Statoil Delivers Solid 4Q09 Financial Results

Statoil today presents its fourth quarter results and its Strategy Update. Statoil's fourth quarter 2009 net operating income was NOK 33.5 billion (~ US $5.6 billion), compared to NOK 37.8 billion (~ US $6.4 billion) in the fourth quarter of 2008. In 2009, net operating income was NOK 121.6 billion compared to NOK 198.8 billion in 2008. Statoil's growth strategy remains firm.

"Statoil continues to deliver solid economic and operational results in a demanding market. The activity level is high, and our production is growing according to plans," said Statoil's CEO Helge Lund.

Fourth quarter and annual results 2009

The quarterly operating income was NOK 33.5 billion, compared to NOK 37.8 billion in the same quarter last year. It was mainly affected by a 48% drop in natural gas prices and a 55% reduction in refining margins. This was only partly compensated by a 17% increase in the average prices for liquids measured in NOK, and a 4% growth in lifted volumes of oil and gas.

Adjusted earnings in the fourth quarter 2009 were NOK 34.4 billion, compared to NOK 43.4 billion in the fourth quarter of 2008.

Net income in the fourth quarter of 2009 was NOK 7.1 billion compared to NOK 2.0 billion in 2008. This result reflects higher oil prices and increased lifting, lower net financial losses and lower tax rates compared to 2008, partly offset by lower gas prices and refining margins. In 2009, net income was NOK 17.7 billion, compared to NOK 43.3 billion in 2008.

Adjusted earnings after tax was NOK 9.7 billion in the fourth quarter of 2009. Adjusted earnings after tax excludes the effect of tax on net financial items, and represents an effective adjusted tax rate of 72% in the fourth quarter of 2009. In 2009, adjusted earnings after tax was NOK 38.3 billion and the effective adjusted tax rate was 71%.

The board of directors is proposing a dividend of NOK 6.00 per share for 2009.

Statoil's equity production in 2009 was 1,962 mboe per day, a 2% increase from last year. During 2009, the equity production outside Norway reached 500 mboe per day, and continues to grow.

"The reserve replacement ratio of 73% for 2009 is improving from a low level, and based on our continued exploration success and growth portfolio, I am confident that we will improve this ratio going forward. Statoil has a high quality portfolio of non-sanctioned projects that will create attractive returns for our shareholders," said Lund.

Strategy Update

"During the latter part of 2009, the global economy showed signs of recovery. However, we will still see uncertainty in the global markets," said Lund.

In 2010, Statoil estimates an equity production between 1,925-1,975 mboe per day. The range reflects the continued uncertainty regarding the demand for gas, and our value driven gas business. During 2010 several new projects are planned to come on stream, with start-ups scheduled towards the latter part of the year. Morvin, Gjøa, Vega, Vega South and Leismer Demo are all scheduled to start in the fourth quarter. Statoil's gas and oil production capacity is therefore expected to be significantly higher towards the end of the year, compared to the full year production guiding.

Statoil's Chief Executive confirms that the strategy as a technology driven upstream company remains firm.

"We are positioned to continue our production growth towards 2012 despite the current weakness in the gas markets. Statoil also has projects and resource potential to underpin profitable growth beyond 2012," Lund stressed.

In 2012, Statoil estimates an equity production between 2.1-2.2 million boe per day. There is an area of uncertainty related to the 2012 production mainly due to the weak gas market conditions.

Statoil maintains its positive long-term view on the future competitiveness of gas. Statoil's objective is to maximise the value of the gas portfolio, rather than the volumes produced in any given year.

"Statoil is now taking steps towards more industrialization and standardization on the NCS to reduce cost and lead time, and thereby move resources into reserves in the most time and cost efficient way. Our ambition is to maintain the current level of production on the NCS for the next ten years," Lund said.

Around 80% of the Hydro merger synergies have been achieved, and the remainder will be completed during 2010. In addition, the administrative cost reduction program has led to a current spend level which is around 15% lower than the 2008 average. Significant cost reductions have secured Statoil's highly competitive operating unit cost position.

The Board of Directors has decided to make adjustments to the company's dividend policy in order to create a more predictable dividend level going forward:

"It is Statoil's ambition to grow the annual cash dividend, measured in NOK per share in line with long term underlying earnings. When deciding the annual dividend level, the Board will take into consideration expected cash flow, capital expenditure plans, financing requirements and appropriate financial flexibility. In addition to cash dividend, Statoil might buy back shares as part of total distribution of capital to the shareholders"

The direct link to the highly volatile IFRS net income has been removed, and the focus will be on growing the annual cash dividend per share in line with long-term underlying earnings. The new policy does not imply a change in the long-term dividend level, including potential share buy-backs, compared to the previous policy. The Board emphasises the importance of maintaining an attractive dividend level also in the future.

Statoil also announces the following guidance for 2010:

• Capital expenditure - USD 13 billion
• Unit production cost - NOK 35-36 per boe
• Exploration activity - USD 2.3 billion, and approximately 50 wells

Highlights since third quarter 2009:

• Equity production is up 2% from fourth quarter 2008 to 2,057 mboe per day. For the full year 2009, equity production is up 2% to 1,962 mboe per day
• Entitlement production is 1,852 mboe per day, largely unchanged from fourth quarter last year
• Average liquids prices measured in NOK are up 17%, gas prices are down 48%, and refining margins in USD are down 55% from fourth quarter last year
• The 2009 reserve replacement rate is 73%, up from 34% in 2008. The three year average reserve replacement ratio is 64%
• On 25 January 2010 Statoil signed the West Qurna 2 field contract with Lukoil and the Iraqi government in which Statoil will have a 18.75% share
• On 31 January 2010 Statoil announced a swap arrangement with ConocoPhillips involving leases in GoM and the Chukchi Sea in Alaska
• On 3 February 2010 Statoil announced that it is considering a new ownership structure for the Energy and Retail business