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

 

April 29, 2014

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 contains a report of the first quarter 2014 results of Statoil ASA.

 

2014 FIRST QUARTER RESULTS

Statoil’s first quarter 2014 operating and financial review

 

Statoil's first quarter 2014 net operating income was NOK 51.4 billion, a 35% increase compared to the first quarter of 2013. Adjusted earnings were up 9% to NOK 46.0 billion.

 

“We are pleased to present strong financial results for the quarter. Higher prices and good results from our US gas value chain contributed to a 9% increase in adjusted earnings, compared to same quarter last year. Our operational performance is solid, providing the foundation for around 2% rebased organic production growth in 2014," says Helge Lund, Statoil's president and CEO.

Net operating income was NOK 51.4 billion in the first quarter, an increase of 35% compared to the first quarter of 2013. After quarter specific items, adjusted earnings were NOK 46.0 billion, a 9% increase compared to the same quarter last year. The adjustments of NOK 5.4 billion is primarily related to an award payment following a commercial dispute and gain on sale of assets. The increased revenue was mainly due to higher prices and improved contribution from the gas value chain. Adjusted earnings after tax were NOK 15.8 billion, compared to NOK 12.0 billion in the same period last year.

"With strong cash flows from operations and firm capital discipline, we further strengthened our financial position. The Board proposes to distribute a dividend payment of NOK 1.80 per share for the quarter, in line with our commitment to capital distribution,” says Lund

Underlying operation costs were stable. Exploration expenditure was NOK 4.7 billion, down 7% compared to same quarter last year. Earnings per share were NOK 7.43 in the quarter, up from NOK 2.02 in the first quarter last year. The net debt to capital employed at the end of the quarter was 10%.

“To meet the industry cost and capital intensity challenge we have initiated new, comprehensive measures in the quarter to further strengthen our efficiency and cost competitiveness, while we reached important milestones in the ongoing process of reducing our cost base. We are on track, executing on our plan to deliver high value growth,” says Lund.

Statoil delivered a production of 1,978 mboe per day in the first quarter, down 1% compared to first quarter in 2013. Continued strong project development and execution enabled concept selection for the Johan Sverdrup field and brought the Gudrun field on stream. Johan Sverdrup will be Statoil’s largest field development since the 1980s. The field centre will be developed in multiple phases, with a field capacity in the first phase of 315,000 barrels of oil equivalent per day. The Gudrun project was delivered below cost and on time, utilising the global supplier market.

The continued progress in the Serious incident frequency per million man hours (SIF) was overshadowed by a fatality. A contractor was fatally injured while working on clearing the path for a future pipeline in the US.

The SIF in the quarter was 0.6, compared to 0.7 in the same period last year.

 

Key events since fourth quarter 2013:

 

·       Production started from the Gudrun project and the fast-track projects Svalin and Vilje Sør on the Norwegian continental shelf (NCS).

·       The concept selection for the Johan Sverdrup phase 1 project on the NCS was approved by the pre-unit owners.

·       Gas and oil was discovered in the Valemon Nord, Askja East and West, F-West and Sao Bernardo wells.

·       Statoil was awarded a deep-water exploration block together with ConocoPhillips in the Myanmar waters of Bay of Bengal.

·       Statoil’s acquisition of 25% equity in the BM-ES-22A concession in the Espírito Santo basin offshore Brazil was approved.

·       Statoil was awarded interests in ten production licenses in the Awards in Predefined Areas 2013 on the NCS.

·       Statoil has signed an agreement to divest a 15% interest in the Statoil-operated block 39 offshore Angola in the Kwanza pre-salt basin. Statoil retains an interest of 40%.

·       The agreement to divest 3.33% of Statoils 25.5% holdings in the Shah Deniz gas field in Azerbaijan and the South Caucasus Pipeline was closed. The agreement to divest further 6.67% is expected to close in the second quarter of 2014.

 

FIRST QUARTER 2014 GROUP REVIEW

The first quarter results were impacted by higher prices in NOK and significantly improved results from the international gas value chain. Equity production was slightly lower, mainly due to expected natural decline, divestments and redeterminations on the NCS. Operational performance was solid, with project execution according to plan.

 

Total equity liquids and gas production [4]  was down 1% to 1,978 mboe per day in the first quarter, primarily due to divestments and redeterminations, expected natural decline on mature fields and lower gas off-take from the NCS. Start-up and ramp-up of production on various fields and lower maintenance and operational effects, partly offset the decrease.

