Norway's Statoil on Friday postponed its 2020 output guidance of 2.5 million barrels/day of oil equivalent by up to four years, as it reported a fall in fourth quarter output and an 8% cut in planned investment to $20 billion/year for the next two years, focusing on cost control.
"What we say today is that we will continue to grow but we will grow at a somewhat lower rate than we anticipated before because we think it gives returns for the international activities," CEO Helge Lund told a press conference in London. "I think all of us have seen over the last decade where there have been significant increases in oil prices and activity levels in the industry, that costs have increased significantly," he added.
Lund's remarks came as the Norwegian 67% state-controlled group reported its production of oil and gas in the fourth quarter was 1.945 million boe/d, down 4% from 2.032 million boe/d in the same period the previous year.
Full-year production averaged 1.94 million boe/d for 2013, down 3% from 2.004 million boe/d in 2012.
Lund said costs had risen because of more complex projects than before that needed more investments, as well as raw material inflation and industry bottlenecks.
"There has also in several areas been tax increases that of course also impact profitability," he added.
"We have a combined challenge and we can improve profitability but working smarter than we have done in the past. I think perhaps other industries have been more efficient in addressing the cost base than we have been. We need to work costs much more structurally that has a lasting impact." Statoil's Q4 and full year fall in production was in line with its previous guidance that output would be lower in the wake of some strategic divestments in order to focus on much bigger projects such as the Johan Sverdrup oil discovery offshore Norway, due to come onstream late in 2019, with recoverable reserves of up to 2.9 billion boe.
The non core asset sale included a $1.45 billion sale of Norwegian assets to Germany's Wintershall, effective July last year which Statoil said would impair its output by about 40,000 boe/d.
Another asset sale was announced a month later, for $2.65 billion to Austria's OMV, which will reduce Statoil's output by about 30,000 boe/d.
The group also said Friday it was now prioritizing cutting costs which meant that previous production goals were shelved for now.
"We still have the capacity to produce 2.5 million boe/d but that was based on capex that we have now reduced," said Statoil official Mirza Koristovic. "We see the 2.5 million boe/d will now came at a later stage at 2023-2024. That will vary because it's not volume that is driving us. It will vary from year to year depending on capex and divestments," he told Platts by telephone. The Norwegian group has in recent weeks been indicating to suppliers that it wants to cut back on costs, which are rising and of increasing concern to operators offshore Norway. The company reported Friday that production costs in 2013 rose 5% to NOK44/boe ($7.1/boe) from NOK42/boe the previous year.
Statoil last year announced it was delaying the $15 billion Johan Castberg project in the Barents Sea on concern about rising cost estimates, saying that an increase in taxes introduced last year by the Norwegian government had been part of the decision. Statoil's concerns have been echoed this week by other major Norwegian shelf producers. On Wednesday, Sverdrup partner Lundin Petroleum, also registered its alarm at rising costs, saying it could hit projects.
Statoil said it expected to drill around 50 wells in 2014 and around 20 high impact wells from 2014-2016. It added that its exploration spending in 2014 would be around $3.5 billion.
Statoil posted net Q4 earnings of NOK14.8 billion ($2.38 billion), up from NOK13 billion for the same period a year ago.
