Current STO Stock Info

Norway’s Statoil (ticker: STO) reported its second quarter results today, and executives said on the conference call that the company has no new drilling plans for its Bakken, Eagle Ford or Marcellus properties, citing volatile oil prices and weak NGL pricing in North America.

Statoil Onshore U.S. Operations

In 2008, Statoil acquired a 32.5% interest in the Marcellus shale gas acreage of Chesapeake Energy Corporation (ticker: CHK). The holding covers 1.8 million acres in the Appalachian region of the north-eastern US, according to STO. Statoil entered the Eagle Ford in south Texas in 2010 via a joint venture with Talisman Energy. In 2011, Statoil acquired Brigham Exploration, a leading player in the Bakken oil play. Statoil is now a major operator in the Williston and is usually ranked in the top five Bakken producers.

“The fundamental market conditions are unchanged but we do see signs that we may be heading toward a more balanced supply/demand picture for oil,” said Statoil CFO and Executive Vice President Hans Jakob Hegge. “Despite this, we must expect to see volatility for some time.”

“I think we have a strong position when it comes to the U.S.,” Hegge continued. “We are placed in the good basins and in good acreage. We see costs coming down and the main focus is on efficiencies.”

Statoil said it delivered equity production of 1,959 MBOEPD in the second quarter. Underlying production growth, after divestments, was 6% compared to the second quarter of last year.

The company reduced its overall CapEx guidance for 2016 from US $13 billion to around US $12 billion, mainly due to the impact of efficiency efforts and continued strict prioritization, it said in a statement. The company said CapEx reductions will be due to continued efficiencies, as it plans to drill the same number of wells as originally planned.

Analysts on today’s call asked for clarification on U.S. CapEx spending:

Q: On CapEx, you’ve cut your CapEx guidance by $1 billion from $13 billion to$ 12 billion this year. And if we look at year-to-date CapEx, it’s at $5.3 billion which implies a run rate of $10.6 billion. Would you say that there is still headroom for further CapEx reductions or will CapEx in the second half of this year be increased by more than 20% that you see it now?

STO: Year-to-date, we spent $5.4 billion and expect higher activity during the year with the Sverdrup execution, starting the execution of Peregrino Phase Two and a potential activity with fracking in Bakken and Eagle Ford, so the U.S. onshore operation.

Q: Your Bakken production fell 11% sequentially in Q1 and then another 14% sequentially in Q2. You stated at Q1 that the drop in Q1 was not representative going forward. What are your plans for activity and production U.S. onshore going forward?

STO: We still have one operating rig in each play and frack crews in the Bakken and Eagle Ford in the second quarter. Stock in production was reduced compared to the first quarter with no wells completed in the quarter and prices have improved since the first quarter. We are considering some activity in the second half, but the cost focus remains critical.

Q: On the U.S. onshore, could you just remind us what the CapEx was that was spent on this business in the second quarter, and what the full-year CapEx budget is there?

STO: U.S. onshore CapEx was very low in the first quarter due to only one rig in each play – expect to see a bit higher spend in the second quarter at an activity level reflecting the current prices which we call ‘value over volume’, so strict prioritization [because] the main focus is on costs.

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