Statoil takes hit as cuts long-term oil price view

[LONDON] Norway's Statoil plunged to an unexpected loss in the fourth quarter of last year, as it cut its long-term assumptions for the price of oil and took a US$2.3 billion impairment charge on the value of its assets as a result.

But the state-controlled company cheered some analysts with a higher than expected production forecast for 2017, with plans to cut another US$1 billion in costs and by saying the average break-even price for its new projects had fallen sharply. "We guess the market will like Statoil's 2017 guidance and probably forgive the major Q4 earnings miss," said Teodor Sveen-Nilsen at Swedbank.

At 0910 GMT, Statoil shares were down 1.2 per cent at 154.7 Norwegian crowns, off an earlier low of 153.4 crowns.

Though oil prices have recovered in recent months, helped by output cuts by major producers, they remain well below levels of more than US$100 a barrel earlier in the decade.

Statoil said on Tuesday it now expected benchmark Brent crude to reach US$75 a barrel in 2020, compared with a previous forecast of US$83, and US$80 in 2030, compared with US$100 before.

Britain's BP said on Tuesday it expected oil prices to remain above US$50 a barrel this year, as it also missed fourth-quarter earnings forecasts.

Statoil said it made a net operating loss of US$1.9 billion for the quarter, versus an operating profit of US$152 million in the same period of 2015 and analysts' average forecast of a US$2.1 billion profit.

The company's adjusted operating profit fell to US$1.66 billion from US$1.78 billion a year earlier, missing analysts'forecast for a rise to US$2.27 billion as its international unit's performance fell short of expectations.

However, Swedbank's Sveen-Nilsen said Statoil's guidance suggested its 2017 production would rise 4-5 per cent from 2016, compared with his own expectations for flat to up 1 per cent.

The company also estimated its average break-even price for new projects by 2022 had fall to US$27 a barrel from US$41 this time last year. "This is impressive and a sign that investment activity is rising again," said Carnegie analyst Kjetil Bakken.

Statoil forecast its capital expenditure would rise to US$11 billion this year from a downwardly revised US$10 billion in 2016, with spending on oil and gas exploration steady at US$1.5 billion.

The company added it would cut another US$1 billion in costs this year on top of the US$3.2 billion it has already cut. It maintained its dividend policy and said it may buy back shares, subject to approval from shareholders.

Statoil shares have gained 31 per cent over the past year, outperforming a 24 per cent rise in the Stoxx Europe 600 oil and gas sector index.

REUTERS