Total entitlement liquids and gas production [3]  remained nearly unchanged at 1,770 mboe per day, impacted by the increase in equity production as described above and a lower negative effect from production sharing agreements (PSA). The PSA-effect was 164 mboe per day compared to 193 mboe per day in the first quarter of 2013.

Exploration expenditures were NOK 4.7 billion in the first quarter, down 7% compared to first quarter of 2013, mainly due to lower seismic and other expenditures, and reduced onshore drilling activity. The decrease was partly offset by higher offshore drilling expenditures due to higher activity and more expensive wells being drilled.

For further information, see section Supplementary disclosures.  

Net operating income  (IFRS) was NOK 51.4 billion in the first quarter, an increase of 35% compared to the first  quarter of 2013.

Adjusted earnings is a supplemental non-GAAP measure to Statoil’s IFRS measure of net operating income and adjusts for certain items affecting the income for the period in order to separate out effects that management considers may not to be specifically related to Statoil's underlying operational performance in the period. See section Supplementary disclosures for reconciliation of net operating income to adjusted earnings.

Adjusted earnings [5] were NOK 46.0 billion in the first quarter. The 9% increase compared to the first quarter of 2013 was mainly due to increased revenues because of higher prices. Lower liquids prices measured in USD were more than offset by a positive exchange rate development and increased gas prices both in Europe and in the US, measured in NOK. Lower volumes of liquids and gas sold and increased operating and depreciation expenses, primarily due to higher activity, partly offset the increase in adjusted earnings.

 

Adjusted total revenues and other income were up 6% mainly because of higher prices for both liquids and gas measured in NOK. Lower volumes sold, mainly due to reduced production of gas, partly offset the increase in revenues.

Adjusted purchases, which represent Statoil's purchase of SDFI liquid volumes [6] and other 3rd party volumes, increased by 2% mainly because of higher prices for liquids and gas measured in NOK.

Adjusted operating expenses and selling, general and administrative expenses increased by 11% to NOK 20.8 billion, mainly due to increased gas transportation related to value chain optimisation and higher activity because of start-up and ramp-up on various fields. Lower ownership shares resulting from divestments and redeterminations partly offset the increase.

Adjusted depreciation, amortisation and net impairment losses increased by 10% to NOK 16.2 billion, mainly due to higher depreciation from ramp-up on various fields with higher depreciation cost per unit and increased investments on major producing fields. The increase was partly offset by higher reserves estimates and lower production because of divestments, redeterminations and decline on mature fields.

 

Adjusted exploration expenses increased by 7% to NOK 3.3 billion, mainly due to higher drilling activity on the NCS and a higher portion of exploration expenditures capitalised in previous periods being expensed this quarter. A reduced portion of current exploration expenditures being capitalised this quarter due to unsuccessful wells added to the increase. Lower drilling activity internationally and reduced seismic costs, partly offset the increase.

Net adjusted financial items  before tax amounted to a loss of NOK 1.0 billion in the first quarter of 2014 compared to NOK 0.0 billion in the first quarter of 2013. The increased loss was mainly due to the level of long term debt, as well as higher interest expense related to long term debt, compared to the first quarter of 2013. Reduced interest income from financial investments added to the increased loss on adjusted financial items. For further information, see section Supplementary disclosures.

Adjusted earnings after tax were NOK 15.8 billion, equivalent to an effective tax rate on adjusted earnings of 65.6%, compared to an effective tax rate on adjusted earnings of 71.8% in the first quarter of 2013. The tax rate decreased mainly due to low tax rates on adjusted earnings from Development and Production International and Marketing, Processing & Renewable Energy in the first quarter of 2014. This was mainly caused by relatively lower adjusted earnings from high tax regimes. The decreased tax on adjusted earnings was also caused by relatively lower adjusted earnings from the NCS in the first quarter of 2014. Income from the NCS is subject to higher than average tax rates.

 

Cash flows provided by operating activities was NOK 55.0 billion, an increase of NOK 16.7 billion compared to first quarter 2013. The increase was mainly due to higher prices measured in NOK for both liquids and gas, and a positive contribution from changes in working capital items.

Cash flows used in investing activities decreased by NOK 24.7 billion. The decrease was mainly due to changes in financial investments of NOK 23.1 billion. The majority of these financial investments are classified as cash and cash equivalents due to a maturity of less than three months. Additions to property, plant and equipment (PP&E) and intangible assets increased by NOK 1.8 billion, which reflects a higher activity level. Proceeds from sale of assets in the first quarter of 2014 was NOK 2.8 billion, and relates mainly to the divestment of interests in the Shah Deniz field and the South Caucasus pipeline.

Cash flows provided by (used in) financing activities increased by NOK 7.5 billion. In the first quarter of 2014, new finance debt has not been issued and there have been no loan repayments.

For further information, see the Consolidated statement of cash flows to the Condensed interim financial statements.

 

OUTLOOK

 

·       Organic capital expenditures for 2014 (i.e. excluding acquisitions, capital leases and other investments with significant different cash flow pattern), are estimated at around USD 20 billion.

·       Statoil will continue to mature the large portfolio of exploration assets and expects to complete around 50 wells in 2014 with a total exploration activity level at around USD 3.5 billion, excluding signature bonuses.

·       Statoil focus on value creation, and RoACE (Return on Average Capital Employed) is expected to stabilise at the 2013 level, based on an oil price of USD 100 per barrel (real 2013).

·       Our ambition is to keep our unit of production cost in the top quartile of our peer group.

·       For the period 2013 - 2016 organic growth is expected to come from new projects resulting in around 3% CAGR (Compound Annual Growth Rate) from a 2013 level rebased for divestments and redeterminations [7].

·       The equity production development for 2014 is estimated to be around 2% CAGR from a 2013 level rebased for divestments and redeterminations.

·       Scheduled maintenance activity  is planned to have a negative impact on quarterly production of approximately 110 mboe per day in the second quarter of 2014, primarily planned on the NCS, mostly in liquids. In total, the maintenance is estimated to have a negative impact on equity production of around 55 mboe per day for the full year 2014, of which the majority is liquids.

·       Deferral of gas production to create value, gas off-take, timing of new capacity coming on stream and operational regularity represent the most significant risks related to the 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. 

 

HEALTH, SAFETY AND THE ENVIRONMENT (HSE)

First quarter 2014

The serious incident frequency (SIF) improved from 0.7 in the first quarter of 2013 to 0.6 in the first quarter of 2014. The total recordable injury frequency (TRIF) was 2.9 in the first quarter of 2014 compared to 4.2 in the first quarter of 2013. The volume of accidental oil spills increased from 26 cubic meters in the first quarter of 2013 to 58 cubic meters in the first quarter of 2014. The number of accidental oil spills decreased from 57 in the first quarter of 2013 to 51 in the first quarter of 2014.

Regrettably, one fatality occurred in the quarter, when a contractor was fatally injured while working on clearing the path for a future pipeline in the US.

 

 

DEVELOPMENT AND PRODUCTION NORWAY

 

First quarter 2014 review

 

Average daily production of liquids and gas decreased by 4% to 1,244 mboe per day compared to the first quarter 2013. The decrease was mainly due to divestments, reductions due to expected natural decline on mature fields, lower gas sales and the Ormen Lange redetermination. The decrease was partly offset by stable production from Snøhvit and ramp-up of the Skarv field and fast track fields.

For further information, see section Supplementary disclosures.  

Net operating income for Development and Production Norway was NOK 34.0 billion compared to NOK 32.1 billion in the first quarter of 2013.

In the first quarter of 2014, lower fair value of derivatives (NOK 0.4 billion) had a negative impact on net operating income, while change in over/underlift positions (NOK 0.2 billion) had a positive impact. In the first quarter of 2013, lower fair value of derivatives (NOK 0.8 billion), an onerous contract provision (NOK 0.8 billion), other adjustments (NOK 0.8 billion) and change in over/underlift positions (NOK 0.4 billion), had a negative impact on net operating income.

Adjusted for these items, Adjusted earnings were NOK 34.2 billion, down 2%. The decrease was mainly due to increased exploration and depreciation expenses, partly offset by increased revenues.

 

Adjusted total revenues and other income increased by 2%, primarily driven by a positive NOK/USD exchange rate development  of NOK 2.6 billion and proceeds from business interruption insurance of NOK 1.0 billion. This was partly offset by decreased production of gas, which reduced revenues by NOK 1.7 billion. In addition, lower prices of liquids (measured in USD) and gas further reduced revenues.

Adjusted operating expenses and selling, general and administrative expenses was close to unchanged.

Adjusted depreciation, amortisation and net impairment losses increased by 12%, mainly due to increased production at fields with high depreciation costs per unit and increased investments on major producing fields. This was partly offset by reduced depreciation due to net increased reserve estimates.

