Statoil - Norwegian Oil Company - Profits Up

The Norwegian oil company Statoil announced on Monday, July 30, 2007, that its net income in the second quarter of 2007 amounted to Norwegian Kroners (NOK) 11.0 billion, compared to NOK 9.8 billion in the second quarter of 2006. In the first six months of 2007, net income was NOK 18.8 billion compared to NOK 20.6 billion in the first six months of 2006.

The 11% increase in net income from the second quarter of 2006 to the second quarter of 2007 was mainly due to lower income taxes and higher sales volumes of natural gas. The increase in net income was partly offset by a decrease in the natural gas price and in the average realized oil price, both measured in NOK.
"We deliver strong results and a record high international oil production, while continuing our efforts to position the group for future growth. Our acquisition of North American Oil Sands Corporation was approved by the Canadian authorities in June. In July the shareholders of Statoil and Hydro approved the merger of Statoil and Hydro's oil and gas activities, and the integration planning is on track," says Helge Lund, Statoil's chief executive officer.

CEO Lund is also pleased with the continued high exploration and project activity.
"As operator and partner we have announced five discoveries, four on the Norwegian continental shelf and one internationally. In addition, we recently announced a successful appraisal well and production test at Rosebank on the UK continental shelf."

"Three new projects have come on stream and the first delivery of gas from Shah Deniz to Turkey in July represents another milestone for Statoil," Mr. Lund notes.
Return on average capital employed after tax (ROACE) (*) for the 12 months ended 30 June 2007 was 23.6%, compared to 26.4% for the 12 months ended 31 December 2006. The decrease was mainly due to lower oil and gas prices measured in NOK. ROACE is defined as a non-GAAP financial measure (*).

In the second quarter of 2007, earnings per share were NOK 5.00 compared to NOK 4.42 in the second quarter of 2006. For the first six months of 2007, earnings per share were NOK 8.58, compared to NOK 9.33 for the same period in 2006.
Net operating income in the second quarter of 2007 was NOK 26.0 billion compared to NOK 29.9 billion in the second quarter of 2006. The decrease was mainly due to a 13% decrease in gas prices and a 3% decrease in the average realized oil price, both measured in NOK, an 11% decrease in liftings of oil on the Norwegian continental shelf (NCS), and a net increase in operating expenses and selling, general and administrative expenses of NOK 1.0 billion mainly due to higher activity. The decrease in net operating income was partly offset by a change in unrealized profit on inventories of NOK 1.5 billion, higher sales volume of gas of NOK 1.3 billion and an increase of 13% in liftings of oil in International E&P.

In the first half of 2007, net operating income was NOK 49.8 billion compared to NOK 62.9 billion in the first half of 2006. The decrease was mainly due to an 8% decrease in the average oil price and a 14% decrease in gas prices, both measured in NOK, negative changes in derivatives amounting to NOK 3.3 billion, an increase of net NOK 1.7 billion in operating, general and administrative expenses, mainly due to higher activity, and a decrease in other income of NOK 1.1 billion related to sales and exchanges of assets in the first half of 2006. The decrease in net operating income in the first half of 2007 was partly offset by a change in unrealized profit on inventories of NOK 0.7 billion.
Total oil and gas production in the second quarter of 2007 was 1,112,000 barrels of oil equivalent (boe) per day, compared to 1,076,000 boe per day in the second quarter of 2006. The 3% increase of was mainly related to increased oil production from International E&P due to start-up of new fields, and increased gas production from the Sleipner, Asgard and Gullfaks fields on the NCS. The increases were partly offset by reduced gas entitlement from the In Salah field due to production sharing agreements (PSA) effects, and lower production at the Kvitebjorn field.

In the first half of 2007 total oil and gas production was 1,155,000 boe per day, compared to 1,156,000 boe per day in the first half of 2006.
Total oil and gas liftings in the second quarter of 2007 were 1,079,000 boe per day, compared to 1,104,000 boe per day in the same period of 2006. This is equivalent to an underlift of 33,000 boe per day in the second quarter of 2007. In the first half of 2007, total oil and gas liftings were 1,166,000 boe per day compared to 1,168,000 boe per day in the corresponding period of 2006.

Exploration expenditure in the second quarter of 2007 was NOK 2.3 billion, compared to NOK 1.9 billion in the second quarter of 2006. In the first half of 2007 the exploration expenditure was NOK 4.2 billion, compared to NOK 3.5 billion in the first half of 2006. The increase in exploration expenditure was mainly due to higher activity and generally more expensive wells in both periods. Exploration expenditure reflects the period's exploration activities.

Exploration expenses for the period consist of exploration expenditure adjusted for the period's change in capitalized exploration expenditure. Exploration expenses in the second quarter of 2007 amounted to NOK 1.2 billion, the same as in the second quarter of 2006.

A total of 10 exploration and appraisal wells were completed in the second quarter of 2007, five on the NCS and five internationally. Five wells are confirmed discoveries. One exploration extension well on the NCS was also completed in the second quarter of 2007 and resulted in a discovery. Drilling in nine additional wells was ongoing at the end of second quarter 2007. The number of exploration wells completed in the second quarter of 2006 was seven.

In the first half of 2007 a total of 23 exploration and appraisal wells were completed, 11 on the NCS and 12 internationally. One exploration extension well was drilled in the same period. Eleven of the exploration and appraisal wells are confirmed discoveries, seven on the NCS and four internationally. The exploration extension well also resulted in a discovery. The number of exploration wells completed in the first half of 2006 was 13.

Production cost per boe was NOK 29.4 for the 12 months ended 30 June 2007, compared to NOK 26.6 for the 12 months ended 31 December 2006 (*).
Normalised at a USDNOK exchange rate of 6.00, the production cost for the 12 months ended 30 June 2007 was NOK 29.1 per boe, compared to NOK 26.2 per boe for the 12 months ended 31 December 2006 (*). Normalized production cost is defined as a non-GAAP financial measure (*).

The production unit cost, both actual and normalized, has increased, mainly due to increased maintenance cost and cost pressure in the industry.
Net financial items amounted to an income of NOK 2.3 billion in the second quarter of 2007, the same as in the second quarter of 2006. Net financial items in the first half of 2007 amounted to an income of NOK 3.3 billion, compared to an income of NOK 3.6 billion in the first half of 2006.
Income taxes in the second quarter of 2007 were NOK 17.4 billion, equivalent to a tax rate of 61.3%. Income taxes in the second quarter of 2006 were NOK 22.3 billion, equivalent to a tax rate of 69.4%. The tax rate was reduced in the second quarter of 2007 mainly due to changes in the tax level of financial items, an increased relative share of income generated outside the NCS, which is generally subject to lower rates of taxation, and an increased effect of the uplift tax deduction on the NCS.

For the first half of 2007 income taxes were NOK 34.3 billion, with a corresponding tax rate of 64.6%. In comparison, income taxes in the first half of 2006 were NOK 45.9 billion with a corresponding tax rate of 69.0%. The reduced tax rate is mainly due to changes in the tax level of financial items and an increased effect of the uplift tax deduction on the NCS.

Health, safety and the environment (HSE)
Overall, Statoil's total recordable injury frequency has improved slightly while the number serious frequency has increased in the second quarter of 2007 compared to the corresponding period in 2006. Serious incidents in the second quarter of 2007 included a fatality at Mongstad port at the end of May. There have been no serious gas leaks at our offshore or land facilities during the first half of 2007.

www.dthreetechnology.com