– Statoil has every reason to be satisfied with this result in terms of operation and reduction in costs and investments, says anaytiker Trond Omdal in Pareto Securities to Dagens Næringsliv Wednesday.
Oil Smell
Statoil meets poor profit expectations Wednesday, which nonetheless are powerful shaved from the first three months last year.
Background: Statoil chief: – We are of course not satisfied with
The backdrop is a significantly weaker oil prices, where North Sea oil in the period was 33, $ 9 a barrel on average, about $ 20 lower than during last year’s period.
This characterizes thus revenues, which is down by about 5.5 billion period from period. They are also more than one billion weaker than the market expected.
Shale oil brake
Omdal points out that the decline in profit is mainly due to weak prices, although Statoil large investments in high cost-oil production in the North America makes the international business continues to weigh on results.
Statoil chief Eldar Sætre is little satisfied that the international upstream business lost $ 800 million before tax.
– We are of course not satisfied, says Sætre and explains that is due to “the weak economy.”
Stronger “story”
Omdal deems however the company’s statements that the operating investments (capex) resolutions to fall sharply, as the most important in today’s messages.
Operating Investments are down nearly 30 percent from the first quarter last year, says Pareto analyst.
– This means that the company’s story of achieving cash flow neutrality after dividends next year an oil price of 60 dollars and 50 dollars a barrel in 2018, given increased credibility, said Omdal.
Mutes concern
He believes that the reduction in operating investments already next year will ensure a sustainable dividend by ordinary operations.
This assuming Pareto oil price forecast in 2016 at $ 60 a barrel regardless of utbytteaksjoprogrammet.
– The debt ratio of the company is still manageable. It has previously been a concern, says the analyst.
Production Dilemma
The decline in investment is due to the postponement of non-committed projects with high break-even prices, more efficient and standardized technical solutions to new projects, lower supplier margins and costs and currency effects, according to him.
Annual investments are down from $ 19.5 billion in 2014 to 14.7 billion last year – and is on track to fall below $ 12 billion in 2016, explains Omdal. Statoil held Wednesday its estimate of $ 13 billion.
– The ability to cut in investments is growing every year since investment cuts were implemented in 2014. But if you continue with this long enough production will plunge , he said.
Pareto analyst expects that when oil prices rise and stabilize above 60 dollars a barrel, investments and projects start increasing again.
Omdal will adjust upward price target the Statoil share to 140 million, and maintains a buy recommendation.
– Lofty
Citi’s first impression of Statoil report is that the first quarter was challenging, but better than expected, according to TDN Finans .
“despite headwinds from weaker European oil and gas prices and a stronger Norwegian krone, we are encouraged by the group’s strong operating performance with an upstream volume growth adjusted for the sale of two percent on an annual basis and continued progress in cost reductions, “writes Citi.
Citi analysts pointed out that Statoil share has evolved greatly since the beginning of the year, supported by higher oil prices, but also due to investors appreciate Statoil’s strong balance sheet compared with comparable companies.
– compromises
in addition draws Citi forward Statoil’s ability to counteract lower commodity prices through a combination of growth, cost cutting and better capital allocation.
“growth and lower capital intensiveness should deliver increased free cash flow and support real growth in shareholder returns over the medium term. We still see an attractive valuation of Statoil and affirm our buy recommendation, “writes Citi.
Swedbank believes Statoil report was a” non-event “, where results were in line with expectation in advance , Statoil’s guiding was not changed. The brokerage expects to make small negative changes in estimates after the report, according to TDN Finans.
– Brenner cash
Jefferies, who has an underperform recommendation on Statoil believes that its operating profit from the Norwegian shelf better than expected with supportive margins, as a result of lower costs, according to Bloomberg News, reports TDN Finans.
Bank of America Merrill Lynch, which also has underperform recommendation on the stock, points out that the cash flow from Statoil operations indicating they continue to “burn cash.”
The brokerage, however, points out that with lower operating investment market will probably see through this, according to TDN Finans.
Statoil rising markedly on the Oslo Stock Exchange, and is up 3.22 percent to 140, 90 kroner. The benchmark index is up 0.9 percent, which is the best among the leading European stock exchanges.
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