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Equinor — Interim / Quarterly Report 2017
Feb 7, 2017
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Interim / Quarterly Report
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6-K 1 sto4q16-mda_6k.htm STATOIL FOURTH QUARTER 2016 REPORT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
7 February, 2017
Commission File Number 1-15200
Statoil ASA
(Translation of registrant’s name into English)
FORUSBEEN 50, N-4035, STAVANGER, NORWAY
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F X Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):_____
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):_____
This Report on Form 6-K shall be deemed to be filed and incorporated by reference in the Registration Statements on Form F-3 (File No. 333-211232) and Form S-8 (File No. 333-168426) and to be a part thereof from the date on which this report is furnished, to the extent not superseded by documents or reports subsequently filed or furnished.
This document includes portions from the previously published results announcement of Statoil ASA as of, and for the twelve months ended 31 December 2016, as revised to comply with the requirements of Item 10(e) of Regulation S-K regarding non-GAAP financial information promulgated by the U.S. Securities and Exchange Commission. This document does not update or otherwise supplement the information contained in the previously published results announcement.
2016 fourth quarter results
Statoil reports a negative net operating income of USD 1.897 billion in the fourth quarter of 2016. The net income was negative USD 2.785 billion.
The fourth quarter results were characterised by:
· Solid results from the Norwegian continental shelf with high production regularity and the in a decade
· Strong marketing and trading results
· Negative results from the international segment, impacted by expensed exploration wells and high maintenance activity
· Cost improvements of USD 3.2 billion, USD 700 million above target
· High impairment charges, mainly as a result of reduced long term price assumptions
“In the current price environment, we delivered solid financial results from our Norwegian operations and from our marketing and trading activity. Our result was impacted by the negative result from our international operations due to expensed exploration wells, high maintenance activity and impairment charges. We delivered strong production and solid operational performance across all segments in the quarter”, says Eldar Sætre, President and CEO of Statoil ASA.
“We achieved strong results from our improvement programme, 700 million dollars above our target of 2.5 billion dollars in annual savings. These are lasting effects, and we target an additional 1 billion dollars in 2017”, says Sætre.
Net operating income was negative USD 1.897 billion in the fourth quarter compared to positive USD 152 million in the same period of 2015. The result was impacted by USD 2.3 billion in net impairment charges mainly due to reduced long term price assumptions, and negative change in fair value of derivatives. In the quarter we have expensed exploration wells capitalised in previous periods in the amount of USD 260 million, contributing to the reduction together with lower European gas prices. Higher liquids prices, strong delivery on the improvement programme and solid operational performance contributed positively to the results. Net income was negative USD 2,785 million in the fourth quarter, down from negative USD 1,122 million in the same period last year.
Statoil delivered equity production of 2,095 mboe per day in the fourth quarter compared to 2,046 mboe per day in the same period in 2015. The increase was primarily due to ramp-up of new fields and strong operational performance. Excluding divestments, the underlying production growth was 2% compared to the fourth quarter last year.
As of year-end 2016, Statoil had completed 23 exploration wells. Exploration expenses in the quarter were USD 1,435 million, up from USD 656 million in the fourth quarter of 2015.
Cash flow from operations amounted to USD 10.7 billion after taxes paid for the full year of 2016 compared to USD 12.3 billion last year. For the full year 2016, net operating income was USD 80 million and net income for the year was negative USD 2.902 billion.
The board of directors will propose to the annual general meeting (AGM) to maintain a dividend of USD 0.2201 per ordinary share for the fourth quarter, and continue the scrip programme giving shareholders the option to receive the dividend for the fourth quarter in cash or newly issued shares in Statoil at a 5% discount.
The twelve month average Serious incident frequency (SIF) was 0.8 at year-end 2016, compared to 0.6 last year. Statoil has presented investigation reports following serious incidents in the quarter and initiated measures to improve safety results.
Capital Markets Update
Today, Statoil presents its strategy to capitalise on high value opportunities to the capital market, focusing on three priorities:
· Investing in our next generation portfolio with radically improved break evens
· Maintaining financial capacity, with a clear funding visibility and the ability to be cash flow positive at USD 50/boe in 2017
· Pursuing our sharpened high value, low carbon strategy
For 2017 Statoil targets additional improvements of USD 1 billion on top of the already achieved USD 3.2 billion.
“We have reset our cost base, transformed our opportunity set, and we continue to chase improvements. We have the financial capacity and are ready to invest in our next generation portfolio with radically improved break evens. With a sharpened high value, low carbon strategy, Statoil is well positioned for the long term and even more value driven in everything we do”, says Sætre.
Statoil has set clear principles for development of a distinct and competitive portfolio. Statoil will develop long-term value on the Norwegian continental shelf, deepen in core areas and develop new growth options internationally, and grow value creation in its marketing and midstream operations. Statoil is one of the world’s most carbon-efficient producers of oil and gas, and will develop its low carbon advantage further. In addition, Statoil is creating a material industrial position within new energy, with the potential to constitute around 15-20% of investments by 2030.
Furthermore, Statoil announces its updated outlook for 2017-2020:
· Statoil will invest around USD 11 billion organically in 2017
· The exploration activity in 2017 will be around USD 1.5 billion
| Quarters — Q4 2016 | Q3 2016 | Q4 2015 | Change — Q4 on Q4 | | Full year — 2016 | 2015 | Change | | --- | --- | --- | --- | --- | --- | --- | --- | | (1,897) | 737 | 152 | N/A | Net operating income (USD million) | 80 | 1,366 | (94%) | | (2,785) | (427) | (1,122) | >(100%) | Net income (USD million) | (2,902) | (5,169) | 44% | | 2,095 | 1,805 | 2,046 | 2% | Total equity liquids and gas production (mboe per day) [4] | 1,978 | 1,971 | 0% | | 44 | 40 | 38 | 14% | Group average liquids price (USD/bbl) [1] | 38 | 46 | (18%) |
FOURTH QUARTER 2016 GROUP REVIEW
Solid operational performance and strong deliveries on the improvement programme contributed positively to the fourth quarter financial results. The results were impacted positively by the development in oil price and marketing and trading results, while the reduced European gas prices and significant impairments due to revision of long-term price assumptions, impacted the results negatively.
Total equity liquids and gas production [4] was 2,095 mboe per day in the fourth quarter of 2016 , up 2% compared to fourth quarter of 2015 mainly due to new production from ramp-up and start-up on various fields, effects from redetermination and stronger operational performance. Higher planned maintenance activity and expected natural decline partially offset the increase.
Total entitlement liquids and gas production [3] was up by 1 % to 1,934 mboe per day compared to 1,921 mboe per day in the fourth quarter of 2015 due to the increase in equity production as described above, partially offset by a negative effect from production sharing agreements (PSA effect) The PSA effect was 122 mboe per day in the fourth quarter of 2016 compared to 83 mboe per day in the fourth quarter of 2015.
Net operating income was negative USD 1,897 million in the fourth quarter of 2016, compared to net operating income of USD 152 million in the fourth quarter of 2015. The decrease was primarily due to higher net impairment charges related to various assets and increased losses from reflecting the fair value of derivatives. A decline in European gas prices, lower refinery throughput volumes due to maintenance and increased exploration costs added to the decrease. Strong marketing and trading margins, higher liquids and US gas prices and higher volumes sold partially offset the decrease.
In the fourth quarter of 2016, net operating income was negatively affected by net impairment charges of USD 2,298 million mainly due to reduced long-term price assumptions with the largest effect being on unconventional onshore assets in North America, and unrealised losses on derivatives and inventory hedge contracts of USD 765 million. For further information on the impairment charges, see note 2 Segments to the Condensed interim financial statements.
In the fourth quarter of 2015, net operating income was negatively affected by net impairments charges related to various assets of USD 1,185 million and provisions for disputes of USD 559 million.
Operating and administrative expenses increased by 6% to USD 2,667 million in the fourth quarter of 2016 mainly due provisions and increased production costs from new fields coming on stream . This was partially offset by cost reductions due to results from the on-going cost improvement initiatives and reduced transportation costs.
Depreciation, amortisation and net impairment losses increased by 7% to USD 4,261 million in the fourth quarter of 2016 , mainly due to higher net impairments in the fourth quarter of 2016. Depreciation cost was higher due to production start-up and ramp-up on new fields and the NOK/USD exchange rate development. This was to a large extent offset by reduced depreciation cost mainly due to maintenance activities and higher reserves estimates.
Exploration expenses increased by USD 955 million to USD 1,435 million in the fourth quarter of 2016 mainly due to higher impairments and a higher portion of capitalised expenditures from earlier years being expensed this quarter. A lower capitalisation rate in the fourth quarter of 2016 added to the increase, and was only partially offset by lower exploration activity in the fourth quarter of 2016.
Net financial items amounted to a loss of USD 838 million in the fourth quarter of 2016 , compared to a loss of USD 625 million in the fourth quarter of 2015 . The negative change of USD 213 million is mainly due to increased loss on derivatives related to our long term debt portfolio of USD 404 million. This is partially offset by gain from currency effects of USD 10 million in the fourth quarter of 2016, compared to a currency loss of USD 249 million in the fourth quarter of 2015.
Income taxes were USD 50 million in the fourth quarter of 2016. The effective tax rate was negative 1,8%.
In the fourth quarter of 2015, income taxes were USD 649 million and the effective tax rate was more than 100%.