Adjusted exploration expenses increased by NOK 0.9 billion, mainly due to higher drilling activity and a higher portion of exploration expenditures capitalised in previous periods being expensed in the first quarter of 2014. The increase was partly offset by a higher portion of current exploration expenditures being capitalised this period.

 

 

DEVELOPMENT AND PRODUCTION INTERNATIONAL

 

First quarter 2014 review

Average equity production of liquids and gas increased by 4% to 734 mboe per day compared to the first quarter 2013. The increase was mainly due to ramp-up on the Marcellus (US), PSVM (Angola) and Eagle Ford (US) fields. Resumed production at In Amenas (Algeria) following the incident in the first quarter of 2013 also contributed to the increase. Expected natural decline at several fields, particularly in Angola, partly offset the increase. In addition, production in the first quarter of 2014 was negatively impacted by disruptions in Libya due to the turmoil in the country.

Average daily entitlement production of liquids and gas increased by 10% to 526 mboe per day, primarily due to increased equity production and a lower negative effect from production sharing agreements (PSA effect). The PSA effect was 164 mboe per day in the first quarter of 2014, compared to 193 mboe per day in the first quarter of 2013. The residual difference between equity and entitlement volumes is related to US royalties.

For further information, see section Supplementary disclosures.

In the first quarter of 2014, net operating income for Development and Production International was NOK 8.2 billion compared to NOK 5.8 billion in the same period 2013.

Net operating income in the first quarter of 2014 was positively impacted by a gain on sale of assets of NOK 1.7 billion. This was partly offset by impairment losses of NOK 0.4 billion, which impacted the Exploration expenses line, and a negative impact by changed over/underlift positions of NOK 0.1 billion. In the first quarter of 2013, net operating income was positively impacted by changed over/underlift positions of NOK 0.9 billion.

Adjusted for these items, adjusted earnings were up 41% to NOK 6.9 billion, mainly because of increased revenues and decreased exploration expenses.

 

Adjusted total revenues and other income were NOK 20.9 billion, up by 13%. Higher entitlement production increased revenues by NOK 1.5 billion, whereas higher realised liquids and gas prices (measured in NOK) increased revenues by NOK 0.7 billion.

Adjusted operating expenses and selling, general and administrative expenses increased by NOK 0.6 billion, mainly relating to transportation costs and royalties in the US caused by increased production.

Adjusted depreciation, amortisation and net impairment losses increased by NOK 0.5 billion, mainly due to production ramp-up of PSVM (Angola) and Eagle Ford (US). This was partly offset by reduced depreciation due to increase in reserves.

Adjusted exploration expenses decreased by NOK 0.7 billion, mainly due to lower drilling activity. The decrease was partly offset by a lower portion of current exploration expenditures being capitalised this quarter.

 

 

MARKETING, PROCESSING AND RENEWABLE ENERGY

First quarter 2014 review

 

Natural gas sales volumes amounted to 13.8 billion standard cubic meters (bcm), down 7% compared to the first quarter of 2013. Lower entitlement production on the NCS and lower third party volumes sold were partly offset by higher entitlement production in the US. Of the total gas sales in the first quarter of 2014, entitlement gas amounted to 11.4 bcm compared to 11.8 bcm in the first quarter of 2013. SDFI share of US gas sales are not included in the total volumes due to new accounting principle as from this quarter, see note 1 Organisation and basis for preparation to the Condensed interim financial statements. Volume figures for the first quarter of 2013 were adjusted accordingly.

Average invoiced European natural gas sales price increased by 8%, mainly due to increase in market prices related to our gas contract portfolio combined with an increased proportion of LNG sales. Averaged invoiced North American pipe gas sales price, at or after the first liquid hub, increased by 94% due to unprecedented cold weather across Northern America this quarter, in addition to having long term pipeline capacity agreements enabling access into premium markets in Toronto and Manhattan.

For further information, see section Supplementary disclosures. 

Net operating income for Marketing, Processing and Renewable Energy was NOK 9.0 billion compared to a loss of NOK 2.1 billion in the first quarter of 2013.

Net operating income in the first quarter of 2014 included an income due to the award payment related to a commercial dispute (NOK 2.8 billion), a loss on operational storage (NOK 0.3 billion), a positive change in fair value of derivatives (NOK 0.2 billion), a reversal of impairment (NOK 0.2 billion), a gain due to periodisation of inventory hedging effects (NOK 0.1 billion) and a gain due to divestment in South Caucasus Pipeline (NOK 0.1 billion). Net operating income in the first quarter of 2013 included an onerous contract provision (NOK 4.1 billion), a negative change in fair value of derivatives (NOK 0.6 billion), a loss due to periodisation of inventory hedging effects (NOK 0.2 billion), and a gain on operational storage (NOK 0.2 billion).

Adjusted for these items, Adjusted earnings were NOK 5.9 billion, compared to NOK 2.6 billion in the first quarter of 2013. The increase is mainly due to stronger contribution from US gas sales as a result of higher prices combined with stronger margins from LNG trading. Further, trading of crude, gas liquids and liquids products has improved results in the first quarter of 2014 compared to the first quarter of 2013, partly offset by lower refinery margins.

 

Adjusted total revenues and other income increased by 5%, mainly due to higher oil and gas sales prices in NOK partly offset by lower volumes for all products.

Adjusted purchases increased by 2% due to the same factors as described above.

Adjusted operating expenses and selling, general and administration expenses increased by 15% to NOK 8.5 billion, mainly due to higher operational activity in addition to more arbitrage opportunities that resulted in increased transportation costs.

Adjusted depreciation, amortisation and net impairment losses increased by NOK 0.1 billion, partly due to new assets in operation.

 

 

Condensed interim financial statements

First quarter 2014

CONSOLIDATED STATEMENT OF INCOME

 

 

The subtotals and totals in some of the tables may not equal the sum of the amounts shown due to rounding.

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

CONSOLIDATED BALANCE SHEET

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

At 31 March 2014 Cash and cash equivalents include a net bank overdraft that has been rounded to zero. At 31 December 2013 and 31 March 2013 the amount has been rounded to zero.

 

 

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's) business consists principally of the exploration, production, transportation, refining and marketing of petroleum and petroleum-derived products. Statoil ASA is listed on the Oslo Stock Exchange (Norway) and the New York Stock Exchange (USA).

All Statoil's oil and gas activities and net assets on the Norwegian Continental Shelf (NCS) are owned by Statoil Petroleum AS, a 100% owned operating subsidiary. Statoil Petroleum AS is co-obligor or guarantor of certain debt obligations of Statoil ASA.

Statoil's condensed interim financial statements for the first quarter of 2014 were authorised for issue by the board of directors on 28 April 2014.

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 (IFRSs) for a complete set of financial statements, and these condensed interim financial statements should be read in conjunction with the annual financial statements. IFRSs as adopted by the EU differ in certain respects from IFRSs 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 is included in the Statoil annual financial statements for 2013 and applies to these condensed interim financial statements.

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 comparable period have been restated to conform to current period presentation.

The condensed interim financial statements are unaudited.

Change to significant accounting policies in the current period

With effect from the first quarter 2014, Statoil changed its policy for the presentation of natural gas sales, and related expenditure, on behalf of the Norwegian State made by Statoil subsidiaries in their own name. Where the subsidiary is considered the principal in the transaction, such gas sales were previously presented gross in the Consolidated statement of income, while the Norwegian State’s share of profit or loss was reflected in Statoil’s Selling, general and administrative expenses as expenses or reduction of expenses, respectively.

With effect from the first quarter 2014, such natural gas sales by Statoil subsidiaries on behalf of the Norwegian State are presented net in the Consolidated statement of income. They are linked to, and in nature no different from, Statoil ASA’s marketing and sale of natural gas in its own name, but for the Norwegian State’s account and risk, which are presented net. Following the change in policy, the assessment of the principal in the transactions and the related presentation of sales for the account and risk of the Norwegian State are determined on a consolidated basis. The revised policy will more consistently reflect the sales of natural gas for the account and risk of the Statoil group, excluding transactions on behalf of the Norwegian State, and therefore provide more relevant information.

The changes have been applied retrospectively in these condensed interim financial statements including the notes. The change in accounting policy is immaterial to the Consolidated statement of income for the periods covered by these condensed interim financial statements. There is no impact on Net operating income, Net income, the Consolidated balance sheet or the Consolidated statement of cash flows from this policy change.

There have been no other changes to significant accounting policies in the first quarter of 2014 compared to the annual financial statements for 2013.

