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StatoilHydro (NYSE:STO) StatoilHydro ASA (OSE: STL, NYSE:STO) second quarter 2008 result was influenced by high production and high prices. Net income in the second quarter of 2008 amounted to NOK 18.9 billion, up 36% compared to NOK 13.9 billion in the second quarter of 2007. Net income in the first half of 2008 amounted to NOK 35.0 billion, compared to NOK 23.9 billion in the first half of 2007.
The increase in net income from the second quarter of 2007 to the second quarter of 2008 was mainly due to a 44% increase in realised liquids (crude oil, condensate and NGL) prices measured in NOK, a 49% increase in natural gas prices and an 8% increase in lifted volumes. The increase was partly offset by negative net financial income and higher taxes.
The increase in net income from the first half of 2007 to the first half of 2008 was mainly due to a 44% increase in realised liquids prices measured in NOK, and a 31% increase in natural gas prices. The increase was partly offset by increased operating expenses, exploration expenses and higher taxes.
"The second quarter result is primarily influenced by high oil and gas prices. Our record earnings are also coming as a result of operational focus contributing to high production", says Helge Lund, StatoilHydro's chief executive.
"Our equity production increased 6% from the second quarter of 2007, mainly due to new capacity both on and outside the Norwegian Continental Shelf (NCS) and higher gas offtake. A number of our fields will undergo planned turnarounds in the next quarter. In total we are on track to deliver on our 2008 production ambition", Lund says.
"We are also satisfied with our exploration results this year. In the first half of 2008 we have completed a total of 49 exploration wells, out of which 18 have been declared as discoveries. For the full year we plan to drill at least 70 wells", Lund adds.
StatoilHydro delivered total liquids and gas entitlement production in the second quarter of 2008 of 1,710 mboe per day. Lifted volumes increased by 8% to 1,736 mboe. Combined with record high prices for liquids and natural gas, the net operating income for the second quarter of 2008 increased to NOK 62.6 billion, up 74% from NOK 36.1 billion in the second quarter of 2007.
StatoilHydro delivered total liquids and gas entitlement production in the first half of 2008 of 1,799 mboe per day. Solid production and record high prices yielded a net operating income for the first half of 2008 of NOK 114.1 billion, compared to NOK 70.5 billion in the first half of 2007.
During the first half of 2008, we gained access to 15 new licenses through licensing rounds in the Gulf of Mexico, Alaska and Brazil. This comes in addition to the acquisition of the remaining 50% of the Peregrino development offshore Brazil. The acquisition is still pending governmental approval.
StatoilHydro delivered an extensive exploration programme in the first half of 2008. Of a total of 49 completed exploration wells by 30 June, 27 were drilled outside of the NCS. We have declared 18 discoveries, of which three were made internationally. An additional five wells have been completed since 30 June.
In the first half of 2008, we delivered three PDOs (Plan for Development and Operation) on the NCS; Yttergryta (18 January), Morvin (15 February) and Troll Field project (27 June). On the NCS we started up production on five fields; Gulltopp (7 April), Oseberg Gamma Main Statfjord (12 April), Vigdis East (15 April), Theta Cook (26 June) and Oseberg Delta (27 June). Internationally, production commenced on Deep Water Gunashli in Azerbaijan (22 April).
Return on average capital employed after tax (ROACE) [*] for the 12 months ended 30 June 2008 was 23.2%, compared to 21.4% for the 12 months ended 30 June 2007. The increase was due to higher net income, partly offset by higher average capital employed. ROACE is defined as a non-GAAP financial measure. [*]
In the second quarter of 2008, earnings per share were NOK 5.89, compared to NOK 4.28 in the second quarter of 2007. In the first half of 2008, earnings per share were NOK 10.91, compared to NOK 7.33 in the first half of 2007.
Net operating income in the second quarter of 2008 was NOK 62.6 billion, compared to NOK 36.1 billion in the second quarter of 2007. The increase was mainly due to a 44% increase in realised liquids prices measured in NOK, a 49% increase in gas prices measured in NOK and an 8% increase in lifted volumes, partly offset by higher operating expenses.
Net operating income in the first half of 2008 was NOK 114.1 billion, compared to NOK 70.5 billion in the first half of 2007. The increase was mainly due to a 44% increase in liquids prices measured in NOK and a 31% increase in gas prices, but was partly offset by higher operating and exploration expenses.
Total liquids and gas liftings in the second quarter of 2008 were 1,736 mboe per day, compared to 1,605 mboe per day in the second quarter of 2007, an increase of 8%. There was an overlift in the second quarter of 2008 of 42 mboe per day [*] compared to an underlift in the second quarter of 2007 of 66 mboe per day.
Total liquids and gas liftings in the first half of 2008 were 1,786 mboe per day, compared to 1,747 mboe per day in the first half of 2007, a 2% increase. There was an overlift in the first half of 2008 of 3 mboe per day [*] compared to an overlift in the first half of 2007 of 6 mboe per day.
Total liquids and gas entitlement production in the second quarter of 2008 was 1,710 mboe per day, compared to 1,671 mboe per day in the second quarter of 2007. Average equity [*] production was up 6% to 1,898 mboe per day in the second quarter of 2008 compared to 1,786 mboe per day in the second quarter of 2007.