Please refer to note 5 Income tax to the condensed interim financial statements for information related to income taxes.
| Quarters — Q4 2016 | Q3 2016 | Q4 2015 | Change — Q4 on Q4 | Condensed income statement under IFRS — (unaudited, in USD million) | Full year — 2016 | 2015 | Change | | --- | --- | --- | --- | --- | --- | --- | --- | | 12,756 | 12,106 | 13,093 | (3%) | Total revenues and other income | 45,873 | 59,642 | (23%) | | (6,290) | (5,793) | (5,974) | 5% | Purchases [net of inventory variation] | (21,505) | (26,254) | (18%) | | (2,667) | (2,453) | (2,516) | 6% | Operating and administrative expenses | (9,787) | (11,433) | (14%) | | (4,261) | (2,466) | (3,972) | 7% | Depreciation, amortisation and net impairment losses | (11,550) | (16,715) | (31%) | | (1,435) | (656) | (480) | >100% | Exploration expenses | (2,952) | (3,872) | (24%) | | (1,897) | 737 | 152 | N/A | Net operating income | 80 | 1,366 | (94%) | | (838) | (76) | (625) | (34%) | Net financial items | (258) | (1,311) | 80% | | (2,735) | 661 | (473) | >(100%) | Income before tax | (178) | 55 | N/A | | (50) | (1,088) | (649) | (92%) | Income tax | (2,724) | (5,225) | 48% | | (2,785) | (427) | (1,122) | >(100%) | Net income | (2,902) | (5,169) | 44% |
Net income in the fourth quarter of 2016 was negative USD 2,785 million, further down from negative USD 1,122 million in the fourth quarter of 2015 . The decrease was mainly due to the decrease in net operating income explained above, a higher loss on net financial items partially offset by lower income taxes.
Proved reserves at the end of 2016 were 5,013 mmboe, a decrease compared to 5,060 mmboe at the end of 2015. In 2016, a total of 653 mmboe were added through revisions, extensions, discoveries and acquisitions. The reductions in proved reserves were related to sale of reserves in place of 27 mmboe and entitlement production of 673 mmboe. The decrease in reserves in 2016 was partially compensated for by positive revisions on several of our producing fields due to good production performance and continued IOR efforts, sanctioning new field development projects in Norway and US offshore and continued drilling in our US onshore assets Bakken, Eagle Ford and Marcellus.
The reserve replacement ratio (RRR) was 93% in 2016 compared to 55% in 2015. The RRR measures the proved reserves added to the reserve base and includes the effects of sales and purchases, relative to the amount of oil and gas produced. The organic reserves replacement ratio was 87% compared to 88% in 2015 and the average three-year replacement ratio (including the effects of sales and purchases), was 70% at the end of 2016 compared to 81% in 2015.
Total cash flows were reduced by USD 3,658 million compared to the fourth quarter of 2015.
Cash flows provided by operating activities were reduced by USD 191 million compared to the fourth quarter of 2015. The decrease was mainly due to reduced liquids and gas prices and an increase in working capital, partially offset by lower taxes paid.
Cash flows used in investing activities were increased by USD 2,687 million compared to the fourth quarter of 2015. The increase was mainly due to significantly lower cash flow from financial investments and higher capital expenditures.
Cash flows used in financing activities were increased by USD 779 million compared to the fourth quarter of 2015. The increase is mainly due to decreased cash flow from collateral received related to derivatives, offset by reduced cash dividend paid and net new debt.
Full year 2016
Net operating income was USD 80 million for the full year of 2016 compared to USD 1,366 million for the full year of 2015. The significant decrease was primarily driven by the drop in liquids and gas prices, lower refinery margins and lower gains on sale of assets. The decrease was partially offset by lower net impairment charges in 2016 compared to 2015 and a reduction in operating, depreciation and exploration costs.
In 2016, net operating income was negatively impacted by net impairment charges of USD 2,317 million mainly due to reduced long-term price assumptions with the largest effect being on unconventional onshore assets in North America, and unrealised losses on derivatives and inventory hedge contracts of USD 1,098 million.
In 2015, net operating income was negatively impacted by net impairment charges of USD 8,167 million and provisions for disputes of USD 639 million. Gain from sale of assets of USD 1,750 million mainly related to the divestment of the Shah Deniz project impacted net operating income positively.
Operating and administrative expenses decreased by 14% to USD 9,787 million in 2016, mainly as a results of the on-going cost improvement initiatives and the NOK/USD exchange rate development. Lower operation and maintenance costs, decreased diluent cost and reduced transportation costs added to the decrease. Higher provisions, ramp-up and start-up of production on new fields partially offset the decrease in operating costs.
Depreciation, amortisation and net impairment losses decreased by 31% to USD 11,550 million in 2016, mainly due to lower impairment of assets in 2016. Depreciation expenses decreased , mainly due to lower depreciation on mature fields, the NOK/USD exchange rate development in 2016 and a net increase in proved reserves estimates . The decrease in depreciation was partially offset by start-up and ramp-up of production on several fields.
Exploration expenses decreased by 24 % to USD 2,952 mainly due to lower impairments in 2016. Significant lower drilling activity and less expensive wells drilled in 2016, added to the decrease. This was partially offset by a higher portion of expenditures capitalised in previous years being expensed in 2016, and a lower capitalisation rate on exploration expenditures incurred in 2016 compared to 2015.
Net financial items amounted to a loss of USD 258 million in 2016, compared to a loss of USD 1,311 in 2015. The positive change of USD 1,053 million is mainly due to gain on derivatives related to our long term debt portfolio of USD 470 million for 2016, compared to a loss of USD 491 million for 2015.
Income taxes were USD 2,724 million in 2016, and the effective tax rate was more than 100%.
Please refer to note 5 Income tax to the condensed interim financial statements for information related to income taxes.
Net income in 2016 was negative USD 2,902 million compared to negative USD 5,169 million in 2015. The increase was mainly due to lower income taxes, lower loss on net financial items and the decrease in net operating income explained above.
Total cash flows were reduced by USD 1,769 million compared to the full year 2015.
Cash flows provided by operating activities were reduced by USD 4,594 million compared to the full year 2015. The decrease was mainly due to reduced liquids and gas prices, partially offset by lower taxes paid.
Cash flows used in investing were reduced by USD 4,055 million compared to the full year 2015. The decrease was due to significantly lower capital expenditures, lower financial investments and reduced proceeds from sale of assets.
Cash flows used in financing activities increased by USD 1,230 million compared to the full year 2015. The change is mainly due to reduced cash flow from finance debt, partially offset by reduced cash dividend due to the scrip dividend.
OUTLOOK
· Statoil intends to continue to mature its large portfolio of exploration assets and estimates a total exploration activity level of around USD 1.5 billion for 2017, excluding signature bonuses
· Statoil expects to achieve an additional USD 1 billion in efficiency improvements in 2017 with a total of USD 4.2 billion.
· Statoil’s ambition is to keep the unit of production cost in the top quartile of its peer group
· For the period 2016 – 2020, organic production growth [7] is expected to come from new projects resulting in around 3% CAGR (Compound Annual Growth Rate)
· The equity production for 2017 is estimated to be around 4-5% above the 2016 level
· Scheduled maintenance activity is estimated to reduce quarterly production by approximately 10 mboe per day in the first quarter of 2017. In total, maintenance is estimated to reduce equity production by around 30 mboe per day for the full fiscal year 2017, which is lower than the 2016 impact
· Indicative effects from Production Sharing Agreement (PSA-effect) and US royalties are estimated to be around 150 mboe per day in 2017 based on an oil price of USD 40 per barrel and 165 mboe per day based on an oil price of USD 70 per barrel [4]
· Deferral of production to create future value, gas off-take, timing of new capacity coming on stream and operational regularity represent the most significant risks related to the foregoing production guidance
These forward-looking statements reflect current views about future events and are, by their nature, subject to significant risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. For further information, see section Forward-Looking Statements .
DEVELOPMENT AND PRODUCTION NORWAY
Fourth quarter 2016 review
Average daily production of liquids and gas increased by 5% to 1,374 mboe per day in the fourth quarter of 2016 compared to the fourth quarter of 2015. The increase was mainly due to the effect of redetermination Ormen Lange, ramp- up of new fields and stronger operational performance at several fields. Lower gas off-take at Troll and Oseberg and expected natural decline on mature fields partially offset the increase.
Net operating income for Development and Production Norway (DPN) was USD 792 million compared to USD 1,704 million in the fourth quarter of 2015. Net impairments of USD 829 million negatively impacted net operating income. In the fourth quarter of 2015, net operating income was negatively impacted by net impairments of assets of USD 350 million.
Operating and administrative expenses decreased mainly as a result of on-going cost improvement initiatives, less well maintenance and cease of production at Volve and Njord/Hyme.
Depreciation, amortisation and net impairment losses increased mainly due to higher net impairments and the NOK/USD exchange rate development.
Exploration expenses increased mainly due to acquisition of seismic and higher portion of exploration expenditure capitalised in earlier years.
| Quarters — Q4 2016 | Q3 2016 | Q4 2015 | Change — Q4 on Q4 | Income statement under IFRS — (in USD million) | Full year — 2016 | 2015 | Change | | --- | --- | --- | --- | --- | --- | --- | --- | | 3,628 | 2,882 | 4,087 | (11%) | Total revenues and other income | 13,077 | 17,339 | (25%) | | (525) | (692) | (600) | (12%) | Operating and administrative expenses | (2,547) | (3,223) | (21%) | | (2,177) | (1,077) | (1,666) | 31% | Depreciation, amortisation and net impairment losses | (5,698) | (6,379) | (11%) | | (134) | (53) | (117) | 15% | Exploration expenses | (383) | (576) | (34%) | | 792 | 1,060 | 1,704 | (54%) | Net operating income | 4,451 | 7,161 | (38%) |
Full year 2016
Net operating income for DPN was USD 4,451 million compared to USD 7,161 million in the full year of 2015. Net impairments of USD 829 million negatively impacted net operating income. In 2015, net operating income was negatively impacted by net impairment of assets of USD 1,074 million and lower fair value of derivatives of USD 338 million.
Total revenues and other income decreased by 25%, primarily driven by the drop in liquids and gas prices.
Operating and administrative expenses decreased mainly as a results of on-going cost improvement initiatives and the NOK/USD exchange rate development.
Depreciation, amortisation and net impairment losses decreased mainly due to lower impairments, lower depreciation on mature fields, increased proved reserves on certain fields, the NOK/USD exchange rate development and decreased asset retirement obligations. The decrease was partially offset by ramp-up of new fields.
