Statoil ASA: 2017 fourth quarter & year end results
Statoil (OSE:STL, NYSE:STO) reports adjusted earnings of USD 4.0 billion and USD 1.3 billion after tax in the fourth quarter of 2017. IFRS net operating income was USD 5.2 billion and the IFRS net income was USD 2.6 billion.
The fourth quarter was characterised by:
Strong earnings and underlying cash flow. Net debt ratio at 29.0% [5]
Solid operational performance with record production in fourth quarter and 2017. The 2017 underlying production growth was above 6% [7]. The reserve replacement ratio (RRR) was 150%
Strong progress on project deliveries and efficiency improvements. 2017 organic capex was USD 9.4 billion [5]
Increase in dividend by 4.5% to USD 0.23 per share, subject to annual general meeting approval
"In a recovering market, we delivered strong earnings and cash flow from all business segments. We had record high production both in the fourth quarter and for the full year, supported by continued solid operational performance. We expect long-term underlying earnings growth, and in line with our dividend policy the board proposes to increase the dividend by 4.5% to USD 0.23 per share," says Eldar Sætre, President and CEO of Statoil ASA.
"We have taken down our capital expenditure to 9.4 billion dollars from an initial guiding of 11 billion dollars. This has been achieved from continued improvement efforts and strong project deliveries. In cooperation with our suppliers and partners, we are getting more for less," says Sætre.
"Our cash flow generation was strong across the business. At an average oil price of around 54 dollars per barrel, we generated 3.1 billion dollars in free cash flow in 2017 and strengthened our financial position. We reduced our net debt ratio by more than 6 percentage points during this year, after having done several value-enhancing acquisitions," says Sætre.
Adjusted earnings [5] were USD 4.0 billion in the fourth quarter, up from USD 1.7 billion in the same period in 2016. Adjusted earnings after tax [5] were USD 1.3 billion in the fourth quarter, up from negative USD 40 million in the same period last year. Higher prices and continued solid operational performance, with record high production, contributed to the increase. In addition, lower exploration expenses contributed positively. For the full year, adjusted earnings were USD 12.6 billion, more than three times higher than USD 4.1 billion in 2016.
IFRS net operating income was USD 5.2 billion in the fourth quarter compared to negative USD 1.9 billion in the same period of 2016. The IFRS result was impacted by net impairment reversals of USD 1.6 billion, mainly related to a US onshore asset. IFRS net income was USD 2.6 billion, up from negative USD 2.8 billion in the fourth quarter of 2016. For the full year, IFRS net income was USD 4.6 billion, compared to negative USD 2.9 billion in 2016.
Statoil delivered equity production of 2,134 mboe per day in the fourth quarter, an increase from 2,095 mboe per day in the same period in 2016. The increase was primarily due to higher flexible gas production to capture higher prices, increased production US onshore and ramp-up of new fields. With continued solid operational performance Statoil delivered all time high production with an underlying production growth [7] of more than 6% in 2017.
As of year-end 2017, Statoil had completed 28 exploration wells with 14 commercial discoveries. Adjusted exploration expenses in the quarter were USD 0.3 billion, down from USD 0.6 billion in the fourth quarter of 2016.
The reserve replacement ratio (RRR) was 150% in 2017, impacted by sanctioning of new projects and positive reserve revisions on existing fields.
Cash flows provided by operating activities before taxes paid and working capital amounted to USD 20.7 billion for the full year of 2017 compared to USD 15.0 billion in 2016. Organic capital expenditure [5] was USD 9.4 billion for the full year of 2017. At year end, net debt to capital employed [5] was 29.0%, after an increase in working capital and payments for value enhancing transactions.
The board of directors proposes to the annual general meeting (AGM) to increase the dividend by 4.5% to USD 0.23 per share, for the fourth quarter. The two-year scrip program ended as planned in third quarter 2017.
The twelve-month average Serious Incident Frequency (SIF) was 0.6 for 2017, compared to 0.8 in 2016.
Capital markets update
Today, Statoil presents its update to the capital market, focusing on three priorities:
Growing cash flow and returns - capacity to generate USD 12 billion in free cash flow [5] from 2018 to 2020, and around 12% return on average capital employed (ROACE) [5] in 2020. Statoil can be free cash flow positive below USD 50 per barrel from 2018 to 2020
Delivering profitable growth from world class projects - investing in a radically improved next generation portfolio with 3.2 billion barrels at an average break-even of USD 21 per barrel
Leveraging industrial strengths to realise the always safe, high value, low carbon strategy
"We expect to increase returns and can deliver 12 billion dollars in free cash flow from 2018 to 2020. With solid operational performance and realised efficiencies, we are a stronger and more competitive company. We have radically improved our next generation portfolio, and Johan Sverdrup phase 1, has now a break-even below 15 dollars per barrel. We will profitably grow production, strengthen our balance sheet, and increase the cash dividend", says Sætre.
"The Norwegian continental shelf is the backbone of our business, where we develop new ideas and technologies, and scale them industrially to create even more value. Internationally we are increasingly targeting opportunities where we can leverage our key value drivers with an even stronger Statoil-operated footprint", says Sætre.
Statoil continues to transform its cost base and value creation potential. With USD 1.3 billion in additional improvements in 2017, Statoil has realised annual efficiencies of USD 4.5 billion from 2013. Digitalisation and innovation can further enhance safety, increase value creation, reduce drilling costs, and enable significant capex reductions in future field developments.
Statoil is already an industry leader on carbon intensity, and has set ambitious CO2 emission reduction targets.
The company expects to invest 15-20% of total capex in new energy solutions by 2030.
"Statoil has a competitive advantage to create superior value in a low carbon future, with CO2 emissions around half the industry average and record high natural gas production that can replace coal. We will continue to develop as a broad energy company and are building a profitable industrial position within new renewable energy," says Sætre.
Furthermore, Statoil announces its updated outlook for 2018-2020:
Statoil expects organic capex [5] of around USD 11 billion in 2018
Statoil expects 1-2% production growth in 2018 and an annual production growth of around 3-4% from 2017 to 2020
Statoil expects to drill around 40 exploration wells in 2018 with an expected spend of around USD 1.5 billion
Further information from:
Investor relations Peter Hutton, Senior vice president Investor relations, +44 7881 918 792 (mobile)
Helge Hove Haldorsen, vice president Investor Relations North America, +1 281 224 0140 (mobile)
Press Bård Glad Pedersen, vice president Media relations, +47 918 01 791 (mobile)
This information is subject to the disclosure requirements pursuant to section 5 -12 of the Norwegian Securities Trading Act.
