Statoil (STO) Incurs Loss In Q2, Weak Pricing Spoils Sport

Statoil (OL:STL) ASA’s (NYSE:STO) incurred adjusted loss of a penny per ADR in second-quarter 2016, while the Zacks Consensus Estimate was of 7 cents earnings. The quarterly results saw a massive deterioration from the year-earlier adjusted earnings of 30 cents. The debacle was primarily due to lower liquids and gas prices alongside lower refinery margins. This was only partially offset by good operational performance and reduced underlying operating costs. Total revenue plunged 39.1% year over year to $10.9 billion.

Operational Performance

In the reported quarter, total equity production of liquids and gas rose 5% year over year to 1,959 million barrels of oil equivalent per day (MMBOE/d). This was mainly due to stronger operational performance and new production from ramp-up and start-up on various fields. Expected natural decline on mature fields and lower ownership shares from divestments partially offset the increase.

In the second quarter, Statoil made two discoveries on the Norwegian continental shelf (NCS) and one in Canada. As of Jun 30, 2016, Statoil had completed 15 wells. Adjusted exploration expenses in the reported quarter were $423 million, down from $524 million in the second quarter of 2015.

In the reported quarter, total entitlement production of liquids and gas rose 6% to 1,814 MMBOE/d. The increase was due to higher equity production and a beneficial effect from production sharing agreements (PSA effect).

Financials

Cash flow from operations were $3,349 million in the first half of 2016 compared with $6,278 million in the same period last year. In light of low liquids and gas prices in the quarter, Statoil maintained a strong capital structure, and net debt to capital employed at the end of the quarter was 31.2%. Organic capital expenditure was $5.3 billion in the first six months of 2016.

Outlook

Statoil lowered its capital expenditure guidance from $13 billion to $12 billion and its exploration guidance from $2 billion to $1.8 billion. Organic production growth for the period 2014–2017 is expected at a CAGR of about 1% from a 2014 level rebased for divestments. Organic capital expenditures for 2016 are estimated at around $12 billion.

Zacks Rank

Statoil currently carries a Zacks Rank #3 (Hold). Some stocks worth considering from the same space are Vanguard Natural Resources, LLC (NASDAQ:VNR) , QEP Resources, Inc. (NYSE:QEP) and McDermott International Inc. (NYSE:MDR) . Each of these stocks sports a Zacks Rank #1 (Strong Buy).