Shale writedown pushes Statoil into red, dividend maintained



OSLO, April 30 — Oil major Statoil swung to a surprise first-quarter net loss on a writedown in the value of its U.S. shale business, but its operating figures beat forecasts and the firm pleased investors by maintaining its dividend.

State-controlled Statoil, which operates in dozens of countries from Canada to Africa, said it had cut its price outlook for its U.S. business. It took about $6 billion in impairments, felt the effects of plunging crude and gas prices and enjoyed only a modest benefit from higher refining margins.

However, its exploration and refining businesses both performed better than gloomy expectations, output beat forecasts and its cash flow covered nearly all of its relatively high investment spending.

“Underlying it's a strong quarter, showing we can function as a company and deliver profitability with oil prices below $50 per barrel,” Chief Executive Eldar Saetre said.

Statoil said it cut its future oil and gas price assumptions after the crude price crash and took a writedown after testing its assets against the lowered price.

“We've assumed prices for 2017 of around $80 per barrel and then a careful rise after that,” added Saetre, a company veteran who stepped up to the top job after Helge Lund left last year to join BG.

Statoil has been among the most successful majors in entering a fragmented shale business dominated by relatively small players, picking up assets in the Bakken, Marcelus and Eagle Ford formations.

The firm generated a tenth of it production in the quarter from U.S. shale assets but the sharply lower price made a once lucrative business a drag.

Crude prices bottomed out below $50 per barrel in January and even at $65 per barrel now, trade down from around $110 per barrel in June.

The impact of lower oil prices on profits of energy companies Royal Dutch Shell, BP and Total has been softened by the strong performance of their refining businesses.

“ROBUST SET OF RESULTS”

Statoil made a net loss of 35.4 billion crowns ($4.7 billion) for the quarter, below expectations for a profit of 3.8 but its adjusted operating profit was 22.9 billion crowns, ahead of forecasts for 16.4 billion. It also kept its quarterly dividend at 1.80 crowns per share.

“This appears a robust set of results from Statoil in the context of quite low expectations,” brokerage Jefferies said.

“While management is clearly responding to a lower near-term oil price outlook, Statoil still has one of the most challenged organic cash cycles amongst peers.”

Still, high capital spending remains a concern as Statoil plans to invest $18 billion this year, making the smallest spending cut among any of the majors.

“We think asset sales are desperately needed to offset stubbornly negative free cash flow pressure and an outlook for rising net debt, and to avoid cutting dividends during and post 2015 also,” Santander said.

Statoil shares were up 3.4 percent at 1330 GMT, reflecting relief about the strong operations as investors mostly ignored the non-cash impairments and the high spending.

“Exploration is incredibly important to us and we have the financial strength and capacity to take a long term perspective,” Saetre said.

“I've been through situations before where we cut exploration because it was the easy thing to do. We were punished for that for years afterwards." ($1 = 7.53 Norwegian crowns) 

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