This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

For Statoil, Less Oil Production, More Shareholder Value

NEW YORK (TheStreet) -- It sounds crazy, but Norway's biggest energy firm Statoil (STO) could boost shareholder return despite shrinking income.

The oil giant is focusing on increasing its buybacks and dividends, as it struggles to increase its output in the face of rising costs and a soft pricing environment. In order to do that, Statoil is strengthening its cash flows by selling its assets, reducing its production targets and cutting down on capital expenditures.

Statoil is concentrating on value creation, rather than producing record levels of output. The markets seem optimistic about Statoil's future, and the company's American depositary receipts are up 11.4% this year to $26.87.

The state-owned firm could continue going higher due to the new focus on cost discipline. The company, which has significant exposure to U.S. shale plays, could also benefit from strength in U.S. oil and natural gas prices. Moreover, a possible reduction in the government's stake could turn into an upward catalyst.

Last month, Statoil reported its quarterly results. Adjusted income fell 12.4% from the same quarter last year to $7.88 billion, which missed analyst estimates of $8.32 billion. The company's total revenue fell 1% to $29.5 billion.

This decline stemmed from a larger share of natural gas in the total output, weakness in oil and gas prices and higher depreciation costs. Daily production also dropped by 4% from last year to 1.95 million barrels.

Statoil isn't the only oil company that has struggled with growth amidst a tough business environment. Other oil majors, such as Royal Dutch Shell (RDS.A) and Exxon Mobil (XOM), have also reported significant drops in quarterly earnings.

Although Statoil's results were not particularly impressive, the company is looking to boost shareholder returns. That is encouraging.

For 2013, Statoil increased its dividend to 3.5%, or $1.17 per share. The company will start paying dividends on a quarterly basis, too. The company has also announced that it will become more aggressive with buybacks.

To support higher dividends and buybacks, Statoil will continue selling assets. So far, since 2010, Statoil has sold assets worth $18 billion, including the recent sale of 10% of the Shah Deniz project and the Caucasus pipeline for $1.45 billion.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,880.36 -31.75 -0.19%
S&P 500 1,970.07 +0.12 0.01%
NASDAQ 4,462.9020 +20.2040 0.45%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs