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

 

October 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 shall be deemed to be filed and incorporated by reference in the Registration Statements on Form F-3 (File No. 333-188327) 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S-8 (File No. 333-168426) and to be a part thereof from the date on which this report is furnished, to the extent not superseded by documents or reports subsequently filed or furnished.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 first nine months ended, 30 September, 2014, 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. For more information on our use of non-GAAP financial measures in this report, see the section entitled "Use and Reconciliation of Non-GAAP Financial Measures". This document does not update or otherwise supplement the information contained in the previously published results announcement.

2014 THIRD QUARTER RESULTS

Statoil’s third quarter 2014 operating and financial review

 

Statoil's third quarter 2014 net operating income was NOK 17.0 billion, a decrease from NOK 39.3 billion in the third quarter of 2013. Net income was negative NOK 4.8 billion mainly due to impairments.

 

“Statoil’s quarterly earnings were negatively impacted by lower oil and gas prices and our decision to defer gas sales to enhance value as well as quarter-specific accounting charges. We delivered strong operational performance and cash generation in the quarter,” says Eldar Sætre, Statoil's acting president and CEO.

 

“We are progressing well on our efficiency improvement program. We continued to produce with high regularity on the Norwegian continental shelf and execute our projects as planned, remaining on track for our 2014 production guiding,” says Sætre.

 

Statoil’s reported net income for the third quarter in accordance with IFRS was negative NOK 4.8 billion due to quarter specific accounting charges mainly related to an impairment of the Kai Kos Dehseh asset in Canada, triggered by the postponement of the Corner field development, as well as impairments of exploration assets in the Gulf of Mexico and Angola. The decrease from the third quarter of 2013 was also a result of lower oil and gas prices, reduced ownership share from divestments, higher depreciation due to investments in producing assets, new fields coming on stream and a larger share of oil in the production mix.

 

"Our cash flow from operations so far this year is NOK 168 billion before tax. We have a strong balance sheet, and will pay a dividend of NOK 1.80 per share for the quarter," says Sætre. At the end of the quarter, Statoil’s net debt to capital employed was 19%. Organic capital expenditure was around USD 15 billion year-to-date, and the guidance of around USD 20 billion for 2014 remains.

 

Statoil delivered production of 1,829 mboe per day in the third quarter. This is around the same level as in the third quarter of 2013, despite expected natural decline, reduced ownership share from divestments and lower gas off-take on the Norwegian continental shelf (NCS). High production efficiency, as well as start-up and ramp-up of production, contributed positively to the production. Production guidance for the year is re-iterated, despite a deliberate choice to produce less gas during the summer.

 

The board of directors appointed Eldar Sætre as acting president and CEO on 15 October. "Statoil’s strategy remains firm. Safe and efficient operations are our top priorities, and we continue developing the business according to plan," says Sætre. Statoil’s board of directors has established a sub-committee which has started the search for Statoil’s next CEO.

 

Statoil made strong progress on project development and execution. The company started production on the two North Sea fast-track projects Fram H-North and Svalin C; successfully installed the Valemon platform in the North Sea; put a new compressor in operation on the Kvitebjørn field in the North Sea, to increase recovery by 220 mmboe; and started the Kristin low pressure production, yielding 160 additional mmboe.

 

Statoil also delivered on strategic portfolio management to realise value and strengthen flexibility. Statoil announced transactions of more than USD 3.5 billion in the quarter, including divestment of NCS assets and a sale of Shah Deniz in Azerbaijan.

 

In October, Statoil continued its exploration progress, announcing its seventh natural gas discovery offshore Tanzania. This brings the total of in-place volumes up to approximately 21 tcf in block 2, adding gas volumes for a future large-scale gas infrastructure development. Statoil also recently proved new high-value oil resources of 30-80 mmboe in the Grane area in the North Sea.

 

The serious incident frequency (SIF) was 0.8 in the third quarter of 2014, unchanged from the third quarter 2013.

 

Key events since second quarter 2014:

 

 

·          On 15 October, Statoil’s board of directors appointed Eldar Sætre as acting president and CEO, following the resignation of Helge Lund.

·          Gudrun platform in North Sea officially opened, topsides installed on steel jacket on Valemon field.

·          Production start on two North Sea fast-track projects: Fram H-North and Svalin C.

·          Ordinary operations resumed at In Amenas in Algeria.

