Statoil ASA’s (STO) second-quarter 2014 adjusted earnings of 63 cents per ADR comfortably beat the Zacks Consensus Estimate of 56 cents. The quarterly results also improved from the year-earlier adjusted earnings of 24 cents per ADR due to higher oil price realizations.
Adjusted net income after tax came in at NOK 9.9 billion (US$1.65 billion) in the second quarter, lower than the prior-year quarter level of NOK 11.3 billion (US$1.94 billion).
In the second quarter, total revenue declined 5% year over year to NOK 142.3 billion ($23.8 billion), mainly due to lower production for both liquids and gas.
Operational Performance
In the reported quarter, total equity production of liquids and gas decreased 9% year over year to 1,799 million barrels of oil equivalent per day (MMBOE/d). The downside came mainly from Ormen Lange redetermination, lower gas-offtake, divestments, turnarounds and expected natural decline at several fields. Of the total quarterly output, 59% was liquids and 41% was natural gas.
In the reported quarter, total entitlement production of liquids and gas decreased 7% to 1,588 MMBOE/d (57% liquids and 43% natural gas), primarily on decreased equity production, offset by a lower negative effect from production sharing agreements.
Average daily oil and gas equity production averaged 725 million barrels of oil equivalent per day (MMBOE/d) in the second quarter, up 1% from the year-earlier quarter.
Average daily oil and gas entitlement production was 515 MMBOE/d in the quarter, up 10% from the year-earlier period.
The company's realized liquids prices averaged $99.7 per barrel, up 6.2% year over year. Natural gas price realization averaged NOK 2.11 and NOK 0.91 per standard cubic meter in Europe and North America, respectively.
Financials
The company has cash and cash equivalents of NOK 75.8 billion at the reported quarter- end versus NOK 47.6 billion at the end of the year-ago quarter. Operating cash flow was NOK 50.5 billion in the quarter. Net debt-to-capitalization ratio was 29.9% versus 27.3% in the year-ago quarter.
Outlook
The company has projected organic capital expenditures of around $20 billion and exploration activity of about $3.5 billion for 2014. Statoil plans to complete drilling of around 50 wells during the year.
Currently, Statoil carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can consider better-ranked energy sector stocks like Newpark Resources Inc (NR), Exco Resources Inc (XCO) and CNOOC Ltd (CEO). All these stocks sport a Zacks Rank #1 (Strong Buy).
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