Use of estimates

The preparation of financial statements in conformity with IFRSs 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 ongoing basis, considering the 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 Significant events

 

Agreement for sale of interests in the Shah Deniz project and the South Caucasus Pipeline to SOCAR and BP

In the fourth quarter of 2013 Statoil entered into an agreement with SOCAR and BP to divest a 10% share of its 25.5% holdings in the Shah Deniz project and the South Caucasus Pipeline. In March 2014, the sale transaction for 3.33% was closed. Statoil has recognised a gain of NOK 1.8 billion. The gain has been presented within the line item Other income in the Consolidated statement of income. In the segment reporting, the gain has been presented in the Development and Production International (DPI) segment and in the Marketing, Processing and Renewable Energy (MPR) segment in Revenue third party and Other income with NOK 1.7 billion and NOK 0.1 billion, respectively. The part of the transaction recognised in the DPI segment was tax exempt under the rules in Norway and Azerbaijan. Proceed from the sale was NOK 2.7 billion. The agreement to divest further 6.67% is expected to close in the second quarter of 2014. 

Kai Kos Dehseh oil sands swap agreement

In the first quarter of 2014 Statoil and its partner PTTEP entered into an agreement to swap the two parties' respective interests in the Kai Kos Dehseh oil sands project in Alberta, Canada. Statoil will pay a balancing cash consideration of NOK 1.2 billion (USD 0.2 billion) in addition to a working capital adjustment from the agreed economic date, 1 January 2013. Statoil will continue as operator and 100% owner of the Leismer and Corner projects, while PTTEP will be the 100% owner of the Thornbury, Hangingstone and South Leismer areas. The agreement is subject to customary regulatory approvals in Canada. The transaction will be recognised in the DPI segment at the time of closing, which is expected later in 2014.

 

3 Segments

Statoil's operations are managed through the following operating segments: Development and Production Norway (DPN), Development and Production North America (DPNA), Development and Production International (DPI), Marketing, Processing and Renewable Energy (MPR) and Other.

Statoil reports its business through reporting segments which correspond to the operating segments, except for the operating segments DPI and DPNA 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 and the methods of distribution.

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 first quarter of 2014 and 2013 is presented below. The measurement basis of segment profit is Net operating income. Deferred tax assets, pension assets and non-current financial assets are not allocated to the segments. Also, the line Additions to PP&E, intangibles and associated companies is excluding movements due to changes in asset retirement obligations.

 

 

 

 

 

 

The segment data for MPR and DPI has been influenced by the transaction discussed in note 2 Significant events. 

 

In the MPR segment an amount of NOK 2.8 billion (USD 0.5 billion) was recognised and presented as Other income in the first quarter of 2014, related to a Statoil claim against a counterparty in a dispute concerning contractual obligations, which has been subject to an arbitration process. Following an arbitration ruling in Statoil’s favour, the awarded payment was received by Statoil and the case finally concluded in the first quarter of 2014.

Revenues by geographic areas

When attributing revenues and other income for the first quarter of 2014 from third parties to the country of the legal entity executing the sale, Norway constitutes 73%, and the USA constitutes 17%.

 

Non-current assets by country

 

*Excluding deferred tax assets, pension assets and non-current financial assets.

 

4 Financial items

 

 

 

 

 

 

 

 

5 Income tax

 

The tax rate for the first quarter 2014 was primarily influenced by relatively high income from companies with lower than average tax rates, including the tax exempted sale of interests in the Shah Deniz project as described in note 2 Significant events and the arbitration award as described in note 3 Segments.  The tax rate was also influenced by the recognition of a non-cash tax income following a verdict in the Norwegian Supreme Court in February 2014. The Supreme Court voted in favour of Statoil in a tax dispute regarding the tax treatment of foreign exploration expenditures.

 

6 Property, plant and equipment and Intangible assets

7 Provisions, commitments, contingent liabilities and contingent assets

During the first quarter of 2014 a major part of the financial exposure related to price review claims, for which arbitration previously had been requested, has been settled on commercial terms with no significant impact on the condensed interim financial statements.

During the normal course of its business Statoil is involved in legal proceedings, and several other unresolved claims are currently outstanding. The ultimate liability or asset, respectively, in respect of such litigation and claims cannot be determined at this time. Statoil has provided in its condensed financial statements 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.

 

 

Supplementary disclosures

 

GROUP DISCLOSURES

 

 

 

 

 

 

 

 

 

 

Gross investments¹⁾  amounted to NOK 30.1 billion in the first quarter of 2014, up NOK 3.5 billion compared to the same quarter last year. The increase was mainly due to higher activity level in Development and Production Norway and Development and Production International.

 

¹⁾ Defined as additions to property, plant and equipment (including capitalised finance leases), capitalised exploration expenditures, intangible assets, long-term share investments and investments in associated companies.