Exploration expenses decreased mainly due to lower drilling activity and more expensive wells being drilled in 2015. The decrease was partially offset by a lower portion of current exploration expenditures being capitalised.
DEVELOPMENT AND PRODUCTION INTERNATIONAL
Fourth quarter 2016 review
Average equity production of liquids and gas in the fourth quarter of 2016 decreased by 2% to 720 mboe per day compared to the fourth quarter of 2015. Main downward drivers were planned maintenance activity and expected natural decline on various partner operated fields, as well as operational challenges. These decreases were partially offset by start-up and ramp-up on several fields including Corrib and In Salah Southern Fields.
Average daily entitlement production of liquids and gas in the fourth quarter of 2016 decreased by 9% to 559 mboe per day compared to the fourth quarter of 2015. The decrease was due to lower equity production and a negative effect from production sharing agreements (PSA effect). The PSA effect was 122 mboe per day in the fourth quarter of 2016 compared to 83 mboe per day in the fourth quarter of 2015.
Net operating income for Development and Production International (DPI) was negative USD 2,610 million in the fourth quarter of 2016, compared to negative USD 2,031 million the fourth quarter of 2015 . In the fourth quarter of 2016, net operating income was negatively impacted by n et impairment losses of USD 1,838 million, mainly due to reduced long-term price assumptions with the largest effect being on unconventional onshore assets in North America. In the fourth quarter of 2015, net operating income was negatively impacted by net impairment losses of USD 831 million, a provision for a dispute of USD 331 million and onerous contracts provisions of USD 156 million .
Operating and administrative expenses increased due to higher operating and transportation costs for new fields coming on stream. The increases were partially offset by lower operating and maintenance costs for various fields, in addition to lower diluent expenses.
Depreciation, amortisation and net impairment losses increased primarily due to higher net impairment losses and production start-up and ramp-up of new fields. Higher reserves estimates partially offset the increase in depreciation.
Exploration expenses increased in the fourth quarter of 2016, primarily due to higher impairments and higher portion of wells capitalised in previous periods being expensed this quarter, partially offset by lower drilling activity and lower well costs in the fourth quarter of 2016 .
| Quarters — Q4 2016 | Q3 2016 | Q4 2015 | Change — Q4 on Q4 | Income statement under IFRS — (in USD million) | Full year — 2016 | 2015 | Change | | --- | --- | --- | --- | --- | --- | --- | --- | | 1,974 | 1,901 | 1,209 | 63% | Total revenues and other income | 6,657 | 8,200 | (19%) | | (924) | (732) | (702) | 32% | Operating and administrative expenses | (2,923) | (3,391) | (14%) | | (2,357) | (995) | (2,168) | 9% | Depreciation, amortisation and net impairment losses | (5,510) | (10,231) | (46%) | | (1,301) | (603) | (363) | >100% | Exploration expenses | (2,569) | (3,296) | (22%) | | (2,610) | (430) | (2,031) | (28%) | Net operating income | (4,352) | (8,729) | 50% |
Full year 2016
Net operating income for DPI was negative USD 4,352 million in the full year of 2016 compared to negative USD 8,729 million in the full year of 2015. Net impairment losses of USD 1,557 million negatively impacted net operating income in the full year of 2016. This was mainly due to reduced long-term price assumptions with the largest effect being on unconventional onshore assets in North America. In the full year of 2015, n et operating income was negatively impacted by net impairment losses of USD 7,517 million, net provisions for disputes of USD 639 million and onerous contracts provisions of USD 156 million. This was partially offset by a gain on sale of assets of USD 1,166 million related to the divestment of the Shah Deniz project .
T otal revenues and other income decreased due to lower realised oil and gas prices partially offset by slightly higher entitlement production.
Operating and administrative expenses decreased primarily driven by lower operation and maintenance costs, in addition to lower diluent expenses. The decreases were partially offset by operating and transportation costs for new fields coming on stream.
Depreciation, amortisation and net impairment losses decreased primarily due to lower net impairment losses in the full year of 2016 compared to the full year of 2015. Higher reserves estimates added to the decrease. S tart-up and ramp-up of production from new fields and effects from reversal of impairments partially offset the decrease in depreciation.
Exploration expenses decreased primarily due to lower impairments, lower drilling activity and lower well costs in 2016. Higher portion of wells capitalised in previous periods being expensed this year and a lower capitalisation rate in 2016 partially offset the decrease.
MARKETING, MIDSTREAM AND PROCESSING
Fourth quarter 2016 review
Natural gas sales volumes in the fourth quarter of 2016 amounted to 14.9 billion standard cubic meters (bcm), up 10% compared to the fourth quarter of 2015. The increase was due to higher Statoil entitlement production mainly on the Norwegian continental shelf and higher volumes of third party. Of the total gas sales in the fourth quarter of 2016, entitlement gas was 12.5 bcm compared to 11.9 bcm in the fourth quarter of 2015.
Average invoiced European natural gas sales price [8] strengthened during the quarter due to tightened market situation, however the quarterly average ended 14% lower than fourth quarter last year. Average invoiced North American piped gas sales price [8] increased by 27% due to a general increase in Henry Hub prices.
Net operating income for Marketing, Midstream and Processing (MMP) was USD 264 million compared to USD 474 million in the fourth quarter of 2015. Net operating income was negatively impacted by changes in fair value of derivatives and market value of storage and physical contracts, with the total of USD 598 million. This is partially offset by a net reversal of impairment charges of USD 368 million mainly related to a refinery asset. In the fourth quarter of 2015, net operating income was impacted by loss on operational storage of USD 164 million, offset by gain on sale of assets.
Operating and administrative expenses increased mainly due to provisions for onerous contracts, partially offset by reduced transport cost.
| Quarters — Q4 2016 | Q3 2016 | Q4 2015 | Change — Q4 on Q4 | Income statement under IFRS — (in USD million) | Full year — 2016 | 2015 | Change | | --- | --- | --- | --- | --- | --- | --- | --- | | 12,790 | 11,670 | 13,090 | (2%) | Total revenues and other income | 44,979 | 58,106 | (23%) | | (11,594) | (10,147) | (11,362) | 2% | Purchases [net of inventory variation] [6] | (39,696) | (50,547) | (21%) | | (1,234) | (1,079) | (1,157) | 7% | Operating and administrative expenses | (4,439) | (4,664) | (5%) | | 303 | (368) | (98) | >(100%) | Depreciation, amortisation and net impairment losses | (221) | 37 | >(100%) | | 264 | 76 | 474 | (44%) | Net operating income | 623 | 2,931 | (79%) |
Full year 2016
Net operating income for MMP was USD 623 million in the full year of 2016 compared to USD 2,931 million in the full year of 2015. Lower fair value of certain derivatives of USD 713 million and change in market value of storage and future physical contracts of USD 360 million, offset by operational storage effects of USD 228 million and a net reversal of impairment charges of USD 74 million related to a refinery asset negatively impacted net operating income. Lower refinery margins compared to the solid results in the full year of 2015, and reduced margins for gas marketing and trading, added to the decrease. N et operating income in the full year of 2015 was positively impacted by net reversal of impairment charges of USD 421 million and gain on sale of assets of USD 174 million. Net operating income was negatively impacted by onerous contract provision of USD 197 million.
Total revenues and other income decreased primarily driven by lower oil- and gas market prices.
Purchases [net of inventory variation] decreased due to the same factors as described for revenues above
Operating and administrative expenses decreased as a result of lower transportation cost and as an effect from the on-going cost improvement initiative.
CONDENSED INTERIM FINANCIAL STATEMENTS
Fourth quarter 2016
With effect from the first quarter of 2016 the financial statements are presented in US dollars (USD). Comparative data has been converted from Norwegian kroner (NOK) to USD accordingly.
CONSOLIDATED STATEMENT OF INCOME
| Quarters — Q4 2016 | Q3 2016 | Q4 2015 | (unaudited, in USD million) | 2016 | Full year — 2015 |
|---|---|---|---|---|---|
| 12,696 | 12,092 | 12,809 | Revenues | 45,688 | 57,900 |
| (58) | (36) | (35) | Net income from equity accounted investments | (119) | (29) |
| 118 | 51 | 320 | Other income | 304 | 1,770 |
| 12,756 | 12,106 | 13,093 | Total revenues and other income | 45,873 | 59,642 |
| (6,290) | (5,793) | (5,974) | Purchases [net of inventory variation] | (21,505) | (26,254) |
| (2,439) | (2,319) | (2,246) | Operating expenses | (9,025) | (10,512) |
| (228) | (135) | (270) | Selling, general and administrative expenses | (762) | (921) |
| (4,261) | (2,466) | (3,972) | Depreciation, amortisation and net impairment losses | (11,550) | (16,715) |
| (1,435) | (656) | (480) | Exploration expenses | (2,952) | (3,872) |
| (1,897) | 737 | 152 | Net operating income | 80 | 1,366 |
| (838) | (76) | (625) | Net financial items | (258) | (1,311) |
| (2,735) | 661 | (473) | Income before tax | (178) | 55 |
| (50) | (1,088) | (649) | Income tax | (2,724) | (5,225) |
| (2,785) | (427) | (1,122) | Net income | (2,902) | (5,169) |
| (2,791) | (432) | (1,126) | Attributable to equity holders of the company | (2,922) | (5,192) |
| 6 | 5 | 4 | Attributable to non-controlling interests | 20 | 22 |
| (0.87) | (0.14) | (0.35) | Basic earnings per share (in USD) | (0.91) | (1.63) |
| (0.87) | (0.14) | (0.35) | Diluted earnings per share (in USD) | (0.91) | (1.63) |
| 3,219 | 3,199 | 3,178 | Weighted average number of ordinary shares outstanding (in | ||
| millions) | 3,195 | 3,179 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| Quarters — Q4 2016 | Q3 2016 | Q4 2015 | (unaudited, in USD million) | 2016 | Full year — 2015 |
|---|---|---|---|---|---|
| (2,785) | (427) | (1,122) | Net income | (2,902) | (5,169) |
| (294) | (24) | 1,013 | Actuarial gains (losses) on defined benefit pension plans | (503) | 1,599 |
| 71 | 7 | (290) | Income tax effect on income and expenses recognised in OCI | 129 | (461) |
| (223) | (17) | 722 | Items that will not be reclassified to the Consolidated | ||
| statement of income | (374) | 1,138 | |||
| (1,552) | 695 | (656) | Currency translation adjustments | 17 | (3,976) |
| (1,552) | 695 | (656) | Items that may be subsequently reclassified to the Consolidated statement | ||
| of income | 17 | (3,976) | |||
| (1,775) | 678 | 66 | Other comprehensive income | (357) | (2,838) |
| (4,560) | 252 | (1,056) | Total comprehensive income | (3,259) | (8,007) |
| (4,566) | 247 | (1,060) | Attributable to the equity holders of the company | (3,279) | (8,030) |
| 6 | 5 | 4 | Attributable to non-controlling interests | 20 | 22 |
CONSOLIDATED BALANCE SHEET
| At 31 December | At 30 September | At 31 December | |
|---|---|---|---|
| (unaudited, in USD million) | 2016 | 2016 | 2015 |
| ASSETS | |||
| Property, plant and equipment | 59,556 | 66,409 | 62,006 |
| Intangible assets | 9,243 | 8,406 | 9,452 |
| Equity accounted investments | 2,245 | 2,082 | 824 |
| Deferred tax assets | 2,195 | 1,658 | 2,022 |
| Pension assets | 839 | 1,285 | 1,284 |
| Derivative financial instruments | 1,819 | 3,723 | 2,697 |
| Financial investments | 2,344 | 2,488 | 2,336 |
| Prepayments and financial receivables | 893 | 985 | 967 |
| Total non-current assets | 79,133 | 87,035 | 81,588 |
| Inventories | 3,227 | 2,966 | 2,502 |
| Trade and other receivables | 7,839 | 5,986 | 6,671 |
| Derivative financial instruments | 492 | 350 | 542 |
| Financial investments | 8,211 | 9,212 | 9,817 |
| Cash and cash equivalents | 5,090 | 8,038 | 8,623 |
| Total current assets | 24,859 | 26,553 | 28,154 |
| Assets classified as held for sale | 537 | 0 | 0 |
| Total assets | 104,530 | 113,587 | 109,742 |
| EQUITY AND LIABILITIES | |||
| Shareholders' equity | 35,072 | 40,050 | 40,271 |
| Non-controlling interests | 27 | 36 | 36 |
| Total equity | 35,099 | 40,086 | 40,307 |
| Finance debt | 27,999 | 28,603 | 29,965 |
| Deferred tax liabilities | 6,427 | 7,784 | 7,421 |
| Pension liabilities | 3,380 | 3,405 | 2,979 |
| Provisions | 13,406 | 15,289 | 12,422 |
| Derivative financial instruments | 1,420 | 1,138 | 1,285 |
| Total non-current liabilities | 52,633 | 56,220 | 54,073 |
| Trade and other payables | 9,666 | 9,457 | 9,332 |
| Current tax payable | 2,184 | 2,256 | 2,740 |
| Finance debt | 3,674 | 4,659 | 2,326 |
| Dividends payable | 712 | 708 | 700 |
| Derivative financial instruments | 508 | 202 | 264 |
| Total current liabilities | 16,744 | 17,282 | 15,362 |
| Liabilities directly associated with the assets classified as | |||
| held for sale | 54 | 0 | 0 |
| Total liabilities | 69,431 | 73,502 | 69,435 |
| Total equity and liabilities | 104,530 | 113,587 | 109,742 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
| (unaudited, in USD million) | Share capital | Additional paid-in capital | Retained earnings | Currency translation adjustments | Shareholders' equity | Non-controlling interests | Total equity | | --- | --- | --- | --- | --- | --- | --- | --- | | At 31 December 2014 | 1,139 | 5,714 | 45,677 | (1,305) | 51,225 | 57 | 51,282 | | Net income for the period | | | (5,192) | | (5,192) | 22 | (5,169) | | Other comprehensive income | | | 1,138 | (3,976) | (2,838) | | (2,838) | | Total comprehensive income | | | | | | | (8,007) | | Dividends | | | (2,930) | | (2,930) | | (2,930) | | Other equity transactions | | 6 | (0) | | 6 | (43) | (38) | | At 31 December 2015 | 1,139 | 5,720 | 38,693 | (5,281) | 40,271 | 36 | 40,307 | | At 31 December 2015 | 1,139 | 5,720 | 38,693 | (5,281) | 40,271 | 36 | 40,307 | | Net income for the period | | | (2,922) | | (2,922) | 20 | (2,902) | | Other comprehensive income | | | (374) | 17 | (357) | | (357) | | Total comprehensive income | | | | | | | (3,259) | | Dividends 1) | 17 | 887 | (2,824) | | (1,920) | | (1,920) | | Other equity transactions | | 1 | 0 | | 2 | (30) | (28) | | At 31 December 2016 | 1,156 | 6,607 | 32,573 | (5,264) 2) | 35,072 | 27 | 35,099 |
-
For more information, see note 7 Dividends .
-
Balance of currency translation adjustments includes USD 321 million directly associated with assets classified as held for sale. See note 3 Acquisitions and disposals for information on transaction.
CONSOLIDATED STATEMENT OF CASH FLOWS
| Quarters — Q4 2016 | Q3 2016 | Q4 2015 | (unaudited, in USD million) | 2016 | Full year — 2015 |
|---|---|---|---|---|---|
| (2,735) | 661 | (473) | Income before tax | (178) | 55 |
| 4,261 | 2,466 | 3,972 | Depreciation, amortisation and net impairment losses | 11,550 | 16,715 |
| 1,067 | 400 | (108) | Exploration expenditures written off | 1,800 | 2,164 |
| 529 | (209) | 424 | (Gains) losses on foreign currency transactions and balances | (137) | 1,166 |
| (29) | 38 | (301) | (Gains) losses on sales of assets and businesses | (110) | (1,716) |
| (203) | 454 | 367 | (Increase) decrease in other items related to operating | ||
| activities 1) | 1,076 | 558 | |||
| 2,350 | (284) | 262 | (Increase) decrease in net derivative financial instruments 1) | 1,307 | 1,551 |
| 60 | 66 | 81 | Interest received | 280 | 363 |
| (151) | (112) | (137) | Interest paid | (548) | (443) |
| 5,149 | 3,480 | 4,087 | Cash flows provided by operating activities before taxes paid | ||
| and working capital items | 15,040 | 20,414 | |||
| (1,349) | (697) | (2,226) | Taxes paid | (4,386) | (8,078) |
| (1,774) | 875 | 357 | (Increase) decrease in working capital 1) | (1,620) | 1,292 |
| 2,027 | 3,658 | 2,218 | Cash flows provided by operating activities | 9,034 | 13,628 |
| 0 | 0 | (398) | Additions through business combinations | 0 | (398) |
| (3,819) | (2,656) | (3,214) | Capital expenditures and investments 2) | (12,191) | (15,518) |
| 557 | 113 | 2,810 | (Increase) decrease in financial investments | 877 | (2,813) |
| 83 | (89) | (136) | (Increase) decrease in other items interest bearing | 107 | (22) |
| 244 | 497 | 690 | Proceeds from sale of assets and businesses | 761 | 4,249 |
| (2,935) | (2,135) | (248) | Cash flows used in investing activities | (10,446) | (14,501) |
| 1,323 | (1) | 9 | New finance debt | 1,322 | 4,272 |
| (893) | (8) | (11) | Repayment of finance debt | (1,072) | (1,464) |
| (371) | (404) | (658) | Dividends paid | (1,876) | (2,836) |
| (1,723) | 124 | (224) | Net current finance debt and other | (333) | (701) |
| (1,664) | (289) | (884) | Cash flows provided by (used in) financing activities | (1,959) | (729) |
| (2,572) | 1,234 | 1,086 | Net increase (decrease) in cash and cash equivalents | (3,371) | (1,602) |
| (352) | 35 | (194) | Effect of exchange rate changes on cash and cash equivalents | (152) | (871) |
| 8,014 | 6,746 | 7,721 | Cash and cash equivalents at the beginning of the period (net of | ||
| overdraft) | 8,613 | 11,085 | |||
| 5,090 | 8,014 | 8,613 | Cash and cash equivalents at the end of the period (net of | ||
| overdraft) 3) | 5,090 | 8,613 |
-
(Increase) decrease in items under operating activities include currency effects.
-
Capital expenditures and investments for 2016 includes USD 64 million related to acquisition of additional shares in Lundin Petroleum AB. See note 3 Acquisitions and disposals for more information .
-
At 31 December 2016, net overdrafts were zero. At 31 December 2015 cash and cash equivalents included a net overdraft of USD 10 million.
Notes to the Condensed interim financial statements
1 Organisation and basis of preparation
General information and organisation
Statoil ASA, originally Den Norske Stats Oljeselskap AS, was founded in 1972 and is incorporated and domiciled in Norway. The address of its registered office is Forusbeen 50, N-4035 Stavanger, Norway.
The Statoil group’s (Statoil) business consists principally of the exploration, production, transportation, refining and marketing of petroleum and petroleum-derived products. Statoil ASA is listed on the Oslo Børs (Norway) and the New York Stock Exchange (US).
All Statoil's oil and gas activities and net assets on the Norwegian continental shelf are owned by Statoil Petroleum AS, a 100% owned operating subsidiary of Statoil ASA. Statoil Petroleum AS is co-obligor or guarantor of certain debt obligations of Statoil ASA.
Statoil's Condensed interim financial statements for the fourth quarter of 2016 were authorised for issue by the board of directors on 6 February 2017.
Basis of preparation
These Condensed interim financial statements are prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as issued by the International Accounting Standards Board (IASB) and as adopted by the European Union (EU). The Condensed interim financial statements do not include all of the information and disclosures required by International Financial Reporting Standards (IFRS) for a complete set of financial statements, and these Condensed interim financial statements should be read in conjunction with the Consolidated annual financial statements. IFRS as adopted by the EU differ in certain respects from IFRS as issued by the IASB, but the differences do not impact Statoil's financial statements for the periods presented. A description of the significant accounting policies applied in preparing these Condensed interim financial statements is included in Statoil`s Consolidated annual financial statements for 2015.
On 1 January 2016 Statoil changed its presentation currency from Norwegian kroner (NOK) to US dollar (USD), mainly in order to better reflect the underlying USD exposure of Statoil’s business activities and to align with industry practice. The change in presentation currency has been accounted for as a policy change, and comparative figures have been re-presented in USD to reflect the change. All currency translation adjustments have been set to zero as of 1 January 2006, which was the date of Statoil’s transition to IFRS. Translation adjustments and cumulative translation adjustments have been presented as if Statoil had used USD as the presentation currency from that date. For further details and re-presented consolidated financial information for prior periods, reference is made to note 9 Change of presentation currency – re-presentation of comparative periods in the Condensed interim financial statements for the first quarter of 2016, available at www.statoil.com.
There have been no other changes to significant accounting policies in the four quarters of 2016 compared to the Consolidated annual financial statements for 2015.
The Condensed interim financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the financial position, results of operations and cash flows for the dates and interim periods presented. Interim period results are not necessarily indicative of results of operations or cash flows for an annual period. Certain amounts in the comparative periods have been re-presented to conform to current period presentation. The subtotals and totals in some of the tables may not equal the sum of the amounts shown due to rounding.
The Condensed interim financial statements are unaudited.
Use of estimates
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis, considering current and expected future market conditions. A change in an accounting estimate is recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
2 Segments
Statoil’s operations are managed through the following operating segments: Development and Production Norway (DPN), Development and Production USA (DPUSA), Development and Production International (DPI), Marketing, Midstream and Processing (MMP), New Energy Solutions (NES) and Other.
Statoil reports its business through reporting segments which correspond to the operating segments, except for the operating segments DPUSA and DPI which have been aggregated into one reporting segment, Development and Production International. This aggregation has its basis in similar economic characteristics, the nature of products, services and production processes, the type and class of customers, the methods of distribution and regulatory environment. The operating segment NES is reported in the reporting segment Other.
As of 1 January 2016, certain assets and operations, with a book value of USD 1,487 million, previously included in the MMP operating segment are now managed as part of the DPUSA operating segment and are now reported as part of the Development and Production International reporting segment. Comparative periods have not been restated, as the impact on the segments has been considered immaterial.
The eliminations section includes the elimination of inter-segment sales and related unrealised profits, mainly from the sale of crude oil and products. Inter-segment revenues are based upon estimated market prices.
Segment data for the fourth quarter of 2016 and 2015 is presented below. The reported measure of segment profit is net operating income . Deferred tax assets, pension assets and non-current financial assets are not allocated to the segments. The line item additions to PP&E, intangibles and equity accounted investments exclude movements related to changes in asset retirement obligations.
| Fourth quarter 2016 | Development and Production Norway | Development and Production International | Marketing, Midstream and Processing | Other | Eliminations | Total | | --- | --- | --- | --- | --- | --- | --- | | (in USD million) | | | | | | | | Revenues third party and other income | (138) | 211 | 12,748 | (7) | 0 | 12,814 | | Revenues inter-segment | 3,841 | 1,783 | 13 | 0 | (5,637) | 0 | | Net income from equity accounted investments | (75) | (21) | 29 | 9 | 0 | (58) | | Total revenues and other income | 3,628 | 1,974 | 12,790 | 2 | (5,637) | 12,756 | | Purchases [net of inventory variation] | 0 | (2) | (11,594) | (0) | 5,305 | (6,290) | | Operating and SG&A expenses | (525) | (924) | (1,234) | (133) | 149 | (2,667) | | Depreciation, amortisation and net impairment losses | (2,177) | (2,357) | 303 | (29) | 0 | (4,261) | | Exploration expenses | (134) | (1,301) | 0 | 0 | 0 | (1,435) | | Net operating income | 792 | (2,610) | 264 | (161) | (183) | (1,897) | | Additions to PP&E, intangibles and equity accounted investments | 1,417 | 3,176 | 78 | 72 | 0 | 4,743 |
| Fourth quarter 2015 | Development and Production Norway | Development and Production International | Marketing, Midstream and Processing | Other | Eliminations | Total | | --- | --- | --- | --- | --- | --- | --- | | (in USD million) | | | | | | | | Revenues third party and other income | 150 | (117) | 13,049 | 48 | 0 | 13,128 | | Revenues inter-segment | 3,937 | 1,373 | 39 | 1 | (5,350) | (0) | | Net income from equity accounted investments | 0 | (47) | 3 | 8 | 0 | (35) | | Total revenues and other income | 4,087 | 1,209 | 13,090 | 57 | (5,350) | 13,093 | | Purchases [net of inventory variation] | (0) | (8) | (11,362) | (0) | 5,396 | (5,974) | | Operating and SG&A expenses | (600) | (702) | (1,157) | (103) | 45 | (2,516) | | Depreciation, amortisation and net impairment losses | (1,666) | (2,168) | (98) | (40) | (0) | (3,972) | | Exploration expenses | (117) | (363) | 0 | 0 | 0 | (480) | | Net operating income | 1,704 | (2,031) | 474 | (86) | 92 | 152 | | Additions to PP&E, intangibles and equity accounted investments | 1,385 | 1,946 | 291 | 49 | 0 | 3,670 |
| Full year 2016 | Development and Production Norway | Development and Production International | Marketing, Midstream and Processing | Other | Eliminations | Total | | --- | --- | --- | --- | --- | --- | --- | | (in USD million) | | | | | | | | Revenues third party and other income | 184 | 884 | 44,883 | 41 | 0 | 45,993 | | Revenues inter-segment | 12,971 | 5,873 | 35 | 1 | (18,880) | (0) | | Net income from equity accounted investments | (78) | (100) | 61 | (3) | 0 | (119) | | Total revenues and other income | 13,077 | 6,657 | 44,979 | 39 | (18,880) | 45,873 | | Purchases [net of inventory variation] | 1 | (7) | (39,696) | (0) | 18,198 | (21,505) | | Operating and SG&A expenses | (2,547) | (2,923) | (4,439) | (340) | 463 | (9,787) | | Depreciation, amortisation and net impairment losses | (5,698) | (5,510) | (221) | (121) | 0 | (11,550) | | Exploration expenses | (383) | (2,569) | 0 | 0 | 0 | (2,952) | | Net operating income | 4,451 | (4,352) | 623 | (423) | (219) | 80 | | Additions to PP&E, intangibles and equity accounted investments | 6,785 | 6,397 | 492 | 451 | 0 | 14,125 | | Balance sheet information | | | | | | | | Equity accounted investments | 1,133 | 365 | 129 | 618 | 0 | 2,245 | | Non-current segment assets | 27,816 | 36,181 | 4,450 | 352 | 0 | 68,799 | | Non-current assets, not allocated to segments | | | | | | 8,090 | | Total non-current assets | | | | | | 79,133 |
| Full year 2015 | Development and Production Norway | Development and Production International | Marketing, Midstream and Processing | Other | Eliminations | Total | | --- | --- | --- | --- | --- | --- | --- | | (in USD million) | | | | | | | | Revenues third party and other income | (123) | 1,576 | 57,868 | 349 | 0 | 59,671 | | Revenues inter-segment | 17,459 | 6,715 | 183 | 1 | (24,357) | (0) | | Net income from equity accounted investments | 3 | (91) | 55 | 4 | 0 | (29) | | Total revenues and other income | 17,339 | 8,200 | 58,106 | 354 | (24,357) | 59,642 | | Purchases [net of inventory variation] | (0) | (10) | (50,547) | (0) | 24,303 | (26,254) | | Operating and SG&A expenses | (3,223) | (3,391) | (4,664) | (342) | 187 | (11,433) | | Depreciation, amortisation and net impairment losses | (6,379) | (10,231) | 37 | (142) | (0) | (16,715) | | Exploration expenses | (576) | (3,296) | (0) | 0 | 0 | (3,872) | | Net operating income | 7,161 | (8,729) | 2,931 | (129) | 133 | 1,366 | | Additions to PP&E, intangibles and equity accounted investments | 6,293 | 8,119 | 900 | 273 | 0 | 15,584 | | Balance sheet information | | | | | | | | Equity accounted investments | 5 | 333 | 214 | 272 | 0 | 824 | | Non-current segment assets | 27,706 | 37,475 | 5,588 | 690 | 0 | 71,458 | | Non-current assets, not allocated to segments | | | | | | 9,305 | | Total non-current assets | | | | | | 81,588 |
In the fourth quarter of 2016, Statoil recognised net impairment losses of USD 2,298 million consisting of impairment losses of USD 3,123 million and impairment reversals of USD 825 million, largely related to reduced long-term price assumptions, partially offset by operational improvements and a reduced discount rate as described in note 6 Property, plant and equipment and intangible assets.
The DPI segment recognised impairment losses of USD 2,295 million and reversals of USD 457 million. The impairment losses were mainly related to North America unconventional onshore liquids play and oil sands assets, and write-offs of prospects and signature bonuses presented as exploration expenses in the Consolidated statement of income. The impairment reversals in the DPI segment were mainly related to North America Gulf of Mexico assets in addition to a North America unconventional onshore asset. In the DPN segment the impairment loss was USD 829 million. In the MMP segment the net reversal of USD 368 million is mainly related to a refinery asset caused by a reduced cost base for the cash generating unit.
In the third quarter of 2016, Statoil recognised net impairment losses of USD 53 million, consisting of impairment losses of USD 395 million and impairment reversals of USD 342 million. The impairment losses were mainly related to a refinery asset in the MMP segment. The reversal of impairment related to a conventional upstream asset in DPI. The DPI segment was also impacted by write-offs of previously capitalised exploration expenditures of USD 357 million, presented as exploration expenses in the Consolidated statement of income.
In the second quarter of 2016, Statoil recognised net impairment losses of USD 275 million, mainly related to a conventional offshore asset in the Gulf of Mexico following a revision of production forecasts for the asset.
In the first quarter of 2016, Statoil recognised net impairment reversals of USD 308 million, consisting of impairment reversals of USD 633 million related to unconventional onshore assets in North America and two conventional assets in the DPI segments, partially offset by impairment charges of USD 325 million, related to an unconventional onshore asset in North America.
See note 6 Property, plant and equipment and intangible assets for further information on impairments.
See note 3 Acquisitions and disposals for information on transactions impacting the DPI and DPN segment.
Revenues by geographic areas
When attributing the line item revenues third party and other income to the country of the legal entity executing the sale for the full year of 2016, Norway constitutes 77% and the US constitutes 15%.
| Non-current assets by country | At 31 December | At 30 September | At 31 December | | --- | --- | --- | --- | | (in USD million) | 2016 | 2016 | 2015 | | Norway | 31,484 | 35,470 | 31,487 | | US | 18,223 | 19,671 | 20,531 | | Brazil | 5,308 | 3,430 | 3,474 | | Angola | 3,884 | 4,728 | 5,350 | | UK | 3,108 | 3,047 | 2,882 | | Canada | 1,494 | 2,495 | 2,270 | | Algeria | 1,344 | 1,362 | 1,435 | | Azerbaijan | 1,326 | 1,354 | 1,416 | | Other countries | 4,873 | 5,341 | 3,436 | | Total non-current assets 1) | 71,043 | 76,897 | 72,282 |
- Excluding deferred tax assets, pension assets, non-current financial assets and assets classified as held for sale.
3 Acquisitions and disposals
Sale of interest Kai Kos Dehseh
In the fourth quarter of 2016 Statoil signed an agreement with Athabasca Oil Corporation to divest the 100% owned Kai Kos Dehseh (KKD) oil sands projects covering the producing Leismer plant and the undeveloped Corner project, along with a number of midstream contracts associated with Leismer’s production. The total consideration consists of a cash consideration of CAD 435 million (USD 323 million), 100 million common shares in Athabasca Oil Corporation (just below 20% ownership share) and a series of contingent payments, capped at CAD 250 million (USD 186 million), based on development of oil price and production over the next four years. Both the shares and the contingent consideration will be measured at fair value on the closing date. As of 31 December 2016 the KKD related assets and associated liabilities were presented as held for sale in the Consolidated balance sheet. Upon entering into the agreement, Statoil impaired the assets by USD 412 million. This impairment is partly reflected as depreciation, amortisation and net impairment losses and partly as exploration expense in the Consolidated statement of income. In addition, as a consequence of the transaction, a separate onerous contract provision of USD 50 million, mainly related to vacant office spaces, has been recognised as selling, general and administration expenses. Accumulated foreign exchange losses, currently recognised in other comprehensive income, will be reflected in the Consolidated Statement of Income at the closing date. The transaction was closed 31 January 2017, and will be reflected in the Development and Production International (DPI) segment in the first quarter 2017.
Acquisition of operated interest in Brazil
In the fourth quarter of 2016 Statoil closed an agreement with Petróleo Brasileiro S.A. (“Petrobras”) to acquire a 66% operated interest in the Brazilian offshore licence BM-S-8 in the Santos basin for the maximum cash consideration of USD 2,500 million. A cash consideration of USD 1,250 million was paid on the closing date. The payment of the remaining consideration is subject to certain conditions being met, and was reflected at fair value at the transaction date. The value of the acquired exploration assets has been recognised in the DPI segment, resulting in an increase in intangible assets of USD 2,271 million.
Acquisition of shares in Lundin Petroleum AB (Lundin) and sale of interests in the Edvard Grieg field
In the second quarter of 2016 Statoil closed an agreement with Lundin to divest its entire 15% interest in the Edvard Grieg field, a 9% interest in the Edvard Grieg Oil pipeline and a 6% interest in the Utsira High Gas pipeline for an increased ownership share in Lundin. In addition to the divested interests, a cash consideration of SEK 544 million (USD 64 million) was paid to Lundin. Following the completion of the transaction Statoil owns 68.4 million shares of Lundin, representing 20.1% of the outstanding shares and votes.
Statoil recognised a total net gain of USD 120 million related to the divestment presented in the line item other income in the Consolidated statement of income. In the segment reporting, the gain was recognised in the Development and Production Norway (USD 114 million) and in the Marketing, Midstream and Processing (USD 5 million) segments. The transaction was tax exempt under the Norwegian petroleum tax legislation.
Following the increase in ownership interest on 30 June 2016, Statoil obtained significant influence over Lundin, and accounted for the investment as an associate under the equity method. Following the change in accounting classification, Statoil recognised a gain of USD 127 million representing the cumulative gain on its initial 11.93% shareholding being reclassified from the line item net gains (losses) from available for sale financial assets in the Consolidated statement of comprehensive income, to the net financial items line item in the Consolidated statement of income.
Sale of interest in Marcellus operated onshore play
In the second quarter of 2016 Statoil entered into an agreement to divest its operated properties in the US state of West Virginia to EQT Corporation for USD 407 million in cash. The transaction was closed on 8 July 2016 with an immaterial effect on the Consolidated statement of income recognised in the third quarter of 2016. Assets and associated liabilities relating to the properties divested, with the net values reflected at their carrying amounts which corresponds to the fair value less cost to sell, was classified as held for sale in the Consolidated balance sheet as of 30 June 2016.
4 Financial items
| Quarters — Q4 2016 | Q3 2016 | Q4 2015 | (in USD million) | Full year — 2016 | 2015 | | --- | --- | --- | --- | --- | --- | | 10 | (66) | (249) | Net foreign exchange gains (losses) | (120) | (245) | | 107 | 81 | 137 | Interest income and other financial items 1) | 436 | 396 | | (672) | 156 | (268) | Derivative financial instruments gains (losses) | 470 | (491) | | (283) | (247) | (246) | Interest and other finance expenses | (1,043) | (971) | | (838) | (76) | (625) | Net financial items | (258) | (1,311) |
- See note 3 Acquisitions and disposals for more information related to realised gain on shares in Lundin Petroleum AB in the second quarter of 2016.
Statoil has available a US Commercial paper program with a limit of USD 5 billion of which USD 500 million has been issued as of 31 December 2016.
In fourth quarter 2016 Statoil issued bonds with maturities from 10 to 20 years for a total amount of USD 1.3 billion. The bonds were issued in EUR and are unconditionally guaranteed by Statoil Petroleum AS.
5 Income tax
| Quarters — Q4 2016 | Q3 2016 | Q4 2015 | (in USD million) | Full year — 2016 | 2015 | | --- | --- | --- | --- | --- | --- | | (2,735) | 661 | (473) | Income before tax | (178) | 55 | | (50) | (1,088) | (649) | Income tax | (2,724) | (5,225) | | (1.8%) | >100% | >(100%) | Equivalent to a tax rate of | >(100%) | >100% |
The tax rate for the fourth quarter of 2016 and for the full year 2016 was primarily influenced by losses recognised in countries with lower than average tax rates or unrecognised deferred tax assets and write off of deferred tax assets mainly within the Development and Production International segment (DPI), due to uncertainty related to future taxable income. This was partially offset by low tax rate on income from the Norwegian continental shelf caused by higher effect of uplift deduction.
The tax rate for the full year 2016 was also influenced by the tax exempted sale of interest in the Edvard Grieg field as described in note 3 Acquisitions and disposals , and currency effects in entities that are taxable in other currency than the functional currency .
The tax rate for the fourth quarter of 2015 and the full year 2015, was primarily influenced by impairments and provisions recognised in countries with lower than average tax rates or unrecognised deferred tax assets. This was partially offset by tax effect of foreign exchange losses in entities that are taxable in other currencies than the functional currency. The tax rate for the full year of 2015 was also influenced by write off of deferred tax assets within DPI segment, due to uncertainty related to future taxable income and the tax exempt sale of interests in the Shah Deniz project.
6 Property, plant and equipment and intangible assets
| (in USD million) | Property, plant and equipment | Intangible assets | | --- | --- | --- | | Balance at 31 December 2015 | 62,006 | 9,452 | | Additions | 9,796 | 2,715 | | Transfers | 692 | (692) | | Disposals and reclassifications 1) | (1,139) | (355) | | Transferred to assets classified as held for sale | (444) | (97) | | Expensed exploration expenditures and impairment losses | - | (1,800) | | Depreciation, amortisation and net impairment losses | (11,536) | (13) | | Effect of foreign currency translation adjustments | 181 | 33 | | Balance at 31 December 2016 | 59,556 | 9,243 |
- Includes USD 445 million related to change in the classification of Statoil’s investments in joint operation (pro-rata line by line consolidation)/full consolidation to joint venture (equity method), mainly related to Dudgeon Offshore Wind Ltd (USD 341 million).
Impairments
For information on impairment losses and reversals for the fourth quarter and the full year of 2016 per reporting segment see note 2 Segments.
| Full year 2016 | Property, plant and equipment | Intangible assets | Total | | --- | --- | --- | --- | | (in USD million) | | | | | Producing and development assets | 1,301 | 590 | 1,890 | | Acquisition costs related to oil and gas prospects | - | 403 | 403 | | Total net impairment losses (reversals) recognised | 1,301 | 992 | 2,293 |
The impairment charges have been recognised in the Consolidated statement of income as depreciation, amortisation and net impairment losses and exploration expenses based on the impaired assets’ nature of property, plant and equipment and intangible assets , respectively.
