Business Context and Reporting Period
Company: Equinor ASA (Statoil ASA)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: First Quarter ended March 31, 2013
Filing Date: May 2, 2013
Statoil ASA is a Norwegian energy company engaged in the exploration, production, transportation, refining, and marketing of petroleum. The company reported a significant decline in financial performance for the first quarter of 2013 compared to the prior year, driven by lower production volumes, reduced commodity prices, and specific operational disruptions.
Key Financial Metrics
| Metric (NOK Billion) | Q1 2013 | Q1 2012 | Change |
|---|---|---|---|
| Net Operating Income | 38.0 | 57.9 | (34%) |
| Net Income | 6.4 | 15.4 | (58%) |
| Basic Earnings Per Share | 2.02 | 4.75 | (57%) |
| Cash Flow from Operating Activities | 38.3 | 47.3 | (19%) |
| Gross Interest-Bearing Debt | 117.4 | 123.1 | (5%) |
| Net Debt to Capital Employed Ratio | 8.6% | 10.9% | Improved |
Operational Metrics:
- Equity Production: 1,998 mboe/day (Q1 2013) vs. 2,193 mboe/day (Q1 2012), a decrease of 9%.
- Average Liquids Price: NOK 582/bbl (Q1 2013) vs. NOK 646/bbl (Q1 2012), a decrease of 10%.
- Average Invoiced Gas Price: NOK 2.01/scm (Q1 2013) vs. NOK 2.26/scm (Q1 2012), a decrease of 11%.
Material Changes vs. Prior Period
- Revenue Decline: Total revenues decreased 17% to NOK 161.7 billion, primarily due to lower production volumes and reduced prices for both liquids and gas. The divestment of the Fuel & Retail segment in Q2 2012 also contributed to the year-over-year decrease.
- Production Disruptions: Equity production fell 9% due to natural decline, divestments (Kvitebjørn), and operational issues at Snøhvit, Troll, and Peregrino. The terrorist attack at In Amenas in Algeria reduced production by 13.6 mboe/day.
- Provisions: A significant provision of NOK 4.9 billion was recognized for onerous contracts related to the Cove Point terminal in the US, negatively impacting net operating income. NOK 4.1 billion was allocated to the Marketing, Processing and Renewable Energy segment.
- Financial Items: Net financial items resulted in a loss of NOK 5.8 billion, compared to a loss of NOK 0.5 billion in Q1 2012, driven by negative currency effects and losses on derivative instruments.
- Tax Rate: The effective tax rate increased to 80.0% from 73.3%, largely due to the onerous contract provisions where no tax asset was recognized.
Guidance, Outlook, and Risks
Outlook and Guidance:
- Capital Expenditure: Organic capital expenditures for 2013 are estimated at approximately USD 19 billion.
- Exploration: The company expects to complete around 50 wells in 2013 with an activity level of USD 3.5 billion.
- Production Impact: Planned maintenance is expected to negatively impact quarterly production by approximately 40 mboe/day in Q2 2013, with a total estimated negative impact of 45 mboe/day for the full year 2013.
Management Commentary:
CEO Helge Lund stated that while results were impacted by lower production and prices, the company continues to deliver industrial progress. Production in 2013 is expected to be lower than 2012, but the company remains on track for production growth towards 2020. The company maintains a solid balance sheet and a predictable dividend policy.
Risks and Contingencies:
- Security: An investigation is ongoing regarding the In Amenas terrorist attack to improve security and emergency preparedness.
- Market Risks: Results are highly sensitive to commodity prices (liquids and gas), exchange rates (USD/NOK), and production volumes.
- Operational Risks: Risks include deferral of gas production, gas off-take issues, timing of new capacity, and operational regularity.
Investor Verification Checklist
- Onerous Contract Provision: Verify the details and future cash flow implications of the NOK 4.9 billion provision for the Cove Point terminal.
- Production Recovery: Monitor the ramp-up status of fields affected by disruptions (Snøhvit, Troll, Peregrino) and the full resumption of operations at In Amenas.
- Commodity Price Sensitivity: Assess the impact of current oil and gas price trends on the company's guidance for the remainder of 2013.
- Exploration Success: Track the appraisal and development decisions for recent discoveries, particularly in Tanzania and the Gullfaks license.
- Capital Discipline: Confirm that organic capital expenditures remain within the estimated USD 19 billion range for 2013.