Norway' Oil Giant Disappoint Investors

Norway’s corporate crown jewel, Statoil ASA, who weights almost 30% of the Oslo Stock Exchange Benchmark Index, reports a net operating income of NOK 26,6 billion in second quarter of 2010. More than in Q2 last year, but substantial lower than investors estimates of NOK 38,2 billion. The Statoil shares are tumbling, dragging the rest of the market down with it.

“Statoil’s second quarter is characterized by strong operational performance and a high activity level.”

Helge Lund

Helge Lund, CEO, Statoil ASA.

At the moment Statoil (STL) is down 2,74%, while the Oslo Benchmark Index is struggling to keep itself above the zero line. Today’s report comes out weaker than expected, and Statoil’s management warns of an even worse third quarter.

Statoil’s second quarter 2010 net operating income was NOK 26.6 billion, compared to NOK 24.3 billion in the second quarter of 2009, Statoil reports.

The quarterly result was affected by a 32% increase in liquids prices measured in NOK, a 6% increase in equity production and a 12% decrease in gas prices measured in NOK.

Also impairments, loss on derivatives and a provision for an onerous contract influenced net operating income.

Adjusted earnings in the second quarter 2010 were NOK 36.4 billion, up 25% from second quarter 2009 when adjusted earnings were NO K 29.2 billion.

Net income in the second quarter of 2010 was NOK 3.1 billion. This result reflects higher oil prices and increased liftings, lower net financial losses and lower tax rates partly offset by lower gas prices, impairments, losses on derivatives and an onerous contract compared to the second quarter of 2009, when net income was zero and the tax rate unusually high.

Adjusted earnings after tax were NOK 10.6 billion in the second quarter of 2010, up 21% from second quarter 2009 when adjusted earnings after tax were NOK 8.8 billion.

Adjusted earnings after tax excludes the effect of financial items and the tax on net financial items, and represents an effective adjusted tax rate of 71% in the second quarter of 2010 and 70% in the second quarter of 2009.

Warns of Q3

“Statoil’s second quarter is characterised by strong operational performance and a high activity level,” Statoil’s Chief Executive Officer, Helge Lund, says in the press release.

“We are making good progress on important projects. The Gjøa production platform is now anchored at the field in the North Sea. The Gudrun development was approved by the Norwegian Parliament in June, and key contracts have now been awarded. In Brazil, the Peregrino field development is moving forward and we have agreed to bring in Sinochem as a 40% partner in the project,” says Lund.

“Statoil’s production is on track. Equity production is up 6% compared to second quarter last year. However, planned maintenance turnarounds will heavily impact production in the third quarter,” says Statoil’s CEO Helge Lund.

The Key Figures

Click to enlarge

Disappointments

However, investors are not satisfied with the number.

Net profit was NOK 3.1 billion in the quarter, up from zero in the corresponding quarter last year. Like last year’s quarter, net income in this year’s second quarter is negatively impacted by a high tax rate.

Statoil believes that the tax rate of 88.2 percent in the second quarter does not reflect the company’s underlying tax exposure, according to TDN Finans.

Operating profit in the second quarter was negatively impacted by NOK 3.0 billion in writedowns, mostly related to the onshore Mongstad project, under-lifted by NOK 0.6 billion, a inventory effect of 0.1 million, lower value of derivatives of 1.5 billion, and other provisions 4.6 million – in where  NOK 3.8 billion are related to a contract loss of a natural gas reception facilities in the United States.

Statoil maintain their production guiding for 2011, but makes a downwards adjustment for 2012 to 2,06 – 2, 16 million barrels a day, from  2,1 – 2,2 million barrels. The decline is due to the sale of a 40% stake in the Peregrino field offshore Brazil.

Shares Drop

At Oslo Stock Exchange the Statoil shares dropped almost 3% when the Q2 report was released, at the moment Statoil (STL) is down 2,74%.

Statoil being the largest Norwegian corporation weights almost 30% in the Oslo Benchmark Index, and the drop in share prices are dragging the whole market down.

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Here’s a copy of the full press release.

Here’s the full Q2 report.

Here’s the presentation material, graphic, etc., from the analysts conference by CFO Eldar Sætre.

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EU To Seek Temporary Ban On Deep-Water Oil Permits

Norway’s Oil Fund Among BP’s Largest Shareholders As Bankruptcy Rumors Hit Market

Norway’s Foggy Outlook

Norway At The End Of An Era

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Norway Economic Update – “Partly Grim”

På lånt tid

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