Waiting out the slumpBecause they offer 'more flexibility,' Statoil scales back US onshore plays Mike Ellerd Petroleum News Bakken
Even though its underlying performance and cash flows were “solid” in 2014, Statoil Oil and Gas reported an income loss for the second consecutive quarter and amid “continuous market weakness and uncertainty,” the Norwegian multinational is trimming 10 percent off its 2015 capital expenditure budget, which in Statoil’s case amounts to US$2 billion in savings with a 2015 capex of US$18 billion.
However, the 10 percent capex cut, part of which is due in part to divestitures, is not uniform across all of the Norwegian multinational’s assets, and the U.S. onshore capex, which includes its Bakken assets in Montana and North Dakota, will see a greater reduction of between 20 and 25 percent.
“On the U.S. onshore, we are scaling down the activities,” Statoil President and CEO Eldar Saetre said in a Feb. 6 press conference. “That has to do with the fundamental view that we are in the downturn and that it might be more profitable to produce these barrels at a later point in time with a higher oil price.”
Statoil’s US onshore assets Three plays make up Statoil’s U.S. onshore assets: the Bakken, the Eagle Ford and the Marcellus. The greatest production comes from the Marcellus with fourth quarter output averaging 133,500 barrels of oil equivalent per day, although that output was 92 percent natural gas. The company’s fourth quarter Bakken production averaged 59,800 boepd. That output was primarily liquids at 91 percent. The Eagle Ford averaged 35,400 boepd in the fourth quarter which was 57 percent liquids and 43 percent gas.
Fourth quarter Marcellus production was up 3 percent, Bakken production was up 9 percent, and Eagle Ford production was up 4 percent over the third quarter.
2015 marks the second consecutive year that Statoil has cut back on spending on the three U.S. onshore plays. “In U.S. onshore, we are taking down the activity level - quite substantially - we had actually taken it down in 2014 compared to ’13 and we are taking it further down in 2015 - for this year,” Saetre said in the Feb. 6 press conference. However, too much shouldn’t be read into Statoil’s decision to pull back on spending on the U.S. onshore assets - they simply offer options that other plays in the portfolio don’t in an uncertain market environment. “We have more flexibility on the U.S. onshore business, but this is the level that we, at the moment, consider to be the most prudent taking into account the need to maintain a going business and also looking at the outlooks for the future.”
Key 4Q stats Worldwide, Statoil’s fourth quarter production averaged 2.103 million boepd in the fourth quarter, a 15 percent increase over third quarter output and an 8 percent increase over third quarter 2013. However, the fourth quarter increase is attributed primarily to a variety of start-up and ramp-up operations in the quarter. Going forward, Statoil is projecting production growth of 2 percent through 2016 and then 3 percent through 2018.
For the quarter, the company reported adjusted earnings of US$3.9 billion, down 13 from the third quarter and down 36 percent from fourth quarter, 2014. And Statoil reported a net income loss of US$1.3 billion for the quarter, the second consecutive quarter of negative net income for the company.
Overall, Statoil’s liquids production averaged US$66.90 per barrel in the third quarter and US$88.60 per barrel for the year. In 2013, the company’s liquids averaged US$100 per barrel for the year and US$100.04 in the fourth quarter.
Saetre officially takes over Saetre was named acting president and CEO after Helge Lund left Statoil to lead London-based BG Group in October. On Feb. 5, the day before the fourth quarter earnings press conference, Statoil’s board of directors named Saetre as the new president and CEO. Saetre has been with Statoil since 1980 and prior to being named acting president and CEO he served in a variety of positions, most recently as vice president for marketing, processing and renewable energy.
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