commented: “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 characterised by gains from divestments and lower prices. Also in the second quarter, we report a close to neutral free cash flow after dividend and proceeds," says president and CEO of Statoil ASA, Eldar Sætre.

Adjusted earnings

The adjusted earnings were NOK22.4 billion in the second quarter compared to NOK32.3 billion in the same period in 2014. The reduction was primarily a consequence of lower oil prices in the second quarter of 2015 compared to the same period last year. Realised average liquids prices in the quarter were down 28% measured in NOK, compared to the second quarter last year. And the adjusted earnings after tax were NOK7.2 billion, compared to NOK9.9 billion in the same period last year.

Net income in accordance with IFRS

Statoil’s net income according to IFRS for the second quarter was NOK10.1 billion, compared to NOK12.0 billion in the same period in 2014. The gain from the divestment of the Shah Deniz project and the South Caucasus Pipeline was NOK12.3 billion, impacting the IFRS results. Earnings per share were NOK3.15, down from NOK3.75 in the same period last year.

“We continue to progress our effort to improve operational and capital efficiency, and reduce cost. Reduced underlying operational expenses both on the Norwegian continental shelf (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,” says Sætre.

Production growth

Despite divestments, Statoil delivered production of 1.873 million boe/d in the second quarter, up 4% compared to the same period in 2014. The underlying production growth, after adjusting for divestments, was 7% compared to the second quarter last year. The production from the NCS grew 7% in the second quarter of 2015 compared to last year. The increase was mainly due to ramp-up of production on various fields, higher gas sales from the NCS and lower maintenance compared to the second quarter of 2014. Expected natural decline and reduced ownership shares from divestments partially offset the increase.

Equity production outside of Norway was 724 000 boe/d and represented almost a 4% increase, adjusted for the Shah Deniz divestment.

NCS discoveries

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 ongoing, 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 adjusted exploration expense in the quarter was NOK4.1 billion, up from NOK2.7 billion in the second quarter of 2014.

Cash flow from the operations amounted to NOK48.0 billion in the first half of 2015. Statoil maintained a strong capital structure, and net debt to capital employed at the end of the quarter is reduced to 22.4%. Organic capital expenditure was US$7.8 billion in the first half, and the guidance has been revised downwards to US$17.5 billion for 2015 due to effects of the ongoing efficiency programme and the US$/NOK exchange rate.

Currency change

With effect from first quarter of 2016, Statoil will change to US$ as presentation currency. The change reflects the company’s underlying exposure to the US$ as well as better alignment of its reporting to peers. As a consequence of the change in presentation currency, Statoil will also declare its quarterly dividend in US$. The change will be implemented from the second quarter of 2015 and Statoil is announcing the second quarter dividend in both US$ and NOK, based on the exchange rate on 27 July 2015. The change in dividends policy implies that dividend will be announced in US$ going forward.

The board of directors has decided to pay dividend of US$0.2201 per ordinary share equivalent to NOK1.80 for the second quarter and the Statoil share will trade ex-dividend on the Oslo Stock Exchange 13 November 2015.

The serious incident frequency (SIF) for the 12 months period ending 30 June 2015 was 0.6, compared to 0.7 the same period last year.

Edited from press release by Stephanie Roker

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