The recoverable amount of assets tested for impairment was mainly based on Value in Use (VIU) estimates on the basis of internal forecasts on costs, production profiles and commodity prices. In the fourth quarter, the downward revision of the long term price forecast constituted the most important impairment indicator. Business plan updates including improved production profiles, more efficient operations and lower costs in addition to increased short term commodity prices partially offsets the effect of lower long term prices. Short term commodity prices (2017 – 2019) are forecasted by using observable forward prices for 2017 and a linear projection towards the 2020 internal forecast. In 2015 the observable forward prices were used for the first three years.
Recoverable amount for assets measured at Fair Value Less Cost of Disposal (FVLCOD) have partially been established through comparisons with observed market transactions and bids, and partially through internally prepared net present value estimates using assumed market participant assumptions.
The price assumptions used for impairment calculations were as follows (prices used in 2015 impairment calculations for the respective years are indicated in brackets):
| Year (Prices in real terms) — Brent Blend – USD/bbl | 2017 — 55 | (45) | 2020 — 75 | (83) | 2025 — 78 | (92) | 2030 — 80 | (100) |
|---|---|---|---|---|---|---|---|---|
| NBP - USD/mmbtu | 6.0 | (4.9) | 6.0 | (8.0) | 8.0 | (9.0) | 8.0 | (9.2) |
| Henry Hub – USD/mmbtu | 3.4 | (2.7) | 4.0 | (4.2) | 4.0 | (4.4) | 4.0 | (4.6) |
The base discount rate for VIU calculations is in the fourth quarter of 2016 changed to 6.0% real after tax from 6.5% real after tax as used in previous years. The discount rate is derived from Statoil's weighted average cost of capital.
7 Dividends
For the third quarter of 2016, a dividend of USD 0.2201 has been approved, payable on or around 7 April 2017, and the shares will trade ex-dividend on 22 February 2017 on Oslo Børs (OSE) and for American Depositary Receipt (SDR) shareholders on New York Stock Exchange.
As part of Statoil's scrip dividend programme, eligible shareholders and holders of ADRs can elect to receive their dividend in the form of new ordinary Statoil shares and ADR holders in the form of ADSs. The subscription price for the dividend shares will have a discount compared to the volume-weighted average price on OSE of the last two trading days of the subscription period for each quarter. For the fourth quarter of 2015 and for the first, second and third quarter of 2016 the discount has been set at 5%.
The two-year scrip dividend programme was approved by Statoil's general assembly in May 2016. The fourth quarter 2015 scrip dividend was settled in the second quarter of 2016. The first quarter 2016 scrip dividend was settled in the third quarter of 2016. The second quarter 2016 scrip dividend was settled in the fourth quarter of 2016.
Dividend approved, but not yet settled, is presented as dividends payable in the Consolidated balance sheet, regardless of whether the dividend is expected to be paid in cash or by issuance of new shares. The line item dividend paid in the Consolidated statement of cash flows includes only dividend paid in cash during the period. The Consolidated statement of changes in equity shows declared dividend in the period (retained earnings ), offset by scrip dividend settled during the period (share capital and additional paid-in-capital ).
| Dividends | | Full year | | Full year | | --- | --- | --- | --- | --- | | | Q4 2016 | 2016 | Q4 2015 | 2015 | | Dividends paid in cash (in USD million) | 371 | 1,876 | 658 | 2,836 | | US dollar per share or ADS | 0.2201 | 0.8804 | 0.2201 | 0.9034 | | Norwegian kroner per share | 1.8068 | 7.3364 | 1.8000 | 7.2000 | | Scrip dividends (in USD million) | 299 | 904 | 0 | 0 | | Number of shares issued (in millions) | 18.1 | 56.4 | 0.0 | 0.0 | | Total dividends | 670 | 2,780 | 658 | 2,836 |
8 Provisions, commitments, contingent liabilities and contingent assets
In the fourth quarter of 2016 Statoil recognised a provision amounting to USD 1 billion for a contingent consideration related to the BM-S-8 acquisition in Brazil. For further information, see note 3 Acquisitions and disposals.
Brazilian tax authorities have issued an updated tax assessment for 2011 for Statoil’s Brazilian subsidiary which was party to Statoil’s divestment of 40% of the Peregrino field to Sinochem at that time. The assessment disputes Statoil’s allocation of the sale proceeds between entities and assets involved, resulting in a significantly higher assessed taxable gain and related taxes payable in Brazil. Statoil disagrees with the assessment, and has provided an initial response to this effect. The process of formal communication with the Brazilian tax authorities, as well as any subsequent litigation that may become necessary, may take several years. No taxes will become payable until the matter has been finally settled. Statoil is of the view that all applicable tax regulations have been applied in the case and that the group has a strong position. No amounts have consequently been provided for in the accounts.
On 26 September 2016, the Norwegian Ministry of Finance (MoF) denied Statoil’s appeal related to a 2014 order from the Financial Supervisory Authority of Norway (FSA) to change the timing of an onerous contract provision to a financial period prior to the first quarter of 2013, in which Statoil originally reflected the provision. Statoil has decided not to pursue the matter further, as it does not impact any comparative financial periods presented in these Condensed interim financial statements or in the annual Consolidated financial statements of 2016. Further reference is made to note 23 Other commitments, contingent liabilities and contingent assets of Statoil’s 2015 Consolidated financial statements.
On 6 July 2016, the Norwegian tax authorities issued a deviation notice for the years 2012 to 2014 related to the internal pricing on certain transactions between Statoil Coordination Centre (SCC) in Belgium and Norwegian entities in the Statoil group. The main issue relates to SCC`s capital structure and its compliance with the arm’s length principle. Statoil is of the view that arm’s length pricing has been applied in these cases and that the group has a strong position, and no amounts have consequently been provided for in the accounts.
During the normal course of its business Statoil is involved in legal and other proceedings, and several claims are unresolved and currently outstanding. The ultimate liability or asset, respectively, in respect of such litigation and claims cannot be determined at this time. Statoil has in its Condensed interim financial statements provided for probable liabilities related to litigation and claims based on the company's best judgement. Statoil does not expect that its financial position, results of operations or cash flows will be materially affected by the resolution of these legal proceedings.
9 Subsequent events
The Board of Directors will propose to the Annual general meeting to maintain a dividend of USD 0.2201 per share for the fourth quarter 2016 with the continuance of the two-year scrip programme introduced as of the fourth quarter 2015. Under the scrip programme shareholders get the option to receive quarterly dividend in cash or in newly issued shares at a discount. For the dividend issue for fourth quarter 2016, the board will propose to the Annual general meeting to set the discount at 5%.
Supplementary disclosures
| OPERATIONAL DATA | |||||||
|---|---|---|---|---|---|---|---|
| Quarters | Change | Full | |||||
| year | |||||||
| Q4 | |||||||
| 2016 | Q3 | ||||||
| 2016 | Q4 | ||||||
| 2015 | Q4 | ||||||
| on Q4 | Operational data | 2016 | 2015 | Change | |||
| Prices | |||||||
| 49.3 | 45.9 | 43.8 | 13% | Average Brent oil price (USD/bbl) | 43.7 | 52.4 | (17%) |
| 45.1 | 41.8 | 40.7 | 11% | DPN average liquids price (USD/bbl) | 39.4 | 48.2 | (18%) |
| 42.1 | 37.8 | 35.5 | 18% | DPI average liquids price | |||
| (USD/bbl) | 35.8 | 42.9 | (17%) | ||||
| 43.8 | 40.0 | 38.4 | 14% | Group average liquids price | |||
| (USD/bbl) | 37.8 | 45.9 | (18%) | ||||
| 366.7 | 332.6 | 327.7 | 12% | Group average liquids price | |||
| (NOK/bbl) [1] | 317.5 | 370.7 | (14%) | ||||
| 3.83 | 2.62 | 4.75 | (19%) | Transfer price natural gas | |||
| (USD/mmbtu) [9] | 3.42 | 5.17 | (34%) | ||||
| 5.30 | 4.85 | 6.18 | (14%) | Average invoiced gas prices - | |||
| Europe (USD/mmbtu) [8] | 5.17 | 7.08 | (27%) | ||||
| 2.53 | 2.02 | 1.99 | 27% | Average invoiced gas prices - | |||
| North America (USD/mmbtu) [8] | 2.13 | 2.62 | (19%) | ||||
| 5.0 | 3.9 | 5.7 | (12%) | Refining reference margin | |||
| (USD/bbl) [2] | 4.8 | 8.0 | (40%) | ||||
| Entitlement production (mboe per | |||||||
| day) | |||||||
| 632 | 541 | 610 | 4% | DPN entitlement liquids | |||
| production | 589 | 595 | (1%) | ||||
| 416 | 445 | 463 | (10%) | DPI entitlement liquids | |||
| production | 435 | 436 | (0%) | ||||
| 1,048 | 986 | 1,073 | (2%) | Group entitlement liquids | |||
| production | 1,024 | 1,032 | (1%) | ||||
| 742 | 492 | 699 | 6% | DPN entitlement gas production | 646 | 637 | 1% |
| 143 | 173 | 149 | (4%) | DPI entitlement gas production | 157 | 144 | 9% |
| 886 | 665 | 848 | 4% | Group entitlement gas production | 803 | 781 | 3% |
| 1,934 | 1,651 | 1,921 | 1% | Total entitlement liquids and gas | |||
| production [3] | 1,827 | 1,812 | 1% | ||||
| Equity production (mboe per day) | |||||||
| 632 | 541 | 610 | 4% | DPN equity liquids production | 589 | 595 | (1%) |
| 530 | 582 | 569 | (7%) | DPI equity liquids production | 555 | 569 | (2%) |
| 1,162 | 1,123 | 1,179 | (1%) | Group equity liquids production | 1,144 | 1,165 | (2%) |
| 742 | 492 | 699 | 6% | DPN equity gas production | 646 | 637 | 1% |
| 190 | 190 | 168 | 13% | DPI equity gas production | 188 | 170 | 11% |
| 933 | 682 | 867 | 8% | Group equity gas production | 834 | 806 | 3% |
| 2,095 | 1,805 | 2,046 | 2% | Total equity liquids and gas | |||
| production [4] | 1,978 | 1,971 | 0% | ||||
| MMP sales volumes | |||||||
| 198.0 | 214.0 | 209.0 | (5%) | Crude oil sales volumes (mmbl) | 811.0 | 829.0 | (2%) |
| 12.5 | 8.7 | 11.9 | 6% | Natural gas sales Statoil | |||
| entitlement (bcm) | 44.3 | 44.0 | 1% | ||||
| 2.4 | 1.8 | 1.7 | 43% | Natural gas sales third-party | |||
| volumes (bcm) | 8.6 | 8.6 | 0% |
| EXCHANGE RATES | |||||||
