Statoil targets 'more asset sales'

Wielding the knife: Statoil chief executive Helge Lund

Statoil is reportedly looking to carry out further asset sales in the billion-dollar class by year-end to reduce its investment exposure as part of a cost-cutting drive to boost profitability.

The Norwegian state-owned oil company earlier this year revealed plans to cut spending by more than $5 billion between 2014 and 2016 and reduce annual investments by 8% to $20 billion over the same period.

It is also targeting annual savings of $1.3 billion from 2016 as part of the effort to boost the cost-efficiency of drilling and projects, as well as streamline development and engineering work.

Chief executive Helge Lund is implementing the cutbacks to boost investment returns and shareholder dividends after seeing the company’s profitability eroded by spiralling costs over the past decade.

Statoil is now working on “a string of promising divestment opportunities”, its head of global strategy and business development John Knight stated in an internal memo cited by Upstream’s sister publication Dagens Naeringsliv.

"If successful, this will improve the financial flexibility of the company considerably by reducing investments while at the same time realising considerable income from the sales," he was quoted as saying.

Knight stated “the company must be able to demonstrate by the end of the year that it is on its way to deliver on those [investment] targets”, adding: “That gives us only five months.”

Statoil is predictably remaining tight-lipped about specific assets targeted for possible sale, with a spokesman saying it was continually looking at optimising its portfolio as part of a strategy to maximise value over production volume.

The company has raked in around $10 billion from divestments carried out in the period from 2009 to 2013, including sales of Norwegian assets to Wintershall and OMV.

Further disposals could be on the cards for some of Statoil’s marginal assets off Norway as it focuses on development of new discoveries in frontier areas such as East Africa and off eastern Canada.

Statoil is facing growing environmental pressure to exit Canada’s oil sands, where it disposed of some of its assets under a swap deal with Thai partner PTTEP earlier this year.

Analyst Teodor Sveen Nilsen of Swedbank First Securities believes the company could also be looking to farm down some of its 65% operating interest in Block 2 off Tanzania after a string of gas discoveries in the tract to cut its spending exposure on a proposed future field development.

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