Statoil ASA’s (STO - Analyst Report) fourth-quarter 2013 adjusted earnings of 77 cents per ADR beat the Zacks Consensus Estimate of 64 cents. The quarterly results also improved from the year-earlier adjusted earnings of 72 cents per ADR.
For full-year 2013, the company registered a profit of $2.13 per ADR, missing the Zacks Consensus Estimate of $2.49 and plunging from the year-earlier earnings of $3.72 per ADR. The earnings miss was mainly due to lower oil and gas prices.
Adjusted net income after tax came in at NOK 11.0 billion (US$1.8 billion) in the fourth quarter versus the year-earlier level of NOK 15.1 billion (US$2.7 billion). In 2013, adjusted earnings after tax were NOK 46.4 billion (US$7.9 billion) compared with NOK 55.1 billion (US$9.5 billion) in 2012.
In the fourth quarter, total revenue decreased 3.3% year over year to NOK 148.4 billion ($24.5 billion), mainly due to lower liquids volumes. In 2013, total revenue dropped 8.7% year over year to NOK 611.4 billion (US$104.1 billion).
In the reported quarter, both equity and entitlement production decreased 4% annually due to the decline of mature fields.
Total oil and gas equity production averaged 1.945 million barrels of oil equivalent per day (MMBOE/d) in the fourth quarter compared with 2.032 MMBOE/d a year ago. Of the total quarterly output, 56% was oil and 44% was natural gas.
Total oil and gas entitlement production averaged 1.766 MMBOE/d during the quarter (53.2% oil and 46.8% natural gas) compared with 1.841 MMBOE/d in the year-earlier quarter.
In 2013, equity production decreased 3% annually to 1.940 MMBOE/d. Entitlement production also decreased 3% annually to 1.719 MMBOE/d.
The company's realized oil prices averaged $100.4 per barrel, down 2% year over year, while natural gas price realization averaged NOK 2.09 per standard cubic meter, down 1% from the prior year.
During the quarter, exploration expenditure (including capitalized exploration expenditure) was NOK 5.7 billion, up from NOK 4.9 billion in the fourth quarter of 2012. For 2013, operating cash flow was NOK 101.3 billion. Net debt to capital employed ratio increased from 10.9% to 14.0%, mainly due to an increase in net interest-bearing debt.
Management believes that the scheduled maintenance is likely to have a negative impact on quarterly equity production of about 10 MBoe/d in the first quarter of 2014. Most of this output is expected to come from the Norwegian Continental Shelf. For full-year 2014, equity production estimated at 55 MBoe/d is likely to be mostly liquids and be adversely impacted by maintenance. Statoil aims equity production of above 2.5 million barrels of oil equivalent in 2020. The growth is expected to come from new projects between 2014 and 2016, resulting in a CAGR of 2% to 3% for the period 2013 to 2016.
The second stream of projects, expected within 2016−2020, would likely lead to a CAGR of 3% to 4%. The company has projected organic capital expenditures of around $20 billion and exploration activity of about $3.5 billion for 2014. Around 50 wells are slated for completion by this year end.
Though we have a favorable stance on Statoil's long-term production growth based on its growing upstream presence in the emerging basins of the Caspian Sea, West Africa and the deepwater U.S. Gulf of Mexico, we remain cautious about its operating risk in Algeria.
Statoil carries a Zacks Rank #3 (Hold). However, there are other stocks in the oil and gas sector – Helmerich & Payne, Inc. (HP - Analyst Report), Swift Energy Co. and Cabot Oil & Gas Corporation (COG - Analyst Report) – which hold a Zacks Rank #1 (Strong Buy) and are expected to perform better.