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Statoil keeps payout as cutbacks respond to depressed oil price
[LONDON] Norwegian oil major Statoil vowed to protect dividend payments and said it was braced for a long period of depressed crude prices as it set out plans on Friday to slash costs and cut investments.
With oil prices falling by more than half since June, oil companies from BP to Chevron have been slashing costs, delaying or cancelling projects and reducing shareholder returns to save cash.
Statoil, which expanded from a North Sea producer to a global explorer over the past decade, will cut capital expenditure by a tenth this year, reducing spending on its US shale prospects and modification work on mature fields.
But it is moving ahead with projects already sanctioned, said Chief Executive Eldar Saetre, appointed to the job on Wednesday.
"We are able to handle volatility," Mr Saetre said. "We will handle the low price environment ... but we must prepare for an extended period of low oil prices."
State-controlled Statoil said it aims to cut costs so its free cashflow can cover its dividend, set at a quarterly 1.8 crowns per share, at an oil price of US$100 per barrel by 2016 and US$60 by 2018.
Analysts estimate the level stands at over US$110, even as oil prices languish below US$60. So to cover the shortfall, Statoil may continue to sell assets after more than US$10 billion of sales over the past five years.
It could also take on fresh borrowings, as its net debt to capital employed ratio was just 20 per cent.
"Borrowing money is a natural part of the business," Mr Saetre told Reuters. "We will manage this cycle at a net debt ratio below 30 per cent, even in this below US$60 environment."
Statoil said it would give up exploration in Angola and the Norwegian Arctic but will drill in Canada, Britain, Tanzania and Norway. It will cut capital spending to US$18 billion this year from a planned US$20 billion, reduce its production growth targets and took a net US$2.4 billion of charges, writing down the value of assets due to low oil prices.
However, it said it would increase spending on already sanctioned developments and will next week give plans for the giant Johan Sverdrup field, which could cost around US$30 billion to develop in Europe's biggest-ever offshore energy project.
Statoil shares rose 1.3 per cent by 1000 GMT, outperforming a flat European oil and gas sector.