|---|---|---|---|---|---|---|---|
| Quarters | Change | Full | |||||
| year | |||||||
| Q4 | |||||||
| 2016 | Q3 | ||||||
| 2016 | Q4 | ||||||
| 2015 | Q4 | ||||||
| on Q4 | Exchange rates | 2016 | 2015 | Change | |||
| 0.1193 | 0.1202 | 0.1173 | 2% | NOK/USD average daily exchange | |||
| rate | 0.1191 | 0.1239 | (4%) | ||||
| 0.1160 | 0.1242 | 0.1135 | 2% | NOK/USD period-end exchange rate | 0.1160 | 0.1135 | 2% |
| 8.3798 | 8.3194 | 8.5273 | (2%) | USD/NOK average daily exchange | |||
| rate | 8.3987 | 8.0739 | 4% | ||||
| 8.6200 | 8.0517 | 8.8090 | (2%) | USD/NOK period-end exchange rate | 8.6200 | 8.8090 | (2%) |
| 1.0783 | 1.1165 | 1.0948 | (2%) | EUR/USD average daily exchange | |||
| rate | 1.1061 | 1.1089 | (0%) | ||||
| 1.0541 | 1.1161 | 1.0920 | (3%) | EUR/USD period-end exchange rate | 1.0541 | 1.0920 | (3%) |
| EXPLORATION EXPENSES — Quarters | | | Change | Exploration expenses | Full year | | | | --- | --- | --- | --- | --- | --- | --- | --- | | Q4 2016 | Q3 2016 | Q4 2015 | Q4 on Q4 | (in USD million) | 2016 | 2015 | Change | | 158 | 104 | 136 | 16% | DPN exploration expenditures (activity) | 495 | 796 | (38%) | | 293 | 148 | 640 | (54%) | DPI exploration expenditures (activity) | 943 | 2,064 | (54%) | | 451 | 251 | 776 | (42%) | Group exploration expenditures (activity) | 1,437 | 2,860 | (50%) | | 274 | 324 | 23 | >100% | Expensed, previously capitalised exploration expenditures | 808 | 213 | >100% | | (83) | 5 | (189) | (56%) | Capitalised share of current period's exploration activity | (285) | (1,151) | (75%) | | 794 | 76 | (131) | >(100%) | Impairment (reversal of impairment) | 992 | 1,951 | (49%) | | 1,435 | 656 | 480 | >100% | Exploration expenses IFRS | 2,952 | 3,872 | (24%) |
| HEALTH, SAFETY AND THE
| ENVIRONMENT | ||
|---|---|---|
| Full | ||
| year | ||
| 2016 | 2015 | |
| Injury/incident frequency | ||
| Total recordable injury frequency | ||
| (TRIF) | 2.9 | 2.7 |
| Serious incident frequency (SIF) | 0.8 | 0.6 |
| Oil spills | ||
| Accidental oil spills (number of) | 146 | 172 |
| Accidental oil spills (cubic | ||
| metres) | 61 | 31 |
| Full | ||
| year | ||
| 2016 | 2015 | |
| Climate | ||
| Upstream CO2 intensity (kg | ||
| CO2/boe) 1) | 10 | 10 |
- For Statoil operated assets in DPN and DPI, the total amount of direct CO2 released to the atmosphere (kg), divided by total hydrocarbon production (boe).
FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements that involve risks and uncertainties. In some cases, we use words such as "ambition", "continue", "could", "estimate", "expect", “believe”, "focus", "likely", "may", "outlook", "plan", "strategy", "will", "guidance" and similar expressions to identify forward-looking statements. All statements other than statements of historical fact, including, among others, statements regarding plans and expectations with respect to market outlook and future economic projections and assumptions; Statoil’s focus on capital discipline; expected annual organic production through 2017; projections and future impact related to efficiency programmes, including expectations regarding costs savings from the improvement programme; capital expenditure and exploration guidance for 2017; production guidance; Statoil’s value over volume strategy; Statoil’s plans with regard to its completed acquisition of 66% operated interest in the BM-S-8 offshore license in the Santos basin; organic capital expenditure for 2017; Statoil’s intention to mature its portfolio; exploration and development activities, plans and expectations, including estimates regarding exploration activity levels; projected unit of production cost; equity production; planned maintenance and the effects thereof; impact of PSA effects; risks related to Statoil’s production guidance; accounting decisions and policy judgments and the impact thereof; expected dividend payments, the scrip dividend programme and the timing thereof; estimated provisions and liabilities; the projected impact or timing of administrative or governmental rules, standards, decisions, standards or laws, including with respect to the deviation notice issued by the Norwegian tax authorities and future impact of legal proceedings are forward-looking statements. You should not place undue reliance on these forward- looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons.
These forward-looking statements reflect current views about future events and are, by their nature, subject to significant risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including levels of industry product supply, demand and pricing; price and availability of alternative fuels; currency exchange rate and interest rate fluctuations; the political and economic policies of Norway and other oil-producing countries; EU developments; general economic conditions; political and social stability and economic growth in relevant areas of the world; global political events and actions, including war, political hostilities and terrorism; economic sanctions, security breaches; changes or uncertainty in or non-compliance with laws and governmental regulations; the timing of bringing new fields on stream; an inability to exploit growth or investment opportunities; material differences from reserves estimates; unsuccessful drilling; an inability to find and develop reserves; ineffectiveness of crisis management systems; adverse changes in tax regimes; the development and use of new technology; geological or technical difficulties; operational problems; operator error; inadequate insurance coverage; the lack of necessary transportation infrastructure when a field is in a remote location and other transportation problems; the actions of competitors; the actions of field partners; the actions of governments (including the Norwegian state as majority shareholder); counterparty defaults; natural disasters and adverse weather conditions, climate change, and other changes to business conditions; an inability to attract and retain personnel; relevant governmental approvals; industrial actions by workers and other factors discussed elsewhere in this report. Additional information, including information on factors that may affect Statoil's business, is contained in Statoil's Annual Report on Form 20-F for the year ended December 31, 2015, filed with the U.S. Securities and Exchange Commission (and in particular, Section 5.1 thereof (Risk factors)) which can be found on Statoil's website at www.statoil.com.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot assure you that our future results, level of activity, performance or achievements will meet these expectations. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. Unless we are required by law to update these statements, we will not necessarily update any of these statements after the date of this report, either to make them conform to actual results or changes in our expectations.
END NOTES
-
The Group's average liquids price is a volume-weighted average of the segment prices of crude oil, condensate and natural gas liquids (NGL).
-
The refining reference margin is a typical average gross margin of our two refineries, Mongstad and Kalundborg. The reference margin will differ from the actual margin, due to variations in type of crude and other feedstock, throughput, product yields, freight cost, inventory, etc.
-
Liquids volumes include oil, condensate and NGL, exclusive of royalty oil.
-
Equity volumes represent produced volumes under a Production Sharing Agreement (PSA) that correspond to Statoil's ownership percentage in a particular field. Entitlement volumes, on the other hand, represent Statoil's share of the volumes distributed to the partners in the field, which are subject to deductions for, among other things, royalty and the host government's share of profit oil. Under the terms of a PSA, the amount of profit oil deducted from equity volumes will normally increase with the cumulative return on investment to the partners and/or production from the license. As a consequence, the gap between entitlement and equity volumes will likely increase in times of high liquids prices. The distinction between equity and entitlement is relevant to most PSA regimes, whereas it is not applicable in most concessionary regimes such as those in Norway, the UK, the US, Canada and Brazil.
-
Not applicable this quarter.
-
Transactions with the Norwegian State. The Norwegian State, represented by the Ministry of Petroleum and Energy (MPE), is the majority shareholder of Statoil and also holds major investments in other entities. This ownership structure means that Statoil participates in transactions with many parties that are under a common ownership structure and therefore meet the definition of a related party. Statoil purchases liquids and natural gas from the Norwegian State, represented by SDFI (the State's Direct Financial Interest). In addition, Statoil sell the State's natural gas production in its own name, but for the Norwegian State's account and risk as well as related expenditures refunded by the State. All transactions are considered to be priced on an arms-length basis.
-
The production guidance reflects our estimates of proved reserves calculated in accordance with US Securities and Exchange Commission (SEC) guidelines and additional production from other reserves not included in proved reserves estimates.
-
The Group's average invoiced gas prices include volumes sold by the MMP segment.
-
The internal transfer price paid from MMP to DPN.
-
Since different legal entities in the group lend to projects and others borrow from banks, project financing through external bank or similar institutions will not be netted in the balance sheet and will over-report the debt stated in the balance sheet compared to the underlying exposure in the Group. Similarly, certain net interest-bearing debt incurred from activities pursuant to the Marketing Instruction of the Norwegian government are off-set against receivables on the SDFI. Some interest-bearing elements are classified together with non-interest bearing elements, and are therefore included when calculating the net interest-bearing debt.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
STATOIL ASA
(Registrant)
Dated: 7 February, 2017
By: ___/s/ Hans Jakob Hegge
Name: Hans Jakob Hegge
Title: Chief Financial Officer
EXHIBITS
The following exhibit is filed as part of this quarterly report:
EXHIBIT 12.1 Calculation of ratio of earnings to fixed charges