(Updates with comment from CEO in third paragraph.)
Oct. 27 (Bloomberg) -- Statoil ASA, Norway’s largest oil and natural gas company, said third-quarter profit unexpectedly declined 25 percent as taxes rose and financial income declined.
Net income fell to 10.4 billion kroner ($1.9 billion), or 3.27 kroner a share, from 13.8 billion kroner, or 4.34 kroner, a year earlier, the Stavanger-based company said today. That missed the 12.4 billion-krone average estimate in a survey of 14 analysts. Sales rose 32 percent to 166 billion kroner while operating income increased 39 percent to 39.3 billion kroner.
“Statoil delivered strong financial results in the third quarter of 2011, reflecting operational performance in line with expectations and strong oil and gas prices throughout the period,” Helge Lund, Statoil’s chief executive officer, said in a statement.
The state controlled company has reduced maintenance offshore Norway and benefited from production abroad as it expands into markets such as the U.S. and Brazil. Statoil boosted its output year-on-year for the first time in five quarters, reaching 1.764 million barrels oil equivalent a day from 1.522 million barrels a year earlier. Output was expected to rise to 1.745 million a day, according to a Bloomberg survey of six analysts.
Statoil’s average oil prices rose to $107.5 a barrel from $73.8. The company’s realized gas prices rose to 1.97 kroner a standard cubic meter from 1.74 kroner a year earlier.
“Production growth is primarily triggered by less maintenance at the Norwegian continental shelf and international fields ramping up,” Helge Andre Martinsen, a Nordea Markets analyst with a “buy” rating, said in an Oct. 18 note.
The company, which operates about 80 percent of Norway’s oil and gas production, is seeking to maintain domestic output from maturing fields while tapping its expansion abroad. Norway’s oil output has halved since 2000 and Statoil has been struggling to replace reserves. The so-called reserve replacement ratio hasn’t been above 100 percent since 2004.
“At just six years, reserve life in liquids is the second lowest in the sector and in our view requires action,” said Peter Hutton, an analyst at RBC Capital Markets with a “sector perform” rating said in an Oct. 24 note. “In addition to opportunities in Gulf of Mexico, we think longer life unconventional liquids in North America make a natural strategic target for Statoil, and we are encouraged by the speed and cost at which Statoil looks to be moving.”
The company this month announced the $4.4 billion acquisition of Brigham Exploration Co., expanding its stake in U.S. unconventional assets and becoming one of the top 10 holders of Bakken shale acreage. Statoil entered U.S. shale gas resources in 2008 by buying $3.38 billion in assets from Chesapeake Energy Corp. and in June bought Eagle Ford shale acreage from SM Energy Co.
“Including Marcellus, Eagle Ford and the oil sands properties in Canada, Statoil’s North American onshore production could reach 300,000-500,000 barrels of oil equivalent a day by 2020, or about 12-20 percent of the company’s total output,” Sigurd-Erik Nissen-Meyer, an analyst at Pareto Markets AS, said on Oct. 18. “The operator experience will enable the company to take further unconventional positions, and we would expect to see Statoil to continue to grow in this sector.”
Statoil targets equity production of 2.5 million barrels a day by 2020, up from 1.9 million barrels a day in 2010, a goal that has been strengthened by this year’s Aldous-Avaldsnes oil discovery in the North Sea.
Statoil’s Aldous Major South is linked Lundin Petroleum AB’s Aldous find. The combined deposit is estimated to hold recoverable resources of 1.7 billion to 3.3 billion barrels of oil equivalent, which would be the world’s largest offshore find this year. The company also made discoveries at the Skrugard prospect in the Barents Sea and at Peregrino South in Brazil.
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