·          Decision to postpone Corner field development at Kai Kos Dehseh oil sands project in Canada.

·          Announced farm-down in Aasta Hansteen, Asterix and Polarled and exit from two NCS assets.

·          Announced exit from Shah Deniz and South Caucasus Pipeline in Azerbaijan.

·          New acreage awarded in Algeria, farm-in to acreage offshore Colombia, assessing opportunities in Nicaragua.

·          Discovery of 1.2 trillion cubic feet of natural gas in Giligiliani-1 exploration well offshore Tanzania.

·          New sanctions towards Russia relating to the situation in Ukraine have been imposed by Norway, the EU and the US, targeting i.a. certain oil exploration and production activities and Russian energy companies. We are currently reviewing the implications on our business and in particular with respect to our relationship with Rosneft.

  

THIRD QUARTER 2014 GROUP REVIEW

Operational performance in the quarter was solid. Results for the third quarter were impacted by reduced oil and gas prices and impairment losses.

  

Total equity liquids and gas production [4] was 1,829 mboe per day, at the same level as in third quarter of 2013, despite expected natural decline, reduced ownership shares from divestments and lower gas off-take on the Norwegian continental shelf (NCS). Start-up and ramp-up of production on various fields and lower maintenance activity partly offset the decrease.

Total entitlement liquids and gas production [3] was down 2% to 1,626 mboe per day, impacted by the decrease in equity production as described above and a lower negative effect from production sharing agreements (PSA effect).

Net operating income  (IFRS) was NOK 17.0 billion in the third quarter, a decrease of 57% compared to the third  quarter of 2013.

Net operating income in the third quarter 2014 was negatively affected by impairment losses of NOK 13.5 billion in total. The impairment losses were mainly related to the Kai Kos Dehseh oil sands project in Canada triggered by the postponement of the Corner field development and general weakening of market outlooks, impairment of midstream assets due to reduced expectations for future trading activities and impairment of exploration assets, mainly in Angola and in the Gulf of Mexico due to dry wells and uncommercial discoveries.

Net operating income in the third quarter of 2013 was negatively impacted by impairment losses of NOK 6.0 billion mainly related to refinery assets and provisions of NOK 4.3 billion mainly related to a redetermination process. Gain on sale of assets of NOK 6.4 billion, eliminations of NOK 1.7 billion and change in fair value of derivatives affected net operating income positively.

In addition to the factors described above, the decrease in net operating income in the third quarter of 2014 was mainly due to lower prices for liquids and gas measured in NOK, reduced gas sales and increased costs. The increase in operating expenses and selling, general & administrative expenses was mainly due to increased gas transportation related to value chain optimisation and other one-off expenses.

Deprecaition, amortisation and net impairment losses increased by 22% compared to the third quarter of 2013, mainly due to increased impairment losses as described above. Also, new investments, start-up and ramp-up of production and a larger share of oil in the production mix in order to optimise future value creation added to increased depreciation compared to the same period last year.

Exploration expenses increased by 44% mainly because of impairments on exploration assets due to dry wells and uncommercial discoveries. Reduced drilling and field development activities partly offset the increase.

 

Income taxes were NOK 20.8 billion in the third quarter, equivalent to an effective tax rate of 129.7%, compared to 64.9% in the third quarter of 2013. The increase in effective tax rate was mainly due to impairments with lower than average tax rates and relatively higher operating income from the NCS. Income from the NCS is subject to higher than average tax rates.

See note 5 Income tax to the condensed interim financial statements for further details.

Total net income were negative NOK 4.8 billion in the the third quarter, down from NOK 13.7 billion in the third quarter of 2013. The decrease was mainly due to the reduced net operating income, higher loss on net financial items and the increased tax rate.

Cash flows provided by operating activities were NOK 26.1 billion, a decrease of NOK 14.1 billion compared to the third quarter of 2013, mainly due to changes in working capital items amounting to NOK 13.4 billion. 

Cash flows used in investing activities were NOK 17.5 billion, a decrease of NOK 7.3 billion compared to the third quarter of 2013 mainly due to lower investments of NOK 16.1 billion in deposits with more than three months maturity. Investments in property, plant and equipment and intangible assets amounted to NOK 26.2 billion. Proceeds from sale of assets of NOK 2.5 billion in the third quarter of 2014 was mainly related to the divestments of working interests in Angola Block 15/06, Block 39 and in the Dudgeon offshore wind-farm. 

Cash flows used in financing activities amounted to NOK 6.6 billion, and were mainly related to the payment of dividends in the third quarter 2014. The amounts reported in 2013 were impacted by a debt issuance of NOK 20.2 billion.

First nine months 2014

 

Net operating income was NOK 100.4 billion compared to NOK 111.6 billion in the first nine months of 2013.

Net operating income in the first nine months of 2014 was negatively affected by impairment losses of total NOK 18.0 billion (mainly the Kai Kos Dehseh oil sands project in Canada and US onshore assets and midstream assets) and losses on several exploration assets. Gain on sale of assets of NOK 6.3 billion related to ownership shares in the Shah Deniz project, the Angola assets and  Dudgeon offshore windfarm, and an award payment related to a commercial dispute of NOK 2.8 billion positively affected net operating income in the first nine months.

Net operating income in the first nine months of 2013 was negatively impacted by impairments losses, mainly related to the refineries of NOK 4.2 billion, a provision related to a redetermination process of NOK 4.3 billion, and an onerous contract provision of NOK 4.9 billion, mainly related to the Cove Point terminal. Gain on sale of assets, mainly related to the sale of certain ownership interests in licences on the NCS to Wintershall of NOK 6.4 billion, affected net operating income positively.

In addition to the factors described above, net operating income decreased compared to the first nine months of 2013 due to decreased volumes of both liquids and gas, partly offset by higher prices.

Depreciation, amortisation and net impairment losses increased by 21% mainly due to higher impairment losses in the first nine months of 2014, see description above. Also new investments and increased production from ramp-up and start-up on various fields, added to the decrease.

Operating expenses and selling, general and administrative expenses remain at the same level. In the first nine months of 2014,  costs were impacted by increased transportation, higher pension cost and other one-off expenses compared to the same period last year. An onerous contract provision impacted operating costs negatively in the first nine months of 2013.

Exploration expenses were up 14%, mainly due to impairment on several exploration assets in the first nine months of 2014, partly offset by lower drilling and seismic activity, reduced field development costs and a higher capitalisation rate.

 

  

Cash flows provided by operating activities were NOK 99.1 billion, an increase of NOK 12.4 billion compared to the first nine months of 2013. The increase was mainly due to higher prices measured for liquids, and a positive contribution from lower taxes paid, partly offset by changes in working capital. 

Cash flows used in investing activities were NOK 75.8 billion, the decrease compared to the first nine months of 2013 was mainly due to lower investments in deposits with more than three months maturity. Investments in property, plant and equipment and intangible assets amounted to NOK 88.2 billion. Proceeds from sale of assets in 2014 amounted to NOK 11.2 billion, which relates mainly to the divestment of interests in the Shah Deniz field and the South Caucasus pipeline.

Cash flows used in financing activities amounted to NOK 29.5 billion, and are mainly related to the payments of dividends in 2014 of NOK 28.0 billion. The amounts reported in 2013 were impacted by a 2013 debt issuance of NOK 37.5 billion.

  

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 focuses 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 production growth [7] 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. ¹⁾

·       The equity production development for 2014 is estimated to be around 2% CAGR from a 2013 level rebased for divestments and redetermination. [7]

·       The equity production development for 2014 is estimated to be around 2% CAGR from a 2013 level rebased for divestments and redetermination.[7]

·       Scheduled maintenance activity  is estimated to reduce quarterly production by approximately 25 mboe per day in the fourth quarter of 2014, primarily planned outside the NCS, mostly in liquids. In total, the maintenance is estimated to reduce equity production by around 50 mboe per day for the full year 2014, of which the majority is liquids.

·       Indicative PSA (Production Sharing Agreement) effect and US royalties are estimated to around 200 mboe per day in 2014 based on an oil price of USD 110 per barrel.

·       Deferral of gas 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 production guidance.

 

 

¹⁾ An updated status will be provided on the Capital Markets Update on 6 February 2015.

 

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.

 

DEVELOPMENT AND PRODUCTION NORWAY

 

Third quarter 2014 review

 

Average daily production of liquids and gas decreased by 3% to 1,086 mboe per day compared to the third quarter of 2013. The decrease was mainly due to expected natural decline on mature fields, divestments and lower gas-offtake. The decrease was partly offset by fewer turnarounds, ramp-up of new fields together with higher production regularity compared to the same quarter last year.

 

Net operating income for Development and Production Norway was NOK 24.6 billion compared to NOK 36.5 billion in the third quarter of 2013.

Net operating income in the third quarter of 2013 was positively impacted by gain on sale of assets of NOK 6.4 billion.

In addition to the factors described above, the decrease in net operating income in the third quarter of 2013 was mainly due to reduced gas and liquids prices together with reduced gas production.

Depreciation, amortisation and net impairment losses increased mainly due to new investments on major producing fields together with new fields in production. In addition, a larger share of oil in the production mix contributed to the increase.

Exploration expenses decreased by 61% mainly due to lower drilling activity.

 

First nine months 2014

 

Net operating income in the first nine months of 2014 was NOK 82.1 billion compared to NOK 99.9 billion in the same period last year.

Net operating income in the first nine months of 2013 was positively impacted by gain on sale of assets of NOK 6.4 billion, partly offset by provision of NOK 0.8 billion and losses on changes in fair value of derivatives.

In addition to the factors mentioned above, the 18% decrease in net operating income in third quarter of 2014 compared to same period last year was due to lower production. The lower production was caused by divestments and expected natural decline. Lower gas-offtake in order to create future value and lower gas prices added to the decrease. New fields in production together with higher production regularity compared to the same period last year partly offset the decrease.

Depreciation, amortisation and net impairment losses increased by 9% mainly due to new investments on major producing fields and new fields in production. In addition, higher volumes of deferred gas with a corresponding larger share of oil in the production mix contributed to the increase.

Exploration expenses decreased by 21% mainly due to lower drilling activity in the first nine months of 2014 compared to the same period in 2013.

 

 

  

 

DEVELOPMENT AND PRODUCTION INTERNATIONAL

 

Third quarter 2014 review

Average equity production of liquids and gas increased by 2% to 743 mboe per day compared to the third quarter of 2013. The increase was mainly due to ramp-up on CLOV (Angola), Marcellus (US) and PSVM (Angola). The increase was partly offset by the farm-down in Shah Deniz and expected natural decline at various fields.

Average daily entitlement production of liquids and gas decreased marginally to 540 mboe per day compared to the third quarter of 2013. Increased equity production and lower negative effect of production sharing agreements (PSA effect) were more than offset by higher negative effect from US royalties. The PSA effect was 166 mboe per day in the third quarter of 2014 compared to 175 mboe per day in the third quarter of 2013. 

 

 

Net operating income for Development and Production International (DPI) was NOK 8.8 billion negative in the third quarter of 2014, compared to NOK 0.5 billion in the same period in 2013.

In the third quarter of 2014 net operating income was negatively impacted by impairment losses of NOK 12.1 billion, mainly related to the Kai Kos Dehseh oil sands project of NOK 8.1 billion and impairment of exploration assets of NOK 3.4 billion. A provision for a commercial dispute of NOK 0.7 billion also contributed to the reduction in net operating income. Gain on sale of assets of NOK 0.5 billion partly offset the reduction in net operating income. In the third quarter of 2013 net operating income was negatively impacted by provisions of NOK 4.3 billion and impairment losses of NOK 1.4 billion.

In addition to the factors mentioned above, the decrease in net operating income in the third quarter of 2014 was mainly due to lower realised oil and gas prices. The increase was partly offset by higher entitlement production.

Increased operating expenses and selling, general and administrative expenses mainly driven by onshore activities in the US contributed to the decrease.

Depreciation, amortisation and net impairment losses increased by 80% mainly due to higher impairment losses in the third quarter of 2014 compared to the same period last year. Also, start-up and ramp-up contributed to the decrease.

Exploration expenses increased by 92% mainly due to impairments on exploration assets in Angola and in the US. The increase was partly offset by increased capitalisation and a lower portion of exploration expenditures capitalised earlier years being expensed.

 

First nine months 2014

 

Net operating income for DPI was NOK 5.1 billion, down 50% compared to the first nine months of 2013.

Net operating income in the first nine months of 2014 was negatively impacted by impairment losses of NOK 16.8 billion. The impairment losses were mainly related to Kai Kos Dehseh oil sands project of NOK 8.1 billion, US onshore assets of NOK 5.0 billion together with exploration assets of NOK 3.4 billion. The negative impact was partly offset by a gain on sale of assets of NOK 5.8 billion. The gain on sale of assets is related to interest in the Shah Deniz project together with ownership shares in Angola assets.

Net operating income in the first nine months of 2013 was negatively impacted by provisions of NOK 4.3 billion together with impairment losses of NOK 1.7 billion.

Total revenues and other income increased by 21%. The increase is mainly due to gain on sale of assets in the first nine months of 2013 and higher entitlement production compared to the same period last year.  Lower oil and gas prices offset the increase.

Operating expenses and selling, general and administrative expenses increased mainly due to higher operating expenses driven by production growth.

Depreciation, amortisation and net impairment losses increased by 56%, mainly due to increased impairment losses compared to the same period last year.

Exploration expenses increased by 29% mainly due to impairments of exploration assets. The increase was partly offset by reduced seismic and field development costs.

 

MARKETING, PROCESSING AND RENEWABLE ENERGY

Third quarter 2014 review

Natural gas sales volumes amounted to 11.1 billion standard cubic meters (bcm), down 17% compared to the third quarter of 2013 mainly due to lower entitlement production on the Norwegian continental shelf and lower third party volumes sold. Of the total gas sales in the third quarter of 2014, entitlement gas amounted to 9.2 bcm compared to 10.0 bcm in the third quarter of 2013.

Average invoiced European natural gas sales price decreased by 21%, mainly due to decrease in market prices related to our gas contract portfolio. Averaged invoiced North American pipe gas sales price decreased by 5%.

 

Net operating income for Marketing, Processing and Renewable Energy (MPR) was NOK 1.8 billion compared to NOK 0.9 billion in the third quarter of 2013.

Net operating income in the third quarter of 2014 was impacted by impairment losses of NOK 1.4 billion related to midstream assets, and a loss on operational storage (Purchases  line item) due to changes in the value of inventories during the period. Net operating income in the third quarter of 2013 was impacted by impairment losses of NOK 4.2 billion related to the refineries and a gain on operational storage.

In addition to the factors described above, the increase in net operating income in the third quarter of 2014 is mainly due to stronger refinery margins together with increased margins for the US gas sales. The increase was partly offset by lower margins for the European gas sales due to lower sales volumes in addition to lower margins from LNG trading. Increased margins from trading of gas liquids are offset by reduced margins from trading of crude and oil products.

Operating expenses and selling, general and administration expenses increased by 19% to NOK 8.5 billion, mainly because of  higher transport costs due to value chain optimisation. In addition, one-off expenses related to ongoing activity level impacted the expenses in the third quarter this year compared to third quarter of 2013.

Depreciation, amortisation and net impairment losses decreased by 58% to NOK 2.1 billion, explained by the impairment losses mentioned above.

 

First nine months 2014

 

Net operating income for MPR was NOK 13.4 billion compared to a loss of NOK 0.7 billion in the first nine months of 2013.

Net operating income in the first nine months of 2014 was positively impacted by an income due to the award payment related to a commercial dispute of NOK 2.8 billion (Total revenue and other income line item) and  a gain on sale of assets of NOK 0.7 billion. Impairment losses net of reversals of NOK 1.2 billion mainly related to midstream assets and a loss on operation storage (Purchase line item) impacted net operating income negatively.

Net operating income in the first nine months of 2013 was negatively impacted by impairment losses related to the refineries (NOK 4.2 billion) and an onerous contract provision related to the Cove Point terminal (NOK 4.1 billion).

In addition to the factors described above, net operating income in the third quarter of 2013 increased. The increase was mainly due to stronger contribution from US gas sales as a result of higher prices, improved margins for gas in Europe and stronger margins from LNG. Further, net operating income increased due to higher margins for liquids as a result of improved overall trading performance, improved refinery margins and increased result related to ownership in infrastructure.

Depreciation, amortisation and net impairment losses decreased by 46%, mainly due to lower impairments losses in the first nine months of 2014 compared to the same period last year.

 

Condensed interim financial statements

Third quarter 2014

CONSOLIDATED STATEMENT OF INCOME

 

 

* Relates to a change in significant accounting policies in the first quarter of 2014, see note 1 Organisation and basis for preparation.

  

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED BALANCE SHEET

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

The Dividends  of NOK 33.7 billion consist of dividends declared for 2013 of NOK 7.00 per share, amounting to NOK 22.3 billion. For the first quarter of 2014 interim dividends of NOK 1.80 per share were declared, amounting to NOK 5.7 billion, and were paid in the second quarter. The interim dividends declared in the second quarter of 2014 of NOK 1.80 per share, amounting to NOK 5.7 billion, will be paid in the fourth quarter of 2014 and are recognised as a liability in the condensed interim financial statements. 

In the first nine months of 2013, Dividends  consist of dividends declared and paid of NOK 6.75 per share, amounting to a dividend of NOK 21.5 billion.

  

CONSOLIDATED STATEMENT OF CASH FLOWS

 

At 30 September 2013 Cash and cash equivalents included a net bank overdraft of NOK 1.3 billion. For the other periods the net bank overdraft 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 third quarter of 2014 were authorised for issue by the board of directors on 28 October 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.

Changes to significant accounting policies in the first nine months of 2014

Except for the two policy changes described in the following, there have been no other changes to significant accounting policies in the first nine months of 2014 compared to the annual financial statements for 2013.

Natural gas sales made by Statoil subsidiaries on behalf of the Norwegian State

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 more consistently reflects the sales of natural gas for the account and risk of the Statoil group, excluding transactions on behalf of the Norwegian State, and therefore provides 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.

Recognition of disputed income tax positions

With effect from the third quarter 2014, Statoil changed its policy for the recognition of income tax positions for which payment has been made despite Statoil disputing the tax claim involved. Previously only amounts virtually certain of being refunded to Statoil were reflected as assets for positions involving such disputed income tax amounts. As of the third quarter 2014 Statoil reflects as assets any disputed amounts that are probable of being refunded. The corresponding impact to profit and loss is reflected as a reduction within Income tax in the Consolidated statement of income.

The change in policy mitigates the previously asymmetrical accounting for disputed tax cases involving assets and liabilities. Disputed income tax positions are now reflected in the Consolidated balance sheet as assets if a refund from the relevant tax authority is probable, and as liabilities if an outflow of cash from Statoil is probable. This ensures that the accounts more consistently reflect the underlying facts and evaluations in each case. Consequently more relevant information is provided independently of whether an income tax dispute occurs in a tax regime that requires up-front payment in disputed matters (such as for instance Norway), or in a tax regime where disputed payments are not due until a dispute has been legally settled in Statoil’s disfavour.

The change in accounting policy is not material to the Consolidated statement of income, the Consolidated balance sheet and the Consolidated statement of cash flows for the periods covered by these condensed interim financial statements, and consequently has not been applied retrospectively.

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 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 third quarter and the first nine months 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.

 

 

 

 

In the third quarter of 2014, the segment data for DPI has been negatively impacted by impairment losses of NOK 8.1 billion relating to the Kai Kos Dehseh oil sands project in Alberta, Canada. The impairment losses are presented 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 impairment losses were triggered by Statoil’s decision in the third quarter to postpone the development decision for the Corner field development, which is part of the Kai Kos Dehseh project, in combination with a general weakening of the market outlook for oil sands projects such as Kai Kos Dehseh, including the impact of market factors such as increased cost level and market access for Alberta oil.

In the DPI segment impairment losses of NOK 3.5 billion on other exploration assets, mainly related to dry wells and uncommercial discoveries in Angola and in the Gulf of Mexico, were recognised in the third quarter of 2014.

The segment data for DPI for the first nine months of 2014 has also been influenced by impairment losses related to US onshore assets of NOK 4.3 billion in the second quarter which primarily affected goodwill. The impairments were mainly related to updated assumptions with sustained negative local price differentials.

The segment data for MPR in the third quarter of 2014 include impairment losses of NOK 1.4 billion relating to midstream assets. The impairment mainly relates to reduced expectations of future trading activities.

The segment data for MPR for the first nine months of 2014 also includes an amount of NOK 2.8 billion (USD 0.5 billion), recognised and presented as Other income in the first quarter 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.

The segment data for MPR and DPI has also been influenced by the sale transactions discussed in note 3 Acquisitions and dispositions. 

Revenues by geographic areas

When attributing Revenues third party and Other income to the country of the legal entity executing the sale for the third quarter of 2014, Norway constitutes 74%, and the USA constitutes 15%.