Statoil Misses On Lower Gas Prices

Statoil ASA (STO: 22.26 0.00 0.00%) reported significantly weaker-than-expected fourth quarter results. Quarterly earnings came in at 40 cents per share, compared to the Zacks Consensus Estimate of 53 cents and year-earlier profit of 9 cents. Revenue for the quarter was NOK 122.6 billion ($21.6 billion), down 18% year over year.

Statoil continues to maintain a high activity level in Norway and abroad. While equity production was up 2%, entitlement production was essentially flat year over year. The increase in equity production was driven by the start-up of operations on several new oil and gas fields as well as the ramp-up of production in existing fields. 
 
Total oil and gas equity production during the quarter averaged 2.1 million barrels of oil equivalent per day (MMBOE/d), 61% of which was oil and 39% natural gas, compared to 2.0 MMBOE/d in the year-earlier period.

Total oil and gas entitlement production during the quarter averaged 1.85 million barrels of oil equivalent per day (MMBOE/d), 58% of which was oil and 42% natural gas, compared to 1.86 MMBOE/d in the year-earlier period.

Total oil and gas liftings in the quarter were 1.86 MMBOE/d, compared to 1.78 MMBOE/d in the year-earlier period. During the quarter, the company’s realized oil prices averaged NOK 405 ($71.3) per barrel, up approximately 17% year over year, while realized natural gas prices averaged NOK 1.57 (28 cents) per standard cubic meter, down approximately 48% from the year-ago level.

Adjusted earnings during the quarter was NOK 34.4 billion ($6.1 billion), down 21% from the year-earlier quarter. The decrease was primarily caused by the reduction in natural gas prices and lower refining margins, partly compensated by increased oil prices.

During the quarter, total capital investment was NOK 20.8 billion ($3.7 billion) and operating cash flows were NOK 11.8 billion ($2.1 billion). Net debt-to-capitalization ratio stood at 27.3%. Cash and cash equivalents at the end of the quarter stood at NOK 24.7 billion ($4.3 billion).

Statoil expects its 2010 equity production to be in the range of 1.925 – 1.975 MMBOE/d. Capital expenditures for 2010 are expected to be around US$13 billion. Excluding purchases of fuel and gas for injection, unit production cost for equity volumes in 2010 is expected to be in the range of NOK 35 to 36 per barrel. The company expects to complete around 50 exploration wells in 2010.

Though weak refining margings and and struggling natural gas prices have hurt the company’s results, Statoil’s strong finances, a relatively improved asset base, significant exploration initiatives on the Snorre field in the North Sea, and the recent spin-off of its retail arm are catalysts for its long-term growth.