StatoilHydro ASA (STO)
Q1 2010 Earnings Call
May 5, 2010 8:30 AM ET
Lars Sorensen - Head of IR
Eldar Saetre - EVP & CFO
John Olaisen - Carnegie
James Hubbard - Morgan Stanley
Elaine Dunphy - Deutsche Bank
Irene Himona - Exane BNP Paribas
Oswald Clint - Bernstein
Hootan Yazhari - Banc of America/Merrill Lynch
Rahim Karim - Barclays Capital
Christine Tiscareno - Standard & Poor’s
Barry MacCarthy - Royal Bank of Scotland
Shawn - Arctic Securities
Nadia Bendris - Focus Banking
John Rigby - UBS
Previous Statements by STO
» StatoilHydro ASA Q2 2008 Earnings Call Transcript
» Statoil ASA Q3 2007 Earnings Call Transcript
» Statoil Q2 2007 Earnings Call Transcript
Welcome to Statoil’s first quarter 2010 earnings presentation. My name is Lars Sorensen and I’m the Head of Investor Relations. Today’s presentation can be found on www.statoil.com and downloaded this website. Questions from US on the web could be as usual sending using the submit question button on your screen.
Without further ado is my favorites to welcome to the speaker Executive Vice President and Chief Financial Officer, Eldar Saetre.
Thank you, Lars and thank you to all of you for joining us at this first quarter earnings presentation and not surprisingly, the first quarter has been like many quarters before, a strongly influenced by the macro environment. This is illustrated by the positive signs of recovery that we have seen in the global economy, especially in the United States and in China, also by issues that we have experienced within the euro, sown and the following volatility in the financial markets and last, but not least for our industry that raising oil prices and oil demand, which is mainly driven from Asia.
It’s a pleasure for me, once again to present a quarter with generally good operational performance for Statoil, a solid production, good trading resource, which I will revert to and the continued strict costs discipline and they all contributing to good financial performance in actually all of our business areas this quarter.
On top of this, we have also made good industrial progress. We have enforced our value chain, our gas value chain in the US, both through increasing the Marcellus acreage and strengthening the market access. The exploration activity continues to deliver high value and we have matured the resource based [weather] by approving and sanctioning six new projects this quarter. So let me start by looking at the financial results for the quarter.
Statoil delivers a net income of NOK 11.1 billion, which is compared to NOK 4 billion in the same quarter last year and there are three main explanation to this positive development, first of all we have had much higher earnings from our international E&P business segment. Secondly, the losses on net financial items has been lower this quarter compared to last year and finally, we have had a significantly lower tax rate, reported tax rate in this quarter.
The main drivers have been the continued recovery of the oil price of around 50%, 48% since the first quarter last year and this is measured in NOK. This was partially offset by decrease in the gas price of 35%. I should also mention that despite the lower gas price that we have seen, we have sustained solid earnings from our gas trading business, which I will back to you.
Statoil’s first quarter reported net operating income was NOK 39.6 billion, which is compared to NOK 35.5 billion last year. The adjusted earnings were NOK 38.9 billion, which implies adjustments this quarter of a moderate NOK 0.7 billion. Adjusted earnings after tax were NOK 12.1 billion, which is up 14% compared to last year and the effective tax rate on the adjusted earnings that is excluding tax on net financial items were 69%. I will revert to the resource for each of the business areas later in the presentation. So let me now say a few words about the oil and gas production.
Total equity production reached 2,102 million barrels per day in the quarter, which is up 28,000 barrels compared to the same quarter last year, and this represents actually a record high production for the group of such on a quarterly basis; and this record was driven by 13% increase in the equity production outside the Norwegian Continental Shelf and partly offset by 2% reduction in Norway.
The growing production outside Norway was mainly driven by the startup last year of Tahiti and the Thunder Hawk Fields in the Gulf of Mexico, the ramp up of Agbami in Nigeria and increased production from ACG in Azerbaijan and also from Marcellus in US.
The decrease in the Norwegian liquids production was explained by the expected decline on the matured fields in Norway and again this was partly offset by the Kvitebjorn being back in full production last year and also new production from the Alve field and the Tyrihans field since last summer.
The customer up tick on our long term gas contracts has been high in the first quarter and this is due to relatively cold weather, as you know in most of our core markets. The entitlement production was down 1% at 1,915,000 barrels per day and this implies PSA effects of 187,000 barrels per day between the equity and the entitlement volumes, which is slightly above are guiding of 180,000 barrels per day at US$75 oil price, which by the way is unchanged from what we are presented earlier.
I will now go into the results from each of the business areas briefly. Starting with E&P Norway, which reached adjusted earnings of NOK 29.1 billion this quarter, which is 2% down from last year; the main drivers for this change were at 46% increase in the liquids price, which out of NOK 9.5 billion to last year’s result and 41% lower transfer price of gas towards the natural gas business segment, which contributed negativity with NOK 9.2 billion and the oil and gas production, the lower oil and gas production had negative effect of NOK 1 billion.