Total liquids and gas entitlement production in the first half of 2008 was 1,799 mboe per day, compared to 1,741 mboe per day in the first half of 2007. Average equity [*] production was up 7% to 1,973 mboe per day in the first half of 2008 compared to 1,837 mboe per day in the first half of 2007. Increases in production between the quarters as well as year-to-date stem from new fields coming on stream and a higher gas offtake, partly offset by declining production on mature fields.
Exploration expenditure was NOK 3.7 billion in the second quarter of 2008, compared to NOK 3.0 billion in the second quarter of 2007. Exploration expenditure was NOK 7.6 billion in the first half of 2008, compared to NOK 5.7 billion in the first half of 2007. The increase in both periods was mainly due to higher drilling activity, drilling cost and increased expenditures on seismic. Exploration expenditure reflects the period's exploration activities.
Exploration expenses for the period consist of exploration expenditure adjusted for the period's change in capitalised exploration expenditure. Exploration expenses increased from NOK 1.8 billion in the second quarter of 2007 to NOK 1.9 billion in the second quarter of 2008, mainly due to increased exploration activity, increased expense of previously capitalised exploration expenditures and lower capitalisation of exploration expenditures, partly offset by a reversal of impairment.
Exploration expenses increased from NOK 3.8 billion in the first half of 2007 to NOK 6.2 billion in the first half of 2008, mainly due to increased exploration activity and increased expense, including impairment writedowns, of previously capitalised exploration expenditures, but partly offset by reversal of impairment and by higher capitalisation of exploration expenditures.
In the second quarter of 2008, a total of 24 exploration and appraisal wells and three exploration extension wells were completed, 15 on the NCS and 12 internationally. Ten exploration and appraisal wells and one exploration extension well have been declared as discoveries. In the second quarter of 2007, a total of 16 exploration and appraisal wells and two exploration extension wells were completed, seven on the NCS and 11 internationally. Nine exploration and appraisal wells and two exploration extension wells have been declared as discoveries.
In the first half of 2008, a total of 45 exploration and appraisal wells and four exploration extension wells were completed, 22 on the NCS and 27 internationally. Sixteen exploration and appraisal wells and two exploration extension wells have been declared as discoveries. In the first half of 2007, a total of 35 exploration and appraisal wells and two exploration extension wells were completed, 14 on the NCS and 23 internationally. Eighteen exploration and appraisal wells and two exploration extension wells have been declared as discoveries.
A number of completed wells internationally have encountered hydrocarbons but need more thorough evaluation before external announcement.
Drilling of 13 exploration and appraisal wells and one exploration extension well was ongoing at the end of second quarter 2008. Five wells have been completed after 30 June 2008, of which one well has been declared as a discovery.
Production cost per boe was NOK 46.1 for the 12 months ended 30 June 2008, compared to NOK 31.4 for the 12 months ended 30 June 2007. [*] Based on equity volumes, [*] the production cost per boe was NOK 42.4 and NOK 30.0, respectively, for the two periods.
Normalised at a USDNOK exchange rate of 6.00, the production cost for the 12 months ended 30 June 2008 was NOK 46.9 per boe, compared to NOK 31.2 per boe for the 12 months ended 30 June 2007. [*] Normalised production cost is defined as a non-GAAP financial measure. [*]
The production cost per boe, both actual and normalised, has increased significantly, mainly due to restructuring costs relating to the merger, start-up of new fields, increased maintenance cost and general industry cost pressure.
Adjusted for restructuring costs and other costs arising from the merger recorded in the fourth quarter of 2007 and gas injection costs, the production cost per boe of equity production for the 12 months ended 30 June 2008 was NOK 32.1. The comparable figure for the 12 months ended 30 June 2007 is NOK 27.3.
Net financial items amounted to an expense of NOK 0.5 billion in the second quarter of 2008, compared to an income of NOK 2.6 billion in the second quarter of 2007. The decrease of NOK 3.1 billion was mainly caused by decreased net foreign exchange gains of NOK 2.3 billion, in combination with decreased capitalised interests of NOK 0.6 billion and fair value adjustments on financial derivatives of NOK 0.4 billion.
The NOK 2.3 billion decrease in net foreign exchange gains was mainly related to external loans and liquidity and currency risk management and was caused by relatively less weakening of the US dollar versus NOK in the second quarter of 2008 compared to the second quarter of 2007. The decrease was partly offset by currency effects on internal US dollar loans provided by a Euro functional currency subsidiary.
Net financial items amounted to an income of NOK 3.4 billion in the first half of 2008, compared to an income of NOK 3.8 billion in the first half of 2007. The decrease of NOK 0.4 billion was mainly caused by decreased net foreign exchange gains of NOK 0.6 billion.
The NOK 0.6 billion decrease in net foreign exchange gains was mainly related to increased currency losses on internal US dollar loans provided by a Euro functional currency subsidiary. This effect was partly offset by increased currency gains on liquidity and currency risk management.
* see end notes in the complete quarterely report
Attachments: - Press release - Financial statement and review
Further information from:
Investor relations Lars Troen Sørensen, senior vice president investor relations, + 47 90 64 91 44 (mobile) Geir Bjørnstad, vice president, US investor relations, + 1 203 978 6950
Press Ola Morten Aanestad, vice president media relations, +47 48 08 02 12 (mobile) Kai Nielsen, public affairs manager, + 44 78 24 32 68 93 (mobile)
